Methods of Negotiations

There are fundamentally two ways in which you can negotiate a price. You can either bargain or set a fixed price. Bargaining induces temporary transaction costs – you might end up fighting even, as you are trying to negotiate. But in the process you and the counterparty are giving each other complete information of what you are thinking, and at every step in the process, there is some new information that is going into the price. Finally, if you do manage to strike a deal, it will turn out to be one that both of you like (ok I guess that’s a tautology). Even when there is no deal, you know you at least tried.

In a fixed price environment, on the other hand, you need to take into consideration what the other person thinks the price should be. There’s a fair bit of game theory involved and you constantly need to be guessing, about what the other person might be thinking, and probably adjust your price accordingly. There is no information flow during the course of the deal, and that can severely affect the chances of a deal happening. The consequences in terms of mental strain could be enormous in case you are really keen that the deal goes through.

Some people find the fixed price environment romantic. They think it’s romantic that one can think exactly on behalf of the counterparty and offer them a fair deal. What they fail to discount is the amount of thought process and guessing that actually goes in to the process of determining the “fair deal”. What they discount is the disappointment that has occurred in the past when they’ve been offered an unfair deal, and can do nothing about it because the price is fixed. But I guess that’s the deal about romance – you remember all the nice parts and ignore that similar conditions could lead to not-so-nice outcomes.

Bargaining, on the other hand has none of this romance. It involves short-term costs, fights even. But that’s the best way to go about it if you are keen on striking a deal. Unfortunately the romantics think it’s too unromantic (guess it’s because it’s too practical) and think that if you want a high probability of a deal, you should be willing to offer a fixed price. And the fight continues.. Or maybe not – it could even be a “take it or leave it” thing.

Moron Astrology

So this morning I was discussing my yesterday’s post on astrology and vector length with good friend and esteemed colleague Baada. Some interesting fundaes came out of it. Since Baada has given up blogging (and he’s newly married now so can’t expect him to blog) I’m presenting the stuff here.

So basically we believe that astrology started off as some kind of multinomial regression. Some of ancestors observed some people, and tried to predict their behaviour based on the position of their stars at the time of their birth. Maybe it started off as some arbit project. Maybe if blogs existed then, we could say that it started off as a funda session leading up to a blog post.

So a bunch of people a few millenia ago started off on this random project to predict behaviour based on position of stars at the time of people’s birth. They used a set of their friends as the calibration data, and used them to fix the parameters. Then they found a bunch of acquaintances who then became the test data. I’m sure that these guys managed to predict behaviour pretty well based on the stars – else the concept wouldn’t have caught on.

Actually it could have gone two ways – either it fit an extraordinary proportion of people in which case it would be successful; or it didn’t fit a large enough proportion of people in which case it would have died out. Our hunch is that there must have been several models of astrology, and that natural selection and success rates picked out one as the winner – none of the other models would have survived since they failed to predict as well on the initial data set.

So Indian astrology as we know it started off as a multinomial regression model and was the winner in a tournament of several such models, and has continued to flourish to this day. Some problem we find with the concept:

  • correlation-causation: what the initial multinomial regression found is that certain patterns in the position of stars at the time of one’s birth is heavily correlated with one’s behaviour. The mistake that the modelers and their patrons made was the common one of associating correlation with causation. They assumed that the position of stars at one’s birth CAUSED one’s behaviour. They probably didn’t do much of a rigorous analysis to test this out
  • re-calibration: another problem with the model is that it hasn’t been continuously recalibrated. We continue to use the same parameters as we did several millenia ago. Despite copious quantities of new data points being available, no one has bothered to re-calibrate the model. Times have changed and people have changed but the model hasn’t kept up with either. Now, I think the original information of the model has been lost so no one can recalibrate even if he/she chooses to

Coming back to my earlier post, one can also say that Western astrology is weaker than Indian astrology since the former uses a one-factor regression as against the multinomial regression used by the latter; hence the former is much weaker at predicting.

Cooking

I’m in the process of my weekly cooking. I’m making onion and potato sambar which should last me for about four meals – one tonight, and for three meals during the course of this week. I have been on and off the phone to my mother, as she has been giving out expert instructions from the other end of the other side (yes, this is a fighter sambar that i’m making). It’s almost done, and I’m waiting for the pressure cooker to cool down. There is a smallĀ  5 minute process to be done after that happens, and I’m good for the week.

I can’t help but think that our normal process of meal preparation (talking of india in general here) is plain inefficient. Cooking happens at least once a day, in each and every household. You have women balancing jobs, kids and at the same time tryign to find time to cook. Every day. Some people hire professional cooks, who again come once or twice a day in order to cook, and get paid a decent amount (I’m told the going rate for a Brahmin cook (yes, this market is segmented by caste) in Bangalore is Rs. 4000 a month). But then again, you need to be around when the cook arrives, occasionally supervise the cooking, and the quality of food churned out by most of these small-quantity cooks is not much higher than abysmal.

There is tremendous opportunity for economies of scale when it comes to cooking. For example, it takes exactly the same amount of effort to make 1 kilo of rice as it does to make 10 kilos of rice. It is a similar case with sambar, and rasam, and with most curries (even north indian curies) – apart from the effort involved in cutting vegetables which varies linearly with the amount of stuff to be cooked. Yet we choose to do it every day, in every house hold, sometimes up to three times a day. There is something wrong right?

There are two ways in which demand can be aggregated in order to exploit economies of scale – across days and across households. Indians in general prefer fresh food. Even after the introduction of the refrigerator a few decades back, a number of families didn’t buy one because they thought that would encourage consumption of stale food (I don’t have any such fundaes so I cook once a week). There are a number of people who insist that each meal be cooked fresh – I remember that my late father used to insist that at least rice be cooked just prior to each meal (he was ok with not-so fresh sambar, etc.).

Caste fundaes mean that eating out hasn’t traditionally been popular in India. Even nowadays, when you have a lot of people living alone, or with friends, there are very few people who eat out every meal. One look at the timings of the traditional eateries in Bangalore (MTR, Brahmin’s coffee bar, the various SLVs, Vidyarthi Bhavan) tells you a story – they are primarily breakfast and tea restaurants. MTR has recently (12 yrs back) introduced lunch nad dinner but had always been a breakfast and tea place. Most of these places would open from 7 to 11 in the morning and again from 3 to 8 in the evening.

Then there are more religious fundaes which encourage the cooking of each meal fresh – if you observe traditional people with sacred threads eat, you might observe that they do one small pooja with the rice and ghee before starting off. Would anyone want to do that with stale food? Again – similar religious fundaes have traditionally stopped people from eating out. Which is why we have the prevailing model of each meal being prepared in each household.

The problem with most restaurants in India is that they don’t serve home food. After all, they have never been the staple (i.e. every meal) source of food for people, so they have always tried to differentiate themselves from home food. The only restaurants that serve stuff that is made in a similar manner as in households are the small “messes” that operate in areas with a large concentration of single people living without family.

Going forward, I wonder if there is a market for restaurants which make food that is similar to what is made in households (of course it differs by genre, but within a genre it will be made similar to the way stuff is made in households), and which are not too expensive. They might operate on take-away or delivery model (i know that right now there are lots of tiffin-carrier providers, but they need to scale up significantly). They can exploit the economies of scale (both inĀ  terms of cost as well as effort) and provide home-like food for people who would otherwise want to keep a cook.

A good place to start this model would be areas with large concentratioon of single people, or double-income couples – something like Gurgaon. Would there be a market for someone who would provide hygienically made and tasty home-style north indian thalis at around Rs. 30 per plate? Economies of scale mean that this food is likely to be produced at a very cheap cost to the restaurant which will enable it to be priced cheap. The price point will also mean that people will eat there rather than hiring a cook to cook at home. Of course, there needs to be reasonable variety at every meal – which again means that hte restaurant should be reasonably big.

The problem with this model is it might not be feasible as a very small business. It needs to start off in a big way, serving some 1000 people every session – this is the only way enough economies of scale can be harnessed to make things cheap and also provide variety.

Assuming a couple of these start in Gurgaon and are successful, and the model spreads around the country. There is a good chance that a large section of the population will get out of the make every meal every day at every household model.