raincloud

Random Arts (II)

2011-11-19T01:06:00.000-08:00

Emancipation (click on the pix for a clearer image)

Random Arts

2011-11-12T02:01:00.000-08:00

Fractal (click the pix for a clear image)

Economics against corruptions – some random thoughts

2011-05-02T07:45:00.000-07:00

The (cricket) world cup over, a feeble rally in SENSEX, a run-down IPL and everything else is business as usual …boring!! Of course, that was before the recent waves of anti-corruption movements, that is. Was it some event, a septuagenarian fasting unto death, hundreds of people thronging the streets, thousands of pages in support on social network sites. All this to pass a law – against corruptions – that is apparently running late by roughly 42 years! Last similar event in nature and scale I remember was the 2006 anti-reservation thingy. It went nowhere.

One of the things about corruption is people do not seem to like it. The other thing - it is mostly a rational behaviour. Economically speaking, it is mostly just rent-seeking. A government having the monopoly over natural resources sells a permit at a price of P. The government official, in charge of selling the permit and having monopoly over his own signature, puts a mark-up and sells it at P1, the difference is the bribe. For an end consumer, the effect is just a price increase. Ethics and morality aside, does it really make a difference? Should you pay the bribe and/ or try stop corruptions? The answer depends

Paying the bribe is almost always rational if the gain you make by doing so, less the bribe amount, is more than what you have otherwise. Be it a personal transaction like applying for a passport, or a business transaction, like applying for a forest clearance. But whether you want to stop it? The answer is quite different in these two cases. For a passport, if you do not have to pay the bribe, that increases your net utility, so you would ideally like it to stop. But for forest clearance, an absence of bribe might also mean more competition lured in to your business, and hence a lower profit. So not necessarily a company paying bribe would like it to stop in an oligopoly structure. Unfortunately, when we have more chances that agents are against bribes (the passport case), the incentives (the amount you pay, or save otherwise, compared to the effort to stop it) are pretty low, and when money involved is really high, there might be no much incentive to stop it. That is why without explicit policy instrument, corruption can be hard to kill. We will have to wait and see how inspired the people are beyond economic rationality to make the structure of the Lokpal Bill a success

But should even policies be aimed at stopping corruptions? In an abstract sense, bribe is just a transfer of wealth, somewhat similar to tax. If there are complicated rules and procedures, paying bribes can help avoid red-tapes and increase efficiencies, and can actually be good for the public. But on the other hand, bribes might also incentivize more complicated rules creations, thus hampering efficiency. In general people tend to believe the net effect is indeed negative. Plus on an aggregate level, bribes also has some dead-weight loss (like for the passport case above, the net increase in utility for the bribe-takers will be less than the loss of that of the bribe payers, total utility goes down, which economists think a bad thing to have). And also it is somewhat discomforting that bribes also means corrupt people gain at the expense of honest people (we have many income redistributions in modern society, like reservations mentioned above, but this is perhaps quite hard to justify).

So once we generally agree yes, this is a bad thing, then comes the next question, how to stop/ reduce corruption. Let’s, just for fun, check out some simple stuff. Assume in a corrupt transaction, the official demands a bribe b, and if caught, with a probability of p, will incur a cost of m1 (loss of job, reputation, punishments etc). Also assume the bribe payer will have an excess gain g, if he pays the bribe, and also, if caught, incurs a loss of m2. So the utility functions of the bribe taker is x1 = (1-p)b – pm1, and for the bribe payer, it is x2 = (1-p)(g-b) – pm2. Now they bargain, and if they are smart, they settle down at b = 0.5[g + p(m1 – m2)/(1-p)]. This implies that bribing happens only when m1+m2 < (1-p)g/p. This leads to some expected results. Like, chance of bribing goes down with increasing punishments (m1 and m2), increasing probability of detection (p) and decreasing gain (g). But perhaps there are more hidden insights in this simple model. For the case of passport, g is low, and since bribe payer has incentives to stop corruptions, p will increase as m2 is reduced (like in extreme case, a reward for the bribe payer for reporting a bribery case). Under this scenarios, reducing g (i.e. making processes more efficient to reduce the pain of going the straight way and not paying the bribe) and m2 (reward for reporting a bribe) are more effective, than increasing m1 (punishments) or p exogenously (high cost of monitoring of a large number of small transactions). But in the scenario of the forest clearance, things are different. There m2 does not affect p (as briber has incentives to continue the corruptions) and p is probably dependent on g (a large scam is more likely to be detected). There raising the punishment (m1 and m2) is most effective, along with close monitoring (exogenously increasing p). So in this context, the proposed bill only addresses to m1 (and perhaps m2) and p (exogenously, by increasing monitoring), and at best will be a partial success. It is important to have close monitoring and grievance redressal system, but perhaps more important to take notice of the underlying incentives

Twenty-Ten, Close of Business

2010-12-29T08:12:00.000-08:00

End of yet another year, which has been, by the way, beginning of a new decade as well. And a long lazy Christmas holiday was perfect for a retrospective glance (well I take it back, not perfect, I have better things to do, really, but sometime I do stuff like this when I've stocked enough beers to last an full-scale zombie siege and go on for weekend-long hibernation). Like ~~who made love to Scarlet Johansson most number of times~~ what people cared for, worried about and pondered over during the year, here in India, and globally and there out in the faraway galaxies, too.

So here are the things and events that worried the world this year. Surprisingly, people didn’t care much about the major events in the finance and economy – like the sovereign crisis or the Wall Street reforms or the currency wars. Seems like the banker bashing sentiments is a myth created by the media?

Back in India, apart from the ubiquitous theme of cricket in the country, we did manage to worry about other things too. And yet again it surprises that Leh cloudburst was more newsworthy for most of us, than the Maoist uprising, or the food price inflation or the microfinance mayhem we witnessed.

And out there in the deep space, yet earthlings remained pathetically limited. Still wandering around the moon or the Venus or at most Saturn. The best achievement we could manage was some freaky scientists testing if the universe is really a 3D holographic illusion (like Matrix? WTF). And all this while nobody seemed to care about the sudden disappearance of some of the characteristic stripes on the Jupiter

And finally, coming back to India, no doubt the theme awards this year goes to “Scams”. This year we have seen some of the largest and finest in the making or busted. To put things in perspective, here is a chart – covering all major corruptions/ scams in India since known history (at least for most of us). Left axis shows the scam size in INR Crores (INR 10 millions), and the bubble size is the same, adjusted for inflation

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disclaimer: graphs are based on data mostly from Google Trends, and other web resources whichever I found convenient

World Cup 2010 - Number Crunching

2010-06-20T02:20:00.000-07:00

Here is a quick and wasteful analysis of the world cup outcome possibilities. Given the results so far (till Cameroon Denmark last night), here are possible lists of group of 16 qualifiers, and in-group rankings based on 3 scenarios to decide the outcome of the rest of the matches in 1^st round : 1. Fifa Ranking (better ranking team wins) 2. Momentum (the current group order stays) 3. Most likely – based on my opinions + betting odds implied probabilities

Group A: Almost surely -> Uruguay and Mexico, in all scenarios, the group topper is either one of them. Mexico tops the group in scenario 1 and 3

Group B: Almost surely -> Argentina topping the group, runners-up South Korea in all scenarios

Group C: The fight appears to be among USA, Slovenia and England. Scenario 1: USA (tops), England, Scenario 2: Slovenia (tops), USA, Scenario 3: USA (tops), Slovenia. USA almost surely qualifies anyways

Group D: Again high uncertainty, Serbia, Germany and Ghana in the run, Scenario 1: Serbia (tops), Germany, Scenario 2: Ghana (tops), Serbia, Scenario 3: Germany (tops), Ghana

Group E: Netherlands tops, Japan and Denmark vies for the 2^nd position, with Japan being the one in Scenario 3, Denmark otherwise

Group F: Almost surely Italy (tops) and Paraguay

Group G: Almost surely Brazil (tops) and Portugal

Group H: Fight between Spain, Chile and Switzerland. Spain tops in Scenario 1, followed by Chile, otherwise Chile is the topper, qualifying along with Switzerland

So from Argentina’s POV, they meet either Uruguay or Mexico in 2^nd round and in the quarters they face any of Serbia, Ghana, Germany, England, USA or Slovenia. Based on the scenarios, they face the winner of Serbia-England (Scenario 1), Ghana-USA (Scenario 2) or Germany-Slovenia (Scenario 3). Beyond semis, it is quite wide open for any big tournament. Argentina faces any top eight of Group E, F, G and H. But most likely they face Italy-Denmark, Spain-Portugal, or Italy-Japan, Chile-Portugal. And given big match performances history, most probably they face Italy

The betting markets in the meantime are showing some odd probabilities, mostly influenced by English and EPL fans IMHO J . It says, given they qualify for it, Spain has a chance of surviving (22%) the knockout rounds better than Argentina (20%) or Brazil (19%). Same for England looks a bit high too (14%) and totally out of line is South Africa (0.1% chance to qualify and 10% to survive!!). Also England is not sure to survive the 1^st round. But they have a 48% probability to top their group, as implied by betting odds, betting against it seems a good bet!!! Another good bet seems the topper for Group A, Uruguay sales at 80%, against Mexico at 26% - seems a bit high for Uruguay. The most interesting seems golden boots betting odds, of the top 25 players, 13 are yet to score!! The top place is rightfully Higuain (probability 36%), followed by David Villa (14%!!!)

And finally here are the probabilities of the winning country, again based on betting odds – Argentina tops at 20%, followed by Brazil (18%), Spain (17%), Holland (13%), England (9% !!!), Germany (9%), Italy (7%)

Note: All odds are taken from Betfred, other data from FIFA. For those interested in running their own simulations – here is a nice excel (http://rapidshare.com/files/398535274/World_Cup_2010.xls). Please note, this is not made by me, I used it, and did not find anything problematic/ harmful, but I cannot promise so

Tonight I Can Write the Saddest Lines (HHGTTG Version)

2010-01-12T11:11:00.000-08:00

A feeble, and outrageous, attempt - The Hitchhikers’ Guide to the Galaxy version of the famous poem (by the famous poet Pablo Neruda). Or rather a poetic way of looking at what is technically known as the WSOGMM, or Whole Sort of General Mish Mash

Tonight I can write the saddest lines.

Write, for example,'The earth is shattered
and the great yellow spaceships hang motionless in the distance.'

The photon storm revolves in the sky and sings.

Tonight I can write the saddest lines.
I loved her, and in some spacetimes she loved me too.

Through nights like this one I held her wrapped in my towel
I kissed her again and again under the endless sky.

She loved me in some spacetimes, and I loved her too.
How could one not have loved her great still eyes.

Tonight I can write the saddest lines.
To think that I do not have her. To feel that I have lost her in temporal realsitics.

To hear the immense night, still more immense without her.
And the verse falls to the soul like Pan Galactic Gargle Blaster to the brain.

What does it matter that my Information Illusion could not keep her.
The Time has ended and she is not with me.

This is all. At the End of the Universe someone is singing. In the Restaurant.
My diodes are not satisfied that they have lost her.

My disembodied mind searches for her as though to go to her.
My Heart of Gold looks for her, and she is not with me.

The same old folks spending another year dead – for same reason.
We, of that spacetime, are no longer the same.

I no longer love her, that's not entirely unlikely, but how I loved her.
My voice tried to find the wind to touch her hearing.

Another's. She will be Somebody Else’s Problem. Like my kisses before.
Her voice. Her bright body. Her infinite eyes

I no longer love her, that's not entirely unlikely, but maybe I love her.
Love is mostly harmless, forgetting is another thing

Because through nights like this one I held her wrapped in my towel
my diodes are not satisfied that they have lost her.

Though this be the last panic that she makes me suffer
and these the last verses that I type for her.

If you liked it, great. If you didn’t, DON’T PANIC – as I mentioned already above, I will try my best not to write any more verses – “for her” or for any goddam body, thing, or particle for that matter.

Inflations? What Inflation?

2009-07-11T21:38:00.000-07:00

Here is a snapshot of recent divergence in consumer prices and wholesale prices. The spread is now at 1018 basis points (for urban, for rural staggering 1176). The correlations all time lows. With May 14 6.07 Note trading at 6.34%, the real yield in the economy can be anything between 7.89% to -3.87%

Any central bank, which is serious about inflation targeting, should put their money where the mouth is. Whatever happened to the 2004 proposal of Capital Indexed Bond (inflation indexed). Ideally I would like to have these linked to CPI. For institutions and even individual, it is much easier to hedge wholesale prices – in commodities market - than consumer prices. And while I am at it, it would be nice to have the savings accounts interest rates floored at inflation too.

Voting for Change – Try Dating a Supermodel!

2009-03-28T03:49:00.000-07:00

The election time again around the corner. All these years we have been tormented by corrupt politicians, strategically located potholes etc, and yet somehow could not leverage our power to vote and bring about the right changes, for the last 62 years and 16 general elections. Until of course a company selling tea suddenly woke up and started “waking” us up vehemently as well. So this time you will vote, and this time you will make difference. Right? Wrong!

As a responsible, law abiding citizen of the country exercising you franchise to protect and uphold the largest democracy on earth, your vote …. simply does not matter. At least mathematically! Here is why.

Suppose you are a voter in Mumbai. As per last general election data, on an average, there will be 8 million voters in your constituency. You have made up you mind to vote for candidate X. Should you vote her/ him? It depends. If you want X to win, and if X wins eventually with a margin of say 100,000 votes, did your vote matter? Not at all. X would have won anyway, whether you voted or not. The same is true for a margin of 1000 and 100 and even 2! Unless X lost by 1 vote, because you chose to stay home, it does not matter!

Now, it indeed may happen that your vote was the decider – there is a tie if you don’t vote. What are the odds? For 8 million votes to tie perfectly, exactly half, or 4 million should vote for X. Suppose all voters have a 50-50 chance of voting for or against X. Then the probability that your vote does matter is 1 in 3546! That’s roughly the odds of dying from some natural disaster. If you think that’s not bad at all, the fact is seldom the voters in your constituency will be split 50-50 exactly. There would be a bias towards or against X. And any such bias, however tiny, drives the odds of you vote being useful down to an alarmingly miniscule number. For example, if the voters are split 50.05 to 49.95 (or vice versa), the odds your vote will matter is 1 in 200,000 – 2 times unlikely than you dating a super model!

And this is just about choosing the right candidate in your constituency. You can imagine the impact of your vote in deciding the government. I tried – no calculator would give me a single significant digit after zero!

Biz Cycles, Crash Etc: A Numerical Experiment

2009-03-07T22:07:00.000-08:00

We are in a troubled time. It is officially recession in most economies that matter, unofficially in the rest (1). Recessions, depressions etc were something supposed to be the subject of nostalgic novels or award winning movies. But when you realize that you are actually going through the second such phase in the short period of time since you first convince people to pay for your work – it makes you wonder. And it inspires you to dig a little deeper.

First, of course, we need a model! Since the objective is to “understand”, rather than “fit” or “predict” market crashes, good to start with a micro model, not a statistical one. And since I don’t get paid for all this, let’s keep things simple. At a basic level, market consists of individuals, acting in pair, exchanging information that produces collective effects (mostly like “stocks markets today were negative on global cues” these days). One quick way to model this kind of phenomenon is the Ising Model (2). Basically, you model the interactions of all the agents in the economy. Each agent has a view – “buy” or “sell” – that can be captured in a binary state variable. Let’s call it the “spin” number of the agent (3). Each possible combination of these state variables of all agents gives rise to a distinct state of the market as a whole. The orientation of agent i at a given time depends on his/ her interactions with other agents and external influences, if any. Let’s call this the “Local Field”. So mathematically we can write, the local field at time ‘t+1’ is given by

I_i (t + 1) = \sum\limits_j {A_{ij} \sigma _j (t)}  + h_i (t)

Where sigma is the spin variable and ‘h’ is the external influence, and matrix ‘A’ captures the interaction strengths. Basically, in this framework, ‘I’ gives an estimate of the probability ‘p’ that the spin variable at time ‘t+1’ would be ‘1’ (“buy”, of course for “sell” that would be ‘1-p’. We don’t consider the “hold” state at all!).

This is a quick way to model, but quite hard to solve! One approach is to assume all agents are similar to each others, and take average approximations (4). This is like attempting to model the economic activities like the temperature or pressure of a gas in a container. But this can give us some insights. From this model, the asset price dynamics is given by the average orientation (the average gap in demand and supply)

x(t) = N^{ - 1} \sum {\sigma _i (t)}

This ‘x’ would depend on ‘I’, which in turn depends on the other parameters in the model. The parameter ‘A’ captures how agents influence each other. The average value of ‘A’, if positive, shows agents follow each other’s decisions (markets have trends), and opposite if negative (5). Also to include the external influences, we can model the parameter ‘h’ the way we want.

Here are some results of numerical experiments, which assumes a trending markets to specify ‘A’, and noisy inputs plus a very weak periodic excitation to model the external environments (periodic components can be thought of central banks signalling their policies. These often have a strong periodicity, and many folks make money with trading algos based on this idea). The figures below show evolution of stock returns and price for a single run

This captures some interesting phenomenon. There are periods when the returns are noisy about some positive values, and some other time when it is the reverse. The bulls and the bears! This model models market reversals naturally!

References: 1. Krawiecki, Holyst, Physica A (2003), 2. Gammaitoni, Hanggi, Jung, Marchesoni - Review of Modern Physics (1998)

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1. The official definition of recession is “blah blah, GDP flunked last 2 quarters, blah blah…”. The unofficial definition is: “when you future bonuses and salaries are at risk as there is a high probability it has already been given to someone who sold mortgages or whatever and started this trouble”.
2. http://en.wikipedia.org/wiki/Ising_model.
3. Notice when we try to model crash, we make all people responsible in the model, unlike, say when modelling a stock to profit from mis-pricing! I wonder why!
4. Mean field approximation – more technically.
5. Technically, the system is Ferro-magnetic for A >0, Anti-ferro-magnetic, for A <0,and Boring for A = 0

Romance Etc: A Linear Dynamic Model Approach (Part-II)

2008-11-14T12:02:00.000-08:00

The simple linear system of love can have a variety of outcomes. And it all depend upon not on the individual parameters, but on that love chemistry (also, eigenvalues, mathematically).

If eigenvalues are real, it can be a saddle if both are of different signs. Or it can be a node (attractor if both eigenvalues are negative or unstable if both are positive). If eigenvalues are complex, it will be a focus (attractor if a + d > 0, repellor otherwise).

Attractor focus: the proverbial eternal love-hate relationship when a lover falls for a nerd (bc is negative). The first impression (initial condition) would only determine the intensity (amplitude). How quickly the love turns to hate (time period) would be determined by their chemistry. In the sad case of a = d = 0 and -b = c > 0, the two would manage to achieve simultaneous love only a quarter of their time spend together.

Repellor Focus: with time love will grow to greater love, and hate will turn in to total apathy. The key is the first impression here. If you are not sure about your lover’s characteristic, the best strategy for happily ever after is to create as good an impression possible, and express your mild initial disapproval for him/ her.

Attractor node: This is a hopeless case. The love that you have will die down eventually, and hate will turn in to indifference. So stop caring now!

Repellor node: Similar to repellor focus, but your happily ever after strategy is slightly different – along with a good first impression, start encouraging him/ her as well.

Saddle: Unlike any other cases, it is very unlikely that you two would end up being indifferent to each other. The happily ever after strategy here is to encourage you lover a lot. Do not worry too much about your first impression on him/ her. Keep chasing the object of your affection till you win her/ him over!

So what are the key lessons here?

Lesseon 1: If you know yourself and your lover thoroughly (all parameters are known), you have a solid idea how to proceed in you love life

Lesson 2: If you do not know the individual parameters, but somehow can guess the overall chemistry, you have quite robust strategies to deal your case

Lesson 3: You know nothing! The difficult case. Statistics can help here. We can assume most people would respond positively to love shown towards them ( b >0 and c >0). Then statistically in over 60% of cases you can expect a saddle situation. Almost 30% would fall under the focus cases (15% each attractor and repellor). The rest are nodes (again divided equally between attractor and repellor).

So if you see in 60% of movies, the boy is chasing the girl, making a fool of himself, you know that the hero's act is totally rational (in a Nash sense). And bollywood is just being statistically correct!

Romance in Bollywood: A Linear Dynamic Model Approach (Part-I)

2008-10-26T10:21:00.001-07:00

Romance has always been a major theme in Bollywood movies. Since it’s beginning in early 19thcentury, it’s been a never-ending story of protagonists falling in love, and the dynamics and evolution of the subsequent romance. Almost 50% of Bollywood movies are explicitly about love and romance, while the rest touch upon this theme in some way or other (source: imdb).

This raises the question, then, how such a singularity in themes has been able to enthrall the audiences more or less consistently for almost a century. One of the possible explanations, which is general in nature and mathematically sound, is as follows. Consider that you are about to watch a movie and more or less know that its genre is romance. However, you are never sure how this particular romance would unfold on screen. It is this dynamics and evolution of that love/ romance that makes all the difference.

Mathematically, we can model love as a system of coupled differential equations (1). In its simples form, we can represent the love equation between our leading characters Raj and Simran as a system of coupled, linear, non-stochastic 1st order differential equation in two variables as follows:

dR/dt = aR + bS, dS/dt = cR + dS,

Here R represents Raj’s love (or hate, depending on the sign) for Simran and S is the same for Simran. The parameters determine individual romantic style. The parameter ‘a’ describes how Raj is encouraged by his own feelings (behavioural inertial) and ‘b’ describes how his feeling is affected by Simran’s (influence function). This gives an array of possible style for Raj the lover:

1. Eager Romeo: a>0, b>0, (Raj is encouraged by his feeling as well as Simran’s)

2. Narcissist nerd: a>0, b<0,(Raj is encouraged by his feeling but retreats from Simran’s)

3. Cautious lover: a<0,b>0, (Raj retreats from his own feelings but encouraged by Simran's)

4. Hermit: a<0,b<0,(Raj hopelessly retreats from his as well as Simran's feelings)

This, coupled with Simran’s own romantic style leaves us with 16 distinct combinations. Consider this, along with the different possible initial conditions, and you may be beginning to appreciate that even this simple system can have an amazing range of solutions.

1. Strogatz, S.H., (1994): Nonlinear dynamics and chaos etc.

Singur - A case of Irony

2008-08-31T12:21:00.000-07:00

Somehow I avoided writing about Singur for a long time (it’s been almost 3 years now?). But there are times when it is hard not to take a stance.

So we all know there is some stuff going on in there for a while. We know the problems too, thanks to extensive media coverage. Or do we? There are three versions, the state version – a case of conspiracy against West Bengal’s much touted industrial revitalization. The TMC version – the oppressive state machinery is robbing land from farmers against there consent. The Tata version – a multi-crore project on the verge of going bust. There should another version too, at least logically, the farmers’. Well! I am not sure what it is.

So let’s refresh the facts. According to Government records, the landowners of 952 of the 997 acres required have given consent letters; and three-quarters of the 12,000 persons involved, including sharecroppers, have collected compensation totalling Rs.131.49 Crore (that’s roughly Rs. 341 per sq m, a bit low than you would expect? But that’s another story). TMC and some independent reports say otherwise, mostly about the consent part. So what if it was without consent (even as per government records). Was it illegal? Heck No. The Land Acquisition Act (1894! Yes, it is that old) gives Eminent Domain power to the state, to acquire any land, without consent but with compensation if necessary for public good. Constitution were amended by Nehru’s socialist government (replacing Article 31 with 31 a, b and c) making provision for acquisition of any land though legislation, even if it is in direct conflict with fundamental rights. It was primarily meant for agrarian reforms, apart from land for public utility. Time has come a full circle! To make matter worse, the Land Acquisition Act makes sale of agricultural land for non-agricultural purpose illegal, so a corporate setting up a plant cannot cut a deal directly with the farmers, legally. Ironically the "fight" in Singur may be "against capitalism", but it is also for two basic pillars of Capitalism, the right of private property and the right of mutual contract. Singur has been a case of irony, sometime amusing, mostly sad.

And in the midst of legality and political battle, what is the India Inc's reaction? Last week, Mukesh Ambani said “a fear psychosis is being created to slow down certain projects of national importance." I expect nothing deeper! Narayana Murthy was much balanced with his comment in saying it was disturbing for progressive Indians. Indeed, in more ways than I think he meant. But one would expect a more responsible reaction from the house of Tata than a long silence followed by a threat to pull out! The Tatas and their famed social responsibility! In case readers are not aware, the Jindals are setting up a 10-million-tonne steel plant very nearby, at Salboni at a cost of Rs 35,000 Crore, with a massive land acquisition (4800 acres, compared to 997 at Singur), without any hitch so far. It had announced a unique land-for-shares package! There are still hopes!

Singur has happened in West Bengal. Unfortunate for a state trying to regain its past glory of industrialization. But it could have happened anywhere, where the state is densely populated and most lands are fertile. Without being prescriptive, these are few thoughts to mull over. We have seen Narmada Bachao, Singur, Nandi Gram, Posco, and many more are waiting to happen.

Washing Away Your Sins

2008-08-26T12:32:00.000-07:00

"And now [Ananias says, (v. 12)] why do you [Paul] delay? Arise, and be [water] baptized, and wash away your sins, calling on His name.' "(1)

Most religions preach that sins are something that you are better be without (well, it is a defining statement of sorts). And most of them seek salvation by “washing” it away. As a matter of fact, religious washing of various body parts have been an integral part of many religions, like hand (Judaism), Foot (Christians), entire body (Islam and Hinduism)(2). This focus of physical cleansing is deep-rooted in religious belief system. And this surprising pervasiveness of these cleansing rituals suggests(3) a psychosomatic association between physical cleanliness and moral purity. Studies conducted(4) in exploring this possibility established that there is indeed an associative relationship between physical and moral purity. One interesting finding from these studies is what is described as “The Macbeth Effect” – that is, a threat to/ lack of moral purity induces the need to clean oneself. Physical cleanliness helps assuage the distressing effects past unethical/ immoral behaviour in a statistically significant measure. Therefore, the quantum of minutes and gallons spent in innocuous daily cleansing, seemingly innocent and benign, might in reality be used for an unbiased estimate for moral purity/ or lack of it. (In this simple framework, moral purity varies inversely proportional with time and gallons spent, hence the author suggests the SI unit for morality be accepted as sec-1.litre-1), for lack of any suitable alternatives).

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1. The quote from bible does not represent any bias, this is the 1st relevant link Google threw up
2. Readers are welcome to extend the studies of cleanliness in other aspects in these religions and any others.
3. This also may suggest the area of body parts covered in these rituals are directly proportional to natural ambient temperature in places where these religions originated and are practised most. Details studies would be required to prove any such hypotheses
4. Chen-Bo Z. and Katie L., “Washing Away Your Sins: Threatened Morality and Physical Cleansing,” Science, vol. 313, September 8, 2006, pp. 1451–2

UPA Trust Vote: The Mathematics of Horse Trading

2008-07-19T05:20:00.000-07:00

So, finally the Left turned red with fury, and the UPA government is facing a floor test next week. In the worst possible time, some might say. But the time is sure the best for a few - the swingers and independent MPs, who are suddenly in demand. Getting out of lull and stupor, (and in some cases, jails), they are right in the middle of the hard bargaining before the D-day.

These are the times, when it surprises us how much powerful these independents et all can be in this kind of situations. So why not measure it. A good way to start is to measure the ability of an MP to influence the outcome of the motion. There is an entire literature on voting power indices that enables us to do so. There are number of ways too, depending on complexities, the voting game structures and so on. But the basics are more or less similar. For a voting game with n players, the power index for player i is the probability of that player swinging a coalition to victory, i.e., she casts the winning vote.

We need to get some data before we can come up with numbers for the present. A recent Times of India story reported that the UPA government has a confirmed 261 MPs in its favour, and 259 against it. 22 are undecided, while 12 MPs of small parties and 4 independents are ready to swing in any directions. Given the fact that the needed majority is 271, and UPA has secured already 261, so all these 38 Mps will take part in a voting game, with a winning quota of 10 (=271-261). We can ignore the 520 (261+259) decided MPs, as their a priori probability to swing is zero.

Based on these, if we run a simple power index calculation (assuming random formation of coalition and equal probability to swing), we see MPs of the big parties have 0 power (they are already decided), and the independents have the highest degree of power. That quite explains the horse trading that usually goes on in these situations

A Cannonical Post-Modernist Interpretation Of Sokal On Scientific Phenomenology

2007-12-22T10:18:00.000-08:00

This is the best hoax abstract for hard-science papers I have ever seen. It is generated from a random sequence of 40 phrases, chosen from a word processing dictionary. It was a part of an experiment on nonsense tolerance of science journals. The abstract was accepted for publication!

Title: Distributed Multiprogramming System for Pen Selectors with Error Probability

Extended Abstract: Controllable connections for input/output supervisor channel adapters with line frequency scanning are often used for unavailable time. This paper describes the use of disturbance voltage with equivalent junction temperature as OP-trade-in for zone packed print.

The main advantage over previous methods are the data transmission lines and routine conversion. Addressing, relative to preferred characters, uses a magnetic disk machine to enable incremental programming. The identifier transmission group correlates to non transmitting typewriters.

Statistically spoken, manufacturing control and messages are mixed so that the primary supervisor may be located in different physical records. A collection of data is defined as the unit of transfer between the program and format management.

The theory is based on arithmetic overflow, qualified names, and axial lead resistors. Using the Sparbuchdrucker-theorem [1] modified by ledger adjustment sales in combination with a secondary operator control station allows the number of single machines to roll over the keyboard. The basic origin coordinates ensure a diminished radix complement. In the future this generalized sequential access method will be the source for forced control field lines.

References: [1] Fachausdrücke der Informationsverarbeitung, IBM Deutschland GmbH, 1985.

Fooled Again, This Time by Swans

2007-10-28T11:14:00.000-07:00

Recently, read The Black Swan by NNT (remember Fooled by Randomness?). A nice read, as expected of NNT, some flashes of original thoughts (the empiricist in him, I guess), pleasantly autobiographical (the essayist) and splendidly full of arrogance (the no-nonsense mathematical trader, of course). A quick summary – it is basically on behavioural ornithology and cross-species relationship between swans and humans. White swans are good, alive or roasted, as they are predictable and normally (in a Gaussian sense!) delicious. It is the black swans, their darker cousins that you should worry about, if you care! Originally spotted in Australia, everything about them is unpredictable, their sense of space-time, their shapes, sizes and even the way they taste. A few of them, moreover, are very fragile and have scales instead of fathers; they are known as grey swans (these features are known as fractal or scalable in the learned circle). So for love of Mandelbrott’s holy beard, hunt for swans and their allies, the evil followers of the Gaussian statistics. And don’t forget to join the noble group of Skeptical Empiricists (and thus ignore everything I say here, including the last remark, recursively, till your brain become soggy and resemble a bowl of tapioca).

If you are interested in the world of finance, philosophy, neuroscience, mathematics, statistics or any other discipline with names ending in -logy/ phy/tics, or have some unplanned weekends, probably you will enjoy this book. If you are suffering from lumber cortex damage, you will surely do!

Rationality! Whoa! Let's Make Money

2007-03-30T23:10:00.000-07:00

This is unbelievable. It happened last time, it happened this time as well. Every time YVR announces rate hikes, the call money rates shoots through the ceiling. 80% after an expected rate hikes. Perhaps the basis of rational expectation – that economic agents are rational – is not that strong after all. And if you are the kind of people who like to spot money machines everywhere, then I guess this half yearly rate hikes presents an excellent opportunity. Ever heard of call money rates arbitrage … LOL. It seems there are plenty of fools out there. Long live YVR, long live BSB, long live inflation

BAAP of all SOP

2007-02-26T01:33:00.000-08:00

The sun is bright, the sky is azure, and the air is warm and heavy with fragrance of daffodils and peaches or whatever, - the unmistakable signs of that time of the year! Yes, it is the placement season again, across b-school campuses. It is the time when you look back and see what you have done - to prepare your CV. It is the time when you look forward and figure out what you want to do in life – your statement of purpose. Below is a sample SOP I chanced upon, courtesy my friend AHM. I bet its authenticity, conviction and veracity will move you!

“My purpose is fleeting as beauty, solemn as winter, higher than the stars and deeper than the pit of lies you vermin dig to bury your egregious follies and your laughable inadequacies, and construct atop your white elephants, your epitomes of futility, your sacred pagan offerings. It is I! Who shall ride the gilded stallion bearing the deliverance of a fiery swathe of purifying purpose that will smite your bodies and consecrate your undeserving souls. Beware, puny little maggot-men, hide behind your little bastions, the bricks still red with the toil and suffering of countless back-office cretins, wretched assistants and the anemic data entry operators. Beware, as the toll of judgment reaches your shivering ears with a thundering crescendo that will recount the exploits of those who have adorned this armor before me. And the scythe I bear shall deliver this judgment, swift and true.

Die, you foulness!
Die!
Die!“

Huh!

When to Get Married!

2007-02-20T03:11:00.000-08:00

Are you thinking about getting married? If yes then STOP NOW! Stop for a moment before you take the leap. Is it the right time to get married? Should you get married now, or a year after? Is it already too late or too early? Relax my friend and read on. There is many a question about the institution called marriage. Some are strategic, like WHAT it is anyway and WHY it is at all? Then there are operational issues like HOW. But then this is not a philosophical blog, nor do I intend to act like the friendly agony uncle in the Saturday personal column. Here is an attempt to answer the tactical question of WHEN – and it is scientifically based and statistically proven way to get around!

Marriage can be thought of as an option. We can assume that after you attend the legal age, your search for life partner begins, and after a certain age you give up on it. You constantly evaluate every prospective partner you meet. You have a particular idea about what is BEST for you and as you are searching, the probability that you find the BEST possible partner keeps changing constantly. Therefore marriage can be thought of as an option on this probability as the underlying. And it is an American option, you can exercise (get married!) any time. Therefore to determine the perfect time to get married is to determine the perfect time to exercise this American option. However, realistically, this option is not a plain vanilla American. As you grow old the probability of finding the perfect match first increases and then decreases (in technical term, the “mu” of the stochastic model for “probability” is a function of time). In addition, as you grow older, the variability of the kind of people you meet also decreases (volatility is also a function of time). And Bingo! We’ve got a complex path dependent American option. This kind of option can be easily valued through a Monte Carlo simulation, with realistic values for the parameters. The perfect timing for exercise will be when the option value reaches the maximum and takes a nose dive. And the figure below shows evaluation of the option for a particular set of parameters – this shows the perfect age for marriage is half past your 30th B’day

So now you know!

Optionality in B-School Placement Processes

2007-01-02T22:24:00.000-08:00

B-Schools placement processes are different from their technical counterparts. In B-schools, you have some optionality, depending on the level of Sensex and NYMEX oil prices and so on. You can pick and choose your offers, weigh them against each other, and pick the best for you. In engineering schools, you got a job and you are out. Make way for the next guy in queue. While this is better in some sense, it is not as good as it sounds. Firstly, whenever you have an option you have to make a decision. If things go wrong, you cannot blame the system. The onus is on you.

But this is a personal problem. You can tackle with a number of things like complex algorithms, philosophy or self-help books. The second problem, related to what happens when you change the optionality of the process, is more critical. This requires a collective decision and hence more difficult to tackle. Reaching a decision unanimously in a large group is always tough, and more so if the group happens to consists of would-be MBAs. Here is a solution.

Assume the world is risk neutral and value the prevailing option. Then value the new option under same set of assumption. If the difference is positive pay the difference to your placecom folks. If the difference is negative, placecom pays. And everyone lives happily ever after. The valuations will be different for different persons. But if the changes in rules change the optionality such that the welfare goes up for the batch as a whole, placecom makes a net profit. And they deserve it. Else they pay for it.

Regarding the methods for valuation: in most cases the option will be a path dependent exotic one. You can be at the same state, but with different optionality, depending on you path (more precisely, how many offers you rejected). So construct a binary tree according to the rules. (You get the 1st job or don’t, then the next job or don’t and so on). Calculate the probability of getting a job based on you CV data and others. And the pay-off, if the option exercised, based on the difference between the NPV of the job that you have and the job you must reject at any node. It is simple you see!

Why Anonymous Gossips Are Worthless

2006-08-04T02:18:00.001-07:00

(continued from the last post)

The dynamics of reputation signaling depend on whether it is public or private, on whether the agents are known or anonymous, and on relative strength of the tie between evaluator and subject and between evaluator and receiver. But one thing is certain, if society is not anonymous, usually reputation costs are heavy. Then everyone tries to protect his reputation, while trying to pass on or manipulate others.

Mostly, while gossiping, we want to influence a collective decision about something or someone. This is known as the indirect impact gossip model. In this case, if the agents are objective, they pass on their best estimate of truth. But what if some are malicious (this is a rather judgmental wording, it signifies someone who distort the true signal for whatever incentive)? Suppose the gossip flows from A to C via B. If the gossip is trustworthy, the objective types will pass on the gossips, despite the possibility that the malicious type can distort the signal. However if there are too many malicious types in the chain, objective types will become suspicious of the trustworthiness of the signal after a while and would prefer to remain silent. As result the malicious type will also choose to remain silent, otherwise it will reveal their identity. This breaks down the chain. So in a society with identity (no anonymity), only trustworthy gossips will survive, although they may be tinged. Hence the proverb – “if there is a smoke, there is a fire”. And this cost of reputation guides the society to the accepted norms.

But what happens when there is anonymity? Like online posting sites? Or orkut community with anonymous postings? (It is more complex than a chain model, it rather resembles a network and networks are mathematically difficult to solve).Here we have to consider why people gossip. The objective type gossip because of the benefit they get from the reputation of being objective and correct. So if a forum is nameless, they loose their incentive to gossip anymore. The malicious types gossip because they have other personal incentives and are deterred by the reputation costs in doing so in public. Anonymous forum definitely removes the cost of reputation; therefore malicious agents can participate without divulging their malicious identity to others. And the objectives types will choose remain silent and will not participate. So it leads us to conclude all anonymous gossips are malicious.

The Theory of Gossips

2006-08-04T02:15:00.001-07:00

Are you the type who cannot live without gossips? Or do think gossips are disgusting social interactions among species resembling tapeworms? Think twice! It is much more than either. It is one of the mechanisms that help social evolution and natural selection! How? Let’s take an example.

Imagine a seller who is driven by his personal pay-offs. Therefore there is a strong incentive for him to cheat his buyers and maximize his utility (leveraging information asymmetry which is almost omnipresent). However, he will suffer in the long run following this strategy, as buyers will not go back to him anymore (if your corner store cheats you regularly, you must have either negative intelligence or extreme faith in humanity to go back to him, and such types are not counted by economists). That’s ok, but what if she expects only one-time transaction with individual buyers. Your wedding planner normally doesn’t expect you to bring business to her every year. So can she cheat you without consequence? Here pitches in the theory of reputation. Conventional signals are kept honest if there is a cost for being deceptive. One way to impose such cost in a community is by reputation. And the communication of this signal is often termed as gossips. If there are believable gossips that the food was excellent at the party, the wedding planner is likely to get more business in future, though not from you (hopefully). If the rumor is about cheap stale wines, it will damage her reputation.

However gossiping is a complex game. When gossiping, it is reputation that people want to signal about, both theirs and others. If you have a good reputation, you want this to be known; if you do not, you want to hide this. How do people signal reputation? What makes these signals (gossips) reliable? Can someone bias the gossips purposefully and how? We will try to find answers to these questions in the next post.

The Quintessential Bachelor: An Obituary

2006-05-24T23:05:00.000-07:00

“Do you have a lighter?”
It was obvious as I had it still in my hand. So I obliged.
“You have guts man … smoking right here”, he said.
We were standing right out the doorway of the officer’s mess at IAT, Pune. And suddenly I noticed senior officers were hurrying up and down the corridor, throwing evil glances at our collective audacity. We went towards the garden. That was when I first met him. A bright brain upon a small frame.

Opinions about him used to vary widely among the guys – he was responsible to some, irresponsible to others, a wonderful biker, had a tongue-in-cheek, in-your-face sense of humor. And, oh boy, he was as smart as the devil himself. Head used to roll when he was in his one of those acerbic moods. Always dependable for a company for couple of shots after a hard day (or not so hard). Always fearless - except once when he got shit-scared sitting as my pillion right in the dreaded Bangalore traffic. It was reasonable though, I did not know how to ride a bike back then. An avid smoker, I never seen him smoking in front any of the fairer sex.

Talking of the fairer sex, he was the friend, philosopher and guide for most of the girls at IAT and then this continued in Bangalore as well. But he never pursued anyone further (or is it the other way round?). I explain it away that girls don’t like their boyfriends to be as smart. Of course, the antithesis would be that smart guys are rarely interested in lesser things like girls. Whatever, the effect was that we were mostly free for each other, except for trivial things like synthetic aperture radars, or realtime missile tracking or chip warning of spiral bevel gear meshes. And that, of course, meant a couple of regulars at the DROMI West End after a hard day, men chow soups and schezwan chickens at The Mandarin, followed by magai paan, and not-so-occasional movies at crazy times. In short we had a really good time.

Come this 28th this quintessential bachelor will be no more. And he will be missed. Happy wedding my dear friend and have a wonderful married life. They say that Tel Aviv is a nice city.

How Opal Mehta Got A Summer Project - And Then Got Pissed and Wild

2006-05-19T00:50:00.000-07:00

1. An enthusiastic summer trainee at a renowned IT company is given a project that takes 6 months to finish. His considerate mentor, however, understands that and asks him to prepare only the project report instead. The trainee, confused as he is normally, retorts how he is to make a project report without carrying out the project, and starts nagging him a lot and asks for some guidance. To avoid all the hitches and hassles, once and for all, the mentor gives him the report itself he is supposed to submit. Dumbstruck, with surprise and hidden joy, the trainee start working on his “project” – formatting a report he did not make of a project he did not do. And everyone lives happily ever after.

2. Another super performer trainee completes his 2nd summer project in 1 month flat! Exasperated and determined to stymie his progress, his mentor give him another one – this time much tougher – to develop a framework of designing mission and vision statements of the organization. A job that stumps even the top management more often than not. Alas, little did she (the mentor) know about his (the trainee) capability. Unaware and unperturbed why he should design such a system (ever heard of an organization having a framework for designing vision – so that they can match it with the ever-changing stock price with same speed and professionalism!), he develops a framework based on the Dilbert mission statement generator, available @ Dilbert official website under the Game tab, (on advice from yours truly) and submits. It is expected to be highly appreciated.

Dear fellow summer trainees, all the above anecdotes are true. Inspired by this, I thought of compiling similar bizarre experiences of management trainees this summer and make a souvenir for the summer of 2006. So if you have any similar experiences of yourself or any other trainee you know from any B-School, please chip in with your bytes. Any incident when you got mad, got wild, got pissed of, yelled or chuckeld at your mentor or wish you had a Winchester, jot them down and and add to the comment

Objectives:

1. To share a good mannered laugh and a few blank stares of absurdity
2. To have a souvenir of the summer of 2006 - your posterity has a right to know
3. To have evidence to show how “kewl” your project was (professional, ground-breaking etc) as compared to others (bizarre, outrageous etc) in your final placement
4. To break the freefall of SENSEX, to stop Bush from attacking Tehran, to help the cause of the Managers without Mahogany Foundation and myriads others you can think of

The Rules

1. There is no money involved. It is a charitable effort for the cause of hundreds of bright young minds suffering from summer heat, canned air and the 9 to 5 syndrome
2. Your contribution must be bizarre, humorous, outrageous or any combination thereof. For a complete list of related adjectives, refer to http://www.thesaurus.com/
3. Remember, we are not laughing at some one – persons or organizations (alive, dead or incorporated). Instead, we are trying to laugh with everyone. So desist from using proper noun. However irrelevant and innocent proper nouns like “The Ganges”, “The Himalayas” or “Mallika Sherawat” are perfectly acceptable.
4. If in doubt, make your own rule, without violating the above.

Reservation: On The Turning Away

2006-05-17T01:27:00.000-07:00

The first known scientific study to evaluate the job reservation system (Borooah, V.K. (Univ. of Ulster), Dubey, A. (North-Eastern Hill Univ.), Iyer, S. (Univ. of Cambridge), 2005) shows that the effectiveness of job reservation in India has been poor. The true gain from reservation in job for SC candidates has been only 5%. It also concludes that a small improvement in job-related attribute will deliver significant employment gain.

The main idea of reservation was economic upliftment, but the mechanism was designed on caste, which is its first fallacy. Secondly, it contradicts the concept of economic freedom of choice and efficiency (the so called “merit” issue). Thirdly, any such design should have a defined time period, and it seems no government has the audacity of removing reservation in future, if it is approved today. Reservation today is against the advantage of both a deserving reserved candidate (for the discrimination she faces in the job market/ promotions) and for unreserved candidates.

The intended benefits of reservation have been limited to a handful “advanced” categories of the reserved castes. The effect is similar for quotas in premier schools (IITs/ IIMs). Moreover providing primary education for free is often less costly than providing reservation in premier schools and jobs. A student enjoying a concession at IIT can provide for a number of primary students. Also job/ seat lying vacant for lack of candidates means loss of tax revenues/ fees for government. (Recently it has been reported only 15% reserved seats are filled each year at IIMs). It is time now to do a nation-wide evaluation to see its efficacy and come up with an alternative like free primary education and improvement of infrastructure so that deprived children are not busy earning their breads, instead of studying. we can not turn away from the reality, not for ever

Economics of Reservations

2006-05-13T11:56:00.000-07:00

We all want a society with maximum good for maximum number of people. That’s publicly, in private we all tend to follow our own benefit (you never said to your neighbor – “hey Mac, would you like to have my pink Cadillac, I already have a blue one and a purple one”). And that is fact. We all think and act according to our own interest. Now suppose you are the king of a country where people value annual cruise holiday highly, and get violent if denied. Unfortunately, few can afford it. To maintain the peace and harmony, the king decrees whoever is taking a cruise holiday must pay for his less privileged neighbor as well and take him/her along. What will be the reaction? This will first lead the marginal holidayers, who have just enough to pay for themselves and work hard to earn it, declare bankruptcy and tow along with their rich neighbor. They have now no incentive to work hard when they can get it for free. So the total cost for the next band of holidayers will increase, as does the number of free-riders, and they will cease to afford it anymore soon. In this way, finally everyone will be demanding the holiday but no one ready to pay for it. The king will become pauper to provide for holiday package for the entire kingdom. What is happening here is the decree is going against the individual incentives of the people who can afford, thus distorting their incentive to earn it. This is what happens when you continuously tax people to provide goods for others (transfer policy in economic terms).

A better way is to tax a lump sum amount from the people who can afford once and for all. And give it to the have-nots. Now they have the resource themselves and can use it as they wish for the rest of their lives (not everyone may like to go for cruise, some may like holiday in Swiss Alps instead). And there is no distortion of incentive as the tax is one time only. People will work harder to make up for the loss. Those who cannot afford have just been given a “head-start” in the race to holiday bliss, so that everyone finishes at the same time. Everyone lives happily ever after.

This is the basis for all reservation policies as well, I guess. Give those who missed out much of good life, some means to catch up. But two things are most important to remember.

1. This giving business must be one-time affair, or at least time-bound
2. Give them the resource that is compatible with competition for resource allocation in the society, this breeds efficiency.

And here lies the reason to doubt the Indian version of this policy. Firstly, the policy seems to last forever, no political party has the courage or audacity to discontinue it, I guess. This defeats the whole cause of the one time bounty. Secondly, while it is true that the targeted people missed much in life, the resource distribution methodology is not compatible with competition for resource distribution in the society that results in the most efficient selection. Instead of by-passing competition (be a job or a seat in IIT/ IIM), they should be given free education and sponsored preparation so that they can fight it out for themselves and be proud of their achievement. And the society also does not loose out efficiency at the same time.

Cluster One

2006-03-11T12:24:00.000-08:00

So what you wanna be?

If you prefer simplicity, how about a tiny little electric purple quark particle spinning and tunneling thru space-time wormhole, beyond the event-horizon

Or suppose you posses the extraordinary power of transformation … whenever it is too hot, you just evaporate and turn in to a cloud. You float around with the wind … if you are happy you are a nice little translucent Cirrus. When you are angry or sad, you become a big black Cumulonimbus. Then you rain upon your favourite spot on earth and turn in to yourself again

How about one fine morning you turn in to a quagga and hitch a ride to Serengeti. Then you can spend the rest of your life migrating with the wildbeests

If deep space fascinates you, imagine yourself to be on a mission to the giant spiral NGC 224 Andromeda galaxy. You are the sole astronaut on a 2.5 million light year travel through the Milky Way and beyond, never to come back home

Or how about the the job the crazy little boy in the book “The Catcher in the Rye” craved for … you are the lone guard in a lush green rye field where a flock of merry little children come to play. Whenever anyone goes dangerously near to the edge cliff you shove them back to safety

Run, rabbit run.
Dig that hole, forget the sun,
And when at last the work is done
Don't sit down it's time to dig another one.
For long you live and high you fly
But only if you ride the tide
And balanced on the biggest wave
You race towards an early grave.

CRAPS - CAPM Rationalized Advanced Pay-package System

2006-02-27T05:27:00.000-08:00

There is a strong division among the students in the campus about their preference and liking for various specializations, as we PGP21s approach towards the second year course selection. But the enmity reaches new height with the HR group and the FIN group; each seeing the other eyeball to eyeball. I personally see it as totally irrational, because there is no need, and because if they patch up and come together, there is money to be made. There is a tremendous scope of joint application of HR and FIN knowledge out there. Salary determination, for example, is just one of them.
Salary determination is a traditional problem with all companies. This involves too much bargaining with the HR people and the employees and the unions, resulting in waste of time, effort and donuts. The trouble with this problem is that in most cases, arguments for and against are based on either philosophy (Marxism or Murphy’s Law), or on the discretion of equally clueless consultants. There is no universally acceptable theory to solve this problem in an objective way. This presents and excellent opportunity for the marriage of FIN and HR. let us see how!
We all know how HR people tout their employees as asset. If you (and the employees of course) accept this fact, then the determination of fair salary becomes a cakewalk with a little help of finance. If employees are the asset, the salary becomes their price – and considerable portion of finance is devoted to asset pricing in an objective way. In this scholarly work I have tried to exploit the venerable CAPM theory to solve the problem in three simple stages in a logical manner with enough jargons thrown in for it to sound like a theory.
The central assumption in the theory (call it CRAPS for CAPM Rationalized Advanced Pay-package System, if you may) is that – 1) market is competitive and 2) to maximize the employee output, a firm should incentivize its employees by linking their payment with their performance (you must be a hardcore capitalist “class enemy” if you don’t hike the salaries of you employees in good times and must be a fool if you don’t respond similarly when the company goofs up financially). Also the payment must be related to some market benchmark (because if the market is booming and you still pay peanuts while the employer two blocks down is distributing blank checks for salary, you will only get monkeys. And controlled laboratory tests have proven that monkeys don’t make high performing employees in most cases. I was also told employing monkeys to do boring, monotonous activities that we call jobs, falls under the purview of Prevention of Cruelty towards Animals people. Anyway, this article is not about employment opportunities for monkeys).
The theory is represented, as in the original theory, in the following relation

Re = RF + β (RM - RF)
In the above equation Re represents expected return, RF represent risk free return and RM represents the market return. Please note that return in this case is the asset turnover of the firm (the balance sheet asset, for a change), i.e. the product of profit margin and asset (again the BS one) efficiency. These two reflect the performance level of your employees, in terms of productivity, efficiency and competitiveness (and in extreme cases – leadership, team spirit and communication skills as well!). To calculate the market return, some representative basket of companies can suffice (like the 30 in the BSE 30 SENSEX). The risk free return of your asset is obviously the return of some government securities that matches the average employment time of your employees. This is the risk free option of investing your money instead investing them in your human assets, i.e. employing your workforce.
After determining the expected return from the workforce asset, the next step is to determine their combined priced. Using the famous Efficient (labor?) Market Hypothesis* and the concept of price earning ratio (P/E), we can conclude that the ratio of total employee expenditure and the return calculated above must be equal to the industry average. Otherwise, your compensation package is under-priced (attrition of your human asset) or over-priced (you loose out in a competitive market, remember the first assumption).
Having determined the total employee expenditure in this way, the third and final step is to distribute it in appropriate proportion among various employee levels using industry standard. I have intentionally left this final stage out of the scope of any rigid mathematical methods for two reasons. Firstly this gives the model more flexibility to adapt to a wide range of situations, prevailing or desired. Secondly, otherwise the HR department may become redundant and that is not good for me. The prospective customers of this idea of mine are the VP HRs, you see!

* An efficient labor market, like an efficient capital market will have two characteristics – namely, a time period matching (tenure of the job like liquidity requirement in financial market) and risk matching. In addition, there will be one extra requirement of skill matching as well. If this kind of a job market does exist (along with free flow of information, of course), then the model is perfectly applicable, I am serious this time.

Slave Traders and Jellyfishes

2006-02-24T02:28:00.000-08:00

Have you ever been really mad at someone and had nothing appropriate to say to carry the punch?... or have you lost miserably in the last verbal duel with your biggest enemy. try the following linkhttp://www.tintinologist.org/guides/lists/curses.html and curse your heart out, . Just put a straight face as well, with your two eyes rolling in sync to maximize the effect.

Touching the Octave

2006-02-15T11:15:00.000-08:00

There is an unmistakable sign of mass euphoria … finally the sluggish, ramshackle Neanderthal vehicle called Indian Economy has got turbocharged and broken the sound barrier (read 8% GDP growth) . Everyone is happy and for good reasons. Ask anyone – in planning commission or your neighborhood gossip corner – what is driving this growth, most probably you will be treated to unison of such classical perfection that even Bach would have been envious – FDI, FII and outsourcing in accentato and policy in accompagnato. I don’t have any problem with that (I like classical music anyway). But just for the sake of some number crunching, calculate the asset efficiency for the last year – for the BSE top 30 companies, the figure is an impressive 6% in just one year. This certainly points to another reason to explain the 8% – improving quality of our human resource, and especially management efficiency. Kudos to all Indian managers – is or to be. Allow me, my good Sire, to suggest you to use this fact and figure next time when you are bargaining hard for your salary.

2006-01-10T12:26:00.000-08:00

King Nothing

Economics of Morality

2006-01-09T01:46:00.000-08:00

Why do we pay taxi drivers after we have taken a ride in his cab? It is the expected thing to do, of course. The norms and ethics tell you so. But what actually is the role of this norms and ethics. Let us look at what if we don’t pay. If the weight ratio of you and the cabbie is 2:1, you just walk off giving a threatening look at the poor fellow, if he dares to remind you of his due. If the ratio is reversed the cabbie pins you down and take whatever you have and drive away. And an ugly scuffle occurs in the interim range. In a society without morality and unaware of recent ethics fad, this is perfectly acceptable. But in real societies, this does not happen. Is it because of our intrinsic human values and altruism (Freud anyone?)? One way of analyzing this situation is through the famous prisoners’ dilemma. There you are; you and the cabbie. On an individual level, both of you are rational and try to maximize your personal gains. Four situation arises here 1. You take the ride and don’t pay, thus maximizing your gain (say 100%), 2. you don’t take the ride but pay for it. that is, you hail a cab, the cabbie comes but instead of taking you to your destination, just robs you of your worth and leave. This maximizes his personal gain (100%). 3. You take the ride and pay like a good citizen (both have some value, say 50% each). 4. The taxi does not take you to your destination and nor do you pay. No one gains anything (0% !).
The rational choice for you when the taxi driver takes you to your destination is not to pay (option 1), and if he does not then again not to pay (option 4), of course. Similarly, for the cabbie, his choice will be not to take you to the destination, irrespective of your decision to pay or not. So the equilibrium (remember Nash?) is option 4. So, on an aggregate basis the cab transport system falls down. Here pitches in the invisible hand of Adams Smith in the form of morality ethics. There exist a situation where both of you are better off (a Pareto improvement) which is the most efficient outcome for all. And this is also preached by ethics and morality. the effect is that you value (or cost) function is modified with an extra term involving moral comfort. this influence your decision and lead to the same soulution for both you and the cabbie, even when you are trying to maximize (minimize) you value (cost) individually. This again lead to an equilibrium at option1. the aggregate maximization is automatically incorporated in individual decision this way.
So morality is in a sense, an instrument to guide the society towards economic efficiency, just like laws, and not to some divine level of human compassion!

And When The Hell Freezes Over...

2005-12-01T13:24:00.000-08:00

As we all know this is a very common term to signify an impossible event…but is it that impossible. From the point of view of thermodynamics, hell will eventually freeze over provided the total heat addition is less than the work done on the hell boundary. This will cause a decrease in the total internal energy as per the first law of thermodynamics and will lead to a drop in temperature. If the cumulative drop in temperature indeed happens and somehow it reaches the freezing point, hell will have to freeze over. Now let us look at the possibilities. First the addition of heat – it can happen due to direct heat addition and/or mass transfer. Using the Anonymous Hypothesis on Hell Traffic (it says since there are more than one religion on this planet that says if you don’t belong to it you go to hell, and since you can belong to only one religion, it means no matter what, you will go to hell anyway. Of course it assumes the religious sayings are true, and hell is a common space shared by all religions. I am not sure about the former. But we safely can assume the later since almost all religion describe hell in quite similar way.), then the net soul inflow into hell will be the difference between birth rate and death rate (minimum) or only the death rate (maximum). In the first case we assume souls are completely recycled (conservation principle of souls) and in the second case it is completely not (equivalence theory of souls and moles). The available data says the current world death rate is 8.78 deaths/ thousand (2005 estimated) and world birth rate is 20.15 births/thousand (2005 estimated). Therefore the net flux of souls is –11.37n souls per year (min) or 8.78n souls per year (max). In absence of data, we can take the mean, i.e., -1.295n souls per year (n = population of the world in thousand). The negative sign indicate a net soul outflow. Now to calculate the energy inflow associated with soul inflow we can say if souls exist, they must be either in the form of mass or energy, in either way, they contribute to the heat inflow to hell. Since we are hot-blooded species, we can assume that there will be net increase in the internal energy of hell for a positive influx of souls. (Alternatively, since after death the body becomes cold, then allowing for other losses, most of the heat should be associated with the souls. Therefore, influx of souls means heat addition and vice versa.) As our negative figure indicates, there is a net outflow leading to a drop in internal energy. Now let us look at the work done in expanding the boundary of hell. Almost everybody will agree that with Iraq, terrorism, corruption, war, pollution, global warming, WTO conferences and for a zillion other things, the boundary of hell is ever-expanding. This means that some positive work is done by the system (that is, hell). So this combined with a decrease in internal energy associated with net soul outflow means that the temperature of hell is ever decreasing. So there is a good chance that the hell will indeed freeze over some day in future. Let’s wait and see.

Two Suns In The Sunset

2005-11-02T00:41:00.000-08:00

I underwent a training-cum-orientation program after I joined DRDO a along with a batch of newly recruited scientists. During the course, we had lectures and demonstrations on technical as well as military subjects. The sensitive souls among us were somewhat disturbed about the facts that so much money and efforts are spent just to devise newer and smarter ways to kill people. During the fag end of the program, Dr. V. K. Atre, the then head of DRDO and Scientific Adviser to the Defence Minister (SA to RM) addressed our batch. I remember very vividly that particular speech. “I wonder if all these effort (our training) is worthy of the cause…why war?” he began and then he went on explaining the cliché why war is a necessary evil (we did not start the fire and will not). Surprisingly, we all understand war is useless, at least most of all those who matter. But the cold hard fact is that we still fight wars – it is perhaps the longest lasting cultural tradition of the entire human race. This is, I believe, a typical problem of the Group Size phenomenon as described by Carl R. Rogers and F. J. Roethlisberger, authors of Barriers and Gateways to Communication. It describes a peculiar aspect of group behavior – the difference between a small group and a large group. Small groups can be made to communicate more effectively, based on our understanding about social and behavioral sciences. They can be guided to be more problem solving in nature, with a decrease in defensiveness, exaggerated statements and evaluative and critical behavior. But our knowledge is limited when it comes to achieving understanding between larger groups that are geographically separated and represented by a few. We simply don’t have much scientific idea about effective ways of communication in such situations. And to add to this, the society itself does not have much faith in social sciences either. During WW – II when a bunch of brilliant scientists bombarded the radioactive isotope of Uranium with neutrons and started a chain reaction of fission, millions of dollars and an army of talent were turned loose (the famous Manhattan Project). The first atomic bomb was ready to use before the war was over. But there is no guarantee, given the present conditions, that if a way is found to facilitate communication in a small group, enough money and talent will be available to exploit that finding on a larger scale. So although we know war is stupid – in bold letter, biggest font and underscored – we still let a privileged few to invent lies, put blames upon nations and declare war. All the more, we spend millions studying ways to motivate soldiers to fight the war and perish! Why folks who are send to war fight the battle? There are n number of theories for battlefield motivation, cohesive unit, value system and normative commitment, and glory (thanks to the Rambo movie series). But to go by my conversations with army officers, a soldier in a real battle field worries only about getting zapped and dry socks. He primarily fights for his and his unit’s survival and to avoid group sanction for not fighting. Almost every army in the world imposes severe punishment (mostly death penalty) for desertion, so a soldier has two choices, a possible death if he fights or a certain death if he does not! The rest of the stuff is a big joke on life. He is just trying to survive in a lunatic world, like the bombardier named Yossarian from the novel Catch 22 by Joseph Heller. They say it's better to die on one's feet than live on one's knees to motivate soldiers. Why it can be “It is better to live on one's feet than die on one's knees”? That way it sounds far better, more like the rational, civilized and empathetic society we claim we are.

Yourself Or Someone Like You

2005-10-31T23:42:00.001-08:00

Previously I claimed (in a blog, of course), I pragmatically convert my every whim in to a principle. Well… not quite. Being a homo sapience by birth, I am a social animal, and society does not function in a whimsical manner (although sometimes the collective rationality may appear whimsical to individual, but that is a different story altogether). Nevertheless I strongly believe that each one of us is indeed a mix of all. We all have our principles and rationality, moderated by whims. That makes the persons we are. That quite explains why I chucked my job and joined this MBA program. And it also explains why it is 2 A.M. and I am still awake, trying to come with something that al least satisfies the word limit.
Well, talking about me and my personality, I taste like vanilla (there must be some kind of controlling authority for these crazy tests) – the most favored flavor worldwide. I go reasonably well with anyone and rarely do anything to offend others (well, that's true, I rarely do anything at all!). I can be expected to be blending in any society. I didn't like the idea of me being compared to an essence of a plant very much, so I took another personality tests MBT test (if you are wondering what Main Battle Tank has got to do with m personality, refer to any book on organizational behavior. and if you are wondering why I was taking online personality tests like nuts, well, I sometime love to fool myself that I have lots of free time you see, why else i would like this blog otherwise). Anyway, in that test I was classified as ENTJ (i.e. I know how to do a thing rightly but sometimeIdoitinarush) and even INTJ (i.e. I listen to others' ideas, although I know they are utterly wrong). However, my intuitive and judging traits are pretty much consistent. That means I can’t remember names, the ability to globe (nonsense in IIML parlance) is hardwired in to my genes and I have everything in my life planned – like my bills, my deadlines or even my distractions! (give me a break, please!)
And the rest of the world to me resembles the object oriented concepts in computer science. In this philosophy of object oriented programming, all program modules interact through objects, which are instances of some classes that define the traits and attributes of the objects and its relationship to other objects. An object cannot see into another object’s attributes or code. Objects can only communicate through interfaces they expose to each other, which is a collection of procedures that defines the way they behave with each other. The interfaces of an object are the only evidence of its existence. This is applicable to the world around us as well. The real world is much like a huge collection of objects, animate as well as inanimate, each interacting with other. We are all like objects, instances of different classes in this world. We all behave according to our program code (script). The only evidence that we exist in this world is the interfaces we expose to others and to ourselves. But the irony is that we don’t have access to others and even to our codes. All we can know about others is through the interfaces they expose to us, we call this their behavior. That is the way we perceive the world around us, through a set of interfaces known to us. For example we divide people in this world as white, black or brown because our eyes can see only in a small fraction of electromagnetic radiations that pervade the space – a narrow band known as visible light. If our eyes were tuned to infra-red ray frequencies, we would divide people as cryogenic, cool, hot and thermonuclear! And we have different way of behaving to different objects (people, animals, inanimate or abstract things), i.e. we expose different interfaces to different objects.
But what makes the real world more interesting is that we have the ability to change, modify or overwrite our program and attributes. This makes the world around us so much more unpredictable and so much more interesting. This is what I perceive learning is all about – changing your program (preferably for better than for worse!). And this is the reason all of us are here…to learn, although we may or may not be aware of it consciously.

On Sex And Cricket

2005-09-21T09:26:00.000-07:00

Cricket and sex both have a personal aspect, but if one looks at the big picture, sex is nature's own way to replicate for most organisms, so it is a biological and social obligation, it is primitive, elegant, intense and sublime way of reproduction, of course if you are not particularly fond of mitotic cell division preferred by most varieties of amoeba and bacteria. Whereas cricket is a device to simulate the primitive adrenaline rush the cavemen experienced while chasing a succulent bison or being chased by the saber-tooth tiger. So fundamentally it is fake. In addition to that, it has a negative effect of country's GDP - unlike hunting, although PETA people may beg to differ. It distracts the participants in the labor market thus affecting seriously productivity and country's competitiveness. Although it is an industry by itself, if u take the ratio of its contribution to the GDP and its negative effect on the same, it is totally askew. In short, it is a strategy of concentrating a part of the wealth (including opportunity cost) of a billion dim-witted people to the hands of 11 athletic deviants...Karl Marx would turn in his grave if Germany ever decides to go international in cricket. (bye the way, if the Germans are smart, it can be a great source of alternative energy for them, put a huge magnet around Marx's grave and thrust inside a cathode and an anode lead, and go international in cricket, as the poor philosopher turns in his grave, you get electrical energy output like an alternator - if you think I am crazy, refer any book on elementary electromagnetism.). Well, coming back to our bone of contention, sex is also and industry by itself. And its contribution to the GDP is much higher than cricket. And it is utilitarianistic, simply because there are more prostitutes than cricketers, thus leading to a better distribution of wealth in the country. Plus it has been proved that white rats, under controlled laboratory condition, become more productive after having sex. Based on the observation that the difference between the way human being and white rats have sex is insignificant, it can be concluded that sex increases productivity for the country's economy. (That’s why they say the difference between magician and psychologist is that while the former draws rabbits out of the hat, the later draws habits out of the rat...). So next time u have any dilemma between sex and cricket just remember even Sachin Tendulkar never played cricket during bed-time, what more support u need

Of T-shirts and Billboards

2005-08-29T14:01:00.000-07:00

A T-shirt is much more than a cheap article of clothing, the t shirt is a portable advert with its wearer declaring their political, musical or social affiliations for everyone to see. T-shirts will never go out of fashion because they are cheap, cool and comfortable. As a walking billboard provocative tee shirts and funny t-shirts inspire reaction, be it shocking, controversial or humorous images or graphics that offend or amuse or simply make a statement.
Some think that T-shirts started out in the First World War when American soldiers copied Europeans who wore them under their uniforms to keep warm and the U.S. troops started calling them T-shirts because of their shape. Others maintain that the first record of the t shirt's existence is in 1899 when a plain white cotton shirt formed part of the US Navy uniform. What is known however is that by the 1930's white T-shirts became standard sporting wear for many American universities while in 1939 printed t-shirts were, for the first time, used with slogans and logo's as part of the promotion for the film The Wizard of Oz although they were not very popular at the time, these were the first funny t-shirts printed – and probably first attempt to marketing through this medium.
In the 60's people began to tie dye and screenprint the basic cotton T-Shirt making it an even bigger commercial success. Advances in printing and dying allowed more variety and the Tank Top, Muscle Shirt, Scoop Neck, V-Neck, and many other variations of the T-Shirt came in to fashion. T-shirts were soon seized upon by marketing professionals all over the world. In 1965 Budweiser was the first to use the t shirt as a widespread marketing tool, and companies have been producing funny T-shirts with logo's and slogans ever since.
The T-Shirt was inexpensive, in style, and could make any statement you cared to print. The American T-Shirt came into it's own during the late sixties and seventies. Rock and Roll bands began to realize that they could make significant amounts of money selling their T-Shirts. Professional Sports caught on and soon the officially licensed T-Shirt became hot merchandise.
Since the late 1980s and especially the 1990s, T-shirts with prominent brand-name logos have been popular, especially with teenagers and young adults. These garments allowed consumers to flaunt their taste in designer brands in an inexpensive way, in addition to being decorative. While critics claim that wearing such logos serve only to advertise for clothing designers without being paid, brand-name T-shirts remain popular. Examples: Calvin Klein, FUBU, Ralph Lauren, The Gap.
In todays business of E-commerce, Many people are spending the cost of a good t-shirt just to get a few clicks. For as little as $3.50 to $5.00, you can get a white cotton t-shirt with your ad on it. A good t-shirt can do a lot for your company.
The person you give the shirt to will be greatly impacted by your message. They'll feel a true connection to your company. They will become a valuable spokesperson willing to endorse your company to anyone that asks.Their immediate friends and family will be inundated with ad impressions every day the t-shirt is worn. Inquiries and curiosities will be answered by the t-shirt wearer - a true believer, an unpaid salesperson for your company. In addition, hundreds, and even thousands of people, will be exposed to your ad during the normal course of the day when your company sponsor is proudly wearing your t-shirt.And, talk about added value! The way you give away your t-shirts can be very creative and make your new sponsor feel great about getting the t-shirts. Using contests, drawings or as gifts of appreciation, these are just a few ways to use the t-shirts to your advantage by making your new sponsor feel good about being chosen to receive a free t-shirt.

Good T-Shirts can last years, even a decade or two in some cases. Your investment in this type of advertising does not expire when your visitor clicks away from your site to surf others. It lasts for years and affects many people intimately. It's a great advertising medium.

Today almost every organization uses T-shirt for advertising regularly, and every big event or campaign worldwide begins with a theme T-shirt. So create a cool t-shirt and people will seek you out and ask for your advertisement. That's powerful advertising

who am i

2005-06-08T02:03:00.000-07:00

there are three kinds of folks on this planet. some people they are pragmatic, taking things the way they come, some people always stand up for their principles, come hell or high water. the rest just act on their whims. but i am different, i pragmatically convert my every whims in to a principle. does that mean i am an alien