Thursday, August 29, 2013

A little more on Truth

(My fanhood and fascination with the idea of truth continues. Older entries here, here, here and here.)

There are two kinds of people.

A:  Those who believe there is indeed a truth, and that it's the only thing that's constant.


B:  Those who think truth is somehow flexible, who say things like "Everyone has their own truth, and this is his truth and that is your truth", and those who sometimes will totally backtrack on their earlier declarations, and stand for something entirely at odds with their old stand while not admitting that the earlier stance was somehow wrong or misguided or false or just a lie but will rather protect it with statements like "that was the truth of last month and this is the truth of today".

It's only a subset of those who belong to the former group who will ever be willing to die for the truth. And it's only some out of those who'd be willing to die for the truth, that will make the world a better place.

You are one of A or B. And you always know who you really are. There's no fooling oneself.

Tuesday, August 27, 2013

Two bullshit pieces of advice

1. Set realistic goals.

2. Always have a plan B.

If doing great work, by which I mean work that you in your most honest and solitary moments can call truly great, as opposed to reaching prestigious positions that will get you the most number of congratulatory messages, is what you really want, the right advice is the very exact opposite of the two popular but pathetic bullet points above.

If it is the other thing you really want, you should probably stick to the two points above as best as you can. And, good luck.

Thursday, August 22, 2013

A story from the pre-mobile-phone era

Mrs. Sarita Jaiswal waited for her son at the schoolbus' designated stop but the bus did not come. She sat anyhow under a warm Gulmohur tree. Every five minutes or so a bus passed, and at the sight of each of them she would stand up, anticipating her son, and then go back under the tree. She called Mr. Anand Jaiswal, her husband and a generally thoughtful person. He was not on his desk, being engaged in a generally useless meeting, and could not take her call, so Mrs. Jaiswal called Mr. Subhash Khatreja, her cousin and a generally business-savvy marble trader. His shop was close by, and in fifteen minutes he arrived at the bus stop, fetched his cousin sister and just as they sat in his car to go to the kid's school, the kid, Vasu Jaiswal, a class fifth student at Delhi's Frank Anthony school and a generally mischievous kid, jumped down from the tree to tell them he had been here all this while. But the car had left just before he could yell at it, and he was left standing there with nowhere to go. He knew that the house would be locked so he did not bother going home but left instead for the closest video game parlour. At Frank Anthony, his mother and uncle were worried on finding that Vasu had been dropped at the bus-stop, and rushed back home in a frenzy expecting him to be sitting tired and hungry at the doorstep. But when they reached he was still playing video-games at the parlour, so they contemplated calling the police. An hour passed, and they had almost dialed hundred, when Vasu came leaping and bounding after having won all his games, his shirt untucked, and necktie tied to his forehead like a headband. Mr. Khatreja approached him aggressively, intending to give him a verbal dressing down, but before he could, Mrs. Jaiswal ran forward to Vasu and hugged him tight and long, and kissed him numerously. Mrs. Jaiswal, after all, was his mother, and a generally cool woman. Mr. Jaiswal could not be reached, when he was called again, this time out of a need for storytelling. 

Moral of the story: The useless meetings are generally the longest ones.

Tuesday, August 13, 2013

As we turn 66 ..

I have to admit I am pessimistic about India's future. When I first came to the US for graduate studies, India was definitely already on a declining track, but even so, I couldn't have imagined things were going to be this bad this soon. In its characteristic way of priding itself on things that deserve no pride, India has for the last several years prided itself on its attractive demographic dividend. There were doubtless proponents of this putative panacea elsewhere too. Many famous pop-thinkers such as Thomas Friedman, the big-4 consulting firms, even the likes of IMF never failed to remind us of what it means. Perhaps it would have paid to be careful to read it as what it 'can mean' than what it 'means'. Clearly, the demographic dividend comes with significant downsides too, that we didn't and in many ways still don't want to see. The foreigners' enthusiasm about it was justified; they didn't have to share the downside, and could participate in the upside at their discretion.  But for the Indian people and administration to be too happy about this demographic dividend, which is always a product of an uninhibited population growth rate, was like a stock-trader being too happy about financial volatility. True, the skilled and astute trader cannot make nearly as much money in a low volatility environment as he can in a high volatility environment, but a mediocre one invariably gets killed by volatility. Now the question that needs no answering is whether astute and skillful are words that better describe the Indian administration or is it words like mediocre. A huge percentage of Indian population today is already young, and unless population growth rate slows down, which it hasn’t been showing any signs of, the Indian population is getting progressively younger. If the Indian government and India Inc together are able to build the health and education infrastructure to support this huge young population, India can undo any and all of its previous failings. But that’s a big 'if' that we take very lightly. And it has gotten much bigger of late, with India's dismal current account deficits, depleting reserves, and the government's continuation of ever increasing and indiscriminate spending beyond its means. Foreign institutional investors have the most negative outlook for India amongst all emerging markets, and most if not all are decisively uninterested in having anything to do with India for quite some time to come. It is high time we face facts rather than languish mired in a web of emotional and ideology-ridden never ending discourse, and the fact of the matter is India has little chance of meeting its infrastructural needs for supporting the future of its young population in the absence of foreign investment. I hope that as Indians we show the courage to swallow the bitter pill for a brighter future, and I hope different people in different states of India, with vastly different and sometimes conflicting goals, can come together this time, because if we don't, the consequences are not pretty. A relapse into the sluggishness of the 1980s is not far, to begin with, but what lies ahead is more disheartening - an unimportant place in the global order, and maybe farther into the future, the need for foreign investment morphing into a need for foreign aid.

In the coming elections I am going to be rooting for Narendra Modi if for no other reason than that it would be a change from the present system. I do not think he is the miracle some people seem to think he is. It is important to notice that the state he inhabited as a chief and no doubt improved, was already prosperous, and had all the makings of a progressive society. Most of the rest of India is either only prosperous or only progressive or, in many cases, neither. Leading India with its remarkable heterogeneities is, if you ask me, a completely different ballgame. But he says that he can bring about a turnaround, and as a nobody, that and his past track record is all I have to go with. The other alternative that has recently emerged is AAP under the leadership of Arvind Kejriwal (who, most importantly, buys morning milk and bread from my best friend's general store but that falls just short of reason enough for me to support him). Despite his possibly good intentions, his campaign for the Delhi assembly elections proves beyond doubt that in finding the balance between populism and bitter-medicine, he tilts all too much towards populism. How else can we justify his plans for de-syncing of oil prices from the global markets, at a time when India's two biggest oil companies, both public sector undertakings, have already been incurring huge losses for several years running, owing to heavy government subsidies. How else to interpret a most juvenile claim to reduce electricity prices by seventy percent! Unless the power distribution companies are grossly manipulating their accounting statements, it seems unreasonable to believe that they can still be in business following a price slash of this magnitude. But besides these specific points, he has failed to come up with any ideas for India's growth going forward, except that he will let common people have their ideas implemented. This is what I have to say to that: the majority of the 'common people' are not intelligent enough (Actually they are not honest and well-intentioned enough either, but even if we assume they are) to guide India's road forward from the pit that we're currently in. And if it is true that the common people by and large will dictate India's economic, defence, home and foreign policy under a future AAP government, I am scared. And you should be too.

Things are not all bad, for sure. India still has vast untapped potential - no one can deny that. But potential alone is useless unless it can be tapped. While India Inc is getting increasingly disenchanted with India, and the government is as effete as it has ever been, India's social sector is also far from effective. Of the five nonprofits I closely worked with, two are downright corrupt, two are too lavish for a nonprofit and do creative things that really help no one, and the one that works hard is not well-funded. There are those like Teach-for-India which are great successes, but the number of such successes is very very few compared to how many we need. The most remarkable aspect of Teach-for-India's success is in being able to mesh the technically advanced graduates of IITs with the world of social work in a big way. We will need many more TFIs in the years to come. Broadly speaking, India needs more maths, more coding, and more manufacturing. I went to one of India's supposedly premier engineering colleges, and yet, I say with neither compunction nor doubt that most of my college's graduates were technically weak even in their own respective engineering trades, let alone the fact that an alarmingly high number of them didn't know how to code at all, and hardly any could code at a level that merits any special appreciation. Compare this to US universities, where everybody from Econ to Stat majors do a significant amount of coding. It might sound naive that I stretch the particular topic of coding so dear, but it is more naive yet to find it naive. All areas of enterprise, from manufacturing to banking to medicine, receive huge advancements in productivity from the simple sounding aspect of ‘coding it’ well. The thing common to the best mechanical engineers, best financial modelers, the best medical researchers, even the best movie studios of today is an abundance of coding talent. I cannot imagine a truly competitive economy of ten years from now, where a significant number of people cannot code well. Whether we like it or not, we today have huge unmet educational needs, and when your needs are as big as this, programs on philosophy and psychology are a forbidden luxury, and here I'm pointing to the massively expensive Nalanda University under preparation for the last few years. I truly hope India is rich enough one day to afford these indulgences, but till then that's what they are - indulgences we cannot afford, things to be put in the same bracket as the Commonwealth games.

Here’s wishing India well and hoping I can be of some use.

Saturday, August 10, 2013

A few good men

"I am very good my school is very good thank you"
So went the first letter of a wonderful kid in Algiers I've recently made kind-of friends with. We will be sharing letters in a rather charmingly old-fashioned longhand way. The one that I sent him, I now suspect, was a little too formal and self-conscious to have felt endearing, but I hope he liked it anyway. Hopefully, whoever read it out to him, in case somebody did, made it funnier.

In other news, I hope Banville wins the Nobel this year, or else the Nobel will have to lose all its remaining credibility. Ancient Light left me with the feeling that he was right on the top of his game, but so had The Sea, The Book of Evidence and The Untouchable. It seems like he is always at his best. I have read just one more novel of his, or quarter-read it, and that was Copernicus, and I'm more inclined to believe that it was too good for me than to believe that it was not as good as the rest. Anyway, really hoping he wins it. The last time I rooted for anyone so much was for Sachin to win the man of the series in the '96 Titan cup. And at that time I knew inside, even if I never let it show, that he did struggle to play Fannie DeVilliers even at the top of his respective game. He did win it, and I was punished the next morning for not having done my school homework. 

In another news, my dad will retire from work in a few days. For me it's hard to even imagine my dad not a government servant. He has always been a big, big influence over me, and I have always felt incredibly lucky to have the most honest man with the most unbelievable goodness of heart, as my father. He worked for this organization for something like 38 years, much greater than all the time I've been in this world, and I'm sure his bank will miss him a lot, and I'm guessing he'll miss it a little bit too. I sometimes wonder about how to jazz up his post-retirement life, and then I realize the funny arrogance of my wondering - as if he needs me, he whose jazzed up my very thoughts all my life - to jazz up his days. He will light up, and lighten up, whatever he does.

Friday, August 9, 2013

When historical correlations fail to hold up

This summer had investors across asset classes and geographies puzzled by the "wrong" correlation between treasury yields and risk assets (such as corporate credit and equities). Historically, it was argued, that the correlation has been strongly positive. That is, when the treasury yields rise (or fall), the prices of risky assets rise (or fall). I would argue that the dismay with the rationality of this year's correlation was misguided in more ways than one. Firstly, when we talk of historical correlations, we tend to think of a continuous time series between, let's say, 40 years ago (assuming that to be a ballpark time at which markets, at least US markets, decisively matured) to today. While it is true that this correlation shows itself to be markedly positive, a strong positive correlation needn't necessarily allude to an economic thumb-rule. And in this case it doesn't. It is important to see that there have been pockets of time in the last 40 years when the correlation was negative, but since they weren't the norm, they don't affect your long term coefficient of correlation in any big way. But just because they weren't the norm does not mean they were periods of random noise. It might do us good service to identify those specific time-periods and then analyze the difference between those time periods and the rest of history. From a study such as the one I just outlined, my far from exhaustive observations suggest an element of causality as a big differentiator in the correlation behavior. That is, it is important to consider what's causing the rates to rise - good economic outlook (in which case the positive correlation does indeed make complete sense and holds up almost always) or something else (lack of confidence in the government (as in 2008), or Bernanke sneaking away his Santa Claus hand (this summer)).

Traditional wisdom for the positive correlation goes like this: The rise of treasury yields (or in other words the falling of treasury bond prices) reflects a transfer of the world's funds from riskless to risky assets and vice versa. Naturally, as a result of this transfer of funds into risky assets such as high-yield credit and equities, they rise. All very well, except this and that and that. We saw this in 2008 at the time of the financial crisis that the treasuries fell (yields rose) and equities fell too. Any positive correlation between yields and equities was thrown out of the window. Now lets try to see why the traditional wisdom is far from a holistic perspective. Most of all, it's because it relies too much on correlation and correlation alone, while only superficially digging into causality. At its core this conventional wisdom makes one grand assumption, that money either flows from risky assets (HY, Equities) to riskless assets (treasuries, gold) or the other way. Such a transfer always gives us a conveniently positive correlation between treasury yields and risky assets, and we rejoice. What it does not take into account is that in times of unprecedented uncertainty (such as Bernanke leaving the markets alone, in the present case) people don't necessarily merely shift their money from one asset class to the other - they may wait for the uncertain period to pass, holding cash, and taking off again only when the sky gets clearer. In such times, it is not uncommon to see both sovereign bonds and equities falling, as we saw this summer, and have before. This is also the reason why the 'aberrations' or breaks in the utopian positive correlation between yields and equities are much more common in the rising rates environment (associated with things going wrong) than in the falling rates environment.

Saturday, August 3, 2013

Nonlinear jump diffusion

In wintry dims of after-rains
like filigree my fingers shiver
as does my mind, 
jumping back and forth in time,
one moment I remember
lying in my balcony in 1999
reading with teenage fascination
about Mohenjodaro at 2 in the night
and thinking "wow, how cool"
living vicariously in BC 2000,
as I now live in AD 1999,
and sometimes, farther back in time,
my dad, who lost to me in 100m sprints
to make me feel victorious and vain,
until he met with an accident,
in September, 1994.
After which I won no more.
And then I sit and wonder what
it must have been to have continued
watching "Johnny Gaddaar" that day in '09.
After all, it had been a wish of mine.