Thursday, March 21, 2013

More Weekend

What did an average American town look like before the age of automobile? Railroads were the major form of transportation for long distances, in the towns horse driven carriages were the dominant mode.

Owning a horse and a carriage was only for the rich. A horse demanded attention and so for every horse driven carriage on the road a man was employed. Transportation was expensive and inconvenient and the towns were small and stank of dung.

Automobile transformed everything. Transportation became economical, convenient, faster and the overall quality of life improved. A vast number of carriage drivers became unemployed and were replaced by a small number of people employed in car manufacturing, servicing, buying and selling.

Similarly with the advent of computer age, a large number of people employed as clerks and secretaries and generally responsible for processing, organizing and retrieving data for usage became redundant. Efficiency and quality of life improved immensely.

Historically those professions that have been eliminated by leaps in technology are replaced by new professions which require higher skills and cater to new needs.

At the start of human civilization, existence and survival was a struggle. More and more men were needed to ensure survival. With time, man started dominating his environment and survival became less of a struggle. Every day needs, which were all people were concerned about few centuries ago are not what people in the developed world are worried about today. I believe that less than 10% of the population needs to work in the modern society to produce and deliver the goods needed for everybody.

But economy and the free market system works on demand and supply. Each individual is a source of supply to the society, which is the work he can do with his skills. For that work he receives the wages which translate to demand. Thus, it is necessary for people to be employed in activities which generate remuneration to keep the economic machine working. But efficiency kills need for labor and employment. There is an old Sanskrit saying which translates to - “Extremes are always bad”. Is too much of efficiency a bad thing?

Looking at advanced economies we find that most people are employed in service sector. While manufacturing can be scaled without generating employment, a waiter will be able to serve only a specific number of tables no matter how efficient he is. Thus as the population increases, service sector generates bulk of employment. With abundance also come a number of frivolous pursuits. In the west you can find people employed in leisure activities which would not make sense to inhabitant of a poor country – for example – paint ball or bowling.

While need based economy generally keeps on running irrespective of the financial health of the population, service based economy suffers when people start to cut down on their expenses. Also with every iota of new efficiency, new needs and frivolous pursuits need to be found to substitute for the jobs that are lost. Thus every technological advancement itself sows the seed of discontent and a future test of human ingenuity.

But what is point of this efficiency if it leads to misery. Efficiency has to be harnessed in a way that adds to the quality of human life.

For thousands of years man did not have an off day. Every day was a challenge for survival. He needed to hunt and feed himself and his dependents. But advent of farming gave him the efficiency and security that man could now think of taking a day off every week. And in last century five days work week became a norm. Not only that, vacations are generously distributed throughout the year. Off late, France has enforced a thirty five hour work week.

I believe the time has come when the work week needs to be reduced to four days. Or instead of a seven day week a six day week with 2 day weekend. Lets face it , most normal business can be done in four days instead of five, unless you are at the vanguard innovation and in a race against time.

The problem in the world today is that there is not enough things for people to do gainfully. Why then do we insist that some people work five days a week and some none at all. A four day work week could be the magic bullet. Like nectar from heaven it could cure the tribulation and soothe the spirit of a wounded world. It will create employment and possibly bring the world out of recession that has gripped the world for last five years.

With that note I sign off for a promising week long vacation!

Monday, December 17, 2012

The English Slap and Sachin's Retirement

Finally its over. India lost four match test series against England. Matches were played on pitches custom made for MS Dhoni. The English were denied spin exposure in practice games. The result – two humiliating losses after the initial bushwhacking. Indian cricket fan, who was just recovering from slaps on the vulnerable “away tour” cheek, was found tending to some fresh English finger prints on the other cheek. In other news – Poonam Pandey tweeted her picture in a Burqa, in solidarity with the fan's sorry state.

Last few tours of the Indian team have brought back memories of the era of Sachin’s captaincy in late 90s. However, this time is worse, with the ironical burden of being the current ODI world champion and leading ICC Test rankings not so long ago.

Players who have emerged worst out of the current series are MS Dhoni and Sachin Tendulkar. It is startling to find  fortunes of two biggest brands in India reversed decidedly.

MSD has been following his low risk captaincy strategy as before. With the retirement of Rahul Dravid and VVS Laxman team, batting looked weak. Defying expectations it wasn't the young replacements that disappointed, but the old established brass. Notable decline in the quality of Harbhajan and Zaheer’s bowling was the other force majeure.  MSD’s undoing was below par individual performance of his squad. Captaincy can prove to be the magical ingredient if the players are performing close to par. When the squad under performs substantially, it is illogical to expect wonders from captaincy.

But, the big question remains  – Why on earth, doesn't Sachin Retire? 

Sachin has been part of the Indian dressing room for last 22 years and it would be a drastic change for him to hang his boots. There is no denying his selfish streak pursuing hundreds at his own pace disregarding the team's interest. But surely, this period is not doing his reputation any good.

For the fans, it carries a feeling of deja-vu. More often than not 'Larger than Life' cricketers have timed their retirement improperly. Be it Kapil Dev's pitiful last matches to break Hadlee's most Test wickets record or Ganguly clinging desperately till the very end.  

In the last few days, I have seen following headlines in the Times of India -
"Crazy to stop playing for no reason: Viswanathan Anand to Sachin Tendulkar"
"Nobody qualified to suggest Sachin Tendulkar on retirement: Viv Richards"
"Tendulkar best player of his generation : Graham Gooch"
Sachin is getting media support. Overwhelmingly from the newspaper (if it still qualifies as one) which doesn't support any brand without a kickback, and make no mistake - Tendulkar is a brand with large corporate interests involved.

If I were a corporate signing a Multimillion Dollar sponsorship deal over a number of years with an athlete, I wouldn't want him to retire and hurt my interest. At least not voluntarily. It is quite possible that some of his advertising contracts come with an explicit term prohibiting voluntary retirement.

This does not imply that he won't retire voluntarily. It just means that he will have to negotiate first with the brands. Both parties have to agree that better mileage is achieved in the "one last hurrah" scenario compared to him dragging on without hope and getting axed finally. Retirement is not a simple process after all if you are a brand, not just an amateur athlete.

I hope the resolution is achieved soon and fan admiration remains intact for the wonderful sportsperson whose place is assured in a billion hearts for years to come.

Wednesday, November 21, 2012

In grip of the past

A few months ago I came across an interesting email forward. Without the illustrations to accompany, it looks like this -

The US standard railroad gauge (distance between the rails) is 4 feet 8.5 inches. That's an rather odd dimension for such a mundane task as guiding a rolling vehicle. Why is that gauge used? Because that's the way they built them in England, and the US railroads were built by English expatriates.

Why did the English build them like that? Because the first rail lines were built by the same people who built the pre-railroad tramways and that's the gauge they used. Why did they use that gauge? Because the people who built the tramways used the same jigs and tools that they used for building wagons.

Okay! Why did the wagons have that particularly odd wheel spacing? Well, if they used any other spacing, the wagon wheels would break when used on some of the old, rutted, long distance roads in England. So who built those old roads? The first long distance roads in Europe (and England) were built by Imperial Rome for their legions and were used long after that.

And the ruts? The initial ruts, which the wagon builders had to match for fear of destroying their wagon wheels and wagons, were made by Roman war chariots. Since the chariots were made for, or by, Imperial Rome, they were all alike in the matter of wheel spacing.

Thus, we have the answer to the original question. The United States standard railroad gauge of 4 feet, 8.5 inches derives from the original specification for an Imperial Roman war chariot which, naturally, were made wide enough to accommodate the back ends of two war horses.

Space Shuttles have two large solid rocket boosters (SRBs) attached to the sides of the main fuel tank. These SRBs are made by Thiokol at their factory in Utah. The engineers who designed the SRBs might have preferred to make them a bit larger in diameter, but the SRBs had to be shipped by train from the factory to the launch site. The railroad line from the factory runs through a tunnel in the mountains and the SRBS have to fit through that tunnel. The tunnel is slightly wider than the railroad track, and, as a result, is somewhat wider than two horses' behinds.

So, a major design feature of what is arguably the world's most advanced transportation system was determined by the width of a horse's ass! Specifications and bureaucracies live forever. The next time you are handed a specification and wonder what horse's ass came up with it, you may be closer to the truth than you think.

Now there are a lot of questionable facts in the article above, but the central idea doesn't strike as preposterous.

I would not be surprised to find other things that are remnants of the past but ubiquitous in our daily lives. While it could be arduous to identify the vestige of a distant past, it would be comparatively easier to identify relics from our immediate past. 

We live in the age of information technology. Computers, mobile phones and networks have seen accelerated change in the last twenty years. Swift changes in technology are hallmark of first few decades after a breakthrough invention after which the technology matures. 

Consider Twitter. While it is perfectly natural for the current generation to try and express itself in 160 characters, this limit was not an obvious choice. The 160 character limit is a vestige of a past where network resources were scant and device memory expensive. SMS format was arbitrarily limited because somebody thought that was adequate, and today we have a whole medium of expression built on that paradigm.

Consider the modern universal (QWERTY) typewriter. We are using practically the same letter arrangement as was used by  Sholes in the initial design. It is not necessarily the most efficient. There are other designs like the DVORAK keyboard which is much more efficient. But for Legacy reasons we QWERTY is the most popular in modern computers. QWERTY was designed so that frequently typed together letters are a safe distance so that the mechanical keyboard does not jam. This constraint does not exist anymore. But we are still stuck with the past.

We are certainly moving forward in science and technology and creating new products and more efficiency, but there is also room for retrospective innovation where gaps created by constraints of the past need to be filled with current knowledge and technology.

Thursday, November 8, 2012

Idea Summary : Minsky's money theory etc

Since all money is created as debt, every unit of money outstanding is A's asset and B's debt, someones surplus and someone else's deficit. In any particular economy, all government deficit will be equal to private sector surplus unless their is trade imbalance (current account mismatch). If it is able to run a trade account surplus then both private and public sector can run in surplus. But if there is a trade deficit then either or both public and private sector will be in deficit. This is not sustainable. Once Private sector runs in deficit it leads to recession.

Situation is different for US because it can pay the rest of the world in its own currency. In this case it can just pay the currency and record it as a liability in a computer and forget about it (until the money comes back to the US to be used). Hence the ability to sustain a deficit is maximized by having a currency accepted by the rest of the world. Of course the rest of the world loses by accepting the currency that is continuously being diluted.Naturally, countries will try to limit their holding of the USD, unless they have other reasons to hold USD, eg. to keep their currency suppressed for active Mercantilism. This is possible by trading with each other without going through the USD. This could be one of the reasons for emergence of the Euro block. It is an attempt to by pass the USD, by having one currency so that the individual holdings of the USD can be minimized.

Having rest of the world accept your currency is a major reason and manifestation of USA's global hegemony. All the world accepts its currency and so it has greater ability to spend. Greater spending power results in big military power used to control the world. That is not to say it is the only reason. The ability to deliver innovation and leading the world forward technologically is probably a bigger reason. But what sustains it all is the economics, which is tremendously skewed in USA's favor.

Book Summary - Guns Germs and Steel

This book is an inquiry into human history. It seeks the answers to some basic and important questions. Why did Europeans come to dominate the world and subjugated people all over the world - Aztecs, Incas, African Blacks, Zulus, Pygmies, Khoisan,  Australian Aborigines etc.? Is it a co-incidence or are Europeans a superior race than all other? Jared Diamond presents an overwhelmingly convincing argument which should be a deathblow to racists and white supremacists everywhere.

When Europeans reached America, they dominated the battles eg. when Pizarro faced the Aztecs in South America - 168 Spanish soldiers defeated thousands of Aztecs in a quick and dirty battle. They had horses guns and cannons, technology that was far superior to anything natives had. Generally more than 90% of native population was wiped out even before the battles took place by coming in contact with the germs that Europeans were resistant to while natives were not. Why was it that Europeans had better technology and germs? Why not the other way round?

The key event in human history, from which all the development followed - was start of food production. This started in fertile crescent area around 10000 years ago.  This area was particularly suitable because it had the temperate climate, wild forms of the crops which are were developed for farming, wild ancestors of animals suitable for domestication. Nearly everywhere else in the world, this technology was imported along with the seeds, animals etc. Food production enabled mankind to support higher population density and emergence of organized society.This led also to invention of writing in the fertile crescent , which was also adopted by all other civilizations over the world. Germs and germ resistance developed as a result of humans living in closed societies and close to domesticated animals (like Influenza virus came from the domesticated pig)

Everywhere else in the world, no suitable crops were available. For example in America, only suitable crop was corn , there was no wheat, rice, millet, barley etc. and even the wild ancestor of corn was 6 cm so it took thousand of years of selection to develop corn to its modern form. Also there were no animals worth domesticating. Only Llamas, which could not be used over all of america but only some specific parts.

Technology traveled faster along the east west axis in Asia. Because same crops could be used in similar climate. While on the north south axis the propagation of technology was very slow. America and Africa being aligned North-south was also a big disadvantage.

Human brain is similarly developed in all major races. Brain evolution stopped around 40000 years ago.It was only a matter of chance and circumstances why these technologies were developed in Asia and traveled to Europe through land. Everywhere else humans showed same kind of ingenuity in understanding their environment - crops and animals. But it was not possible to achieve a lot with what was available, so a lot of races did not develop or even went back to hunting gathering lifestyle.

Technologically, most of Asia and Europe was at a similar level at around 1500 AD. For the rest of the world, differences in technological development can be explained purely from the variables outside human control. Since then Europeans made amazing progress reasons for which have not been explained as convincingly as for period before that. Reasons presented are mostly idiosyncratic - as in Europe benefited from being fragmented and plural while China was unified and not plural. Diamond proposes that there is an optimum fragmentation/unification level.  In any case, it is not the main purpose of the book to explain the differences created in the last 500 years, which have already started to be normalized and probably will disappear in next 500 years. The book presents a very long term view of human history, one which has presented insightful arguments and enriched me immensely. 

Friday, September 14, 2012

FDI in Retail - Why now?

Yesterday the Indian government surprised a lot of people by allowing a 51% FDI in retail. While Congress had wanted to do it for some time now, it had been stopped in the past by its now famous coalition dharma and general public fear of foreign competition. What prompted this policy move now?

Congress has distinctly been a party without an ideology. In Nehruvian times it was a left leaning Fabian socialist party. But there has been clear lack of ideology in last two decades. Since 1991 it has been credited with ushering in economic reforms, ending the licence raj and putting the country on the track of growth. Although it was an act of a desperation once there was no other choice left, congress did not shy in taking credit even for what was thorough capitulation. One would be tempted to think that after such a drastic move   Congress would have aligned itself away from what it stood for in pre-1991 era. But NREGA showed that they are not shy of populist policies. For congress winning the next election is the new ideology. But why then is the Indian junta now supposed to believe the Manmohan Singh rhetoric that "If we are going down, we will go down swinging". Where does this sudden surge in courage come from? Or more importantly what is the strategy behind this move and why is congress willing to risk its government for FDI in retail?

Skeptics might be motivated to find a corruption motive. I do not believe there is any truth in that. This is a no transaction policy decision which is political in nature. It will help congress fare better in the next election. Popular middle class opinion in the nation is emphatically against the congress, but middle class never determines the election in India. It is the poor masses that determine the winner. And for the masses - Inflation is the biggest issue. At the right moment congress can provide some freebies to the masses (like mobile phone or laptop) to sway the opinion or pull out another NREGA like scheme out of the hat. But that won't be sufficient if the inflation that is breaking the poor man's back does not come down. Since inflation in India is structural in nature, this step was required.

Yes, the FDI will bring efficiency in retail, weed out middle man and make thing cheaper for the consumer, but that will take years to happen. This effect will probably not be seen before the 2014 election. Doesn't that defeat the purpose?  How does it help congress in 2014 election then? To understand this you have to understand the root cause of inflation in India and the reason why rupee fell 25% in a short while.

After the NDA was pushed out of power, for a few years the country was on right track of growth and surplus due to a number of reasons. Effect of the infrastructure spending for prior years were showing and the global economy was doing very nicely. In the second term congress was not so lucky. The global economy had plunged into a recession, but effect on India was not so pronounced. The real shocker came later. Monetary policy was accommodating and  government had started the NREGA which was costing the government forty thousand crores every year and was directly released to the poor. Exports were down but domestic consumption was high fueled by the increased money supply through the system. Current account balance crashed, luckily the rupee was saved due to capital account surpluses. Capital account surplus was temporary in nature - Indian corporates were borrowing heavily in US markets in trying to take advantage of record low dollar rates. But the dollar had to be paid back. Current and capital account both turned red and second half of 2011 was mayhem for the rupee as it lost 25% of its value in short time. There is a significant possibility that this trend of high inflation and rupee depreciation would continue in the future.

Given the government deficits and global economic scenario, there were very few options left. Government tried to fix its deficit by raising fuel prices, it helped. But that did not help the Foreign exchange problem. If the economy remains structurally weak and exports fail to pick up, then somehow Dollars have to be arranged to stop the rupee decline. India has to see some foreign investment and corporates are not ready to borrow after being screwed badly. So in another act of desperation congress has decided to allow FDI in retail. The money that will come in will stay in India for long and stabilize the Rupee. It will be a boost to growth and productivity. It will be atleast a decade before Walmart etc. start repatriating anything back home. Then it will be somebody else's problem to plug that hole. For now, congress can again be a hero, but the truth is that if they did not do this now, there would have been nothing left to save. It is a calculated political risk, and a potential masterstroke.

Sunday, August 12, 2012


Is History a science or an art? I would argue it is much more a science than we realize.

Science functions as follows- inquisitive folk observe a natural phenomena, which they do not initially understand. They set out on a quest to understand that and related phenomenon. To that end, the inquisitor creates plausible hypothesis. And then starts the collection of evidence to support the hypothesis. This is done through experimentation and keeping sense perception heightened to what they are looking for. If the evidence collected allows the inferring of correctness of the hypothesis, it becomes an accepted theory. One more brick in the wall of Science. Another milestone.

Through the history of mankind science and human knowledge has followed this path to growth. Be it Galileo, Copernicus, Edison , Darwin or innumerable others.

There are some experiments where carrying out of the experiment is hard part and inference is self evident. For example when Edison was inventing the bulb, he had to create different prototypes and then switch on the bulb. If the bulb lights up the experiment would be successful and hypothesis would be theorized. However there are some experiments where  inference is not as simple as toggling a switch and watching for light. For example the Large Hadron Collider experiment. Constructing the experiment and carrying it out was no easy task, but neither is the inference. After all you are trying to find the Higgs Boson, which can not be seen. So large amount of data is collected, which are electrical signals generated from collision of particles, and computer programs go through that data looking for a signature. If the data would pass statistical tests - hypothesis would become the theory. With time if more and more data confirms the hypothesis, scientist would be able to assert with more statistical significance, the correctness of their conjecture.

A close examination would reveal parallels between the act of inference in scientific inquiry and the quest to understand human society and its history. We have a huge number of people on this planet, existing co-dependently for very long, where individuals change through time and ideas that bind them also change through time. Society resembles a mutating organism in that way. It can also be seen as a diversified scientific experiment happening as we breathe. The tough part is Inference. Like a biologist a historian tries to understand the organism that is our society. If we can study our own behavior on a giant scale and through time, and take some knowledge from it, we will have much greater control over our destiny.

History, and the act of writing and re writing of it is not just a statement of facts, but our attempt at inference. History is an attempt not just to create a theory which is an end to itself, but an understanding of individual and collective human nature which itself would evolve over time. The distinction between art and science probably comes from the fact that there is no well defined objective in this exercise, but it resembles science in so many other ways.