Man Up, Wall Street

I can’t say I’ve been following the Occupy Wall Street protests with bated breath. For one, I don’t know what the protest is about and it seems, nor does anybody else – not the protesters, not the reporters, not those who approve or disapprove of the movement – in short, nobody.  A protest that’s not against something definite is not a protest so much as it is a public forum for airing self-pity. I thought the internet was enough for that. 


I'm a bit confused about what they expect to achieve and how they will do so. But I suppose most protesters are and that's really a secondary issue. Personally, I’m a big fan of protests. It gives everyone a few days off work. The media finally has something to report. There’s always something to watch on TV. And it’s indicative of a populace that is trying to think about the state of the world.

Unfortunately, Occupy Wall Street is running out of funds. Apparently, it’s difficult to draw attention to how poor you are unless someone gives you the money to do so. No, no. No irony at all. It’s time for Wall Street to be a man and do the right thing. It must fund the protests, thereby negating the premise of the protest altogether. It’s a win-win. 

Business Communication

 “…for the businessman, the greatest gift is to be able to speak so many words which seem to signify something but don’t, which convey a general attitude but are free from commitment.”

For 3 years I studied business and desperately groped for words to describe the exasperating imprecision of every statement I read. Mr. R.K. Narayan puts it so accurately, succinctly and seemingly effortlessly, that I’m afraid I may have become a business(wo)man myself.  

Much as I lament the English language’s limitations for expressing romanticism, I must praise its pliability for business: the scope for ambiguity is immense.

That said I’m quite scandalised with my English these days. It started when I first discovered online dictionaries that would pronounce words like the Americans and the British do: I realised that I didn’t speak like either of them and to add to it, my pronunciation didn’t even resemble the spelling – I was wrong in every way it was possible to be wrong.

We don’t realise how much of the “good English” we speak is actually very bad English. Being able to string a sentence together is hardly indicative of mastery of the language. If the British ever come back to visit they’ll never guess that we’re speaking their language. We can try to speak in a polished accent or use big words, but speaking correctly is a far cry for most of us, and is unlikely to become a reality unless we decide to spend a lot of time scanning Wren & Martin (oh, you boys) and listening to that stuck up witch on TFD speak “propahly” everyday. 

The Agreeable Shortness of Being

For long I have wondered why I attract so many short jokes. I’m not particularly short. Okay well I am, sort of. But I am the chosen target even when there are shorter people in the vicinity. I think I’m at that optimal height where it’s all right to make short jokes without worrying that I may have some underlying medical condition. Personally, I love short jokes. They are particularly funny when a person of my height cracks them.

Perhaps I’m partly responsible for attracting attention to my height. I can never resist an opportunity to show off the merits of being small. Short people have some remarkable advantages: leg room is never an issue, sleeping on the couch isn’t all that uncomfortable, low-ceilinged rooms are less likely to make us claustrophobic and we are, on average, better limbo dancers.

Beethoven and Picasso were 5’4”, as is Scorsese. As Bill Bryson says in A Short History of Nearly Everything, “The world belongs to the very small – and it has for a very long time.” If anything, short people are more likely to be able to adapt to sudden changes. We do live in the more oxygen-rich part of the atmosphere. We have the choice of being taller by wearing heels or stilts, while tall people can’t be short without undergoing some very unusual surgery. One of the few things economics has successfully taught me is that a larger choice set means better optimisation. 

In Defence of my Frenemy

I read a wonderful article about maths recently. It drew my attention to the treatment of maths in economics. Social scientists hold what can only be described as militant views on the use of mathematics. Those who are good at it insist that it is the only plausible reasoning mechanism. Those who aren’t argue that it’s hogwash. Oh what well-reasoned arguments.

The need for mathematics is well-established in the physical sciences. But it is, after all, just a tool. Considering a paper good just because it is sufficiently mathematical is akin to rewarding the methods employed rather than the result achieved. It could be argued that the result is more rigorous when proven mathematically, but that’s not always a valid argument when one is trying to describe human behaviour. Given that there are more than enough people who hate maths, it is probably reasonable to assume that nobody will employ a very complex reasoning process merely because some researcher believes that it is the only one sufficiently sophisticated to be attributed to a rational individual.

Asserting that the use of mathematics to derive economic results is rubbish just because it is beyond one’s comprehension is pretentious. It takes an ostrich’s brain to insist that something is not true merely because one lacks the cognitive capacity to understand it. The use of maths brings some regularity and predictability to behaviour, a necessary simplification for modelling anything. 

There might, however, be a case for substituting bedtime stories for children with bedtime mathematical equations. They’ll fall asleep quicker, there is a lower chance of them imbibing any prejudices on account of the parents’ carelessness in choosing a story and who knows, they might turn out smarter. 

Picketing, Pocketing

Suppose each of your pockets can be picked with an equal probability on any given day. I’m going to take a conservative estimate of 10% and assume that the probabilities are independently and identically distributed. You have some money, say Rs. 500 that you would like to carry. Would you prefer to distribute them across both pockets so that the probability of you having nothing is minimised, or would you prefer to keep it in a single pocket to maximise the probability of getting to keep all your money? To put it another way, by putting your money in a lot of different pockets, are you actually raising the probability of at least something getting stolen?

Is it correct to say that the probability of each pocket being picked is independent? We could argue in favour of this assumption because it is unlikely that pickpockets would take the risk of checking all the pockets of the same person once they’ve found something. But if the assumption is correct, then you should be indifferent between the distributions (250, 250) and (499, 1), which you are not. So let us further simplify by assuming that the money is equally divided between all pockets.

Let’s calculate what you should do, shall we? If you put all your money in one pocket, the expected value of the money that you can expect to have at the end of the day is 0.9 * 500 = Rs. 450. Since we assume that the probability of the first pocket being picked is completely unrelated to the probability of the second pocket being picked, the intersection of the events should simply be the product of the two probabilities. So the probability both pockets being picked is 0.1 * 0.1 = 0.01. If you equally distribute your money over both pockets, the expected value will be 500 – P(AUB) = 0.1*250 + 0.1+250 – 0.01*500 = Rs. 455. While the amount you put in each pocket doesn’t affect the expected value, the number of pockets will. So it’s rather rational to keep your money in many different pockets if you’re an average person.

But there could be pickpockets who grab opportunities with both hands. Assuming a probability distribution over all pockets instead of conditioning it on the individual does not allow for a fantastically unlucky individual who has all pockets picked on a single metro ride. Let’s just say nobody likes that guy too much anyway so we aren’t relaxing any assumptions for him. This also means that we don’t think a person’s pocket is more likely to be picked just because he has a lot of them. I’m forced to concede that this, too, isn’t very unrealistic. Where will the pickpocket look in a pair of Dockers?

So even without accounting for risk aversion, our model shows that it is indeed rational not to put all your eggs in one basket. In any case, the preference for not losing everything is probably stronger than the preference for not losing anything. But extend this concept to too many pockets and regardless of what the calculations tell you, you should know that you will end up losing at least some money just by forgetting about it (true story). It is reasonable to say that there is an upper bound to the number of pockets you will split your money across: just as it would be embarrassing to find out that you are broke because your pocket has been picked, it would be rather awkward to have to fish out tenners from four different pockets to pay for a doughnut. The answer, my friend, is moderation. 

Stop Writing Already

I can’t help marvelling the amount of completely superfluous writing we all do on a daily basis. We write blogs and text messages but that’s just the tip of the iceberg. Think about all the writing that goes into reports, business proposals, university applications, job applications, any application, college projects, official reports – most of this is solicited work, rewarded with grades, admission or money. And yet, most of it goes unread. Nobody wants to read it. We pay money to make people who don’t want to write, write reports that nobody wants to read. Why?

The demand for “writing skills” in almost every job profile is nearly comical. Apparently the need for strong communication skills overshadows any technical or industry-specific skill one would require to get a job done. It’s more important to be able to talk or write about what one plans to do. Is this because the information age has put us out of touch with skills like writing complete sentences or being able to make conversation beyond “suuup?” or is it because jobs must involve useless, joyless activities? I suspect it’s a bit of both. And maybe much else that management never taught me. 

What Economics Wants

So far, I learnt that everything we do is well-reasoned, properly justified and can be modelled using basic calculus and linear algebra. So well-reasoned across all individuals in fact, that it can be correctly and precisely aggregated. We optimise our choices all the time. We can perfectly predict the future. (How come astrologers are frauds when they make that claim but economists are geniuses?) Once we commit to an action, we make sure that we follow it through. All this just contributes towards making us the wonderfully regular, rational, trade-off talking people we are.

But that’s not all. In economics and other social sciences, we have built models for how we choose where to live in terms of access to education, the composition of the neighbourhood and a lot of other factors that I can no longer remember. Based on our identity, cost of education and employer beliefs conditional on social identity, we emit some signal. Based on this signal, we could be assigned some job that we supposedly want with some probability. Considering the amount of mathematics required for these important but relatively straightforward decisions we make, I’m frankly amazed that we manage to breathe without analysing ourselves to death.

I think students of economics should be charged the lowest possible insurance premium. Have you ever seen a reckless economist? We’re dull, boring, predictable and worst of all, rational. Insurance firms couldn’t ask for more. I bet they can’t find another category of people less likely to get into scrapes.