Wednesday, August 5, 2009
Creating liquidity in every imaginable market has become a guiding principle for participants that we have often created tradable entities where none should have existed. We want to trade carbon, carbon footprint, grades, virginity?, and many other historical non-tradables. I do not want to enter into the debate of moral questions on trading all kinds of stuff. I am not easily outraged, and more importantly, I would prefer debating on this issue without entering the morality domain. The belief that if anything is tradable, the price would be accurate is ubiquitous. I think this is just plain wrong. Some instruments are meant to be illiquid. In our fetish to create liquidity, we create shallow markets and prostrate before the holy god of price discovery. Merely trading over and over again does not aid price discovery. We merely get to a market-clearing price, and not to a relevant discovered-price.
I think there is an interesting analogy in the science of measurement that might help explain what I am getting at here. There are two interesting terms in measurement – accuracy and precision, both of which give an idea about the efficiency of a measurement but with subtle differences. Accuracy is the measure of how close the measurement is to an actual value, while precision is a measure of how close the measurements are to each other. Accuracy depicts how close we are to the actual quantity. So, in layman terms, accuracy is what is important. Very often, we mistake a precise measurement for an accurate one. According to me, market determined share prices are very precise. Quiet often share prices are “discovered” based on orders accumulated around a point. The more orders that are there, more precise the measurement. But markets do not uncover value accurately. If that were the case, then an index would not move from 8K to 21K in 1.5 years and go all the way back in another 8 months.
Market aficionados will retort saying that there is no “actual” value as far as markets are concerned. Perception is reality, “discovered price” is indeed the actual price. This is a credible argument. One that acknowledges the inherent variability in values of assets based on future assumptions about different factors in the world. But, if this is indeed the case, why do we want precisely discovered prices. Why place the burden of precision on an entity that has no notion of accuracy? The idea of having high levels of precision for an measurement that is inherently inaccurate is absurd. This is like a weather report guy telling you that the temperature for the day should be 23.678 degrees Celsius, but with the caveat that the measurement could be off by 15 degrees on either side. If your range if this broad, your precision counts for pish tosh, a concept with financial markets have never come around to understanding.
If valuing assets is a mugs game, if variance is going to be high, if market dynamics are going to influence prices way more than actual changes, if a change in unemployment rate in the US can take the share price of a local pharma company down sharply, then why should we insist on creating liquidity and aiding price discovery. This piece from Paul Wilmott from New York Times discusses the notion of liquidity and price discovery well.
Leaving aside the question of whether or not liquidity is necessarily a great idea (perhaps not being able to get out of a trade might make people think twice before entering it), or whether there is such a thing as a price that must be discovered (just watch the price of unpopular goods fall in your local supermarket — that’s plenty fast enough for me).
I remember a time when real estate prices of places close to the LSE were higher than ones 200 meters further away – merely for the fact that orders entered into systems in these offices could hit the LSE sooner. We are talking nanoseconds here. If this does not make people look at the financial markets and go – Oh my god, what have we created here? I don’t know what will.
Apparently, this madness is finally being debated. Our fetish for liquidity has led to a scenario where High Frequency Traders account for 50% of NYSE volumes. As ever, this article uses myriad high-falutin words like Flash trading, frequency rebate etc. Finance need not and should not be this complex. If it gets to this level, we should be stopping and restarting.
Nicolas Nassim Taleb wrote a book on randomness in markets called “Fooled by randomness”. The fundamental premise in the entire book is that people do not realise the role randomness plays in life, and in financial markets. That randomness is there is undeniable, and perhaps can be managed. What is more difficult to handle is the fact that inevitably (and periodically) people create structures and thought processes that do not acknowledge the inherent randomness in life (and financial markets).
Why should stock prices trade every day? Why should stock prices be given to the final decimal? We could just have a system that says stock A trades between Rs. 50 and Rs. 55. They announce results on the third Thursday after each quarter ends. The stock can be traded for a week after their results are announced – from the Monday after the results are announced to the Friday. Beyond this, there will be a week in the middle of the quarter when stock A will be open to trade. Prices will still be “discovered”, liquidity will still be there, randomness will be acknowledged, there will be little mark-to-market madness, and insider trading will be non-existent. Mutual funds will not be able to publish NAVs. If there NAVs change from when they publish it to when you read it, the NAV publishing is useless anyway. This is a small price to pay, I would argue. There would be fewer people participating in the price discovery game. This may not be a bad thing.
Weather forecasts often go wrong. The financial market is often like weather forecast. Except that instead of having a weatherman give his thoughts, we have about 25 who contribute their data-points for the daily temperature, and we take the average as a benchmark for the day. Can any of these forecasts change the temperature for the day? Can more estimates improve our accuracy of our prediction? If both these answers are no, then we are probably better off with one guy trying to tie all the dots. All people in the country will have to live with the fact that the temperature could be between 28 and 32 degree Celsius. It is far better than them assuming that it is 30 degree Celsius, when in fact it could be anywhere between 14 and 46.
Imagine the number of weather forecasters freed up to do less damage to the world than they were originally doing. Now, multiply that number by a million. That would probably be the number of resources that can be taken away from harm-creating financial jobs, if the world could shed its fetish for price discovery.
Monday, July 27, 2009
Usually, I try to resist the chip-on-the-shoulder response to articles on the western media, but this time I thought the article was painting a wholly inaccurate picture and chose to comment. My comment was as follows
An interesting article. But unlike your usual articles, there are some specious bits of reasoning which are thrown in into the mix here. 1. You say that the NBP's are wrong to say "your ancestors broke it, you fix it". Mainly because their ancestors dramatically increased population.
Your exact rant reads thus - The logic in the argument of the NBPs comes unstuck especially badly here. If the overdeveloped world is held accountable for the choices of past and present generations that produced large past emissions of CO2E and resulted in today’s high atmospheric concentration of CO2E, then surely today’s inhabitants of China and India should be held accountable for the individual and collective choices of past and present generations of Indians and Chinese that have resulted in the oversized populations of these countries? The selective application of the ‘your ancestors broke it, you own it’ logic by those who advocate special lenient treatment for today’s poor countries in global efforts to reduce greenhouse gas emissions is deeply intellectually dishonest.
Sir, I cannot imagine you actually drew out this comparison. The previous generation of OECD's pillaged the world. The previous generation of NBP's had kids (because they were poor and did not know about contraceptives, by the way). I agree with your original contention that inter-temporal punishment is morally unjustifiable. But your counter-argument is built on spurious ground.The argument from the NBP's need not be stated as "It is our turn to pollute". It can be interpreted as "You have taken the lead in polluting, now take the lead in cleaning up". A stance that I find very justifiable, morally.
2. You set out to try to establish that per-capita comparisons are incorrect. Your passage says - First, the externality associated with greenhouse gas emissions relates to the total amount added to the atmosphere, not to the amount emitted per capita. A given quantum of CO2E emissions does an equal amount of global harm, regardless of whether it is produced by 2 over-fed Americans or Europeans or by 100 under-fed Indians. Those who bang on about per capita emissions appear not to understand the ‘technology’ of the global environmental externality created by CO2E emissions.From here on you draw the conclusion that per-capita emissions are an inaccurate measure.
It is undeniable that overall emissions matter to the world's well-being and per-capita is but a diversion. But when on the issue of determining how we can morally justify how much EACH country can pollute, per-capita measure is perhaps as good as any other. Would the world stop writing articles on global warming if India were broken down into 30 smaller countries, each not being big enough to be part of your global 20?
3. When you start your argument, you get in your disclaimers early; and further hedge your positions well by citing the precautionary principle. I guess George Bush's justification for the Iraq war could have been constructed on similar grounds. 1) Weapons of Mass destruction are a bad thing 2) Human-made WMD are capable of destroying the world (and very quickly) 3) That WMD can be created by some dictator-run state is a reality. Invoking the precautionary principle, one should attack everyone in sight. The green-mongers have succeeded in depicting anyone debating climate-models as someone who is out to destroy this world.
The debate on how much we need to do is very crucial to the debate on who has to do what? In the current setting, the way you have put things, it appears as if the OECD countries have woken up to the threat posed by global warming, have taken a lead in cleaning the act for the world and given the time constraint everyone (read NBPs) has to chip in. An alternate interpretation could be, the OECDs have had their fun, now that they are losing out, they are throwing the toys out of the pram. The NBPs perhaps have this view.
OECD carrying the moral high-ground on the global warming debate. Now, that is hilarious.
In case it was not obvious, I am from one of the NBPs that you have mentioned. And although I am sceptical of the climate models (from a scientific point of view), I agree to the premise that the entire world must pull together to reduce emissions. I also agree that India and China should do more to reduce emissions. What I disagree with (and vehemently) is that the OECD countries should be pontificating on moral high ground.
My stand on this global warming debate is straightforward. India should fight tooth and nail against any restrictions, be it on geopolitical or moral grounds. I belong to the Henry Kissinger school of thought - His guiding philosophy was that foreign policy should serve the national interest.
On the more global issue of global warming, I think the debate should cover the grounds on which scientists are claiming that the world is heating rapidly. Invoking the precautionary principle in defence of going green is unacceptable in a world full of vested interests. As a student of science, I am inclined to give credence to scientists' claim that the globe might be warming. On the same basis, I think there should be room for healthy scepticism for the scientists and their models.
The world is already reeling under the impact of one group of self-appointed geniuses believing the infallibility of their models; we can ill-afford another screw up like this. Let us by all means reduce CO2 emissions; but let the freedom to question these models not disappear either.
After all, it was only 35 years ago when the world was damn scared of the Ice age; and even these scientists will tell you that climate changes will take a century to take shape.
This category comprises of two sub-sections, buy-side and sell-side. The buy-side is the one that buys/sells securities. These groups manage funds, invest in equities, debt etc and try to generate returns. Sell-side firms are the ones that work for a commission. Whenever buy-side firms trade anything, they do through a broking firm, paying anywhere between 10-45 bps for this transaction. This commission is the key revenue line for sell-side firms. In other words, buy-side firms generate on fund-based income, sell-side firms generate fee-based income.
Sell-side firms have 3 kinds of participants – analysts, sales guys and traders. Analysts are the ones that sweat over balance sheet, P&Ls and the like, come up with recommendations for stocks and supposedly uncover value in equities. Sales guys propagate these ideas. They call up assorted buy-side firms and ask them to buy stocks which they (analysts and sales) think are undervalued and sell those which they think are overvalued. Traders are the guys who actually put orders through. They understand the mechanisms of the market and can get a sense of which direction the market is headed merely by watching the order book.
Analysts agonise over small details and generally pontificate about specific industries. They are the most pseudo-intellectual of the lot. They generally do not have the courage to put in any trades on their own but take great pride in sharing anecdotes about how they helped a client make lots of money. Particularly bitter analysts have a habit of recalling stories where a client lost money after having not listened to the sage advice from the analyst himself.
Sales guys have the individuality of a log of wood, a particularly uninteresting one at that. They peddle analysts’ views with any market flavour they can pick up. Sales guys spend hours on the phone recalling funny anecdotes from stories they heard while they were spending hours on the phone talking to other clients. Sales guys swear by the flavour of the season and pride themselves on knowing the pulse of the market.
Traders live for/in the moment. If they see a big buy order they conclude markets are indefinitely going up. If they see no activity in a day, they are generally depressed. These guys rarely care about anything beyond the immediate future.
On the buy-side, there are analysts and fund managers. Analysts are generally flunkeys who interact with fellow analysts in sell-side firms, provide internal research to fund managers, and generally do anything that helps them in their eternal quest to impress fund managers. Fund managers are the guys who manage portfolios, the ones who take the decision to buy/sell/not buy any stock. They are paid on the basis of their funds’ performance.
Now, where is the catch? If this is such a well-structured industry, where is the problem?. The problem stems from the fact that everything in the industry is relative or hidden. And every participant is allowed to hide behind some smokescreen. Cover-thy-ass is the underlying theme amongst all participants. Any research report will be littered with the following phrases – “in our view”, “we believe”, “increasing likelihood” etc. Now, equity pricing is an inexact science, so there is nothing wrong in getting things wrong. Except that, the pay packets of the participants hardly acknowledge the fact that this is an inexact science. Markets are random, investors bear the brunt of this, but employees are hardly affected. And, in my view that is wrong.
Imagine going into a hospital and the doctor says – “Look, in my view, you should take these tablets. There is a likelihood that these might help you” and follows up with – “ I must disclose to you that I might or might not have a stake in the pharma company that sells these tablets”. And for good measure, you find out that the doctor himself would never take these tablets. Not because he does not trust them. No siree. But because he wants to diversify his professional and personal risk. As in, if the tablet turns out to be bad, even if his professional reputation is ruined his personal health at least would remain. Remember, doctors generally earn about one-fifth of financial consultants globally.
Both diagnosis and stock-picking are inexact sciences. It is just lamentable that we set two standards for these two. The more crucial between doctors and analysts is set the more onerous set of restrictions, judged harder and has to get by with far lesser pay.
Now, coming to the part where the industry participants hedge their bets. Sell-side guys are in the business of generating commissions, not returns. So, they do enough to create chatter. According to the sell-side, the actual job of picking the right-stocks is with the buy-side. The motto is simple – Ours is not to buy or sell, ours is but to peddle (paraphrasing Alfred Tennyson). Even within this, the structure helps these guys out. The research analysts are slightly reticent; while the sales guy is at liberty to say whatever he wants, because in the end he is just providing market view (albeit with a bias). On the buy-side, the analysts do not take any calls, so it is impossible to blame them. The fund managers, who are the only ones who can be pinned down to something (because they have a clear P&L) have numerous ways of getting away with it. Fund managers are generally measured only relative to the market. So, their play is simple – allocate 85% of portfolio to the standard stocks (market), have 4 companies where you have inside information, park 10% of your portfolio here, and place 5% of funds base on your analysts’ recommendations and blame them if things go wrong. Everyone is happy this way.
Monday, June 22, 2009
Broadly, the industry can be divided into three parts – one bunch of people working with companies, one bunch of people working with markets and a third bunch who we will charitably describe as other jokers (mostly because I do not understand what they do). By industry, I do not include the guys who actually do banking in the true sense of the word. The guys who actually lend you money to buy house, car, or an education. These guys are probably only slightly less clueless, but what makes them far more tolerable is the fact that they generally don’t have huge egos. Also, there are more women in this part of banking. J
Bunch 1 – Guys who work with companies.
The guys who work with companies are the ones that advise companies to issue corporate paper (to “borrow” in English), to “optimise” their balance sheet (there is no English-word equivalent for this) and to buy other companies. This industry is structured in three layers, one big shot guy who has a “board-level” relationship with 4-5 companies in an industry. He has 2-3 guys reporting to him (rising stars) who do the market analysis and are generally sold the dream of being tomorrow’s big shot. This structure is propped up by flunkeys who make the presentations. Now, you might wonder why these guys would be best-suited to give gyaan to CEOs on what companies to buy. How in the wide world would a 28-year-old who has spent all his career (all of 4-5 years) in the financial sector be capable of “advising” on a transaction where one telecom company buys another, you might wonder. But this is how the industry works. Most big deals are done for the sake of one underlying theme, and generally that is not financial. Top management either develops a fetish for a competitor’s product, or develops an ego that demands a bigger company to run, or in most cases is under pressure to “better-utilise” the cash on its balance sheet.
The “board-level” guy plants the idea in the minds of top management, gets his flunkeys to flip a bunch of the presentations, has one of his stars run through this and makes a pitch to the management with a shortlist of 3 targets. Some financials are thrown in for good measure. The flunkeys literally do a match-the-following of “buyers” and “sellers” in the industry and create a laundry-list of possibilities. When some companies fall under the category of potential “buyers” and “sellers”, flunkeys self-actualise. I have heard questions from flunkeys like – Can Atos Origin buy Satyam in order to acquire offshore capacity?. I would reply that Atos has cartloads of debt, and Satyam’s market cap is actually higher than Atos’s. Oh, then can Infosys buy Atos Origin then?, would be the next question. Imagine you going to a vegetable vendor and asking for potatoes and him replying, I don’t have potatoes today, but can I buy your pen instead?
The stars know a lot more about the industries. They would know that Atos hadn’t a chance in hell of acquiring anything and Infosys would rather de-list before they bought Atos. They would shorten the list created by flunkeys, add their “expertise” and bond with the board-guy to discuss possibilities for the sector. They would patiently “crack” new boardrooms, build a potential-deal “pipeline” and wait for one ego to get big enough to cloud judgement. That is pretty much the description of your average M&A house. Till I completed by MBA, I did not even know that companies bought other companies so frequently. I just could not see the reason for this type of transaction. They probably wouldn’t do this if not for this industry.
The other divisions which raise debt, help with rights issues etc, work similarly. There is one bunch that does financial engineering to help companies manage their balance sheet. In India, generally this work is done by assorted auditing firms. Mostly, what these guys do pushes the ethical boundaries; in some cases it is downright fraud. The auditing firm will help you “optimise” your balance sheet. In essence, the company will help you massage your ratios if you want to borrow on favourable terms. Your inventory will be placed with your biggest customer to count it as receivable, your key shareholders will be paid cash dividends, your big lenders will be told they will receive interest, only it will be called dividend from now on. This is called financial engineering. It sullies the good name of engineering.
Will give a few bits on bunch II and III later on.
Thursday, June 4, 2009
1. Equities may be a riskier asset, but if you are investing for a long time, they will definitely generate better returns: This is pish tosh. Most long-term calculations are biased by the starting date, and therefore most statistics presented are wrong. Let me explain this with an example. If as a small investor, one had entered the market in 2006, the long-term argument will hold good, but anyone who entered when the sensex was anywhere between 18-21K might not see this argument bearing good even if we stretch the definition of long-term to 50 years. If over any stretch of long-term, equities generated better returns, then this is not a riskier asset class, it is the juicier asset class.
2. Small investors are not at a disadvantage: Think about this. The industry has 3 kinds of participants, domestic institutions, foreign institutions and small investors. The first two move the market, and the third is a price-taker, and this is a zero sum game. This is how market mechanism works – Company of reasonable size keeps peddling its own investment story, Fund managers hear the story and build positions; one of the sell-side research firms picks up on this and writes research, some more fund managers like story and buy stock; some retail brokers follow suit and write about the investment idea, the small investors also get in and the stock price keeps going up. Who do you think is selling? In the first 2 phases it is some promoter, in the third phase it is the fund manager. The key to an investment idea is not whether or not you understand the story, it is whether you are amongst the ones who are early to the story. A fortnight after the elections, the buzz word among retail investors was how infra would be a major theme for this government. At least 4 fund houses held conference calls with psephologists before election results were out. Infra stocks were up 50% in the first 2 weeks after election results. By the time the retail investors get into the theme, it is already done and dusted.
3. The guys on TV are really smart, and therefore get things right: I worked for a large sell-side firm. Journalists from Bloomberg or Dow Jones would call our offices once a month to have a chat about this and that. I would give him/her the most sanitised dope possible, sans name/organisation. (The stated internal rationale for this was that our clients pay for our research, they would be angry if we gave it away for free; the real reason is that in most cases, we are really not sure what is going to happen and wouldn’t want to get sued). These journalists would spin a story out of this which would then get picked on by the TV guys. As a sell-side analyst, I was generally late to the game as the buy side guys had more at stake, more resources and were generally better than me. The best buy-side guys got may be 60% of their calls right. TV analysis is at the fag end of the investment analysis-chain. They still sound smart because they are good at packaging and are perhaps at the beginning of the retail investment analysis chain. In a reasonable market, a major insight uncovered by good analysis lasts perhaps a week. This is roughly about the time the insight takes to find itself on TV screens. So, if you invest based on TV analysis, be prepared for some rude shocks.
4. A lot of small investors make very good money: Remember this is a zero sum game. Most small investors get s*ckered into this because someone they know has struck it rich by just randomly punting it on the market. All investors like to talk about their investments that worked beautifully. This is true of mutual fund managers, hedge-fund guys and small investors. When things go well because the market is going up, people give themselves credit for picking the right stocks. When things go wrong, they go quiet. So, anyone hearing these jokers will assume that they are rockstars of the investment world. They are not. (Nobody is, the market is a great leveller. More on that in another post). Rising tide takes all boats up, the oarsmen take credit for this; and when the tide recedes, they go quiet. You will hear the odd story that someone has gone bust because of stock investing, but this is not all. Most guys enjoy trading in bull markets, lose a lot of money in bear markets and keep their trap shut about this. Chatter is directly proportional to return levels.
5. Blue-chip names are generally safe bets: Again, think about this. Blue-chip names are among the most researched in the market (There are perhaps 40 sell-side analysts covering Infosys, there will be another 50 buy-side analysts covering the same name). There are guys who have spent 10 years in just studying the 25 names that are so-called blue-chips. So, even if they are stable and solid, you will get beaten to the best returns by the guy who goes to the same club as the CFO. So, you are likely to generate better returns by placing money on the index. There is a huge difference between a good company and a good stock.
6. The financial markets are very ethical and take care of the small investor: Hahahaha. This is a whole new can of worms. One can write an entire book on ethical standards in the financial sector. Let me at least set this aside for another post.
So, what does a retail investor do? Generally, market return is classified into two types – alpha and beta. Beta is just what the market returns, while alpha is what the “skill” level of the money-manager returns. By definition, the cumulative alpha of all market participants has to be zero. According to me, the best strategy for retail investors is to go for beta, and build portfolios where they won’t get smacked by huge negative alpha. In essence, time your overall market entry, don’t get s*ckered into the absolute lemons, and for the love of god do not fall for the temptation of trading more when the going is good. The simpler version of this is to just punt on the overall market and not get into specific names. If you want to trade on khabar, do not use your brains to verify whether khabar is likely to be right, rack your brains to figure out if you are the first to the khabar. Baseless khabar can generate returns if you are the first to hear it; and vice versa. And develop a temperament to handle volatility in returns without letting it affect your health. If you cannot do any of these, place your money in FD’s and pray that this bull-market madness comes to pass.
Sunday, May 31, 2009
In the era where there is a thin line separating freedom of speech from conflict-inciting rhetoric, I will begin my piece with a request to all of the 3 people or so reading this piece to view this piece in the right light and promptly fight off all thoughts of inflicting grievous physical injury on the writer.
To begin with, let us set the context right. What we are trying to ascertain is not a statistical evaluation of the cricketing achievements of Sachin, neither are we trying to see whether he is the most important cricketing icon of the country, nor is this an attempt to compare Sachin with other members of the Indian team and measure his performance. We are not trying to ascertain how fans would evaluate Sachin; we are trying to evaluate how history would. And in order to have a more active discussion on "All-Time" greats, we have limited our context to Test cricket and excluded ODI's. Otherwise, we would be like Americans playing "World Series" Baseball if we discussed the "All time greats" in a version of sport that has had a relevant history of 25 years, in 16 of which the protagonist has played in. The distinction between a contemporary good performer and an All-time great would be thinner than the icy ground I would be standing on once I have slowly veered the reader towards my own prejudices.
In order to evaluate this question seriously while still keeping it simple, I have listed but three criteria to distinguish between the great and the merely good. The first and most simple criteria would be the time-span spent at the top of the pile among contemporary players. Every player hits a purple patch, but consistent performances over a period of time and against varied opposition would only merit a place among all time greats. The obvious extension of this criterion would be that the aspiring-to-be-great player must not have an Achilles Heel. In other words, there must not be a facet of the sportsman that can be considered as an obvious weakness, or stated in more severe terms removing the benefit of doubt away from the player; there must be demonstrated capability for playing on all surfaces, against all opposition in all conditions. Players like Matthew Hayden, Justin Langer and Carl Hooper would fall at the first hurdle while Ian Botham with his none-too-impressive record against the West Indies and Ricky Ponting with his so-far-not-proven record in India would fall at the second.
The second criteria that I wish to establish is that the player should have the ability to hold center stage in a match and force the direction of play. He should have the ability to dominate the opposition, an ability to have a devastating period of play and therefore impact the entire course of the series. The player should have this intangible presence at the crease that allows fans to dream of possibilities even in dire situations and evokes fear and respect in opposition players who have a constant awareness of the threat posed by that one player; a presence because of which opposition players say "the match isn’t really over until we dismiss him, or, see off his spell". This presence can be brought on by the sheer genius of the player making an impact with his huge talent, a la Vivian Richards, or Keith Miller, or by a presence acquired by the not-so-gifted by sheer weight of performances under trying circumstances, as in the case of the indomitable Stephen Waugh (a quality, that for all his talent, his brother Mark Waugh sadly never did acquire). Notable good players that would fail to make the cut because of not having this "quality" would be Jacques Kallis and Shaun Pollock. I know that criteria no. 2 seems like a contrived factor through I which I can eliminate players whom I don’t have a particular liking to in the forthcoming (likely) scenario of these three criteria becoming the accepted international benchmarks for assessing greatness, but then I did warn you that I would make my prejudices count.
The third criteria which would distinguish a great career would have to be a series of defining performances, a series of testaments attesting the proof of the pudding, signature knocks, legendary bowling spells, outstanding series, match-winning performances, marks on sporting history that become part of cricketing folklore, a timeless testimony of talent that has found fulfillment. History has a bias towards events that sometimes undeservedly relegates eras to second position; sporting history is no different. Stories of Curtly Ambrose turning in a fiery spell after being irked by Steve Waugh will be retold by generations, while Ambrose's overall statistics will rarely get discussed. Exceptional performances have this happy habit of being retained for posterity, while patient accumulation does not. The obvious caveat for judging greatness based on signature performances would be that they should not be one-off. Graham Gooch's outstanding 154 against West Indies or Mike Atherton's excellent 182 against SA would be noted in cricketing history as a one-off brilliant performance by a steady performer, but not as a signature performance by a great player.
Now, having set the context in which to discuss Sachin Tendulkar's career, we can go to the onerous task of actually ascertaining his position in history. The sheer weight of the runs he has scored and his awe-inspiring presence at the crease make the evaluation along the first 2 criteria a no-brainer. It is in the third criterion that Sachin Tendulkar might fail to make the cut.
My contention is that Sachin has rarely ever played innings that have determined the course of an entire series. In fact, barring a wonderfully belligerent 155* in the Chennai test of the India-Australia series in 1999 where he showed Shane Warne who was boss, there haven’t been any innings that have been series-determining. It is unfortunate that some of his best overseas innings like Perth 1992, Edgbaston 1996(?), Johannesburg 1999(?) and in Wellington 2001(?) have been in lost causes. Though these have been masterclasses in batsmanship, their impact on the course of the series has been minimal. Unfortunate circumstances, a laughable bowling attack and a mediocre support cast have all been contributed in ample measure for this state, but the bottom line remains that there is a clear blot on Sachin's CV which provides ample ammunition for his critics to point at when Cricketing Hall of fame comes beckoning. When history judges Sachin's performances, he could get slotted into that fateful "Special mention" category, instead of marching on as one of the winners. A slot not different from the one occupied by the Dutch Football team in the World cup context or by Ivan Lendl in Wimbledon.
According to me, Sachin Tendulkar seamlessly transformed from a player with extraordinary promise who was set to rule the world to a player who, albeit being past his prime was a great player nevertheless. There was a phase in his career, when every pundit said "If he is this good now, how will he be a few years from now"; a few years later these same pundits were saying "Even at this age, after these many years in international cricket, he is still one of the best in the world". What I find disconcerting is that this promised "peak" of Sachin never came. As a once-die-hard fan of Sachin Tendulkar, I am still awaiting for that one fantastic series, one run of extraordinary innings, one stamp of class that puts distance between him and Number 2. The only difference being that, at the beginning there was an eager expectation before each series of witnessing a defining performance from Sachin; this slowly gave way to desperate hope that he would finally deliver that great innings to silence his critics. Now what remains is just a prayer for that final swansong, a la Marlon Brando in Godfather. That promised "peak" never came. (The heart still says the promised peak "hasn’t come yet", but years of disappointment have made the brain a touch cynical)
Perhaps this is because of the weight of the promise that was made to us Sachin fans at the beginning of his career, or perhaps it was our own fault in building our expectations to such spectacular levels that even Sachin could not achieve, but the truth is that there remains a lack of complete fulfillment when looking back at Sachins career. Too many "could-have-beens" casting their lengthy shadows. Too few instances when the prodigious talent has found expression in a sufficiently forceful manner to impact important series.
Now, for all my smugness at having arrived at the foolproof method of assessing "greatness" in cricketers, I realize that this entire process is merely an exercise to express one side of a long-running debate and attempt (rather feebly) to pass it off as a verdict. Any half-wit can easily evolve a set of criteria for assessing greatness that could contrive to create anomalies. And it would be just as easy to pick holes in any set of criteria presented and discredit the assessment. (The obvious 'hole' in this set of criteria would be the fact that there has been a deliberate super-positioning of team's performance in an individual's assessment. My defense is that context super-cedes statistics in historic assessment, and series outcome is as good a proxy for context as anything else. But this contention is imminently debatable)
This is today's post. Feel free to revile.
Even in a country besotted by cricket, it is perplexing that one single individual should be given so much attention. Even in the current Indian team that had quiet a few personalities, he was still the one batsman millions of fans identify with. Sehwag drew the crowds in and got the adrenalin flowing, Laxman brought a wristy elegance and a subtle grace to batsmanship, Dravid was the perfect blend of classicism of the past and professionalism of the modern, Ganguly chimed in with the passion and controversy, but if there is one person who embodied the heart and soul of Indian cricket, it was Sachin Tendulkar. A fan running out of a train after a 6-hour train journey to check the score of the latest ODI (we Indians tend to do that) would no doubt ask for the score, the context of the match, the batsmen playing right now, the required rate, the odds-of-winning etc. But more often than not, he will follow up with the one question that has been most asked by desperate Indian cricket fans - "How much did Sachin score".
For Indian fans, the match context is never really over until the postscript about Sachin's performance is added. Though the match context is the information we desperately seek, it is this sub-plot about Sachin that quenches our thirst for drama. He is the man that amplifies the vicissitudes of Indian performance. Every Indian victory is sweeter if Sachin had a hand to play, likewise every defeat harder to take when Sachin's efforts go in vain. Even in 2006, when there was a slow realisation that the master is perhaps past his prime and that Indian cricket is going to eventually move on from the "Sachin" era, the focus on his individual performance was enormous. He is Indian cricket's answer to Maradona.
What was it that made Sachin special? Perhaps it was the time of his entry into international cricket, arriving at a moment when the cricketing and media establishment of the nation realised that this near-religious zeal of Indian cricket fans can be monetized -- a realisation stemming from the enormous commercial success of the 1987 Reliance World Cup, and helped in no small measure by the entry of cable TV. Perhaps it was the bewitching combination of a precocious talent swathed in an endearingly humble personality. Or perhaps it was just the sheer drama of a 16-year old man-boy playing the fastest bowlers of the world and taking them on, something the Indian fans had not been accustomed to barring short glimpses during the chequered career of that old warrior, Mohinder Amarnath. Whatever the exact trigger was, Sachin Tendulkar captured the imagination of the entire nation very early in his career and suffice to say that he did not relinquish till his retirement.
His brutal assault of Abdul Qadir in his very first series, a back-to-the-walls innings in his first series against Wasim and Waqar, his first test century in England, his masterpiece at Perth all soon became stories told and retold. He was soon earmarked for greatness; whatever he did on the field seemed to exude confidence. Off the field, he was a huge commercial success. Across the nation, he appeared on Television ads, billboards, hoardings, chat shows, documentaries and what not. But, oddly enough, never suffered from the affliction called "over exposure" that affects the biggies of that "other" entertainment industry in India, Bollywood. People just lapped it up. He was everywhere, but not enough for people to say, "Oh, there he is again". He had become a consummate pro at advertising, but never ceased to have that innocent boyish look on screen. In short, India's first sporting Icon had been born and the nation loved him.
The on field presence of Sachin was due to the fact that he could enthrall laymen and critics alike. If the purists loved the bat arc of his straight drive, and the high elbow in his cover drive, his uninhibited stroke play and an innate desire to dominate bowling attacks made him a darling of the masses. He brought in skill and precision to his batsmanship without sacrificing his instinctive flair. He was calm and composed at the crease, yet there was an air of unpredictability about his batting. Whenever he had a role to play in the match there was an air of anticipation all around. The generous applause afforded by Indian crowds for the fall of the second Indian wicket was not mere appreciation; it was an act of reverence, an involuntary warming up of the crowd in expectation of what was to come. For a number of Indian spectators, the match really started only when India lost two wickets, and the master could come in and display his wares. The openers were merely there to set the stage - like the title song before the action begins.
There was a presence that the man exuded that made grown men suspend rationality temporarily. I have witnessed a few men wishing out aloud that the Indian openers would get out soon so that Sachin could come in. The rationale offered was "This is Sunday afternoon. We cannot watch the match if the openers play out the day" - only that when these people say, "match", they mean Sachin's batting.
It was this presence that to some of his die-hard fans symbolizes the very basis for watching sport- an active distraction from the drudgery of regular life, a few moments of magic and adrenalin that drowns out the monotony of routine. A presence that often transcends the match scenario or context, a presence that consigns the match status to being incidental, a mere prop to the stage on which the master performs. A presence that in some perverse way, would help the fan get solace - even rejoice, on occasions, from a Sachin half-century, even if India ended up losing the match. In as much that the result of the match did not matter so much to the Indian fan as Sachin's performance in the match, this could be called as cricketing Karma.
In many ways, this pre-eminence accorded to Sachin by dint of his precociousness is the principal bone of contention for his critics. To the critics, the subordination of the result of the match to the performance of one individual was a travesty. The critics could not take the fact that Sachin's performance superceded the match result, and more importantly that Sachin was absolved of all blame whenever the team sank to defeat. This elevation of Sachin to demi-god status seemingly shielded him from criticism, which further irked the critics who began laying in wait for every slip of the man where they could bring out the old knives.
The average fan's internal response India's defeats and average performances was to go into a state of denial and distract himself by way of celebrating Sachin's performance. Fans would talk about how Sachin batted admirably and did not receive any support, about how some shots were pure magic. Newspaper columnists would mention India's defeat in passing and dwell on Sachin's performance for pages. The critics, on the other hand, would insist on pointing out that the effort, though admirable, was in vain. To one, the batting was a celebration; to the other it was a pointless exercise, as it did not lead to victory. Reality, as in many such cases of debate, is, perhaps somewhere in the middle.
On occasions when there was a happy correlation between Sachin's and the team's performance - an event that has dotted his entire career if you listen to his fans, an event made remarkable only by its rarity if you listen to his critics - the entire nation was a happier place. The critics would convert for a day and write reams about the brilliance of the individual. The fans would thoroughly savour the moment and relish in pointing out that Sachin's performance was, in fact, crucial to the team's performance; the more pedantic among them would treasure the details to fight another statistical battle. Another day, another match, a Sachin failure and Indian defeat, and we were back to square one, with battle lines redrawn.
And herein lay the reason why the country discussed him so much, everyone aboard celebrated the victory, yet polarisation of opinion was never far away. When things went well, celebration centered around him, when things went badly debate surrounded him. Much like alcohol.
Inertia is one of the most-important and least-understood facets of existence. It is the reason why you have not gone on a holiday to a great-new place in the past 3 years, why you have spent the major part of the last 4 weekends doing the same things you did in the 4 weekends before that (watching TV), why you shut the alarm clock on Saturday morning and postpone that ambitious jogging plan. It is the gap between the thought process behind a great business idea and the actual execution behind it. Hell, it is one of the main reasons most people continue in their jobs in spite of the lousy boss and the ugly secretary.
At this point, I would like to digress a bit and clearly define inertia. Specifically, differentiate it from the often-confused-with laziness. You are lazy when your body refuses to listen to instructions from your brain; inertia has set in when the brain doesn’t bother to instruct your body. Let me state it clearly with an example. When you skip your first two gym sessions after having paid for the forthcoming 15 sessions, you are being lazy. When you subconsciously train your brain to forget that you paid for the gym-subscription and skip the next 10 sessions, you have got inertia.
People live in a state of denial about inertia. They underestimate this power of inertia and tend to gloss over it and pretend that it is not there. Life would be much better if we acknowledged inertia, and realigned our life. There are two major ways to do this.
The first method is to fight it aggressively. This has to be done very methodically and can be done only when you completely acknowledge that it is there. I will give you an example to illustrate this.
One of my friends had this problem with his alarm clock - in that it would ring and he would switch it off. Not an uncommon problem, but only that he had done this so many times that he had become conditioned to it. The alarm clock never woke him up. Every time it rang, his hand would just trace an arc, lovingly caress the top of the clock and re-occupy its original position - all without his "awareness". And every time he kept the alarm clock in a different position, his hand would just trace a different arc. He came up with this ingenuous solution to tackle the problem. Whenever there was a desperate need to get up - as opposed to generally waking up to attend classes or such - he would place the alarm clock in this tiny slot above his fan and place his chair outside his room. Every time it rang, he would have to get the chair from outside, switch off the fan, wait for it to stop (a good 2 minutes for those old-fashioned hostel fans), climb on the chair, remove the alarm clock and shut the damn thing down. By the end of it he would have the mental state of a serial killer, but would be wide-awake. Job done.
Some other gems for fighting inertia (followed by a few friends of mine): If you have to apply for new jobs and cant get the time to build your CV, call up the HR person and promise her that you will send the CV in 4 hours. If you have an 8-hour window to complete a 4-hour job, play for 4.5 hours and then start the job.
The second method and the method often preferred by me is the very simple - "Accept you have inertia and get on with life". This is extraordinarily effective and simplifies life enormously. Weekend gets planned around TV, there is a small shelf in the loo having a bunch of books, there is a deodorant bottle near your shoe-rack, you forward articles that are titled "10 mins of ogling at women can be as useful as 30 minutes at the gym" (This article was actually published in the TOI - Oh, the powers of journalists who have inertia) to all your friends and think the law of conservation of energy has a more literal meaning. No planning, no pressure, no guilt. Ah, a simpler world. The believers would say God meant it to be this way.
Unfortunately for us, we can not permanently take either of these courses, internal response favors option two, while society (read parents, stupid peers) forces you towards route one. This struggle between these two states has given birth to some beautiful business models. I will discuss a couple of these.
Gyms: Gyms are the best examples of institutions that have cracked the concept of inertia. They run essentially on the assumption that people enroll for Gyms and don’t complete their courses. I will run the economics behind a gym to explain the concept to you clearly. Lets take an example of a gym in a reasonably big city like Chennai. The gym has to be in a very good location, has to have at least 5 treadmills and corresponding gym equipment and a separate room for aerobics and such. Add a few trainers, a mini-refreshment center, the imputed rent for 4000 sq ft of area in a posh location, maintenance of a showering area, a parking lot, a watchman and some basic marketing, and you have got your self a monthly cost base of Rs 200,000 (bare minimum).
At a reasonable rate of Rs 1500 per person per month, that is a required customer base of more than 130 people for just break-even, leave alone return on capital, depreciation on machines, etc etc. Generously allowing for a window of opportunity of 5 hours each day for gymming (2 hours in the morning and 3 hours in the evening), and assuming peak efficiency in management, this implies that at any point of time there wd be more than 25 people inside the gymming area. If you have been one of the unfortunate people who has got membership for a gym and actually seen one, you will realize that there is no way there can be more than 20 people at a time inside the gym (A good gym wd have 5 treadmills, 3 each of those cycling and SFX things, 4 weird machines, and some area to do weights-training. Of these machines, at least 2 wd be dysfunctional at any point of time. There won’t even be space for 25 people to be in there).
But gyms still make money, and are popular. This can mean only one thing. A lot of people take Gym membership and don’t turn up regularly. If you were an economic geek, you wd call it capture of inertial surplus
Another example that I am big fan of and I must say, fell for comprehensively, is this concept of mobile phone rental in the UK. They have this beautiful concept of half-line rental for post-paid connections. You get a one-year contract for say £40 a month. They give this to you at half rate for the first 9 months of a one-year contract, give you the handset free at the end of the month and give you a return-flight ticket to New York if you complete your contract. This is like money in the pocket. The only catch being that while you get the rental for half the price for the first few months, you actually have to pay the full amount, get the receipt and mail to an address six-months after you have paid your bill, and get half the rental refunded. Pure genius.
The customer thinks he has got a deal for £20 a month for 9 months, the company knows that they retain the remaining half-line rental for 80%+ of the customers (market statistics prove that). And as far as the return ticket to New York is concerned, the customer sales rep will probably explain to the 3 or so people who have sent all 9 of their bills and got the refund and completed the contract that the offer was a co-promotion with the insurance company and wd not be available for the customer because he had cancelled the £15 per month insurance contract in the second month itself. Again, pure genius. These marketing guys make George Costanza seem like a saint.
Less subtle versions of these forms of revenue capture are adding "fault-prevention-charges" on your credit card bill. The brilliantly irritating we-will-cancel-it-if-you-call-up-and-abuse-our-callcenter-guys-but-are-still-giving-it-a-go-because-40%-of-cutomers-dont-bother strategy preferred by Citibank.
One of my friends actually worked in a division called "revenue-enhancement" in a large firm. Is his job description were stripped of fancy management terms it would look like "think up devious methods to extract revenue from customers". Out of respect for the group, I am withholding the name of the company, but if any of you get this weird looking "charges on messages received" entry on your mobile phone which charges up every time you receive a message when on roaming, you can safely assume my friend has earned his salary for that month.
That’s it for the day. Acknowledge Inertia. Eliminate guilt. Enjoy your weekend on the couch.
Stated in English, the law can be taken to mean “Any measuring device that is used to measure any parameter sufficiently distorts that parameter during the process of measurement so as to not make the measurement completely accurate”.
Let me explain the above interpretation with an example (stolen from the stable of my physics professor). Assume that in a particular school, there is a particular noisy corridor occupied by boisterous students. The principal of the school decides to pay a surprise visit to this corridor to find out who the miscreants are and to what extent these students were making noise. Unfortunately for the principal, one particular student notices him walking down the corridor and promptly sounds the warning as a result of which the entire corridor becomes quiet. This is an ideal illustration of an extreme case of the presence of a measuring device altering the measuring parameter sufficiently so as to defeat the entire purpose of the experiment.
Taking the above illustration as a proxy for the Heisenberg principle let me build this theory further and incorporate certain corollaries. To make this process scientific, let us define certain terms; the teacher becomes the “measurer”, the teacher’s walk becomes “measuring process”, the teacher’s cane is the “feedback”, the guy who watches the teacher is the “signal”, the noisy classroom is the “object of observation”, and the entire exercise is the “experiment”.
1. When the experiment is conducted in a finite interval of time, i.e. it is not a continuous function of time (the teacher does not continuously walk up and down the corridor), the single observation made by the measurer often becomes the proxy for the performance of object of observation over a period of time.
2. If the principal walks the corridor once every ‘T’ units of time, it eliminates the necessity for the signal and the object of observation has that much more freedom to misbehave and not get noticed.
3. This implication is perhaps the most important implication in the context of the forthcoming example. Over a period of time “Effectiveness” of the object of observation gets determined solely by its performance in the experiment so much so that the only thing the object of observation does during the entire period is to create scenarios for better performance during the next experiment.
Replace “measurer” with “people”, “measuring process” with “Elections”, “object under observation” with “government” and the “experiment” with “the great democratic way of functioning” and you have uncovered what can be termed as the “Electoral Fallacy”.
Have you met someone who is reasonably tall, fair, with a reasonable build (sometimes frail, but never well-built), a tikka on the forehead, and a self-righteous expression on their faces in your college premises? If you still haven’t placed this species called Tambrahmo Sapien, I will describe further characteristics of this species.
The members of this species perform well academically, are generally religious, are sought after for their views, have an opinion on most things under the sun while simultaneously being non-judgmental, and frequently wear an "I have not been given my due by this world" expression on their faces. They are also consciously self-effacing (aka painfully modest) about their achievements (generally academic)
The members of this species have a strong desire to be with fellow species' members though they are socially 'accepted' in other groups as well. When 2 Tam Brahms meet, they discuss a third, when 3 meet they discuss other species' members, when more than 3 meet, they discuss topics like 'Changes in socio-cultural patterns of urban India fuelling prosperity in rural India' or 'the inherent fallacies in the parliamentary democracy system' with their collective decibel levels of discussion varying in direct proportion to the proximity of non-tam-Brahms, especially those possessing XY chromosome. A lone tambrahm has this brooding intellectual look about him giving an impression that he is trying to mentally divide 233 by 17 while he is actually benchmarking himself vis-à-vis other tambrahms and later on with other homo sapiens as well. This is a favorite pastime of the Tam Brahms.
They are fiercely competitive but are repulsed by the notion of relative benchmarking and frequently proclaim (with a sigh of relief) that they are glad that they didn’t get sucked into this rat race. That the tam-brahm knows the re-evaluated score in the second cycle test of the little known character with whom he has spoken to exactly twice before in his life is pure coincidence.
When tambrahms are locked in conversation, they laugh at jokes like 'Even if you win the rat race you are still a rat' and 'statistics are like Bikini, they show a lot but not what you want to see' but only so much a smile politely at sardar jokes or gujju accent jokes. Not that they mean ill to surds or gujjus, it is just that they have a far more refined taste than that.
They also revel in the knowledge of their own refined taste in art or literary forms and consciously move towards 'better' books rather than wasting time in mundane 'pulp' fiction. They are wont to make statements like 'yeah, I used to read Sidney Sheldon when I was in class IX and X. I don’t know why but I used to like them a lot. Sheldon is pure pulp. You read 3 and you can write the 4th. Now, I am glad that I have graduated to Ayn Rand, PG Wodehouse and The Economist'. All this to a poor soul who has just told him that he liked a Sheldon novel that he had read the previous night. After a pause, the tambrahm follows his speech up with "yeah, I read that book and liked it too. Typical, but ok. If you are a Sheldon fan, it’s a great book". The well-kept secret of Tam Brahms is the fact the Tam brahm himself struggled his way through 985 pages of 'Atlas Shrugged' precisely for deriving the satisfaction of making the above statements.
Now, where is the catch? What is it that this species lacks? They are academically good (some are 'gifted'), socially accepted everywhere, well-sought after for their views on everything, adored by even the girls, are considered smart and sincere, are on the right side of ethics and teacher's favorites.
Wait a second; God isn’t all that kind to anybody. These guys have their share of problems too. In most cases, they are too good for themselves. When it comes to academics, their parochial attitude keeps them on the edge; in sports, upbringing and dietary constraints kill them; in social life, their pseudo-intellectualism does them in, but their biggest problem lies with their performance with girls. They generally get slotted into 'Oh, he is a deeeeeaaaar friend' or 'I can always count on him for a chat after I have had a tough day with my boyfriend(s)', or in really rare and sad cases 'If only I had met him earlier'.
There is also a bunch of lads who slot into the between n and n+1 category, but more on that later.
Friday, May 29, 2009
"These are very critical times," the West Indies cricket board president (Hunte?) asserted petulantly from a far corner of the office...
"Hasn't he got any patriotism?"
"Won't you play hard for your country?" Giles Clark (ECB chairman) demanded, emulating Hunte's harsh, self-righteous tone.
"Won't you give up your life/joy for Hunte and me?"
Gayle tensed with alert astonishment when he heard Giles Clark’s concluding words. "What's that?" he exclaimed. "What have you and Hunte got to do with my country? You're not the same."
"How can you separate us?" Giles Clark inquired with ironical tranquillity.
"That's right," Hunte cried emphatically. "You're either for us or against us. There's no two ways about it.
"I'm afraid he's got you," added Giles Clark. You're either for us or against your country. It's as simple as that."
"Oh, no Hunte. I don't buy that."
Giles Clark was unruffled. "Neither do I, frankly, but everyone else will. So there you are."
“Go play this tournament because we have promised a summer series every year to Sky and Natwest. Now, run along”
The original is given below. This is from a timeless book called Catch-22.
"These are very critical times," Colonel Cathcart asserted petulantly from a far corner of the office...
"Hasn't he got any patriotism?"
"Won't you fight for your country?" Colonel Korn demanded, emulating Colonel Cathcart's harsh, self-righteous tone.
"Won't you give up your life for Colonel Cathcart and me?"
Yossarian tensed with alert astonishment when he heard Colonel Korn's concluding words. "What's that?" he exclaimed. "What have you and Colonel Cathcart got to do with my country? You're not the same."
"How can you separate us?" Colonel Korn inquired with ironical tranquillity.
"That's right," Colonel Cathcart cried emphatically. "You're either for us or against us. There's no two ways about it."
I'm afraid he's got you," added Colonel Korn. You're either for us or against your country. It's as simple as that."
"Oh, no Colonel. I don't buy that."
Colonel Korn was unruffled. "Neither do I, frankly, but everyone else will. So there you are."
The context is given in these two articles - Vanesa baksh says it is a sign of the times here - http://www.cricinfo.com/magazine/content/story/404911.html
Gideon Haigh article on Gayle's candour captures the mood before the series well. http://www.cricinfo.com/magazine/content/story/404810.html