Sunday, 26 October 2008
Friday, 24 October 2008
I give you Woody Allen and Alan Greenspan!
[Incidentally, I don't believe that the entire concept of the "free market" has been repudiated, only one definition of the word "free" in the term "free market". Once again, let me harp on my distinction between "free" as in a lack of controls, and "free" as in protection from the acts of others (i.e., a liquid market with no player large enough to impact the market by themselves). A truly liquid market would not be suffering from the failures of a few players, as has happened in our oligopolistic system with no effective controls on their behaviour.]
Thursday, 23 October 2008
(Here's my reasoning. As of 24-25 October, ABC's electoral map gives Obama 311 votes to McCain's 163, with 64 being too close to call. I believe the states that are labelled 'moderate Republican', 'marginal Republican' or 'too close to call' will gradually be won over by Obama before election day, so I've counted only the electoral votes of strongly Republican or very strongly Republican states in favour of McCain. That only yields a total of 134 votes for McCain, leaving 404 for Obama. See map and table below.)
And why do I think the moderate Republican states will ultimately swing to Obama? Many reasons - Colin Powell's endorsement, Sarah Palin's un-hockey mom wardrobe that should speak louder than her pro-American rhetoric to undecided voters, the lingering fears of an economic collapse and a recession that alienate voters further from the Republicans whose cronies and appointees are perceived as having caused the whole mess, attacks on President Bush by McCain and Palin (!) that may put some Republican voters off voting altogether, my expectations of a high voter turnout that's usually a good sign for the Democrats, and my belief that there is a 'reverse Bradley effect' at work that prevents many people in conservative neighbourhoods from openly backing Obama in opinion polls, understating his actual support.
We've seen a generation of "Reagan Democrats". Welcome to the Obama Republicans. I believe they're called Obamicans.
Wednesday, 22 October 2008
When visiting Google's headquarters last year, he was reportedly asked a question that would have stumped even a few techos: "What's the most efficient way to sort a million 32-bit integers?"
In the thoughtful, deliberate way we've come to admire so much, the Democratic candidate answered that he thought the bubble sort would be the wrong way to go. I'm sure he'll arrive at the correct algorithm with the help of his advisers, but it's good to know that his instincts were correct, as always. And there's at least one country that he could be President of in a heartbeat.
It could be disastrous to elect a person with a poor sorting policy, especially in these difficult economic times when we can't afford to waste resources. I'm told McCain couldn't answer the same question when he visited the Google campus a few months earlier. And I'm sure Sarah Palin's answer would have involved stacking the numbers as far right as they'd go...
Tuesday, 21 October 2008
I have three simultaneous reactions to this development:
There's naive internationalist liberal me: "This is great news! Trade bonds between nations strengthen peace. When countries become economically interdependent, the chances for conflict between them recede. This is the first step towards peace in our time. How wonderful that India and Pakistan can finally enjoy normal relations! South Asia as a whole will now prosper."
Then there's paranoid me: "This isn't about trade between India and Pakistan. It's a lifeline to Indian-controlled Kashmir to help it support itself through trade with Pakistan-controlled Kashmir. Never a big fan of India (in spite of the Indian taxpayer-funded largesse continuously poured into that province), Kashmir probably now sees a way to cement its ties to "the other side". It's a wedge that Pakistan is driving between India and Indian-controlled Kashmir. This is the economic unification of Kashmir at India's expense. There's nothing here for India or Indians to rejoice about."
Finally, there's geopolitically cynical me: "India is squandering the chance to do to Pakistan what Reagan's America did to the Soviet Union - exploit its bigger and faster-growing economy to bankrupt its military rival and dictate peace on its own terms. Why throw a lifeline to someone who doesn't like you? As Ray Kroc of McDonald's said, when you see a competitor drowning, you stick a hose down his throat. India should throw Kashmir out into the cold, even into Pakistan's waiting arms, then force the pyrrhic victor to come crawling back a few years later to sue for peace and beg for a chance to share in the prosperity of its (by then) superpower neighbour."
So what do I finally think? I don't know. A little of each of the above, I guess. One thing I'm sure about - Indians are too sentimental a race to elect a Reagan. Even the biggest hawks in the previous Hindu right-wing BJP government turned out to be doves on Pakistan, a reality that India's smaller neighbour cunningly understands and exploits. So fortunately for Pakistan, India will never press home an advantage even against a proven enemy.
Enemy? Surely that's a tad harsh? Well, Pakistan's civilian president blurted out the truth in a rare moment of candour (i.e., that India has never been a threat to Pakistan). If only the reverse was also true...
As always, I'm hopeful about peace in our time and all that, but not optimistic.
Thursday, 16 October 2008
Essentially, it's a set of hypothetical questions - what if certain characteristics of Sen. Obama and his Republican opposite numbers (McCain and Palin) had been switched around? Would people still look at the two candidates the same way?
I'm going to repeat those questions verbatim here, because they're so hard-hitting:
What if the Obamas had paraded five children across the stage, including a three month old infant and an unwed, pregnant teenage daughter?
What if John McCain was a former president of the Harvard Law Review?
What if Barack Obama finished fifth from the bottom of his graduating class?
What if McCain had only married once and Obama was a divorcee?
What if Obama was the candidate who left his first wife after a severe disfiguring car accident, when she no longer measured up to his standards?
What if Obama had met his second wife in a bar and had a long affair while he was still married?
What if Michelle Obama was the wife who not only became addicted to pain killers but also acquired them illegally through her charitable organization?
What if Cindy McCain graduated from Harvard?
What if Obama had been a member of the Keating Five? (The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s.)
What if McCain was a charismatic, eloquent speaker?
What if Obama couldn’t read from a teleprompter?
What if Obama was the one who had military experience that included discipline problems and a record of crashing seven planes? (My note: I understand it was 3 planes, not 7)
What if Obama was the one who was known to display publicly, on many occasions, a serious anger management problem?
What if Michelle Obama’s family had made their money first bootlegging, then from beer distribution?
What if the Obamas had adopted a white child?
Amazing, isn't it? Any or a small set of the negative aspects of McCain/Palin might have ended Obama's candidacy prematurely if they had been his flaws. Conversely, any of the positive things about Obama might have been trumpeted far more loudly had it applied to McCain/Palin.
What's often said about women (i.e., that they have to work twice as hard as a man to get the same recognition) may also apply to minorities.
I'm afraid we're still in Kansas, Toto.
Wednesday, 15 October 2008
Are we in danger now of reacting to the recent financial crisis with similarly misdirected populism? Australian Prime Minister Kevin Rudd today essentially announced a "War on Greed", by attacking the excessive pay packets of corporate executives as one of the negative aspects of what he called "extreme capitalism". And sure, he's got a point, a very valid point. But he's also in danger of being way off the mark, to the detriment of all of us.
Attacking excessive remuneration appeals to everyone (everyone, that is, except those in the top levels of the corporate world). Last year, Macquarie Bank's CEO Alan Moss took home 33 million big ones. This year, Macquarie caused quite a few jitters among investors. CEOs take home the big bucks, and when their enterprises threaten to fall over, governments have to rush in and prop them up with taxpayers' money, because the economy will suffer otherwise. It's like the fat cats have a gun to everyone's head.
Let me make my position clear. I'm a taxpayer, and my money is being used in these bailouts, so I have a legitimate right to voice my opinion about the way the system is run. But perhaps surprisingly, I'm against placing limits on executive remuneration. It indicates a mercantile mindset that believes in rationing out scarce resources. What we need is a capitalistic mindset that recognises wealth to be potentially limitless. The capitalist worldview recognises the need for appropriate systems that incentivise us to apply our ingenuity and industry to continue to create wealth out of nothing, exactly as we have been doing since we left our caves thousands of years ago.
Many people may miss a crucial portion of Rudd's statement: "Regulators should set higher capital requirements for financial firms with executive remuneration packages that reward short-term returns or excessive risk-taking." (emphasis mine) I agree with the way Rudd is proposing to tackle the problem, which is to impose higher standards of capital adequacy on firms that show short-termism or risky behaviour in pursuit of profits, but there is a deeper aspect to the problem, which I'll come to in a moment.
I do believe that one of the fundamental things wrong with the brand of capitalism practised today (apart from its hostility to competition) is that it rewards companies for showing short-term profits. It encourages CEOs (who serve relatively short tenures) to under-invest in the future and show unnatural returns in the short term, then depart with huge payouts as a reward for such stellar performance. Every new CEO announces that things have been left in very bad shape by their predecessor (true), and then proceeds to write off huge losses at the start of their tenure. Not only does this clear the decks of all past losses, it also takes the share price to a comfortably low level, so that the new CEO can demonstrate impressive share price gains from this low point. Repeat ad nauseam. The enterprise and its shareholders bear the brunt of this short-term and self-serving behaviour. The technical term for this is "agency risk". The goals of the agent (the management) are not aligned with the goals of the principal (the shareholders).
To my mind, the problem of "extreme capitalism" (as Rudd would call it) is the tendency to reward short-termism. So it's not executive salaries per se. If a way can be found to link executive remuneration to an enterprise's long-term performance, then by all means, shower your executives with gold. For example, go ahead and give your CEOs generous stock options, but ensure that they vest only after 5 years or later. That'll make them more careful about the long-term effects of their decisions.
Is this the root of the problem, though? Perhaps there's really no agency risk here! Perhaps the agents' goals are in fact perfectly aligned with their principals' goals.
Monday, 13 October 2008
Of course, there's the fine print. The Australian government will only guarantee deposits in Australian-incorporated banks, so we could still see a run on foreign-owned banks like Citi and HSBC. Still, it's a much-needed affirmation from the government, and will do much to keep the financial system on its feet.
I guess we're entering a phase when the "Australian model" is going to be put to the test like never before. Prime Minister Kevin Rudd has said he doesn't consider the budget surplus as something to defend in its own right. He's willing to use up the surplus if that's what it takes to stimulate the economy and prevent a deep recession.
Quotable quote: "How long have you all heard me say it is good to have a surplus ... as a buffer for the future? Well, the future is here."
The biggest fears now are a slowdown in growth and a rise in unemployment. The Reserve Bank has done its bit to stimulate growth by slashing interest rates by a full percent, something normally unheard of. The upside of having had high interest rates in the recent past is that there's sufficient leeway to move rates down, a luxury that the US doesn't have. If the PM and his Treasurer Wayne Swan play their cards right by operating the right fiscal levers (and they can spend a fair bit without running up a budget deficit, unlike the US government, which has dug itself into a deeper deficit hole), they can keep the Australian miracle going, and in the process, ensure their own places in history.
It's a difficult time in world history and no time to be partisan, but if Australia comes out of this crisis in better shape than other nations, it will be a powerful lesson in the benefits of good economic governance. I.e., avoid a budget deficit at all costs and tweak interest rates constantly to encourage growth without provoking inflation higher than 2-3%. (And let me add my Liquidism mantra like a broken record: maintain high levels of market liquidity through aggressive antitrust if need be. A thousand blades of grass will weather a storm better than a few oak trees.)
The Australian financial sector has also been prudently regulated and the "toxic assets" of other economies haven't been ingested to any significant degree here. To some extent, this hides the problem of oligopolistic conditions in the market. I wonder if we will have to wait for a different crisis before we learn that lesson...
Sunday, 12 October 2008
Today (Oct 12, 2008) was the Walk to Cure Diabetes organised by the Juvenile Diabetes Research Foundation (JDRF) at Sydney's Olympic Park. Not many people know that Juvenile (or Type 1) diabetes is fundamentally different from the diabetes that is more commonly seen in adults.
Let me quote the JDRF website verbatim:
Type 1, or juvenile diabetes is a serious, chronic disease that destroys the body's ability to produce insulin - a hormone needed to convert food into energy.I've written before that I'm sensitive to reports that ethnic minorities in Australia tend to volunteer less than the general population, so I've been trying to do my bit from time to time.
Type 1 diabetes is an autoimmune disease that usually begins in childhood or early adulthood, but can occur at any age. People with type 1 diabetes need up to six insulin injections every day for the rest of their lives, just to stay alive.
Type 1 diabetes is not caused by diet or lifestyle and cannot be managed through diet and excerise. Insulin injections keep people alive but are not a cure. There is no cure.
Even when treated, type 1 diabetes can cause serious and devastating long-term health complications such as blindness, kidney failure, heart disease, amputations and stroke.
Type 1 diabetes affects every aspect of a person’s life and managing the disease involves whole families.
There are currently around 140,000 children and adults in Australia living with type 1 diabetes. We have one of the highest rates in the world and every day, five more people are diagnosed, most of them children.
The only way that people with type 1 diabetes will live the long and healthy life they deserve is if more money is invested in research to find a cure.
For further information about type 1 diabetes and current research progress go to the JDRF Website.
This time, I put together a group of like-minded friends and decided to collect money for the JDRF cause and also make this an enjoyable family outing. Most of us being Indians, we called our team the Sydneyside Maharajahs. The team website may not remain in place for long, so here's a screenshot (with the names of my friends and other volunteers blurred out to protect their privacy).
I would like to thank all my friends and colleagues who kindly donated and helped us towards our target (not quite achieved as of the time of writing).
Although the walk is over, fundraising is still open till the 7th of November, I'm told, so if anyone out there would like to donate towards finding a cure for this cruel condition that afflicts some of our youngest, please donate at my JDRF page.
Saturday, 11 October 2008
Being a nerd, I'm always amused by church signs that reference technology to evangelise religion.
Now the church has competition in this space, as this sign from Gurgaon near New Delhi demonstrates.
[I'm not an expert on Yoga, so I won't attempt to explain what Pranayama is. I'll leave it to Wikipedia to define Pranayama (and if someone doesn't agree with the definition, they can always edit the entry ;-).]
Tuesday, 7 October 2008
Those of you who saw the romantic comedy My Big Fat Greek Wedding will surely remember the father of the female lead who is always very big on Greek culture ("What were the three greatest contributions of Greek civilisation to the world? Astronomy, philosophy, democracy").
Well, like the Greeks have the Iliad and the Odyssey, we of Indian descent have the Ramayana and the Mahabharata. (Yes, it's hard to tell where the accent goes, so try Raamaayuh-na and Muh-haabhaaruh-ta). Mighty proud of these epics are Indians, and rightly so. Modern Indian literature, movies, songs and colloquial speech are littered with allusions to these classics. Babies are named after characters in the great epics. You'll even find these epics in comic book form. Indian kids grow up on the stuff. I read these comics in English, side by side with Tarzan and Superman, when I was growing up.
But I've also enjoyed shocking traditional Indians with my entirely serious thesis that there are three great epics in the world, - the Ramayana, the Mahabharata and Star Wars. I never fail to get a rise out of people with that statement.
Just look at the similarities. All three are about the struggle of good against evil (and the ultimate triumph of good). They're all long, all boring in places, with confusing sub-plots and myriad characters, many of whom are only tangentially relevant. And ultimately, they're entertaining while being morally educational (To those like me who are perpetually suspicious of organised religion, that last bit should prompt a mental uh-oh).
I would like to report a successful experiment that I just concluded last week. I got my 77 year old mother to watch the entire 6 part movie series of Star Wars! And wonder of wonders, she grudgingly acknowledged that Star Wars was "quite nice". She agreed that there were parallels between the Jedi religion and Hindu philosophy (there are murmurs in the musty corners of Indian philosophy to the effect that dark, tantric practices are a bit more powerful than the wholesome yoga and meditation that India would like to showcase - the "power of the dark side"). She thought the transformation of Anakin Skywalker from innocent child through idealistic (and disillusioned) young man to evildoer paralleled the stories of many demons in Hindu mythology who also started off being nicer folk.
She quoted Yoda's statement: "Fear leads to anger; anger leads to hate; hate leads to suffering." To her, this was lifted straight out of Eastern philosophy, so rather than Star Wars being a legitimate epic of the stature of the Ramayana and Mahabharata, it was just a copy, albeit a well-made one.
But I'm happy at the outcome. My mother, a representative member of an older Indian generation, has seen something of value and relevance in Star Wars, so much so that she's expressed a desire to watch the series again after a few months!
I must say I don't necessarily see religion in any of these epics (though there's a fair bit of spirituality). I think they're great stories with awesome atmosphere, powerful symbolism and beautiful imagery. To me, the image of Tatooine's twin suns or the unfinished Death Star is as powerful as the paintings (by Raja Ravi Varma and by someone else) of the noble vulture Jatayu's (Juh-taayu) vain attempt to rescue Sita as she is carried off by the demon king Ravana (Raavuh-na), or of Abhimanyu (Uh-bhi-muhn-yoo) attacking the Kauravas (Cow-ruh-vaas) "like a proud young lion falling upon a herd of elephants" (to quote Amar Chitra Katha). Or, for that matter, the image of Achilles dragging Hector's body around the walled city of Troy, or that of the Cyclops throwing rocks at Ulysses' ship as the Greeks flee his island. Lots of stuff that gives me goose-pimples even today.
That's the stuff of which epics are made. Epics are about heroes and other larger-than-life characters (many of them tragically flawed), their struggles and adventures, they're about destiny and nemesis and an overarching moral theme that dwarfs all characters. Star Wars has all of this in full measure. So an epic isn't necessarily one that was written hundreds or thousands of years ago. It could just as easily have been released in 1977.
So there you have it - humanity's three great epics (or five, since we wouldn't want to belittle Homer :-).
Friday, 3 October 2008
At a car lot: The best way to get on your feet....Miss a car payment.
At a tyre repair shop: Invite us to your next blowout.
Outside a muffler shop: No appointment necessary. We heard you coming.
In front of a car wash: If you can't read this, it's time to wash your car.
At a towing company: We don't charge an arm and a leg. We want tows.
At a used car lot: Second-hand cars in first crash condition.
At an auto body shop: May we have the next dents?
On a caravan trailer: I go where I'm towed to.
On a music teacher's door: Out Chopin.
At a music store: Out to lunch. Bach at 12:30. Offenbach sooner.
On the door of a music library: Bach in a min-u-et.
At a pizza shop: 7 days without pizza makes one weak.
On a butcher's window: Let me meat your needs.
Outside a restaurant: Try our fish just for the halibut.
On the menu of a restaurant: Blackened bluefish
Outside a hotel: Help! We need inn-experienced people.
At an optometrist's office: If you don't see what you're looking for, you've come to the right place.
In a counselor's office: Growing old is mandatory, growing wise is optional.
In a dentist's office: Be true to your teeth or they will be false to you.
In a podiatrist's window: Time wounds all heels.
On a maternity room door: Push. Push. Push.
In a veterinarian’s waiting room: Be back in 5 minutes. Sit! Stay!
At the electric company: We would be delighted if you send in your bill. However, if you don't, you will be.
A church sign: To remove worry wrinkles, get your faith lifted.
At a gym: Merry Fitness and a Happy New Rear!
At a beauty parlour: Dye now!
In a farmer’s field: The farmer allows walkers to cross the field for free, but be aware that the bull charges.
In a non-smoking area: If we see smoke, we will assume you are on fire and take appropriate action.
In a cemetery: Persons are prohibited from picking flowers from any but their own graves.
At a hardware store: Would the person who took the step ladder yesterday kindly bring it back or further steps will be taken.
In the front yard of a funeral home: Drive carefully. We’ll wait.
In the window of an appliance store: Don't kill your wife. Let our washing machine do the dirty work.
Inside a bowling alley: Please be quiet. We need to hear a pin drop.
At a maternity clothes shop: We are open on Labor Day.
On a desk in a reception room: We shoot every 3rd salesman, and the 2nd one just left.
On a fence: Salesmen welcome. Dog food is expensive.
On a plumbing company's trucks: Don’t sleep with a drip. Call your plumber.
On a scientist's door: Gone Fission
On a taxidermist's window: We really know our stuff.
On an established dry cleaning store: Thirty-eight years on the same spot.
On the door of a computer store: Out for a quick byte.
Outside an antique shop: We buy junk and sell antiques.
Sign at the psychic's hotline: Don't call us, we'll call you.
And my favourite (Patel & Co. Plumbing in London): You've tried the cowboys, now try the Indians.
Wednesday, 1 October 2008
When they say trillions have been wiped off the stock market, what do they mean exactly?
The market value of the stock is what the market thinks it is worth. Obviously, when a crash happens, a lot of people suddenly think a lot of stocks are not worth what they thought they were worth just hours earlier, and they put their money where their opinions are by not being willing to pay the earlier price for them. It's just opinion that suddenly changes. Nothing in the real world has changed in such a short period of time except some trigger event.
The reasons for the change of opinion have been heavily researched, and will no doubt continue to be heavily researched, but my immediate concern is something else.
Why are people suddenly "poorer" after a stock market crash?
If the bulk of a person's savings is held in the form of shares, either directly or indirectly (through mutual funds that invest in shares) [or even more indirectly (through retirement savings plans that invest in mutual funds)], their "wealth" is not measured by how well they dress and eat and live but by the value of the shares in which their entire life savings are ultimately invested. I have been oversimplifying by using the word "shares" when I should have been saying "assets", which include real estate, commodities (gold, oil, wheat) and securitised versions of these.
When the market value of assets crashes, the owners of those assets become poorer overnight.
In other words, in a financial sense, we are ultimately worth what other people think we are worth.
How starkly this contrasts with Eleanor Roosevelt's reassuring admonition that no one can make us feel inferior without our consent!
But on reflection, I realise that the two statements are not saying different things at all. When the market suffers a "correction", it implies that the new value of the assets we hold are the "correct" ones. Therefore it can only mean we bought them at unrealistically inflated prices. In other words, we accepted other people's opinion of what they were worth at the time we bought them. That's why we're now poorer. We have allowed other people to make us feel inferior because we earlier (wrongly) allowed an aspect of our true worth (our savings) to be pegged to other people's inflated opinions of various assets.
So Warren Buffett and Eleanor Roosevelt are essentially saying the same thing. Look for the fundamentals, for true worth. If you are blindly led by the opinions of others, they can make you feel superior for a while while the market continues to boom. But when things return to their "true" value, they can make you feel inferior as well. And it can really hurt.
On the positive side, if you invested in true value and the market has now crashed to take the price of your assets below their true value, there's no need to feel down. Things will eventually return to normal, and you will once again be seen to be worth what you are (in financial terms). Just don't panic and sell :-).