Dumb it Down

Marketing guru Seth Godin wrote an eloquent (as usual) piece on the race to the bottom. His arguments were in the context of business. There is another race to the bottom that is becoming alarmingly prevalent. That of the intellectual kind

Deep thinking has been banished for a while now. It is all about intelligence in one forty characters or less. “Dumb it down so I can get it quickly”. “Dumb it down so the audience can get it instantly” (Seriously? You are speaking to a dumb audience? Then why do you even bother?). Intellectually stimulating conversations do not find an audience – leave alone participation. In the era of flippant Facebook updates and comments there is only that much google-supported brains can take. The rest is ignored. Or dumbed down

Now pause for a moment. What happens when things cannot be dumbed down anymore and all of us are in the basement of intellectual capabilities? Beam me up Scotty – that is what is going to happen then. First principles will again become relevant because those are the only ladder steps to climb out of the basement

Expand the canvas of conversations, bring in more variables, import an adjacent market (maybe not even a market – maybe physics) framework and discuss how it applies – raise the bar. That’s what athletes do. They challenge their physical capabilities. They don’t dumb things down for their bodies. Then why do that for your mind?

Opening is Overrated

Each morning I receive a email from the institution that does equity broking for me. The mail, without variation, foretells how the Indian equity markets would open on that day. There are three variations

1. Indian markets are expected to open flat
2. Indian markets are expected to open strong
3. Indian markets are expected to open weak

In the last two instances the cause is ascribed to “global cues” while in the first case it is generally the “lack of global cues”. We shall refrain from discussing the inanity of a message such as this (or maybe park it for another day) but why this fixation about “opening”? What does opening get us? Other than a burst of bunched up activities pent up from a period of inactivity it signifies nothing much

Opening is overrated. As much in stock markets as in life

What is of consequence is closing – the point where the tape meets the chest (or it does not). Heard of any broker that predicts how markets will close? They don’t. Too complex, they say. So much happens during the day that makes the closing a fuzzy thing. It is different for human beings though – we most often know how the closing should be. But then we waste too much effort on the opening. An inauguration, a project kick-off meeting, an unveiling, cut the ribbon, a kick off dinner. Wasteful. Instead focus on the closing

It is how you end that matters. Opening is overrated. As much in stock markets as in life

Rumor Has It

There is this one thing that fascinates participants in Indian capital markets. So much, that it cuts across the Glass Steagal (pretty much non existent in India) wall between investment banks and brokerages. And also between brokers and asset managers of any shape, form or intent.

That one thing is rumor

“But you know what – that <insert name of vendor> is better because it gives me rumors. What is happening in the market I already know, boss”, is a common refrain I hear when one holds up the virtues of a particular information source I used to vend a few months earlier over another (everyone in India calls everyone else “boss” – it is all a very democratic structure). Interesting part was that it was understood – and accepted – that rumors will not always be true but it gave the marketman something to go with. A place to start. And engage in a playoff that had expected returns of a long run experiment of flipping a coin

The greater acceptance of rumors for investment and transactions is a bane in Indian capital markets. The practice puts greater emphasis on information arbitrage over painstaking research. Information arbitrage is a good thing when the game is played with insights drawn from equal primary sources – the edge bestowed upon skills of secondary research and applying analysis techniques more effectively. The easy access to rumors makes for very bad habits, which tend to not only die hard but also rots the core of business ethics

The rise of algorithmic trading implies unprecedented use of primary information by computer programs to trade securities. This in turn makes primary data almost useless for human initiated investment decisions. This actually should have been a positive step in the evolution of investment research but unfortunately there opened an easier access to arbitrage – rumors. Rumors which in several cases became impossible to distinguish from information possessed by a select few consequent to their proximity and exclusivity to the information. Yes, insiders

Information was – and even today is – not accorded its true value in India where the assumption is that any information should essentially come without any cost! Though the ambulance chasing capital market crowd is only too happy to pay for rumor. My personal point of view is that in the medium term this rot will deepen as information propriety is not very sacrosanct in corporate India. The process will correct itself when the law of large numbers take over in what is essentially a coin flipping exercise. Or when someone like Eliot Spitzer comes in with a large bottle of disinfectant

Seed Client

Finacle and Flexcube are two very successful, homegrown (India) core banking applications. The quick differentiation between the two goes like this – if it is handling complex instruments and features it is Flexcube but to scale with number of accounts handled, choose Finacle

I can only give you one side of this comparison. Having worked at Oracle, I confirm that Flexcube can indeed handle really complex instrument and accounting situations. Looking around in India though – where it is commonplace for Banks to have several million accounts – it is easy to notice that Finacle has more installs. So there is circumstantial evidence that the second part of the comparison is valid as well. But of higher interest is WHY the two systems are how they are. It is – as people close to the companies will narrate – because of the seed customers of the two products. Flexcube had Citibank (complex corporate bank) as seed and ICICI Bank (large retail bank) was seed for Finacle

The seed customer approach for building a product is a fine art to master. One the one hand there is a firm willing to buy the story and help the product be built out for real life, while on the other hand there is a clear and present danger that what gets architected is skewed for a particular (restrictive) set of use cases (and assumptions). This where Product Managers have to play larger than life roles (and this is one reason why even startups need product managers). Abstracting requirements away from specific, narrow use cases and making them generic fit-for-wider-purpose is a key responsibility of the Product Manager in such a situation

Young companies should rightly remain ever grateful to seed customers and go above and beyond to satisfy them. While doing that it is important to understand the difference between bespoke solutions and generic products. Choices made at this early stage will stick around for much longer than you think