Saturday, September 19, 2009

Risks and Moral Hazards

I was searching for some simple problems in finance to demonstrate the use of scipy for such cases. I realised that I needed to understand a lot more and decided to explore the Financial Markets Open Yale course.

The perspective of risk management was quite enlightening, e.g. a few sentences from the 3rd lecture of Prof. Shiller :

  • The problem with long-term risks, also, is that anything that we do to mitigate these risks creates moral hazard.
  • When you manage risks, you create moral hazard. That's why we need invention and theory in finance to minimize that.
  • Everything is evolving, so I'm actually presenting here our modern finance as the outgrowth of socialism, but that's not the usual way to present it.
He quotes the classic example of fire insurance - I get fire insurance on my house and so I behave badly: I deliberately burn the house down to collect on my insurance.

I have, possibly unhappily, known and accepted that people who handle money will earn a lot. Not explicitly mentioned, but I suppose it is implicit in the lecture that if a person is handling a lot of public money, better pay him well or there is the moral hazard of him cheating.

Monday, September 14, 2009

Exit Car Park, Enter Food Court

In the commercial sector 17 in Chandigarh, I often find tables and chairs in the corridors in front of inexpensive eateries. These often disappear - I suspect, when the police 'raid' the area.

It is obvious that the eateries are encroaching on public spaces but who is the real beneficiary?

I take my car and park it for a full day - for Rs. 5 (10 cents) only. Suppose a convenient part of the massive parking area is earmarked for a common food court. Each user can pay Rs. 2 for the luxury of sitting and eating for about half an hour. A person is likely to need 1 sq meter of space in comparison to at least 5 sq meters for a car. It will certainly benefit a lot more people than the car park.

LXDE on Fedora 11 Diskless Machine

I have a five year old machine without a hard disk which I boot using a liveusb.

I have been creating a custom livecd by adding a multimedia components from the rpmfusion repository. I decided to explore the option of lxde on the liveusb after reading an article on Lubuntu in Linux Magazine. I modified the fedora-livecd-multimedia.ks replacing @gnome-desktop group by @LXDE group. As before, I retained mplayer and the gstreamer bad and ugly plugins.

The creation of the livecd and the liveusb was smoothe.

Booting created one problem. Instead of gdm, slim was used as a simple login manager, which would not give me the option to switch from gnome-session to LXDE session. I just created a file /home/liveuser/.xinitrc with one line -
startlxde

That was it.

Anyway, I normally use this machine in init 3 setting, and usually use it start a remote X session on my main desktop.

Icewm is restrictive. Advantages of XFCE has been diminishing as it has become more functional. So, LXDE does seem to be a very good compromise. I am now also using it as the default session for remote X sessions. The snappiness of the desktop is impressive and ideal for the work I do from the diskless machine.

Sunday, August 30, 2009

Open Source, R&D and People on Bench

R&D is a non-trivial activity. Most organisations have specialised groups working only in this area. The idea of allocating people to R&D with the proviso that the people may be pulled out any time with no notice seems absurd. That may be because of the way we are currently structured. Much like some of the banks whose branch organisation is unchanged but now give computerised passbooks. If the person responsible for printing passbooks is absent, the answer is 'sorry, can't be done, come back tomorrow'.

R&D is not merely creation of something new and different. There is also an applicative role. An organisation needs to know and understand how a new technology may be applied to a problem. Often crash programs or urgent recruitments need to be organised when a project requires the use of an unfamiliar technology or product. In this case, it is a project specific activity. On the other hand, if we recognise the possibility of some software being potentially useful and start exploring it, especially before it becomes successful, we would regard that as an R&D activity. This activity can be done in fits and starts provided there is some continuity and guidance.

An example may help. We got involved with a AJAX tool a few years ago. I had reservations about that product and would have preferred an open source alternative like Dojo. Dojo was new, with little documentation, and we knew nothing about it except my perception that it was the better option. The project time constraints did not leave any room for experimentation. We went with the required product and faced a lot of headache in trying to achieve the desired objectives, often winding up rewriting code using our own JavaScript routines. Had we written the additional code for Dojo, our name may have been in one of the source files.

An attraction of open source software is that we do not need to spend any money to buy a product. We do not have to restrict the number of products we can afford to explore. There will be no question of having to justify the cost of exploring a product. No one will say, 'By the way, what happened to the $1000 we had spent on X?”.

The missing piece in this environment is the manpower. We need to have a small core group which is passionate about open source and technically sound. The group need not have all the skills but must have the technical and people skills to guide and advise people on virtually any technology. The persons finishing a project are often bursting with ideas. There is often a feeling that we could have done better or there must be a better option. There could also be the category who have been bored stiff with the mundane work and would like a challenge. It is my belief that the people an organisation would like to retain will fall in one of these categories. All they need is for their energies to be channelled and their efforts recognised.

The next stage would be that these people could contribute to the projects. No ad or marketing rep can be as effective as contributed code to prove that an organisation can use and support a technology. But this is an incidental benefit.

Time is a consumable. Given the size of the Indian IT industry, it boggles my mind to think about the number of brain-hours that are, perhaps, not used every day. Can we afford to continue on this path?

Workforce on the Bench

I had written the following article about 2 years ago. I remembered it after watching a TED talk on motivation by Dan Pink. I have always been bothered by the motivation problem of being idle at work and the sheer waste involved. So, I decided to place it here in two parts.

A man in a village discovers that the scales in the local shop are not balanced. He computes the losses incurred by the villagers over the generations. He is so overcome by the sheer magnitude of the losses that he loses his mind. The memories of this story, I believe by Heinrich Boll, that I read over 30 years ago, came to my mind after reading about the manpower utilisation figures of some of the software companies.

Full utilisation of manpower in a service industry is not possible or even desirable. In the software industry, we know that 80% utilisation does not mean that each person is idle for about 20% of the time! If that were so, we would have implemented one of the significant attractions of working at Google. Unfortunately, I am reminded of the time when I was waiting for an assignment. It was in the stone age, without internet or even personal computers. I kept myself busy reading magazines, computer books, anything I could lay my hands on. And of course, waiting for 530 PM so that I could go home, mentally exhausted from doing nothing. Some days were particularly bad when I was asked to do some analysis urgently just when I was about to leave and had to miss my chartered bus. Had it gone on much longer, I would have lost my mind, or more likely, quit.

Another interesting example was when I was working for the Indian market and was perpetually short of resources. A colleague with whom I had worked earlier had just returned from an assignment and, well, did not like the idea of being idle. I could definitely use him even on a day by day basis but his manager turned it down. The manager's reaction, 'I would rather keep you idle for 3 months than risk delaying sending you for a project by a month.' This colleague did not wait around for much time. He switched jobs after a month.

Lesson from the Past

The siblings playing in the crematorium, the Swine flu, the Global warming remind me of the following about the Renaissance.

http://en.wikipedia.org/wiki/Renaissance
"""
In the wake of the black death, reduced population left work-forces depleted: this tended, throughout Europe, to give workers more bargaining power, particularly skilled workers. This lead to a shift of power away from rulers and towards workers and merchants, particularly in smaller states (such as composed Italy at the time). Thus, regardless of its spiritual and psychic impact, the plague's economic (and consequent political) legacy may have helped set the scene for the Renaissance.
"""

A Vision of the Future

I was at a crematorium last week. I saw 3 little sisters running around, having fun. Each time I turned around, there was one more sibling. I finally counted 7 of them from a toddler to the eldest girl who didn't seem to be more than 10.

They seemed happy, cheerful and ran around collecting stuff left behind by mourners.

Seeing so many of them depressed me. Future seemed bleak.