Ten interesting things we read this week

Image: Shutterstock

At Ambit we spend a lot of time reading articles that are not directly relevant to Indian stocks. However, since the Indian economy is now umbilically linked to its global counterparts, the articles that we come across have relevance for Indian stocks and the Indian economy. In that context, this report contains the ten most interesting pieces that we read this week.

Here are the ten most interesting pieces that we read this week, ended September 23, 2016.

1) The genetic advantage of the (other) 1 percenters [Source: Financial Times]
This piece says that success is not just the result of hard work (as has been argued by the “10K hours of practice” camp) but is also built on a nugget of early cognitive advantage. The piece references a study by Jonathan Wai, a psychologist in the Talent Identification Program at Duke University, which looked at five subsets of the US elite: Fortune 500 chief executives, federal judges, billionaires and members of the Senate and House of Representatives. He discovered that in each group those in the top 1 per cent of ability, ranked by school test scores, were over-represented. While some might have been advantaged by attending leading schools or by tiger parents according to Mr Wai, environment alone cannot account for the statistics on success.

2) Wall Street’s 0.01%; The guru who only talks to hedge fund elite [Source: Bloomberg]
Jens Nordvig, one of the hottest prognosticators in finance, is leading the way for one of the most striking shifts in finance today: the rise of a class system where entire businesses cater to only the highest-paying clients - the 1 percent of the 1 percent. Nordvig, who left Nomura in January after five years as Wall Street’s top-ranked currency strategist, has built his firm, Exante Data, around a rarefied group of the brightest hedge-fund names whose fees covered most of his startup costs. His research is tailor-made to suit each one’s needs and Nordvig says he’ll often spend hours at a time with a single firm debating macroeconomic policy and trade strategies. The article points towards an increasing appetite for bespoke research like Nordvig’s. Banks are slashing costs and many firms have eliminated analysts as they scale back research spending — making personalized service and attention all the more valuable.

3) How WD-40 created a learning obsessed company culture [Source: HBR]
The “paradox of expertise” says that the more closely you have looked at an industry, the more successful you have been in a company or a profession, the harder it can be to see new patterns, prospects, and possibilities.  This is why the best leaders are the most insatiable learners. This article discusses the case of Garry Ridge, CEO of WD-40 Company, who has made learning extremely central to the corporate culture and has found multiple ways to develop a thirst for learning among his colleagues. How he is confronting the “paradox of expertise” offers lessons for long-established organizations in all sorts of fields.

4) Big banks seek graduate trainees; jerks need not apply [Source: Financial Times]
This hilarious article seems to poke fun at the big banks who are using behavioural profiling to select candidates for their graduate training programmes. These banks believe that computer tests, like those used on dating websites, can identify potential superstars while giving candidates “real insight” into life at a bank. The FT put together a hypothetical set of questions that would arise if these tests reflected the realities of life in the stock market.

5) Hail the algorithms that decode human gestures [Source: Financial Times]
One scientist is attempting to write our seemingly universal code of human non-verbal communication. Ehsan Hoque from the University of Rochester in New York has developed a computerised “conversation assistant”. The program scans hand movements, eye contact, nods, expressions and pauses. It gives feedback on friendliness, intonation and overuse of certain words. Lissa — “live interactive social skills assistance” — appears to the speaker as a humanlike avatar and is built on the responses of real people who have rated speakers’ conversational styles.

6) The psychology of compensatory consumption [Source: LiveMint]
Humans are hardwired to compare themselves with others. This article talks about how the most common comparisons happen with respect to our body types. Interestingly, while research demonstrates the dark side of exposure to attractive models, psychologists have also shown that exposure to idealized models led to improved performance in other domains, such as improved decision-making and enhanced self-regulation. It showcases the role grooming products market plays to benefit from this psychological trait. For instance, fitting into smaller-sized clothes makes us more likely to buy them, simply because we imagine ourselves being thinner and more attractive in smaller-sized apparel. However, in case the opposite scenario unfolds, we are not only going to storm out of the changing room but will also end up spending more on other non-size-related, yet appearance-enhancing products (such as make-up) to “repair” our broken self-esteem.  This is what psychologists call compensatory consumption.

7) The hazards of a world where mediocrity rules [Source: timharford.com]
The economist, Tim Harford, argues in this piece introduces the concept of Kakonomics — the economics of rottenness which studies an economy where mediocrity rules. People not only supply shoddy work and expect shoddy work in return, they actually prefer to receive shoddy work. He says that Kakonomics can be quite pleasant for a while as one gets to relax and do a shoddy job but a true kakonomy is collusive, a tacit agreement to be mediocre at someone else’s expense.

8) India and Pakistan: A tale of two economies [Source: LiveMint]
This piece captures how the economies of India and Pakistan have converged and diverged in terms of policy-making since partition. It discusses how in spite of both countries having implemented radical reform around 1991 after reaching economic crises in late 80s, India managed to race head in the ensuing decades as the political institutions and participants reacted differently to political and religious instability in the two countries.  The conflicts of Mandir-Masjid-Mandal, divisive and violent as they surely were, seem to have been managed relatively calmly by Indian political institutions when one compares it with how the situation evolved across the border.

9) How Google plans to make its machines learn real time through ‘Allo’ [Source: LiveMint]
In May this year, Google outlined its plan for redefining instant messenger apps by showing off a future vision for its chat software – Allo. On the face of it, Allo looks like just any instant messenger app but the difference lies in the fact that Allo uses machine learning and natural language processing, both of which work in the background, to suggest smart replies as you are in a conversation with a friend. It is essentially understanding the latest sent message and anticipating the replies based on context and content. Initially, you may not always get the perfect reply suggestion, but as you converse more and more, Allo will understand your style of conversing and register some specific words that you use and offer enhanced suggestions.

10) The newspaper industry is suffering and that’s bad news for journalists [Source: Youtube]
John Oliver, in his trademark style, discusses the issues plaguing traditional newspaper industry on his show ‘Last Week Tonight’. He discusses that while print ads are becoming less popular, at the same time digital ds do not produce enough revenues to replace the loss. For instance, from 2004-2014 newspaper digital ad revenue increased by $2bn but the print ad revenues fell by $30bn! He further talks about the perils of corporate barons owing the newspapers and how chasing online ‘clicks’ is risking quality of news. 

- Saurabh Mukherjea is CEO (Institutional Equities) and Prashant Mittal is Analyst (Strategy and Derivatives) at Ambit Capital Pvt Ltd. Views expressed are personal.