Ten interesting things we read this week

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At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Sports (Jasprit Bumrah, the master of his game), Lifestyle (Here’s why you need to talk less and listen more), Internet (The dark forest theory of the Internet), Business (The unmaking of India’s fountain pens; Lille’s player-trading business model attracts hedge fund Elliott) and Technology (Algos are changing India’s stock market; Cyber-bullying is becoming a trend).

Here are the ten most interesting pieces that we read this week, ended January 17, 2020.

1) Jasprit Bumrah, the master of his game [Source: Hindustan Times]
This lethal bowler was away from cricket for four months due to back injury, but is now back. In this piece, he talks about his bowling technique and why he keeps evolving and learning all the time. “I always like to have new things up my sleeve,” he says. “If you’ve got only two or three tricks, then you’re stuck. Some days you go in with a fixed agenda; you think, at the end, I’m just going to bowl yorkers and slower balls. But on that day, if your yorkers are out of place—and your opponents know you will bowl slower balls and are waiting for it—then you need a good bouncer, right? If you’ve got a very good length ball. Or a wide yorker, a wide slower ball…oh! I’ve got so many options!”

His captain Virat Kohli calls him the “most complete bowler in the world”, and it’s hardly an exaggeration. On learning new things every time, he says, “I like to learn, I always want to learn new things. I’m always asking people, ‘what do you think I can add?’ I am asking players. I ask coaches. I keep on adding, keep on adding new things all the time.” Part of that learning happens from watching other bowlers operate in places they know best.

For someone who is so hungry to learn, Bumrah has many teachers. He lists India’s bowling coach Arun, fellow fast bowlers Ishant Sharma, Mohammed Shami, Bhuvneshwar Kumar; and from the Mumbai Indians set up, Shane Bond, Lasith Malinga, and Mitchell Johnson. Yet, he is a self-taught bowler. Having played just over a year of Test match cricket, Bumrah is now a veteran. He has four five-wicket hauls in Tests, and they have come in four different countries—South Africa, England, Australia and West Indies in 2019—all on his first set of tours. No other bowler from Asia can claim that. Not Wasim Akram. Not Waqar Younis.

2) Don’t Fall For It and crazy tales that didn’t make it to the book [Source: awealthofcommonsense.com]
This piece talks about Ben Carlson’s latest book “Don’t Fall For It: A Short History of Financial Scams” and stories that didn’t make it to the book. Initially Mr. Carlson wanted to write a personal finance book. But this is an area with tens of thousands of books already and Ramit Sethi wrote a book on the topic last year that’s better than anything that he could come up with. However, he had an idea for the book. How charlatans have always been able to swindle, coerce, scam, and take people for everything they have has always been a topic that’s piqued his interest.

What can be best than to learn from mistakes others have made in the past to work on avoiding them in the future. Mr. Carlson went through numerous books while researching this project and one of the best parts about non-fiction books can often be the list of sources. He would often buy 4-5 books at a time straight from the bibliographies of the initial books that he read. In this book, each chapter is a standalone story. So you can jump around if one topic doesn’t catch your fancy.

Some of the fascinating stories covered in the book are: 1) The man who tried to sell the Eiffel Tower…twice; 2) How Robert Mueller was involved in an absolutely unbelievable con; 3) Isaac Newton and the South Sea Bubble; and 4) Johnny Depp and the Vanderbilt family. There were so many stories that some of them didn’t make it to the book. And that’s why Mr. Carlson has separately written a special blog about them. What were these stories? A pyramid scheme in China that literally sold pyramids. Richard Harley claimed that he was a billionaire and asked people to invest, when in reality he was living on $500/month of social security benefits. In the 1920s Joseph “Kid” Weil set up a fake brokerage house! And there’s more!  
 
3) Talk Less. Listen More. Here’s How. [Source: The New York Times]
They say listening is an art. Truly it is because to read in between the lines of what the other person is saying, you need to listen attentively, and not just be present physically. We are encouraged to listen to our hearts, our inner voices and our guts, but rarely are we encouraged to listen carefully and purposefully to other people. Listening can be more valuable than speaking. Wars have been fought, fortunes lost and friendships wrecked for lack of listening. It is only by listening that we engage, understand, empathize, cooperate and develop as human beings.

Today, high schools and colleges have debate teams and courses in rhetoric and persuasion, but rarely, if ever, offer classes or extracurricular activities that teach careful listening. The image of success and power today is someone miked up and prowling around a stage or orating from behind a lectern. Giving a TED talk or delivering a commencement speech is living the dream. The cacophony of modern life also stops us from listening. So, how can we reclaim the lost art of listening?

Listening goes beyond simply hearing what people say. It also involves paying attention to how they say it and what they do while they are saying it, in what context, and how what they say resonates within you. A lot of listening has to do with how you respond — the degree to which you facilitate the clear expression of another person’s thoughts and, in the process, crystallize your own. Also, good listeners ask good questions. And the right ones. Listening is a skill. And as with any skill, it degrades if you don’t do it enough.

4) The Dark Forest Theory of the Internet [Source: onezero.medium.com]
This piece talks about how the Internet is becoming a dark forest. The author of this piece, Yancey Strickler, got inspired by Liu Cixin’s sci-fi trilogy, The Three Body Problem. In this book, the author presents the dark forest theory of the universe. With the rise of online bullying, shaming, and swatting, the internet became emotionally, reputationally, and physically dangerous. It became the dark forest. Dark forests like newsletters and podcasts are growing areas of activity. As are other dark forests, like Slack channels, private Instagrams, invite-only message boards, text groups, Snapchat, WeChat, and on and on. This is where Facebook is pivoting with Groups.

We’re wary of showing who we are outside our private channels. But at the same time, we recognize that there are trade-offs to our isolation. Our dark forests can become black domains, with little connection to or influence on the outside world. Mr. Strickler experimented by being away from Internet, and then being online. According to him, that process is ongoing, but his more-complicated-in-practice-than-theory answer is to strive to be your true self in every context and vow to be present wherever you are. We can’t lurk in the dark forests and expect anything to change for the better.

Mr. Strickler sometimes questions the merits of the project. Is this a waste of time? Why not just delete accounts and stay in dark forests forever? It’s tempting, he admits. But whenever he goes down that path, he thinks about Russia’s disinformation campaign that began before the 2016 election, and that continues to this day. Russia’s GRU directed their agents to pose as Americans using fake social media accounts, and to use those accounts to flood Twitter and Facebook with politically and racially divisive messages. So now, Mr. Strickler is re-learning how to be his own self on the internet instead.   

5) Vanguard and the US financial system: too big to be healthy? [Source: Financial Times]
Vanguard is a big name in its field, but its deepening control over the stock market could at some point become unhealthy. While Vanguard’s success has been a boon to millions of retail investors, there is mounting nervousness over its sheer size, something even Bogle acknowledged before passing away a year ago. This issue is not specific to Vanguard. But the investment group is swelling at a dramatic pace, thanks to one crucial advantage over its rivals: it is owned by its own funds, allowing it to use profits after covering costs and business investments to lower its fees, rather than reward outside shareholders with dividends and buybacks.

Vanguard today accounts for over a quarter of the entire US mutual fund market — a market share almost as big as Fidelity, BlackRock and Capital Group put together — and it is one of the biggest shareholders in virtually every major listed US company. Vanguard’s swelling size has certainly been a blessing to clients, by allowing it to keep cutting the cost of its funds. The asset-weighted average expense ratio on Vanguard’s funds was just 0.1% last year, compared with the US average of 0.58%.

Vanguard is also looking outside the US for opportunities. When it launched a UK consumer investment platform in 2017 it sent shares of several local rivals sliding. Last week it received approval to provide investment advice in the UK. The next big move may be China, a market eyed by virtually every major investment group. Vanguard, along with other leading asset managers, is waiting for Beijing’s long-planned move to open up its mutual fund industry to foreign players after approval was granted last year. Yet concerns of increasingly concentrated corporate power are unlikely to go away. John Coates, a professor at Harvard Law School, points out that despite being a Vanguard fan there is a “governance risk” inherent in one company that may eventually control a big chunk of every major US company.

6) The unmaking of India’s fountain pens [Source: Livemint]
Now rarely you will get to see someone using a fountain pen. Today, everyone prefers ball pens. Yet, in the market for writing instruments, fountain pens still retain a 10% market share. At the stroke of the midnight hour, there were many Indian brands—Ratnam, Ratnamson, Guider, Deccan, Sultan, Gama, Penco, Wilson. There were also many brands of fountain pen ink—Krishnaveni, Horse/Camel, Sulekha. Clearly, there was an incipient Make-in-India story for fountain pens and ink. It dissipated because of policy-induced distortions— import duties, quantitative restrictions on imports, small-scale industry (SSI) reservations and the Foreign Exchange Regulation Act (FERA). This is the story of how India messed up a competitive advantage and what lessons it holds for the country’s economy even today.

In all, there were four different categories of fountain pen makers: “Foreign" like Pilot; very large Indian units like Dhiraj Pen Manufacturing Co. Ltd. and Bal Krishna Pen Pvt. Ltd.; largish Indian manufacturers, “large" in the sense of being under the Factories Act; and small manufacturers. Thanks to protection from imports, and fuelled by the spread of education and increased demand, these firms thrived and co-existed. This seemingly happy state changed because of three policy-induced distortions. The first was SSI reservations. Statutory powers for reservations were introduced through the Industries (Development and Regulation) Act (IDRA), 1951.

The second distortion was FERA of 1973, which was even stricter than the 1947 version. Everyone is familiar with IBM and Coca-Cola Co.’s exits consequent to mandatory dilution of foreign equity. But those same provisions also applied to “foreign" subsidiaries and joint ventures of fountain pen makers. The final distortion was when Chapter V-B was introduced in the 1947 Industrial Disputes Act in 1976-77, making labour markets rigid for very large fountain pen makers. This was of course not specific to fountain pens. But as much of fountain pen manufacturing was concentrated in Bombay (now Mumbai), labour unrests in Maharashtra in 1980s made them close down.

7) Lille’s player-trading business model attracts hedge fund Elliott [Source: Financial Times]
Why is Elliott Management interested in a French football club? There are several reasons as per the club’s owner and president Gerard Lopez. One is that club valuations are lower than those in more prominent leagues, such as in England and Spain. The top three teams in Ligue 1, France’s top tier, gain entry each season to the Champions League. According to the latest available figures from the consultancy Deloitte, Lille made revenues of 53.9mn euros over the 2017/18 season, roughly half of which came from its share of French domestic broadcasting contracts.

In December 2017, French football authorities banned Lille from acquiring players during the winter transfer window over a dispute regarding its financial reporting. In a related sanction, Mr. Marc Ingla, formerly a top executive at FC Barcelona and Lille’s chief executive, was last year fined and handed a three-month suspended sentence from footballing activities, for allegedly providing false information relating to the legal and financial situation of the club. In an effort to shore up Lille’s finances, Mr. Lopez raised 140mn euros from Elliott in 2018 through a loan with an interest rate in the “low double digits” that is to be repaid by August 2021.

The deal has prompted accusations that Elliott is lying in wait to take control of the club if the loan is not repaid. At AC Milan, the hedge fund took control of the club after its Chinese owner Li Yonghong failed to repay 300mn euros in high-interest loans. Mr. Lopez admits that to free himself of the Elliott debt, the club must continue to perform on the pitch, while still selling its best players each season. It is a model he insists can succeed and that’s what got Elliot excited about the deal. “For me to tell you that we’re the best club in the world in trading players would probably not be too far off the truth,” said Mr. Lopez. “If not the best, we’re probably in the top three, four or five clubs.” 
 
8) Algos are changing India’s stock markets [Source: Livemint]
Technology has changed the face of each and every sector today. Even in stock market the computers are placing trades automatically. Humans just need to program the software to do so. Yes, that’s called Algo trading. In India, algorithmic trading is still less than 50%, and firms are relatively small in size. A significant amount of algo-trading volumes is in pure arbitrage. While the technology is doing the work for now, there are a few questions. What happens when the math goes wrong? Or when the robotic nature wreaks havoc? Besides, there is the eternal question of fairness. Is it fair for a few well-heeled market participants to secure undue advantages with the help of technology? And how much of the task of price discovery, which is the basic function of a market, can be outsourced to computers?

Even in India, the Employees’ Provident Fund Organisation (EPFO) has been buying into the Nifty ETFs with as much as ₹2,500 crore a month. There’s another side of the technology curtain too that people find scary: the angle of privacy, of algorithms analysing personal data. In the US, you can sell “order flow". Your buy order at your broker can be given to a large market participant, who will “peek" at the order and then can either say he’ll fulfil the order, or let it pass through to the other exchanges. But in reality, technology can be used to derive an advantage—if the market participant is faster than you, it could buy from another exchange at a lower price even faster and then sell to you, given that your order hasn’t even reached the other exchange yet.

While “fintech" is a buzzword nowadays, it is just as easy to abuse technology to take things to an extreme, to make invalid assumptions, to “fake" disclosures, to even set off something called predatory algorithms. Predatory algorithms simply prey on other algorithms. Some will detect that an algorithm is trying to sell a large quantity of shares in small bits and pieces, and then take advantage by running ahead of it. Technology is an opportunity, and in finance, it provides a direct link to profit as well. You can use it for good: to get more people in, to reduce costs, and to save time. But you can clearly use it for evil as well, and if you wear a dark suit, you might just get away with it.

9) Visualizing how the Demographics of China and India are diverging [Source: Visual Capitalist]
Everybody knows that the Indian population will outgrow that of China. Aside from the obvious differences in their political regimes, the two populous nations have also diverged in another way: demographics. Although the countries have roughly the same populations today — by 2050, India will add roughly 270 million more citizens, and China’s total will actually decrease by 30 million people. China’s one-child policy was implemented in 1979 — and although it became no longer effective starting in 2016, there’s no doubt that the long-term demographic impacts of this drastic measure will be felt for generations.

Meanwhile, by 2050, it’s estimated that India’s workforce age population will be comparable in size to that of China’s today — over 800 million people strong. China’s population has plateaued, and will eventually decline over the remainder of the 21st century. There is plenty of room to grow economically, but the weight of an aging population will create additional social and economic pressures. By 2050, it’s estimated that over one-third of the country will be 60 years or older.

On the other hand, India is following a more traditional demographic path, as long as it is uninterrupted by drastic policy decisions. The country will likely top out at 1.6-1.7 billion people, before it begins to experience the typical demographic transition already experienced by more developed economies in North America, Europe, and Japan.

10) Cyber-bullying is becoming a trend among young Americans [Source: The Economist]
“Digital self-harm”, as researchers call it, has been increasingly in America. A study in 2019 found that nearly 9% of American adolescents have done it, up from around 6% in a previous study from 2016, according to an author of both studies, Sameer Hinduja, director of the Cyberbullying Research Centre and professor of criminology at Florida Atlantic University. Why do it? Ana, a 20-year-old from Alabama, says she wanted to see if someone would stick up for her.

Much about digital self-harm is still poorly understood. Even the reason for its recent increase has mystified researchers. Mr. Hinduja speculates that the rise correlates with increasing emotional instability and deteriorating emotional fulfilment among adolescents. Some young people turn to a less direct version—seeking out existing self-destructive content, such as blogs that glorify eating disorders or physical self-harm—rather than producing abusive content.

As a technological matter, identifying digital self-harm is relatively easy. Usually this involves finding the computer or account that created the harmful material. The harder part is what to do after that, says Justin Patchin, another director of the centre and professor of criminal justice at the University of Wisconsin-Eau Claire. Social-media platforms might consider directing known self-cyber-bullies to counselling services.