"A Mathematician Plays The Stock Market"

I've been trying to read this book called "A Mathematician Plays The Stock Market" by John Allen Paulos. It is a book which gives an insight about how the stock market works (or doesn't) with mathematical and counter-intuitive reasoning.


Though I have not read it completely as yet, here's an interesting parable I wish to share:

How to auction a $1 bill for more than it's worth:

This is a story about a professor at Yale. He routinely used to auction $1 bills in his class. But the rules were a little different - while the highest bidder gets the bill, the second highest bidder will also have to pay. The increments are allowed a minimum of 5 cents.

So, the incentive is clear: You can bid sufficiently lower than $1 and still get the bill. Assume the highest bid at some point is 40 cents (A) and the second highest is 35 cents (B). Now, B has an apparent double incentive to bid at 45 cents - he needn't pay the 35 cents and he gets to keep the bill at 45 cents, albeit at a higher price than he earlier intended. Similar reasoning holds true for A. So, both A and B are now 'locked' into the auction - the 'double incentive' pushes the bid higher and higher. When B bids 1 $ and A is at 95 cents, A can bid at 105 cents and make a loss of 5 cents OR lose 95 cents. In this way, the $1 bill can be auctioned at much more than it's worth.

Interestingly, the auction grows from a 'maximise profit' to 'minimise loss' model.

At The Crossroads: India’s Energy Demands

Following is an article I wrote for the first edition of the Energy Bulletin of IIT Madras. 

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At The Crossroads: India’s Energy Demands

India is firmly on the superhighway of accelerated economic growth. Along with China, India will be an important player in determining where the world will be poised a couple decades hence. India’s stance on major contemporary issues of energy security and climate change are especially relevant in view of the depleting natural resources and increasing international attention towards our vehicles of growth.

During 2002-2007, India’s GDP has grown at a rate of over 8 % which has been achieved by an energy growth of less than 4% per annum.  Experts refer to this as ‘GDP-Energy Decoupling’ - the independence of economic growth from energy growth. You might be inclined to conclude that our energy mechanisms are becoming more efficient, thereby able to make-do with the below par growth in energy. But such a conclusion will be grossly unfair; a deeper analysis of GDP brings forth our myopia in doing so.

While the Industry sector of India is one of the most energy-intensive sectors accounting for about 35-40 pc of the consumption of electricity in the country, its contribution to India’s GDP, however, is only about 20 percent. On the other hand, India’s growth is mainly fuelled by the knowledge-intensive services sector which accounts for 60 pc of the GDP. While intrinsically the industry sector is energy-intensive, it also suggests that a conscious increase in power input to the sector will accelerate its growth thereby giving the GDP a shot in the arm.

The   per capita consumption of power in the country in 2005-06 was about 631 Kilowatt Hours. The government of India envisages increasing it to 1000 units by 2012. A look at the global pattern of power consumption suggests a striking correlation between economic growth and power consumption. USA, the world’s largest economy has a per capita consumption of 13,338 units. Japan and Germany measure at 8076 and 7030 units respectively. Closer home, states like Haryana, Gujarat & Punjab which have high per capita GDP consume more than 1000 units of electricity per capita. Economically background states like Bihar, Madhya Pradesh, Rajasthan and north-eastern states fare poorly on per capita consumption scale with Bihar recording a meager 86 units per capita.

That we cannot call ourselves a world superpower without ensuring inclusive growth places huge expectations from our citizens and responsibilities from our policy makers. Inspite of the economic recession being a dampener, the manufacturing sector is growing faster than ever. India’s residential consumption is growing at 14 pc. Around 1,25,000 villages will have to be electrified to fulfil the vision of providing power for all by 2012. With this background, McKinsey & Co. in a recent report on India’s power sector estimates that India will need an investment of Rs. 24 lakh crores to keep pace with the growth.

India’s installed power capacity should triple in another 10 years time. We are presently at 140 GW. It needs to touch 415-440 GW by 2017. In the last 10 years, our annual addition was 4 GW. What we really need is 20 GW per year from now on. We are clearly at the crossroads.

Are our policy makers up for the challenge?

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Specialization is for insects

Here's a quote forwarded to me by Uss:

A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.

-Robert A. Heinlein

Specialization is for insects - Indeed! Indeed it is!

Let me see how I fare on the checklist:

Change a diaper - Yet to try, shouldn't be too difficult I reckon. Should try out on my 1-year old cousin soon.

Plan an invasion - Ummm.. I think I should draft a proposal to Mr. Singh.

Butcher a hog - Well, lets skip that one for now - I am a peace-loving human being.

Conn a ship - It will be amazing; but it'll take time before I get to lay my hands on one.

Design a building - This one I have done!

Write a sonnet - This one's difficult; I don't like poetry!

Balance accounts - Aye aye, S grade in the course on accounting. \m/

Build a wall - Sometime soon

Set a bone - I don't know what it means :-|

Comfort the dying - Yes, I have been there

Take orders - Loads of times

Give orders - (Loads of times) X 100

Cooperate - Yes, been there. done that

Act alone - Done

Solve equations - Did that till first year of college

Analyze a new problem - same as above

Pitch manure - Good old childhood days

Program a computer - "Hello World"

Cook a tasty meal - 'Taste' is subjective

Fight efficiently - In my schooldays, Yes. After that, it was mostly on the joystick and subsequently on the comp. Lately, the fight is with my self.

Die gallantly - I am sure I will!

Archive: From the era of the 'Board Exams'

My sister is class X and she has her first paper of her second pre-board exams tomorrow - Social Studies. She was asking me about my class X marks. I told her I got a (respectable) 86.6 pc.

That reminded me of a very (now) funny event that happened to me. After the results came out, I realised I did fairly well in most subjects - I scored above 90 in all subjects except Social Studies. I got 71 in ess ess tee. Hence, my cumulative percentage plummeted to 86.6. The fact that I got 71 led to an almost unstoppable giggle from my sis!

Those were the days when we had the option of 're-evaluation'. We had to make a DD of Rs. 100 per subject and send it along with a form to CBSE. After discussions with a few students and teachers, I realised it was an effort in vain. Add to that the fact that dad will be poorer by Rs. 100. But the embarassment of having scored in the seventies was too much to take and I backed my instinct and opted for re-evaluation of my Social Science answer-sheet. In the process, I bought some time and arguments to explain why I made a blunder.

Weeks passed by. The issue was forgotten. One day, out of the blue, my school office hands me a letter from CBSE. It was about the re-evaluation. I opened it in anticipation of a regret letter stating that the marks remain the same.

BUT, to my pleasant surprise it read something like "the marks in the following subject(s) have been change: Social Studies" ... and to my utter disbelief it said:

Old marks: 71
New Marks: 70

We regret that there was a mistake, kindly find enclosed a Draft for Rs. 100.. blah blah..

CC to: Principal

Holy cow!! If I was allowed to publicly swear then, I would have. But as luck would have, my school did not follow-up and I still retain the mark-sheet which says 71 in Social Studies! ;)

Apart, I pinged a few friends who were online at that time to check their marks:

Ugri - Ninety-holymother-Five percentage with Math - 99, Sci - 98, Sanskrit - 99, English - 82

I was just thinking, if he had got about 90-95 in English, he would have been on national TV. Tough luck mate. [Ofcourse, what happened later in IIT is more interesting, but I skip that for now :-) ]

Normal - 85 in ICSE. He wants me to believe that in terms of difficulty levels:

State Board < CBSE < ICSE

Normal, ofcourse is known to justify everything in this world. So I need second opinion on that.

Ankita - 90.6!

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My sis, she claims herself, got 94 pc in 9th standard. Now that sounds a little funny to me coz' she shares the same genes as I do and I could never attach such high percentages to myself. So, assuming it is true, I wish she breaks Ugri's record of 95 and makes it to national television.

There'll be a proud brother applauding her.

Anyone else, who wishes to share their class X marks are more than welcome. I definitely will not be last, Normal's there to cushion me!

Global Cooling, I guess

This post comes from Bangalore - an unusually cold Bangalore.

I cannot recall Bangalore being so cold in the recent past. Bangaloreans used to take out the woolens at the slightest fall in temperature [even at temperatures of mid-twenties]. After having lived through the chilling winter of Delhi, it was amusing to see people with their monkey-caps and woolen socks in the comfortable Bangalore weather.

All that seems to have changed - Bangalore is now cold and breezy. I have to shuttle between balconies and hide behind pillars to be able talk on the phone without falling prey to the cold.

Recently, I read that the temperature hit 10 degrees in Chennai! People tell me Pune is cold and Delhi is freezing!

Whats happening, what's wrong - what 's up with all the talk about global warming, morons? :-)

Epic Fail

This website called Failblog - www.failblog.org is highly recommended. Following is an Epic Fail:

Pakistan: A story dying to end

Post the carnage at Mumbai, global political games have kicked off. While India is constantly and as it seems, convincingly, accusing Pakistan of having played a direct role in the attack, Pakistan is using the good-will of its civilian leadership to act the angel. The US, never a mute spectator, has its own ends to meet through India and Pakistan. The leaders are measuring their words, encapsulating it in diplomacy to avoid a face-off.

A war-like situation is developing. Given the economic situation in Pakistan [their economy was on the verge of collapsing a few fortnights back; received a 'bailout' loan from IMF to the tune of $7 bn. ], it is evident that Pakistan can't afford a war. India, on the other hand, is economically much better off to deal with the inevitable.

Pakistani troops, about 100,00 in number are occupying its western border with Afghan and this is of utmost importance to the US to maintain pressure on Taliban. Fearing an Indian backlash, the Pakistan army has started to 'blackmail' the US maintaining that if India ups the ante along their border, Pakis would have no option but to mobilize their forces towards the east to fend off any Indian insurgency. That would inturn give Bush/Obama sleepless nights as all their progress in Afghan till now will be undone.

Given that international consensus and support is imperative for Pakistan's survival (lets talk about growth later), the civilian government led by Asif Zardari is playing all its diplomatic cards, including appeasing India to minimize the damage. If the civilian government is indeed looking at bettering ties with India, then this incident is a clinching proof to show that the military is the real boss. The international community, including India, fears that should a war break out in the near future, the military in Pakistan would overturn the people's government and we will again have a situation where the jehadi extremists call the shots. Add the nukes, the concoction becomes extremely precarious. Whether they have the pair to engage in nuclear warfare is a question better not posed to the radical extremists.

While India, in all its sanity would wage a 'clean war', the Pakis can resort to anything because the leadership there is based on anti-India ideology, a hatred based one. Infact, the Army Chief of Pakistan is a former ISI chief. This might prevent India from going ahead with a full-fledged war.

A quote from a recent TOI article:

Even in the political sphere, Pakistan's continued existence as a single entity is premised on enmity with India, the glue which keeps the country together. Some Pakistanis have suggested in recent months that take away animosity against India, then Pakistan's founding itself becomes questionable.

International community might vehemently side with India in the coming days but will also be careful enough to craft strategies to ward off war calls. The US has a bunch of problems to heed to - the economic recession and the transition in their own leadership. An Indo-Pak standoff will only add to their woes. US can't sever its links with Pakistan and they can't go back on the newly established love relationship with India. And at a juncture of transition between two leaderships opposite in their beliefs, more external trouble spells more internal indifferences.

Leave out everything, the coming few days will see a lot of international lobbying. Needless to say, a war SHOULD be avoided - but not at the cost of appellation of 'soft state' to India. Its time we show the world who's the boss and if need be, be the means to the end.