Cacoethes Scribendi

2011-01-13T22:55:00.000-08:00

Cricket and the Arts

"What is Art?".
This is the provocative question posed by CLR James in his magnificent book Beyond the Boundary, widely regarded as the finest cricket book of all time. James attempts to answer this question in a manner which is much too elaborate to be summed up in a blogpost. Nevertheless, he unequivocally concludes that :

It (cricket) is a game and we have to compare it with other games. It is an art and we have to compare it with other arts.....Cricket is first and foremost a dramatic spectacle. It belongs with the theatre, ballet, opera and the dance

These lines intrigued me. Cricket is ofcourse a ball game. But is it fundamentally different from the other ball games? Are we justified in regarding cricket as being closer to the arts (the likes of theatre and literature) than other sports?

I attempt to partly answer these questions in this blog. To my mind, there is one chief characteristic that distinguishes all ball games from the arts:

Ball Games are invariably competitive, in that the performance of the sportsman is contingent on the opposition he is up against. Whereas, in most of the other conventional arts, the performance of the artist is nearly independent of practically everything else.

For instance, Pele scored 1,280 goals in his career over 1,363 games. That's an average of 0.94 goals per game. Suppose Pele had played all his football in the Indian leagues (which are distinctly less competitive), one would naturally expect that average to have been significantly higher (perhaps 1.5 or more).

On the other hand, our appraisal of an artist in the theatre or in the cinema is absolute and is hardly contingent on the prevailing competition or standards.

Now, let us examine the game of cricket. To what extent are performances in cricket dependent on the quality of the opposition? I believe that cricket is closer to the arts than other ball games in this respect. Cricketing feats, be it batting or bowling, are less sensitive to "opposition quality" than feats in soccer or rugby.

Does that sound counter-intuitive? On the surface, Yes. But not if one examines closely the records of great cricketers, past and present.

Let us start with bowling. Below, I have looked at the bowling averages of five great modern bowlers both in Tests and first-class cricket.

Mean Bowling Averages
	Tests	First-class
Shane Warne	25.41	26.11
Wasim Akram	23.62	21.64
Allan Donald	22.25	22.76
Glenn McGrath	21.64	20.85
Muthiah Muralitharan	22.72	19.64
Overall Average	23.13	22.2

It is quite clear that all five bowlers have very similar averages both in Test matches and in First-class cricket. Let us suppose a hypothetical bowling attack comprising these five bowlers. Given that their mean Test average is 23.13, we can expect an average Test-class batting lineup to score 231 runs (23.13 X 10) against this attack. Whereas, an average First-class batting lineup (presumably consisting of relatively inferior batsmen) can be expected to score 222 runs (22.2 X 10) against the same bowlers!

The learning is that the wicket taking ability of these five men is almost independent of the standard of cricket being played. It is quite unlikely that these bowlers are any deadlier in a First-class fixture than in a Test match. In fact, we can infer that the bowling average is very close to being a measure of the intrinsic wicket-taking worth of a bowler. A bowler's average is unlikely to change too much across eras and different playing standards.

What about batting then? Is the career batting average very sensitive to the quality of the bowling attacks faced? The answer is No. Below, I have a similar list contrasting the Test careers of several top modern batsmen with their First-class careers.

Mean Batting Averages
	Tests	First-class
Sachin Tendulkar	56.94	59.86
Brian Lara	52.88	51.88
Steve Waugh	51.06	51.94
Kumar Sangakkara	57.25	48.01
Kevin Pietersen	48.42	49.01

Again, we notice that a batsman is quite likely to have similar averages both in Tests and First-class games. In fact, it is quite common to observe cases where the first-class average is lower than the Test average since it is a lot harder to sustain a high batting average over a very large number of first-class fixtures.

I find these tables very revealing. They do suggest how very different cricket is from other ball games. Unlike most other games, performance in cricket is purely a function of the cricketer's inherent skill and not overly influenced by the playing standards of the opposition.

Which is why, it is possible to argue that a cricketer is closer in spirit to a ballet dancer or a movie star than to a soccer player or a rugby forward.

Also, cricket lends itself to comparisons across eras unlike other sports. No serious tennis buff would want to argue too strongly that Bill Tilden transported from the 1920s and equipped with modern raquets would be able to defeat Roger Federer today. The reason is that modern tennis players train harder and are more athletic than champions of yesteryear. In a very physical sport like tennis, training and "professionalism" matter a LOT.

Cricket, on the other hand, is different. Being a skill-based sport, it places less premium on training and athleticism than most other sports. Secondly, the nature of the game is such that it tests one's character as much as skill. If you're a batsman, it only takes one ball to get you out. This holds true regardless of whether it is a Test match at the MCG or a University game in New Delhi. It doesn't matter whether the cricketer in question is WG Grace in 1870 or Viru Sehwag in 2010. It only takes one ball to get you out!!

To my mind, that's the reason why standards in cricket unlike other ball games do not always improve with time. For instance, fast-bowling talent today is most definitely not as rich across the world as it was in the early 1980s. Similarly, the art of leg-spin in the 1970s was surely not as advanced or as prevalent as it was in the 1930s.

Like the other art forms, cricketing standards are subject to crests and troughs. In this regard, it is fundamentally different from most other sports where standards invariably improve with time.

Also, it is possible to think of a batsman or a bowler as an artist in isolation. It is also possible to measure a cricketer's worth by examining his numbers without bothering to consider the numbers of anyone else!

Cricket sure is a very unique game! A veritable art form? Well, very nearly!

2010-11-27T03:04:00.000-08:00

On Risk, Return and Batsmanship

In Finance, one of the cardinal sins is to undertake an investment decision without assessing the forecasted return in the context of the risk exposure. Risk and Return are inextricably linked. I'd rather have my money earn 3.5% in the Savings account if an alternative market investment promises a 10% return with a standard deviation of 50%!

A common metric often employed to evaluate portfolio performance is the Sharpe Ratio, which is basically the premium return that is offered by an investment for each unit of risk undertaken. No wonder "risk-adjusted return" is a hackneyed phrase one hears from portfolio managers.

How is all this related to Test Match Batsmanship? Very closely related as we shall see.

Batsmen in Test Matches are often judged on the basis of their "batting average". An average of 50+ is usually regarded as outstanding and is often the figure that most Test batsmen aspire for. Ofcourse, one needs considerable skill to maintain an average of over 50. But more than skill, I think the key is to understand risk-return dynamics well.

There are two components to the batting average that ought to be understood if one wishes to optimize it:

Component A : Time Spent in the Middle i.e the No of balls that one lasts on an average per innings

Component B : The ability to force the pace while in the Middle. This component is better known as "Strike rate" i.e the No of runs that one scores per 100 balls faced.

Batting Average = F(Component A, Component B)

Sounds too obvious, yes. But this is not exactly a simple plain-vanilla two-variable function. What's often overlooked by batsmen and cricket pundits is that A and B are not independent variables. A is a function of B and vice-versa.

In fact, the two components influence each other negatively. Typically, a batsman with a high strike rate spends less time in the middle, because of the risks involved in trying to force the pace. Similarly, a batsman who bats for long periods of time tends to have a lower strike rate, for reasons that are obvious.

So what should one do to optimize the Batting Average? Should the batsman adopt a risk-averse style by concentrating only on putting away the rank bad ball and defending the rest? The likes of Hutton, Gavaskar and Dravid have achieved great Test records by optimising Component A, without overly worrying about Component B. Nevertheless, for every Gavaskar, there are a dozen other fine technicians who couldn't reach the magic figure of 50 despite their excellence at Component A. Geoff Boycott is a name that readily springs to mind.

There are others who have Test records just as enviable as those of a Gavaskar or a Dravid thanks to their extraordinary strike rates. Viru Sehwag is an obvious example. Here's a guy who is a very limited batsman in many ways, with serious technical deficiencies against the short rising ball. A guy who lasts only 64 balls each time he comes in to bat (that's probably about half the number of balls per innings faced by someone like Gavaskar). And yet, he has a brilliant batting average of 54, significantly better than Gavaskar's 51!! The secret of his success is that he manages to maintain a strike-rate of 80 and yet lasts 64 balls per innings!

There have been several daredevil strokeplayers in the past who have graced the game of cricket. Think Gilbert Jessop, Kris Srikkanth and more recently Shahid Afridi. All of them had batting averages significantly below 40. This is because their high-risk approach to the game significantly reduced their average duration at the crease.

The reason why Sehwag is such a great treasure is not because he is a great strokemaker (there have been several such players in the past) or a great technician (which is hardly the case). Sehwag's greatness lies in his ability to understand the dynamics of risk and return. He is able to play his normal game without taking undue risks that were the bane of players like Afridi or Yuvraj Singh.

It is vital for batsmen around the world to grasp the importance of maximising risk-adjusted returns. The tradeoff between risk and return may vary among batsmen depending on their skill level. Yet, the magnitude of the tradeoff can be minimised only if you are aware of the tradeoff in the first place!

Take Dravid for instance. The man averages a fantastic 53 with a strike rate of about 42 per 100 balls faced. He roughly faces 110 balls each time he visits the crease in a Test match. I'd like to argue that he has not consciously thought about the tradeoff during his career. For a batsman of his ability, the tradeoff between strike-rate and duration at the crease shouldn't be too large.

Mathematically, the tradeoff can be stated as shown below :

d(No of Balls per innings)/d(Strike Rate) <= 0

The objective should be to minimise the absolute value of the above differential!
Cutting down the aerial strokes to the extent possible and running well between the wickets are some of the ways of achieving this objective.

Let us suppose Dravid had been a little more aggressive during his Test career and maintained a strike-rate of 50 instead of 42. This might have reduced his "No of balls per innings" figure from 110 to perhaps 100. Nevertheless, it is a great trade-off. His hypothetical batting average in this case is 56.5, a good three runs higher than his current average! (Note: I'm assuming the same no of "Not out" innings as before)

The man widely regarded as the greatest batsman in Test history is ofcourse Sir Donald Bradman. People often have endless debates on what made him so special. The Don was a somewhat frail man with poor eyesight. In fact, he came perilously close to losing his life on account of poor health during his career. By most accounts, he wasn't a particularly "correct" batsman, with a very unusual grip and a notorious tendency to play across the line. Yet, he averaged 99.94 in Tests and more astonishingly 95.14 in all first-class cricket!

The secret to his success is that like Sehwag, he understood the risk-return tradeoff probably better than most people. No wonder he was a professional stock-broker off the field. The Don managed to maintain a strike-rate of 60 in Test matches (astonishingly high back in the thirties) and lasted about 145 balls per innings.

The figure of 145 is not as exceptional as his batting average. It's still probably better than the Component A of most other batsmen in Test history. But I'm sure there are several bastsmen who are running him close. What made him special was his ability to score at a strike rate as high as 60 without compromising on the time spent in the middle.

I know this post may sound a tad too obvious to a lot of people. But I think it bears repeating. The Risk-return tradeoff is something we're all aware of, yet we don't always consciously think of optimising it in the daily business of life!

2010-11-20T06:15:00.000-08:00

Ranji - the most underrated cricketer of all time?

The name Ranji immediately conjures up a smallish brown man of royal lineage who lit up the English cricket fields with his brilliantly unorthodox strokeplay about a hundred and ten years ago. He is widely regarded as one of the game's great early innovators and a very popular cricketer in England at the turn of the century.

But pundits don't normally invoke Ranji seriously while discussing all-time greats. Recently, Cricinfo picked an "All-Time XI" for each of the major international Test playing countries. I was flabbergasted to learn that Ranji was not even nominated as a middle-order choice for the All-Time England XI!!

English cricket lovers are not exactly known for their ahistoricism, unlike Indian fans who tend to focus on the here and now. It is very hard to find any English cricket writer who hasn't turned in a few lines on the likes of WG Grace, Sidney Barnes, Gilbert Jessop, Jack Hobbs among others. In fact, Wisden went to the extent of picking Hobbs as one of the five greatest cricketers of the Twentieth century!

Being an Indian with a fair share of interest in English cricket, I wondered - Where does Ranji rank in the pantheon of great English cricketers? Is he widely known today primarily on account of his exotic Indian origin? Are we guilty of overrating his stature in the context of English cricket history? After all, he was the first person of colour to play Test match cricket.

I turned to Cricinfo Statsguru to better understand Ranji in terms of hard numbers. The idea was to move beyond the romantic prose penned by the cricket writers of his time and judge the man using figures alone.

What one discovers is a true cricketing colossus!

Here is a man who played First class cricket in England for 25 years spanning from 1895 to 1920. A man who scored nearly 25,000 First class runs at an average of 56.37!! (yes, you read that right) These figures are very impressive even by today's English first class standards, notwithstanding the fact that English pitches in Ranji's time were a lot livelier by most accounts, even when unaffected by rain. Just to put that average into perspective, Graeme Hick, the most prolific English first class batsman of the past 20 years averages 52.

During his time, Ranji played Test match cricket with/against names like Grace, Trumper, Jessop, Fry and Hobbs among others. All these guys represented the cream of talent the world had on offer during that period. How does Ranji compare with each of them?

I must say Ranji trumps them all going by the first class averages. In fact, he is miles ahead of the rest.

First-class Averages of Ranji and his Contemporaries
Ranji	56.37
Jack Hobbs	50.70
CB Fry	50.22
Charles MaCartney	45.78
Vic Trumper	44.57
Clem Hill	43.57
Frank Woolley	40.77
WG Grace	39.45
Archie MacLaren	34.15
Gilbert Jessop	32.63

It is a very revealing table! Ranji is about 6 runs ahead of the next best batsman. That's a really huge margin. The most striking revelation is that Ranji averaged a good 17 runs more than the great WG in his First class career and about 12 runs more than the celebrated Australian legend - Vic Trumper.

The two guys who approach him in consistency are Jack Hobbs and CB Fry. However, Hobbs scored the bulk of his runs post WW-I during the twenties, when batting became a lot easier thanks to the improved pitches of the time. It is quite likely that Hobbs averaged well below 50 if one considers only his pre WW-I record. CB Fry had an outstanding First class record, but disappointed in Test cricket with an average of barely 32.

How does Ranji rank among all the great first-class cricketers of the past 150 years?
To attempt an answer to this question, I looked at the top 10 batsmen with the highest first-class averages in cricket history (with a minimum run aggregate of atleast 20,000 runs). Ranji ranks sixth in this list.

Highest First-class Averages of all Time (Qual.criteria : 20,000 runs)
Don Bradman	95.14
Sachin Tendulkar	59.63
Darren Lehmann	57.83
Geoff Boycott	56.83
Ricky Ponting	56.73
Ranji	56.37
Bob Simpson	56.22
Wally Hammond	56.10
Rahul Dravid	55.89
Len Hutton	55.81

Ranji is the only person on this list who made his first-class debut prior to 1920. In fact, he played nearly all his cricket before World War I. Now that was an era when an average of 35-40 used to be regarded as a very good record in first-class cricket.

I think these tables ought to be better known. Ranji was so much more than a mystical Oriental talent who played unorthodox strokes. He was, without doubt, the foremost batsman of his generation. In fact, it can be argued that Ranji was the most dominant and consistent batsman the world had seen until Bradman came along in the thirties.

Surely it's a career that deserves more recognition by cricket historians and greater mindshare among cricket fans (especially English cricket fans)!

2010-11-06T20:32:00.000-07:00

On Income "Inequality"

I stumbled upon an article lately on my Google Reader feed that ranted somewhat predictably about how income "inequality" has risen significantly in the United States and how the middle class in the US has stagnated over the past 2-3 decades. Here's the link

It is a very provocative article as most poorly reasoned articles are. The worst part of it is that the author attempts to place the blame for "inequality of incomes" on Corporate America without rhyme or reason. In this post, I ponder on the possible reasons for stagnation of middle-class incomes. There are several of them and the most obvious ones have nothing to do with Corporate America or conservative economic policies.

Let's look at certain portions of the article that are worthy of repudiation.

globalization's significant profits were captured by a small corporate elite in the U.S. and a new corporate elite and rising middle class in China and India. The American middle class got very little of it. No wonder people are mad.......Americans accept income and wealth inequality to a much larger degree than Europe........... Looking at the stats on inequality gives us an idea of why so many are angry at the business elite — it's the highest since the 20's and getting worse

Okay. So the moot point is that while incomes have soared in the top bracket, the "median" income of the "representative" Middle American has stagnated over the last few decades notwithstanding the outstanding economic growth during the same period.
I checked up the income stats on wikipedia and it appears that this contention is quite compelling on the surface.

Sluggish Growth in Median American Incomes
Data	2003	1979
Median (50th)	$43,318	$38,649
95th percentile	$154,120	$111,445

We observe that while the 95th %ile income has risen by nearly 40% between 1979 and 2003, the median incomes have remained quite stagnant. On the surface, this might seem like an indictment of Reagan era deregulation and the increasing preponderance of economic conservatism in the US since the late seventies.

But there are several problems with this story.
Think about Individuals and not some mythical "Middle American" : Anybody with an iota of sense can readily see that the 50th %iler who earned a median income of $38,649 in 1979 is not necessarily from the same household as the 50th %iler who earned $43,318 in 2003. It is quite possible that someone who was at 50th %ile in 1979 now has a gainfully employed son who is closer to the 80th %ile on the income distribution curve.

The American Middle class has changed in constitution since the late seventies. Several households have moved up the economic ladder as one would expect in any society bustling with private economic activity. Then, the natural question is that if most households have been upwardly mobile over the past three decades, why have median incomes remained stagnant?? The answer could well be immigration.

Immigration likely to push down median Incomes: A lot of people emigrate to the US with the hope of working their way out of poverty in their native lands and entering the "middle class". These immigrants are often unskilled and poorly educated and hence unlikely to land up with jobs that fetch them more than the median US income.

Households that have immigrated in the eighties and nineties did not feature in the dataset that generated a median income of $38,649 in 1979. Which is why it is highly irregular and inappropriate to compare two very distinct datasets from 1979 and 2003 and make sweeping statements about stagnant "middle class" incomes in the country.

So, does that mean the US should place restriction on immigration to help solve this "problem" of seeming income inequality? No. Reducing inequality of incomes should never be an end in itself. Most recent immigrants to US earning less than the median income are quite happy with their adopted country and wouldn't want to return to their roots. Take for instance a waiter in an ethnic Indian restaurant in NYC (Saravana Bhavan for eg). The guy probably earns $20,000 in his present role which perhaps places him at the 40th %ile on the income distribution curve. It is quite likely that percentile-wise he was much better off in his native country, prior to immigration (given that median income in India is barely $500 p.a). Yet, immigration makes sense for this guy as he is better off being a 40th %iler in NYC than an 80th %iler in Trichy, TN.

The Tamil waiter's immigration to US has contributed to a drop in the median American income. Nevertheless, it is welcome as the waiter's immigration was a personal preference and leaves him better off than he otherwise would've been in his native town.

"Inequality" could be an outcome of personal choices : Let's consider Bob, a successful corporate executive of yesteryear who used to earn the equivalent of $300,000 back in 1979. He has a daughter - Alice who has led a rather comfortable life thanks to her father's affluence. Unlike her father, Alice has little aptitude for business. She has always evinced keen interest in Native American history and wants to specialize in the same and eventually end up as a professor of Native American history in one of the eastern colleges. Alice is 30 years old now in 2003 and is well settled in a Boston college enjoying her role thoroughly. Her annual income is in the vicinity of $50,000, not even one-fifth of what her father used to earn in 1979!!

Is this an instance of downward intergenerational mobility? Yes. Nevertheless, it is an outcome of personal preferences and shouldn't be bemoaned. Alice is less well off than her parents in terms of monthly cash-flow. But she loves her job and probably enjoys more leisure than her father ever did in all his working life!

This little story emphasises an important point that's often overlooked by liberals who bemoan income inequality :

"It is quite likely that the 50th %iler enjoys more leisure and leads a less stressful life than the 95th %iler!"

Distribution of Leisure fairer in recent decades : Back in 1900, the distribution of Leisure was terribly unfair in the Western world. The rich were not just wealthy in terms of cash but also leisure, with little accountability. The workers who slogged 18 hours a day in unwholesome sweatshops, had neither the income nor the leisure to compensate for the lack of income.

Today, the distribution of leisure is distinctly fairer. The clerk in a Federal office may languish at the 50th %ile of the income curve, but he is quite probably placed much better (perhaps 90th %ile+) on the leisure distribution curve! The corporate executives of today enjoy far less leisure and peace of mind than the landed gentry who constituted the affluent class in the 19th century.
Disclaimer : This is only a hypothesis. But I do wish someone undertakes a study that examines how the distribution of leisure has shifted over the past 100 years in favour of the lower income groups.

Writers in the press who talk about rising income inequality in America seldom think about the points discussed in this post because of their obsession with aggregate nation-wide statistics and an indifference to what the statistics actually mean in the context of average individuals and households. Which is why we keep reading pieces where "pundits" use statistics such as the ones used in this post to launch a tirade on outsourcing and corporate executive compensation.

Inequality of outcomes need not necessarily always be a plot hatched by Wall Street wolves or neo-conservative policy makers. People who think so misunderstand not just economics but also human nature. Economics is a social science that concerns real people gifted with a free will. To reduce these people to a statistical abstraction is not just downright unfair, but bad science.

2010-10-30T22:46:00.000-07:00

Puncturing Inflated Legends

Here's another cricket post!
I've been spending a lot of time on Cricinfo lately, where they've been busy compiling All Time XIs. These exercises are fun as they help you put the performances of current players into proper perspective by sparing some time to objectively judge bygone careers which are not fresh in the memory of the cricket watcher.

The passage of time often dims our memory of past players, to the extent that we're very unlikely to appraise them on their merits. Certain cricketers are unfairly forgotten as the years roll by since their once-impressive career records achieved under more challenging circumstances appear less flashy today - an era which has generally been kinder to batsmen. Certain other past cricketers are more fortunate. They end up occupying disproportionate mindshare thanks to legends that inflate with time!

This post concerns a cricketer of the latter kind - a top-class opening bat of his time who has gathered a somewhat undeserved reputation as one of the greatest batsmen of all time thanks to poorly remembered legends. Sunil Gavaskar.

Gavaskar's inflated reputation rests on his seemingly outstanding record against the premier team of his era which possessed a four-pronged pace attack - the West Indies. He averaged about 65 runs per test innings against them with 13 Hundreds! Seven of them in the West Indies. I encountered these stats about a decade back when my obsession with cricket was far greater than it is today and I was busy devouring any form of cricket literature.

My initial reaction was awe, but it was soon tinged with doubt and scepticism. Something was amiss I wondered. I didn't think it was quite likely for anybody to make that many big scores against an attack consisting of Andy Roberts, Michael Holding, Joel Garner and Malcolm Marshall.

Thanks to Cricinfo Statsguru, I now discover that my doubts were well founded. Gavaskar played six Test series in all against the West Indies. Here's a summary of his performance in each of them.

Average
1970/71 in West Indies	154.8
1974/75 in India	27
1975/76 in West Indies	55.7
1978/79 in India	91.5
1982/83 in West Indies	30
1983/84 in India	50.5

Very Impressive on first sight. But distinctly less impressive if someone actually bothers to visit the scorecards!
Let's briefly examine what Gavaskar had to contend with in each of these series.

1970/71 : This was Gavaskar's debut series. Probably the most outstanding series return for any batsman making his debut, in the history of Test cricket. The West Indian team he was up against was far from formidable. It was a team in transition captained by an ageing Sobers. The bowling attack was composed of Vanburn Holder (career bowling avg : 33.27), Shillingford (avg : 35.8), Noreiga (avg: 29.0) and Sobers himself (avg : 34.03).

The era of Roberts, Holding and Co was still 3-4 years away. I know it might sound a little churlish to grudge Gavaskar his accolades. Averaging 150+ over 4 games is an achievement in any form of the game, be it Tests or club cricket, especially for a 22 year old batsman. However, it is quite unlikely that Gavaskar on debut would've achieved similar results against the West Indian attack of the early eighties!

1974/75: Gavaskar only played in two of the five test matches owing to injury. And he wasn't particularly successful against an attack spearheaded by the great Andy Roberts in the two test matches that he did play in. Note : West Indies was still some distance away from their era of fast bowling glory. Roberts had already announced himself. But the rest of the quartet were yet to make their test debuts. Gavaskar's friend and brother-in-law GR Viswanath was a lot more successful against Roberts in this series winning two test matches almost single-handedly at Kolkata and Chennai.

1975/76 : Gavaskar did well in this series with two hundreds, including a match winning knock enabling India chase a 400+ target on the fifth day! Nevertheless, it is worth remembering that the record chase was achieved against an attack that was somewhat mediocre barring Michael Holding. The rest of the attack included B.Julien (avg: 37), AL Padmore (avg: 135), Imtiaz Ali (avg: 44.5) and R.Jumadeen(avg: 39.3). That's the kind of attack against which even a flat-track bully like Yuvraj Singh will fancy his chances.

1978/79 : Now, this was a rewarding home series for Sunny in which he harvested four hundreds! But, mind you, this was against a weakened West Indian touring party thanks to Kerry Packer! I grant that the great Malcolm Marshall was around. But hang on. This was his debut series!
The other bowlers whom Gavaskar flayed round the park were ST Clarke (avg: 28), N Philip (avg: 37) and Vanburn Holder (avg: 33). Hardly terrors on subcontinental pitches.

1982-83: Ah. Now, for the first time, Sunny Gavaskar was pitted against a full strength West Indian attack in the West Indies, with Holding, Roberts, Garner and Marshall operating simultaneously. Sunny averaged a paltry 30 over five tests.

1983/84: Here, I must give credit where it is due. He was up against some very formidable bowlers. Holding, Roberts and Marshall. Sunny acquitted himself well with a healthy average of 50, including an unbeaten 236* at Chennai in the final test. Nevertheless, the average of 50 looks flattering thanks to that unbeaten double century.

Sunil Gavaskar was one of the great Indian batsmen. Arguably the finest Indian bat of his generation. But his record against the WI is made to look more brilliant than it actually is thanks to some pretty easy pickings against weakened Carribean attacks on flat pitches.

His record against the full-strength West Indian attack of the early eighties is somewhat sketchy, not necessarily better than that of other great players of that generation against the same attack.

And yet, I invariably find pundits of all hues championing Gavaskar as one of the top 2-3 opening batsmen in the history of Test cricket! That may not be an altogether unreasonable claim, given that the guy scored over 10,000 Test runs and lasted nearly two decades at the highest level. But it is definitely not very easy to sustain that claim based solely on his record against the West Indies!

2010-10-10T01:30:00.000-07:00

Play back or Drive

The ongoing India-Australia Test series has marked my resumption of Test match viewing, after having practically lost all interest in the game over the past 4-5 years.

This post was prompted by Michael Clarke's soft dismissal by Harbhajan in the first innings of the Bangalore Test yesterday.

One of the most ungainly features of modern batsmanship is the almost instinctive lunge forward while defending a slow bowler. To my mind, it seems like a nothing shot. The forward lurch does not necessarily get you to the pitch of the ball. Also, it deprives you of the extra instant of time to judge the delivery.

The key to playing spin bowling well is to use your feet to reduce the element of uncertainty. There are two ways in which one can meet that objective -

By getting to the pitch of the ball
In which case it does not really matter how much spin the bowler has imparted to it.

By playing back!
When in doubt, one must always play back. If it isn't possible to get to the pitch of the ball, the batsman must always play late which helps him buy an extra second to examine the extent of deviation off the pitch.

By lurching forward, you're only making an offer of a bat-pad dismissal every ball!
And yet, this most ungainly of strokes has been inexplicably popular across the world for as long as I can remember. I wonder if there was ever a time in cricket history when the forward defensive was not in fashion!

And yes. It is particularly disappointing when batsmen of the calibre of Ponting and Clarke commit batting suicide by lurching forward.

These thoughts made me scour the net for similar polemics against the "forward defensive". Here's a video clipping of Don Bradman's defensive play in one of the 1938 Ashes tests. Check out the section from 1:45mins to 2:05 mins. What struck me was that the guy does not show any inclination to lunge forward. Instead, he plays back as a rule even if the delivery is not exactly short in length. No wonder he seldom got out caught at forward short-leg or silly point.

I thought it was a very good demonstration of how to defend against slow bowlers.

2010-05-29T21:35:00.000-07:00

On why our bank deposits earn even less income than a Risk-free Government bond

This was a question that had been vexing me for quite a while. My savings deposit earns an interest of 3.5% a year. Whereas, the 90 day Government bill issued by the Indian Government earns about 5% p.a currently.

Shouldn't my salary account at a risk-ridden private bank yield me an income that atleast exceeds what can be earned by holding a "risk-free" 3 month government security?

Irving Fisher, the American Economist of the early 20th century, provides the answer in his opening chapter of The Theory of Interest published in 1930.

While any exact and practical definition of a pure rate of interest is impossible, we may say roughly that the pure rate is the rate on loans which are practically devoid of chance. In particular, there are two chances which should thus be eliminated. One tends to raise the rate, namely the chance of default. The other tends to lower it, namely, the chance to use the security as a substitute for ready cash. In short, we thus rule out, on the one hand, all risky loans, and on the other, all bank deposits, subject to withdrawal on demand, even if accorded some interest...

Reading this unpretentious prose is a bit like being present at the invention of something new - like the discovery of fire or the invention of the wheel. I love the way he uses the term "pure" instead of the cliched modern phrase "risk-free". Also, I love the very broad-minded definition of the term "chance". Back in B-school, we invariably used to think of sigma (the standard deviation of cash flows) when the word "chance" was mentioned. Fisher is delightfully free from all the jargon conventions that bind us.

Most importantly, he manages to answer the question posed in the beginning of the post. There is some merit in reading 80 year old classics once in a while

2010-04-11T05:27:00.000-07:00

On how malleable "economic" Theories can be

Back in business school, I was told that the spread of any interest rate over the "risk-free" short term government bill rate is a function of maturity risk, liquidity risk and default risk among other things. So, the higher the spread of the longer term Government bond rate, the greater the perceived uncertainty of the government's finances in the long run. Let's call this Theory A.

Theory B: At the same school, I was also told that longer term interest rates can be interpreted as the function of the market's expectations of short term interest rates in the future. For instance, one can think of the two year bond yield as the product of the current short term Fed rate and the market's expectation of the short term Fed rate one year hence.

I didn't note the contradiction between these two points of view back then. It all seemed very sober and scientific in the classroom. But now, I often wonder if these were political theories after all, masquerading as science.

The recent blog debate starring Megan McArdle of The Atlantic and Paul Krugman is particularly interesting. Here is the chart that spurred the debate (courtesy Steve Waldman). It shows that the spread of the 30 year/10 year bond yield over the 3 month "risk-free" rate has widened since the recession. Also, the spread is not showing signs of decline even after the recession subsided mid last year.

Megan is worried about this and interprets the trend as a sign of the market pricing in the perceived default risk posed by the US government. Like a good conservative Republican, she thinks this ought to be a warning to the government to stem the deficit and stop adding to the burgeoning public debt. I guess it is very clear that she subscribes strongly to Theory A.

Paul Krugman of the NY Times responded in typical fashion. Quite predictably, he said that Megan was all confused about yield curve basics. The long term bond yield remains high because the market expects short term interest rates to go up in future. Now, we all know that short term rates generally go up only if the Fed perceives improved economic times ahead. So Krugman is in effect saying - Don't worry about the yield spread. It is mostly good news!
Now, this is the classic Market expectations theory which we labeled Theory B earlier in the post.

The question is - which theory holds water? Krugman makes his theory sound more plausible, which is no surprise given his considerable verbal skills. But is he right? Can we be altogether sure that the long term rate is purely a function of future market expectations? If that's true, what about the default risk premia, liquidity risk premia and maturity risk premia that I read so much about in FM-1?

I'd like to believe that all these "theories" are political beliefs in the main. A liberal like Krugman who is so sceptical of Fama's efficient market theory and Lucas' rational expectations hypothesis is so willing to buy the prowess of the same inefficient market in predicting future Fed actions! It is convenient because the "market expectations" interpretation of the yield curve helps him shrug off critics who cavil at government spending and the huge debt burden by saying "Look...the bond market isn't particularly worried about the debt. Why bother!"

Similarly, the conservative Megan does not buy Theory B in the context of government bond market, but is quite likely to buy the not too dissimilar rational expectations theory which helps her make a case against expansionary government policy.

It's all so very politically convenient.

2010-01-29T23:14:00.000-08:00

On the Misjudgment of Probabilities

A somewhat rambling, indulgent post. I'm writing a blogpost after quite a while which may account for the rather stodgy turns of phrase.

Finished reading Nassim Taleb's bestsellers Fooled by Randomness and Black Swan lately. One among the several insights in the books is that in the real world, it is difficult to assess the degree of uncertainty as risks are not easily computable. The tools of Probability theory come in mighty handy to help compute odds in controlled environments like a casino. But they are of little use once we step out of such regulated environs.

Also, even when we are in a position to reliably compute the odds, we do not consciously use the odds while taking decisions.

Suppose an insurance salesman presents you with two policies.

- Death on account of a terrorist strike
Covered Amount: $50,000
Annual Premium: $50(for 5 years)

- Death on account of any cause
Covered Amount: $50,000
Annual Premium: $2500(for 5 years)

Now, I find Policy A just as attractive as Policy B if not even better. Yes, we would all expect the premium on a special-case death policy to be a lot lower than a "normal" life insurance policy.
A premium of $50 as opposed to $2500 seems fair enough as it appears to account for the relative rarity of a death on account of a terrorist strike.

However, though a ratio of 1/50 ($50/$2500) sounds very good, Policy A is terribly overpriced! (I'm assuming ofcourse that Policy B is reasonably priced)

Death on account of a terrorist strike is an extremely rare event. Surely, fewer than one in fifty deaths is caused due to a terrorist strike. Even if Policy A were priced at $10, I'd still regard it as overpriced!

This reminded me of the law trial in the memorable Otto Preminger classic - Angel Face starring Robert Mitchum and Jean Simmons (who passed away last week) that I watched the other day on DVD. A 20 year old girl kills her step mother by tampering with the gear and break system of the latter's convertible. She succeeds quite spectacularly in her attempt as her victim hurtles to her death along with the vehicle which falls off a cliff.

In the trial that ensues, the ruins of the vehicle are examined. An automobile engineer concludes that the gear shaft was manipulated. The defence lawyer asks whether the gear shaft may have reached its present position due to the impact of the fall. The engineer replies that it is a one in a million event. The shrewd lawyer rejoins - why not one in a thousand? or even one in ten!

So now the case rests on the jury's assessment of probabilities. The higher the likelihood of the gear shaft reaching its present position during the fall, the better the chance of the step daughter getting acquitted. Here's a case where there is no way one can judge the likelihood of the event, no matter how sophisticated you are in your knowledge of statistics and probability. Juries tend to play safe in scenarios like these (i.e over-estimate the likelihood of the rare event) and let the criminal go scot-free.

PS: Jean Simmons does get acquitted in the movie, somewhat predictably.
I've seldom seen a mainstream Hollywood movie demonstrate our inability to come to terms with randomness. Angel Face is an honourable exception.

2009-08-28T23:04:00.001-07:00

Changing Social Equations : Witnessed through the prism of movies

I've always felt that motion pictures are much more representative of a society's collective impulses than any other art form. It is possible for a novelist or a painter to construct an alternative universe of his own and create works of art that can exist in isolation in any era independent of the social milieu that surrounds them. The art of cinema is fundamentally different. Being a mass medium, movies must be able to relate to the impulses of the audience if they have to succeed. Most movies are products of the times in which they are made, unlike a lot of great books. Frank Capra's films are products of the thirties Depression Era. Woody Allen's pictures on the other hand are influenced by the counterculture of the sixties and seventies. Either of them couldn't have succeeded in the other person's era.

Literature is quite different in this respect. It is a lot easier to associate the attribute of 'timelessness' with books than it is with movies. Take for instance the fictional world of the incomparable PG Wodehouse. He created a universe inhabited by absentminded earls, erudite butlers and wealthy nincompoops which hardly had any basis in reality. The books of Wodehouse found a niche market which exists even today, though the 'Edwardian' utopia found in his books is not to be found anywhere on earth.

Which is why I feel that studying the history of motion pictures can provide a great deal of insight into how the society has evolved over the decades. Having watched countless Hollywood classics over the past year or so, I was drawn towards how the treatment of coloured people on the big screen has changed so dramatically in the course of movie history.

The earlist movie I've seen is DW Griffith's Birth of a Nation released in 1915, a three hour period saga of how two white families cope with the consequences of the American Civil War. The movie was notorious even then for its blatant depiction of blacks in a negative light and its glorification of the Ku Klux Klan. What's more interesting to me is that Griffith employed white actors with faces painted black to play Negroes in the film! And yes. This movie was a major worldwide blockbuster the year it was released. It couldn't have been made in 2009!

Things got a little better in the 30s and 40s, with black character actors like Rex Ingram and Hattie McDaniel getting meaty roles in A-films. Yet, their characters were invariably maids or butlers. It was still quite unthinkable for a mainstream Hollywood film to accept a black leading man or a leading woman. I find Alexander Korda's delightful 1940 Arabian fantasy - The Thief of Bagdad most significant in this respect. It is one of the earlist films that I know of to feature a coloured boy in the leading role. The actor was a teenage son of a mahout in Mysore who was transported to England to play in several British adventure films, the best of which is The Thief of Bagdad.

However, it was still anathema to both movie-goers and movie makers to have a coloured actor as the romantic male lead. The emergence of Sidney Poitier in the sixties was to change that. Remember, we are in the sixties now. The decade of Martin Luther King & Malcolm X, the Beatles & The Vietnam War. The audiences could finally digest the prospect of Poitier, a Bahaman negro, dating and *gasp* marrying a white girl in the family drama Guess Who's Coming to Dinner. The movie may seem too cutesy and sentimental to modern audiences. But it must have made powerful viewing in 1967, amidst all the cultural upheavals of that decade. The success of Poitier in the sixties seems so timely and inevitable. Poitier couldn't have become a star in the thirties. He may have ended up specializing in butler roles instead. He wouldn't have been such a big deal in the nineties either. His stardom had a lot to do with being in the right place at the right time with the right complexion.

Which brings me to a movie that I happened to see recently. The Taking of Pelham123 starring Denzel Washington and John Travolta, two ageing actors lending some star power to an otherwise forgettable movie. Having been weaned on movies from Hollywood's Golden Age (1930-1960), I was extremely surprised that none of the characters drew attention to the fact that Washington is black in the course of the film. Not even a single oblique reference! It was almost as though the colour of his skin was totally immaterial to everyone around him. This would have been unthinkable in a Poitier movie! No wonder America is ready for a black President.

The critic David Thomson wrote that the "history of American movies is the history of America in the time of the movies". Very true. I couldn't agree more.

2008-11-15T23:44:00.000-08:00

On Ganguly's Legacy and the "Great Man" theory of Leadership

Saurav Ganguly's retirement from international cricket spawned many finely written tributes, most of which emphasized his role as a Lutheran figure who transformed Indian cricketers from a bunch of designer track bullies to the world's second best team. Apparently it was he more than anybody else who made the Indian team believe that it could win abroad on a regular basis.

These claims are backed by facts that are very impressive on the surface. 15 of India's 31 overseas test triumphs have been in this decade. Writers who subscribe to the "Great Man" theory of Leadership believe that great leaders arise when there is a great need. The emergence of the leader in Ganguly happened at a time when Indian cricket was at its lowest ebb what with the 3-0 loss to Steve Waugh's Australia and the implication of certain players in the match fixing controversy. Since Ganguly's appointment as captain coincided with the reversal of India's abysmal cricketing fortunes, the "Great Man" theory dictates that he be hailed as a "great" captain. Post hoc ergo propter hoc.

A closer examination of Indian cricket history reveals that the "Great Man" theory exaggerates Ganguly's legacy a great deal. It was just over two decades ago that the Indian cricket team was a fairly formidable force both at home and abroad. In a span of 10 months in 1985-86, India won three overseas test series against SriLanka, Australia and England rather comfortably. At that point India was probably the second best team in the world after West Indies. The key to their success was balance. A great opener in Sunil Gavaskar, a strong middle order with Vengsarkar, Amarnath and Azharuddin, a hard hitting allrounder in Kapil Dev and a very well balanced bowling attack led by Kapil again. Things began to fall apart in the late eighties with the retirements of most of the stalwarts in this team. By the early nineties, only Azhar remained and the batting replacements for the rest simply weren't good enough, with the sole glorious exception of Tendulkar.

So, between 1989 and 1996, the Indian side was a very indifferent one, heavily reliant on one man Sachin Tendulkar to put the runs on the board everytime it toured abroad. No wonder we won zilch outside the subcontinent during that period. 1996 was a transformational year. Three very good batsmen debuted for India that year - Dravid, Ganguly and Laxman. They filled a gap that had remained ever since the retirements of the batting bulwarks in the eighties. Indian performances outside the subcontinent improved remarkably from that year onwards.

Now, the natural question would be - why did the Indian team win so little abroad between 1996 and 1999 despite the much improved batting order? Why didn't we start winning until Ganguly took over captaincy? I attribute that mainly to chance more than anything else. We should have won in England in 1996 when we were clearly the better side after the first test loss (Dravid and Ganguly did not play in the first test). We were up against a very strong SA side in 1996 (possibly the best eleven South Africa ever assembled since its return post apartheid) and yet we nearly managed to win the third test at Johannesburg. We were very unlucky with the umpiring decisions in Australia in 1999. The series was nowhere near as one-sided as the 3-0 scorecard suggests.

Now, let's examine Indian overseas results after Ganguly took over captaincy. 7 of the 15 wins overseas since 2000 have been against Zimbabwe and Bangladesh. The Indian team of the mid/late nineties didn't get to play that many games against these teams. 2 more wins have been versus Pakistan, a country we didn't visit during the nineties. The series draw in Australia in 2003-04 was against an Australian team in transition, with McGrath and Warne injured. And we lost series in West Indies, Srilanka and South Africa with Ganguly at the helm.

So, it's quite clear that the "Great Man" theorists have got it wrong here. Yes, we are performing better overseas than we used to. But the seed of this improvement was planted in 1996 and not in 2000.

Moving away from cricket, we find "Great Man" theorists at work everywhere. Alan Greenspan is often hailed as the greatest of all central bankers on the basis of the remarkable performance of the American economy during the eighties and nineties. What's often overlooked is that Greenspan's period at the helm was also marked by the personal computer revolution and the internet which drastically improved the productivity of the American economy and helped rein in inflation. Funnily, Greenspan gets the credit for what was largely the handiwork of the impersonal force of technology.

2008-10-12T21:21:00.000-07:00

Thoughts on banking

Prof. Jayanth Varma seems to hold a view similar to what I wrote in the previous post. Securitization has little to do with the current crisis. Here's the link. Ofcourse, a fiasco like AIG probably wouldn't have happened but for the misuse of Credit Default swaps. However, it isn't wise to pin the blame on CDS product per-se, especially when the infrastructure to support it is inadequate. The CDS market is mostly OTC. In the absence of an exchange that bears counterparty risk and ensures liquidity, credit derivatives were unlikely to be successful.

The professor's remarks on the basic unsoundness of a bank driven financial system were quite provocative. Ideally, a credit intermediary would want to borrow long and lend short (who wouldn't!). However, no saver wants to lend long and no investor wants to borrow short. As a result, the banking system is forced to resort to very high leverage levels to make its business model viable.

Now, the most facile solution is to do away with credit intermediaries (banks) and move towards a world where credit allocation happens entirely through financial markets. Securitization is a step in that direction. In an idealized version of that world, every credit-seeker, be it an individual or a business, will issue a bond. The prospective lenders will make the investment decision based on the borrower's creditworthiness (say his FICO score). Sounds very good.

However, there is a hitch. For such a system to function, it is important that we have borrowers and lenders who are willing to borrow and lend respectively over an identical timeframe. That's seldom the case since most reasonable people want to borrow long and lend short. Which is why we have highly risky institutions called banks with humongous leverage levels :(

To do away with banks would imply a considerable shrinkage in the economy's capacity to supply credit to those who need it. To persist with them would mean many more financial crises similar to what we're witnessing.

2008-09-15T20:04:00.000-07:00

On Financial Meltdowns

Frederick Bastiat, the nineteenth century French economist, once authored a memorable essay aptly titled 'What is Seen and What is not Seen' in which he said that the unintended, often invisible consequences of an event tend to be overshadowed by the more obvious effects. We are so preoccupied with the visible problems resulting from an event that we completely overlook the much more darker possibilities that might have unfolded had the event not happened.

The current financial meltdown is a classic example. Large, hitherto formidable, investment banks have succumbed, marking what's clearly the worst financial crisis in atleast a generation. Pundits of all hues have been quick to demonise financial innovation (read CDOs and derivatives) as the prime culprit. However such an inference is incorrect since it is based on the faulty assumption that there would have been no crisis in the absence of the much maligned financial products.

The seeds of the current crisis were sown by the discretionary monetary policy of the Federal Reserve which kept interest rates too low for too long by overreacting to the economic slowdown in 2001. The fact that Asian central banks were propping up the dollar and suppressing long-term interest rates by investing in American bonds did not help matters. The abundance of liquidity and the availability of easy money triggered a huge demand for credit among those who had hitherto not entertained notions of taking on debt and successfully servicing it. When the rates eventually started increasing circa 2005, defaults started piling up and the banks had to face the music.

Now, all of this would have happened regardless of the sophistication of the financial products in place. Securitization is essentially a tool for managing risk. No...it doesn't help us get rid of risk. But it ensures that the risk is borne by those who are most capable of bearing it. Imagine a world without securitization and derivatives. A more traditional world where banks borrow short from depositors and lend long to individuals and businesses. In the event of widespread defaults, the risk would be borne by those who are least capable of bearing it - the small time depositor, the average Joe on the street who has placed all his lifetime savings in the neighbourhood bank. Bank runs would have ensued thus contracting the money supply in the economy. What's worse, many depositors would've lost savings of a lifetime. This is precisely what happened in the early thirties during the Great Depression. The amount of money in the economy declined remarkably and the size of the economy shrunk by almost a third in a couple of years!

Thanks to securitization and the widespread use of derivatives, bank runs are now a thing of the past. The real economy continues to grow at a reasonable rate despite the carnage in the financial sector. Yes, there will be job losses resulting from bankruptcies. But the ones affected belong to the highly skilled, educated and affluent section of the workforce who are extremely employable and can afford to make ends meet without a job for a few months atleast.

Commentators who cannot look beyond the obvious claim that the current crisis is an indictment of free markets and financial innovation. They cannot be more wrong. The crisis is infact reason enough for us to celebrate the virtues of financial innovation, which have helped insulate the real economy and also ensured that the risk is NOT borne by the more vulnerable sections of society.

Postscript :
Bank runs are now a part of our economic mythology - a curiosity from a bygone era that can only be recreated in movies. Here's a clip from the classic Frank Capra film, It's a Wonderful Life that illustrates a bank run :)

2008-08-03T06:40:00.000-07:00

Blurbing an epic

It is often said that Indians don't have a flair for marketing. A line in the first parva of the great Indian epic - The Mahabharata, suggests that our forbears had a genius for advertising that would be envied by many a book publisher today. Here it is -

"What is found here, may be found elsewhere. What is not found here, will not be found elsewhere."

What a way to blurb a book! You just have to pick up the book after reading this most extraordinary advertisement :)

2008-04-09T19:54:00.000-07:00

On Plays , Movies and Hitchcock

Alfred Hitchcock once said that the silent movie is the purest form of cinema. The first time I read this quote, I dismissed it as a nostalgic remark of one who yearns for old fashion to return. It seemed ridiculous to claim that the addition of dialogue could detract anything from a film.
In retrospect, I think the reaction betrayed my lack of appreciation of the differences between theatre and moving pictures.

A play is a form of literature, notwithstanding the fact that it is primarily meant for performance rather than reading. Its success hinges almost entirely on the script penned by the playwright. The art of the Cinema on the other hand is not tied to language. It is essentially a montage of moving pictures that aims to provoke emotions among the audience. Silent pictures fulfil this criterion admirably. Unlike a play, a silent picture is universal in its appeal. Unlike a play, it influences the audience not by means of dialogue but by enabling the viewer to draw connections between a sequence of moving frames. It is no wonder that Charles Chaplin was the most recognizable face in the world in the twenties and thirties as his brand of pantomime transcended the barriers of language and culture.

However, the distinction between cinema and theatre became blurred with the introduction of sound in the late twenties. The cinematic style pioneered by silent film went out of fashion. Films became increasingly talky with a greater emphasis on dialogue and the performance of actors than on music and cinematography. Hitchcock, a director who came of age in silent films during the twenties decried this -

In many of the films now being made, there is very little cinema: they are mostly what I call "photographs of people talking" . . . One result of this is the loss of cinematic style, and another is the loss of fantasy.'

The difference between a play and a movie became very apparent when I rewatched a couple of old favourites last week - Maltese Falcon, a fast paced film noir starring Humphrey Bogart, and Rear Window, one of Hitch's evergreen favourites. The former, though a fine yarn with superb performances, is not cinema. It is essentially a play that heavily relies on dialogue to convey the plot. Rear Window, in contrast, is a film driven almost wholly by visuals. Though it contains a lot of dialogue, it is possible to comprehend the movie in mute. Dialogue is used mainly to impart humour and develop characters and not for explaining the plot.

The coming of talkies also prompted filmmakers to focus more on content than on style, a development that was diametrically opposed to Hitch's 'content doesn't matter' dictum. Dialogue was used as a medium to explore themes that would've been beyond the reach of silent doyens like Murnau. Hitch nevertheless stayed away from dramatic material and stuck to the suspense/mystery genre as it enabled him to give full scope to his cinematic style. Ofcourse, he paid a heavy price for it as the Oscar Academy preferred substance over style and assiduously avoided his films every year.

The tendency to celebrate substance over style still very much persists among critics and moviegoers. This is especially noticeable in India where off-beat serious movies like Taare zameen par are glibly hailed as masterpieces with little regard to their actual cinematic merit. Whereas exceptionally well made light comedies and thrillers such as Bheja Fry and Johnny Gaddar seldom enjoy similar critical adulation or comparable box office success.

The first question audiences invariably pose while deciding to watch a movie is - "What is it about?". I wish they'd rather ask "How well made is it?"

2008-01-19T02:55:00.000-08:00

More on the Rupee

There still isn't a consensus on the ideal future course for Indian currency policy. Today, Surjit Bhalla in the Business Standard laments the adverse impact of the rupee appreciation on the economy-wide growth figures in general and the Indian exports in particular. Though this might be true to some extent, we can actually do something about it only if the following conditions hold

The RBI is in fact pursuing a strong-rupee policy
If it makes up its mind, the RBI can actually keep the rupee at a much lower level

However, both these statements are untrue. The central bank has actually been struggling hard to keep the rupee down over the last year with limited success. Thus, the rise in the rupee has been despite the RBI policy and not because of it.

In the wake of huge capital inflows, the RBI typically undertakes large-scale purchases of US Dollars in the currency market to keep the rupee down. However, currency market intervention inevitably leads to increases in liquidity and acceleration in prices. To suck the excess liquidity out of the system, the RBI sterilizes its intervention by issuing government bonds. But sterilization is no magic wand. Large scale sale of government securities increases interest rates and tightens credit conditions. Moreover, the interest payable on these bonds constitutes an enormous burden on the exchequer.

The RBI's experience in Dec 2006-Mar 2007 clearly illustrated the problems created by the weak-rupee policy. Call rates shot up to astronomic levels. To bring them down, the RBI resorted to partial sterilization which resulted in an inflation scare. Eventually, the RBI had to ease its dollar purchases and let the rupee appreciate in order to retain some semblance of control on inflation and the credit conditions.

As Milton Friedman once quipped, there is no such thing as a free lunch. The cost of pursuing a weak rupee policy, amidst strong global pressures, is enormous. Successful pegging of the exchange rate will either entail the loss of monetary policy independence or the imposition of draconian capital controls. Neither of the outcomes is desirable or viable.

Instead of trying to have a currency policy, the RBI should be focusing on setting up a vibrant currency derivatives market that will mitigate some of the distress caused by a free-float exchange rate regime.

2007-12-30T04:46:00.001-08:00

SS Tarapore leaves me nonplussed

I recently read a piece by SS Tarapore in IIMA's management journal - Vikalpa (Issue - Apr/Jun 2007) titled - "Impact of Monetary Policy on Bank's Growth Path"
The title is a misnomer of sorts since a substantial part of the article is dedicated to an examination of the recent rupee appreciation and RBI's handling of the same.
Below, I will point out whatever seemed downright incorrect to me in the article.

Tarapore:

It is still not clear as to what extent the Indian economy has integrated with the world economy

I see no reason why this shouldn't be clear. As of 2007, gross capital flows amount to a staggering 45% of the GDP. Gross two way flows on both the capital and current account exceed 110% of the GDP!

Tarapore :

Persistent capital inflows into the country could result in an unrestrained monetary expansion and a REER appreciation which in turn is likely to end up in a crisis

How on earth can capital inflows increase the stock of money in the economy? Ironically, it is RBI's attempts to defend the dollar in the wake of capital inflows which is contributing to monetary expansion and not the capital flows per-se.

Also, the comment on REER appreciation is unfounded. The REER is a function of both the nominal rate and the rate of inflation in the economy. If the nominal rupee appreciation can help moderate prices, the REER shouldn't change by much. And it hasn't. Check out this piece by Swami Iyer for more on this.

Tarapore:

Now suppose that the RBI does not intervene in the forex market. There would be an unbridled monetary expansion and...an appreciation of the REER

Now, this borders on the preposterous. RBI's vain attempts to defend the dollar and its largely ineffective sterilization attempts are to be blamed for the price acceleration India witnessed in March this year. It seems like Tarapore is inhabiting a different planet.

Tarapore:

A real appreciation of the rupee is clearly against fundamentals and is clearly unsustainable as it would imply an over-valuation of the exchange rate.

What does he exactly mean by "fundamentals"? How does one arbitrate on whether a certain rate is overvalued or not? The comment reminds me of the fatal conceit that Hayek once wrote about. The very idea that a handful of "wise" central bankers can figure out the appropriate value of an asset which is traded by millions of market participants smacks of an arrogant condescension towards the market and an exaggeration of a central bank's abilities.

To my mind, the article has far too many open-ended unsubstantiated statements that one would not expect in an academic journal, albeit one published by a Bschool. Please do point out if I've got it wrong anywhere.

2007-12-11T01:32:00.000-08:00

Equity Research vs Wisdom of the Crowds

This is an arbit post. Not much thought has gone into it. So please feel free to correct me.
What is the true 'value' of a good/asset? Whatever the buyer is willing to pay for it in my opinion.
Equity analysts disagree. They claim that certain people (read analysts) are better equipped to estimate an asset's 'true' value than the riff-raff crowd.

Isn't that very similar to the argument put forth by socialist command-and-control freaks about half a century ago? The Nehruvian conviction that a handful of wise men at New Delhi are better placed to allocate resources and dictate the destiny of the economy is not very different from the condescending attitude of equity researchers, especially the ones who rely on so-called 'fundamental analysis'.

In both cases, there is a blind faith in the discretionary wisdom of a handful of technocrats as opposed to the wisdom of the crowd (read market).

2007-12-11T00:34:00.000-08:00

Why do mediocre novels make great movies?

I've never been a big fan of moving pictures (better known as movies) all my life. However, this changed in term 5 thanks to a not-so-curious mix of boredom, lack of academic rigour and peer-to-peer networking software.

I stumbled upon one of the less well known Hitchcocks - Dial M for Murder, halfway through the term. It was probably the best thing I did in the term. Over the next couple of months, my movie education progressed very well! I watched close to thirty movies, most of them filmed sometime between the mid 30s and the mid 60s.

A few observations -

- The older Hollywood movies are far richer on dialogue compared to the more recent ones, but score low on cinematography. Expletives are conspicuous by their absence :)
In contrast to the present day Hollywood pictures that look better than they sound, the older movies sound better than they look.

- Most of the movies, including the really good ones that feature in the IMDB Top 250/AFI Top100, are adaptations of novels and short-stories. Interestingly, most of these novels/stories themselves are often very ordinary and fall under the category of 'Pulp Fiction'. However, the movie adaptations of the same are outstanding and have become all-time favourites!

Take for instance films like Rear Window, It's a Wonderful Life, One Flew over the Cuckoo's Nest or even Double Indemnity. All of them are based on novels/novellas that are nowhere near as acclaimed as the movies!

In contrast, attempts to adapt truly popular novels to the visual medium have failed more often than not. Has anyone succeeded in making a great movie out of any of Dickens' novels or for that matter even the popular books of an Agatha Christie or a PG Wodehouse? No.

Ofcourse, there are a few exceptions like Gone with the Wind/Godfather. But those are exceptions and not the rule.

2007-09-20T20:52:00.000-07:00

Uncommon Sense

An out of the box solution to the Sethusamudram deadlock

2007-08-29T03:58:00.000-07:00

Responding to Incentives

Greg Mankiw talks about how American Universities respond positively to incentives, just like anybody else -

Looking at the new rankings reminded me of a conversation I had with a teacher at a mid-ranked university a few years. He explained to me that all classes of introductory econ at his school were, without exception, capped at 49 students. Why such an odd number?, I asked. He explained that the US News ranking penalizes schools based on the percentage of classes with 50 or more students. Deans, like all people, respond to incentives.

Perhaps there's a lesson out there for Indian Business schools especially the younger IIMs.
It is a widely held view that LIK (IIMs Lucknow, Indore and Kozhikode for the uninitiated) often get a raw deal in the Business school rankings. The indignation is perhaps justified. But I'm not sure whether smugly not participating in surveys is the right way to go. Haven't given much thought to this. Do post your views :)

2007-07-26T05:30:00.000-07:00

Drishtikon

The word literally translates to 'view' (drishti), 'point' (kon)

The metaphorical meaning is 'viewpoint' as well!!

huh. It is interesting how disparate languages in different continents bear such striking similarities, i.e employing the same metaphor to convey a certain meaning.

2007-06-13T09:09:00.000-07:00

Defending Vegetarianism
I'm a lacto vegetarian. Primarily because I was born into a family with vegetarian eating habits. The fact that I wear leather shoes and sport woolen trousers without a trace of compunction goes to show that my ethical code in these matters is not without hypocritical exceptions.

Greg Mankiw, in his blog, cites the strongest defence of herbivore eating habits that I've come across thus far.

Aliens from another planet, with vastly superior intelligence to humans, land on earth in order to consume humans as food. What argument could you make to convince the aliens not to eat us that would not also apply to our consumption of
beef?

Strong stuff.
Suppose for the sake of argument that our utility to these intelligent aliens as food is greater than our utility to them in our productive capacity. In which case, it would be perfectly rational for the aliens to kill and consume humans! Chilling thought.

Alternatively, the same argument can also be used in defence of VS Naipaul's opening line in the Bend in the River

The world is what it is; men who are nothing, who allow themselves to become nothing, have no place in it.

2007-06-13T08:22:00.000-07:00

Puritan America

Citizens of Virginia can expect a 27 month sojourn in prison if they serve beer to callow sixteen year olds. Huh :|

Read more about it here

2007-04-02T21:04:00.000-07:00

Cricket's East-West Divide

A provocative take on Sunil Gavaskar's prejudices ;)

how much do "coloured" cricket societies do to keep the stereotypes alive? It is easy to admonish Australian aggression as overdone, but name the cricket journalist in India who has not written long essays bemoaning India's lack of Aussie-style steel. As Indian coach, Greg Chappell has been asked by a dozen interviewers as to how he plans to inculcate "Australian aggro" into the Indian team. To be fair to him, he has not taken the question seriously.
The fact that it is asked, however, does point to the obverse side of excessive sensitivity to racism - that it sometimes betrays an inferiority complex. That's another pitch, to be tackled another day.

Read the rest of it here