Most people (who are likely to read this post) think of their financial station as middle class, so you might find it strange that I should say the middle class is disappearing. But the polarization in the wealth distribution of the world is very real, and it is visible at every strata of the society. I would like to convince you by anecdotes and examples before getting logical and formal about it.
Marshall Brain, as you may know, is the founder of HowStuffWorks.com and a well known speaker, teacher, writer etc. Although he wrote Manna as fiction, he was so certain that it was the way of our future that he actually patented the system he described (if memory serves). Of course, he was right. I just got this link from a friend about how fulfillment centers work — how do you get the same-day or next day delivery on all those mountains of things that you order from the Internet? Here is how. It is astonishing how similar this scenario is to what Marshall Brain described in Manna.
As you may have noticed, I haven’t been writing much in the last couple of months. It was because of one of my regularly scheduled writer’s blocks. When I’m blocked, I usually find other things to do, and convince myself that they are really important and urgent. One such thing this time around was a revamping of my blog backend. The original design was dated, and it really needed an upgrade. Or so I told myself and worked on it for a few weeks. If you are reading this post, you can see the fruits of my labor. And I hope you like it.
Once upon a time in India, there were three parrots. They were for sale. A prospective buyer was interested.
“How much is that parrot?” asked he, pointing to the first one.
“That’s pretty steep. What’s so special about it?”
“Well, it can speak Hindi.”
The prospective buyer was impressed, but wanted a better deal. So he probed, “How much for the second one?”
My primary degree is in engineering of the electric/electronics variety, which is why I can fix LED lights, for instance. I suspect an engineering degree gives you more of a theoretical understanding rather than practical knowledge. I mean, I’m no electrician. At times, I take on projects where I may have been better advised to call an electrician.
Recently, our maid’s instant water heater died, and some action on my part was indicated. Though an engineer, I have been in the corporate scene long enough to know that the right response to any action item during a meeting is, “May be by next Tuesday.” So I asked the maid to use my mother-in-law’s bathroom, thinking that I could postpone this issue to one of the future Tuesdays. But the maid, probably bound by some sacred ethical covenants of her profession, refused to do that. At that point, I should have called the electrician. But I foolishly decided to take a look at the prima facie evidence. The switch looked fine, with its indicator light coming on as expected, but the water heater remained intransigent.
When it comes to business development, branding etc., you have to look for discontinuities, think outside the box, and not be constrained by conventionality, geometry, optics etc.
Draw seven perpendicular red lines using transparent green ink. Using non-linear thinking process.
Everybody wants to be young forever. Of course, nobody is going to be succeed in that quest. You will get old. The next best thing you can hope for is to look young. If you have enough money, tricks like facelifts, BOTOX, tummy tucks, hair implants etc may help. Those on a budget will have to content themselves with delaying tactics like hair dyes and gym memberships in their battle against the ravages of time. This is not too bad; I’m in this category and I think I have managed to stave off about five years.
A few years ago, I had significant income from online advertising because of my networked business model that worked extremely well at that time. At one point the ad serving company decided to cancel my account because some sites in my network violated their terms and conditions. They told me that they couldn’t pay me for the last two months because they had already refunded the money to the advertisers who were outraged at my T & C violations. Mind you, it was a small fortune. But a couple of months later, they decided to reinstate me. The first thing they did after reactivating my account was to pay me my outstanding balance — the money they had “refunded” to their disgruntled advertisers. I, of course, was quite gruntled about the outcome. But the joy didn’t last; they banned me again a month later.
Long time ago, I had a run-in with an insurance company. It was after my first trip back home from the US. During my four years in the sanitized and relatively virus-free conditions of upstate New York, my natural third-world immunity had deteriorated significantly, and I came back from India with a bad respiratory infection, which had stopped responding to the antibiotics my doctor uncle had prescribed me. So I went to the emergency room at the Tompkins County Hospital in Ithaca, where they determined that I had pneumonia. The medical bill came up to over $450, and had multiple parts to it, like the X-Ray, radiologist’s fees, physician’s fees, ER fee, pharmacy etc. For payment, I handed them my student insurance card and went home.
A couple of weeks later, the hospital called me to tell me that the insurance had refused to pay one out of the many bills and that I still owed them about $80. I found it weird and ask them to try again, and went back to my PhD and whatnot. Then the insurance company told me that they were refusing because the procedure was not “pre-approved.” Weirder — how could one part of the same ER visit have different reimbursement criteria? Anyway, I proceeded to ignore the bill, which soon got handed over to some collection agency who started making harassing calls to me.
The whole thing went on for a few months before I decided enough was enough. Luckily, my university had a free legal service. So I went and met Mike Matterson (or some such name) at the legal office. He listened to my plight sympathetically, and advised me that it was pointless fighting some small battles in which you would lose even if you won. But he called the insurance company and proceeded thus, “Hello, this is Mike Matterson, attorney at law, calling on behalf of Manoj Thulasidas. I would like to make a few enquiries.” True, he had to rehearse my name a few times, but he made the whole opening salvo sound impressive. At least, I was impressed with this courtroom drama unfolding before my very eyes. But nothing really happened and I went back to my Danby Road apartment determined to stretch the payment a few more weeks if possible.
But four days later, I get this letter from the insurance company stating that they had decided to pay the bill in full — pre-approved or not. I realized that a call from a lawyer meant something to the company. It meant trouble, and they didn’t want to fight a small battle either. I wondered if this was a standard practice on their part — refusing a legitimate reimbursement if the amount is too small for the policy holder to wage a legal war.
Another incident taught me that it might well be. A family friend of ours passed away a few years ago. His widow knew that he, being the prudent and caring soul he was, had some life insurance policies, but could not find the papers. So she called the two major insurance companies here and made inquiries using his national identification number. Both companies expressed their condolences to the widow, but regretted that the late husband had no policy with them. Never heard of him, in fact. A few days later, while going through his papers, she found the policies with the same two companies. She called again, and the reply was, “Oh yeah, of course. Sorry, it was an oversight.” If it was just one company, it might have been an oversight. Is it again part of the corporate policy to discourage policy payouts if at all possible? Uninsured until proven otherwise?
If you have had similar experiences with insurance companies, why not leave your story as a comment below?
We started this long series with a pitch for my book, Principles of Quantitative Development. This series, and the associated eBook, is an expanded version of the non-technical introductory chapters of the book — what are the things we need to keep in mind while designing a trading platform? Why is it important to know the big picture of finance and banking? Hopefully, these posts have given you a taste of it here. If you would keep a copy of the series handy, you can purchase and download the beautifully crafted eBook version.
We went through the structure of the bank from the exotic and structured trading perspective. We talked about the various offices (Front Office, Middle Office and Back Office) and pointed out the career opportunities for quantitative professionals within. The organizational structure of the bank is the apparatus that processes the dynamic lifecycle of trades.
If the structure of the bank is akin to the spatial organization, the lifecycle of the trade is the temporal variation; their relation is like that of the rails and the trains. We spent quite a bit of time on the flow of the trades between the front office and middle office teams, how the trades get approved, processed, monitored, settled and managed. Each of these teams has their own perspective or work paradigm that helps them carry out their tasks efficiently.
Trade Perspectives was the last major topic we touched upon. As we saw, these perspectives are based on the way the various teams of the bank perform their tasks. They form the backdrop of the jargon, and are important if we are to develop a big-picture understanding of the way a bank works. Most quants, especially at junior levels, despise the big picture. They think of it as a distraction from their real work of marrying stochastic calculus to C++. But to a trader, the best model in the world is worthless unless it can be deployed. When we change our narrow, albeit effective, focus on the work at hand to an understanding of our role and value in the organization, we will see the possible points of failure of the systems and processes as well as the opportunities to make a difference. We will then be better placed to take our careers to its full potential.