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Ten interesting things that we read this week

Some of the most interesting topics covered in this week's iteration are related to 'the principle of compound time', 'Uber as an outlier of game theory' and 'Mexico's dual economy'

Published: Aug 26, 2017 09:24:42 AM IST
Updated: Aug 26, 2017 09:23:28 AM IST

Ten interesting things that we read this week(Image: 

At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, including investment analysis, psychology, science, technology,philosophy, etc. We have been sharing our favourite reads with clients under our weekly ‘Ten Interesting Things’ product. Some of the most interesting topics covered in this week’s iteration are related to ‘the principle of compound time’, ‘Uber as an outlier of game theory’ and ‘Mexico’s dual economy’.

Here are the ten most interesting pieces that we read this week, ended August 24, 2017.

1) Why successful people spend 10 hours a week on "compound time" [Source:]
Despite having way more responsibility than anyone else, top performers in the business world often find time to step away from their urgent work, slow down, and invest in activities that have a long-term payoff via greater knowledge, creativity and energy. As a result, they may achieve less in a day at first, but drastically more over the course of their lives. This phenomenon is termed as compound time, because like compound interest, a small investment now yields surprisingly large returns over time. Ben Franklin once wisely said: “An investment in knowledge pays the best interest.” To build your own intellectual capital, there are six compound time activities that you can start incorporating into your life.

2) Ajay, Atul and Rajesh Gupta, South Africa's power brokers [Source: Financial Times]
Businessmen Ajay, Atul and Rajesh Gupta came to South Africa in the 1990s just as the country was emerging from apartheid. From small beginnings — they started with a shoe shop, then a computer business — the brothers built a mighty mining-to-media empire. Whilst it is easy to characterise their ascent as symptomatic of the new age of majority rule in Africa’s most sophisticated economy, the very private Guptas are now widely seen as masters of a “shadow state” and the symbols of the flaws in the transition from apartheid to a democracy struggling with racialised economic inequality. At the heart of the criticism of the brothers is their strong links to the political elite, in particular to President Jacob Zuma, with whom they have close ties since before he became president in 2009 and, more recently, with his son Duduzane. Through Mr. Zuma’s appointments, the family has allegedly positioned ministers and officials to bring in policies that favour their business. (Indians in India are obviously very familiar with this template for amassing great power and riches.)

3) How China's central bank is clamping down on the mobile payment industry [Source:]
With mobile payments, 40% of China’s population gets around carrying less than 100 RMB cash ($15). Unlike in the USA, where bank-issued credit cards are behind most cashless transactions, mobile payment services in China are dominated by Internet behemoths, like Tencent and Alibaba-backed Ant Financial, taking respectively 40% and 54% of the third-party mobile payment market. The transaction volume of non-banking payments grew to almost RMB 100 trillion ($15 trillion) in 2016, increasing 2x from 2015. The number of third-party mobile payment users increased to 469 million in 2016, which is about 70% of China’s mobile user base. The staggering rise warrants greater regulatory oversight.

4) Baillie Gifford plans to use AI to improve fund performance [Source: Financial Times]
Baillie Gifford – the 109-year-old Scottish asset manager - is exploring how to use artificial intelligence to improve the performance of its funds thus becoming one of the first traditional investment companies to push into an area traditionally dominated by hedge funds. The firm embarked on its AI mission six months ago, following the footsteps of big hedge fund companies, such as Man Group and Winton Capital, which have used machine-learning techniques for years. Baillie Gifford has hired a former mathematician to assist with the project, and has four internal staff from its IT and investment teams focused on the initiative. The goal is to assess whether AI can eliminate mundane tasks that take fund managers’ time, enabling them to investigate a wider range of potentially market-beating investment ideas.

5) Fund managers deny that AI threatens jobs [Source: Financial Times]
Fund management companies fiercely deny that their growing use of machine-learning techniques, which help portfolio managers spot patterns in vast streams of data, will trigger a dramatic fall in headcount. A senior executive at a large hedge fund says that fears that widespread adoption of AI could result in mass redundancies for high-earning portfolio managers are misplaced. He said while AI removes some work, it creates different work. It is about understanding what machines are better at. There are certain jobs that have been automated over the past 10 years but it’s unlikely the whole of finance will be automated away.

6) How you define the problem determines whether you solve it [Source: HBR]
Typical stories of creativity and invention focus on finding novel ways to solve problems. James Dyson found a way to adapt the industrial cyclone to eliminate the bag in a vacuum cleaner. Pablo Picasso and Georges Braque developed cubism, a technique for including several views of a scene in the same painting. The desktop operating system developed at Xerox PARC replaced computer commands with a spatial user interface. These brief descriptions of these innovations all focus primarily on the novel solution. The problem they solve seems obvious. But framing innovations in this way makes creativity seem like a mystery. How could so many people have missed the solution to the problem for so long? And how in the world did the first person come up with that solution at all? The fact is that most people who come up with creative solutions to problems rely on a relatively straightforward method: finding a solution inside the collective memory of the people working on the problem. That is, someone working to solve the problem knows something that will help them find a solution — they just haven’t realised yet that they know it.

7) The multiplex appeal of Christopher Nolan [Source: Financial Times]
In the movie “Memento” (remade in Bollywood as “Ghajini”), a man with amnesia tries to track down his wife’s killers, but forgets vital information every few minutes. By way of record, he resorts to tattoos and Polaroids. The film switches narrative direction throughout. Black-and-white scenes tell the chronological story. Colour shows the reverse. The film is complex. It impressed critics and turned a profit, putting its Anglo-American maker, Christopher Nolan, in the classic dilemma of the successful artist: hone his art or make crude blockbusters for the big studios. The reason we now have “Dunkirk”, but also “Inception”, “The Prestige” and the Dark Knight trilogy, is Nolan’s rejection of that choice. Instead, he deepened his interest in the largest themes — time, ethics, science — without forfeiting the largest audiences.

8) The Uber Dilemma [Source: Stratechery]
By far the most well-known “game” in game theory is the Prisoners’ Dilemma. What makes the Prisoners’ Dilemma so fascinating is that the result of both prisoners behaving rationally — that is betraying the other, which always leads to a better outcome for the individual — is a worse outcome overall. What, though, if you played the game multiple times in a row, with full memory of what had occurred previously? To test what would happen, Robert Axelrod set up a tournament and invited fourteen game theorists to submit computer programs with the algorithm of their choice. The winning program started with a cooperative choice, and thereafter did what the other player did on the previous move. Analysis of the results showed that one single property – that of being nice, (which is to say never being the first to defect) distinguished high-scoring entries from low-scoring entries. This is the exact opposite outcome of a single-shot Prisoners’ Dilemma, where the rational strategy is to be mean. When you’re playing for the long run it is better to be nice — you will make up any short-term losses with long-term gains.

9) The problem of two Mexicos [Source: Livemint]
Few economies pose as big a paradox as Mexico’s. Emerging from a series of macroeconomic crises in the mid-1990s, Mexico undertook bold reforms that should have put it on track for rapid economic growth. In many ways, the reforms did pay off. Macroeconomic stability was achieved, domestic investment rose by two percentage points of gross domestic product (GDP), and average educational attainment increased by nearly three years. Perhaps the most visible gains were on the external front. Exports jumped from 5% to 30% of GDP, and the GDP share of inward FDI tripled. But where it counts—in overall productivity and economic growth—the story is one of substantial disappointment. Since 1996, per capita economic growth has averaged well below 1.5%, and the total factor productivity has stagnated or declined. So what exactly happened?

10) If you're so smart, why aren’t you rich [Source: Bloomberg]
Contrary to the popular perception, the data suggest that IQ has a much smaller influence on incomes than what is expected: about 1 or 2 percent (vs expectations of 25-50%). So, if IQ is only a minor factor in success, what is it that separates the low earners from the high ones? Science doesn’t have a definitive answer, although luck certainly plays a role. But another key factor is personality, according to a paper, economist James Heckman co-authored in the Proceedings of the National Academy of Sciences last month. He found that financial success was correlated with conscientiousness, a personality trait marked by diligence, perseverance and self-discipline.

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

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