Ten interesting things we read this week

Some of the most fascinating topics covered this week are: Decision-making (Common causes of very bad decisions), Science (Do we live in a simulation?), Technology (Hyderabad model of CCTV surveillance), Investing (Value investing is struggling to remain relevant), and Business (New status game for companies: Fewer Employees; Covid villain in the story of India's co-living industry)

Published: Nov 21, 2020 10:44:45 AM IST
Updated: Nov 21, 2020 10:46:01 AM IST

reading_20th nov_bgImage: Shutterstock

At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Decision-making (Common causes of very bad decisions), Science (Do we live in a simulation?), Technology (Hyderabad model of CCTV surveillance), Investing (Value investing is struggling to remain relevant), and Business (New status game for companies: Fewer Employees; Covid villain in the story of India's co-living industry).

Here are the ten most interesting pieces that we read this week, ended November 20, 2020:

1. Common causes of very bad decisions [Source: Collaborative Fund

Have you thought about why people keep making the same mistakes again and again? Italian psychologist Massimo Piattelli-Palmarini says it is because of “Inattention, distraction, lack of interest, poor preparation, genuine stupidity, timidity, braggadocio, emotional imbalance, ideological, racial, social or chauvinistic prejudices, and aggressive or prevaricatory instincts.” The author of this blog, Morgan Housel adds a few more reasons.

  1. Incentives can tempt good people to push the boundaries farther than they’d ever imagine. 2) Tribal instincts reduce the ability to challenge bad ideas because no one wants to get kicked out of the tribe. 3) Ignoring or underestimating the full range of potential consequences, especially tail events that seem rare but have catastrophic effects. 4) Lots of little errors compound into something huge. And the power compounding is never intuitive.

  2. An innocent denial of your own flaws, caused by the ability to justify your mistakes in your own head in a way you can’t do for others. 6) Underestimating the need for room for error, not just financially but mentally. 7) Underestimating adaptation, both present and future, leaving you convinced that history will repeat itself and bitter when it doesn’t. 8) An inability to know how you’ll respond to stress causes you to take risks you think you can handle but you’ll actually regret when they turn on you.

2. Smile because it happened [Source: https://buggyhuman.substack.com

March was a bad month for most of the businesses and individuals, and stock market as well. But, since then, the markets have regained momentum. Excluding a few outliers that were forbidden from functioning, such as multiplexes, malls and hotels, most reached between 80% and 120% of where they were a year back. Multiple metrics – revenues, collections, disbursements, orders, utilization – tell the same story. A meaningful part of the system functioned near normal, despite some lockdowns during this period. It’s a ridiculous achievement to run at near 100% while hurriedly adapting to disruptive changes across the board. Everything from busing to cafeteria to shopfloor moved to new normal.

There are pockets that are further away from normalcy: SMEs; a range of sectors from air travel to school buses; unorganized labour. The author of this article draws attention to how extraordinary recent turn of events are. Others can do justice to the negatives. Social world is messy due to feedback loops. It’s why brands are sticky, good businesses stay good and turnarounds are tough. If something’s on a roll or in a rut, it’s hard to find a starting point to break out of that cycle. For this reason, it’s sometimes good to collectively take in positive news without entering a new cycle of doubt. Feel fine, act normal, see many doing so, feel finer, repeat, reinforce.

In asking people to ‘go shopping’ in October 2001, Bush urged a return to normalcy so that terrorists don’t doubly hurt America. Indians have already heeded his wise advice, and agile businesses made sure that their trip was fruitful. Compared to abysmally low expectations just a few months back, we have what we refer to as a ‘big beat’. ‘Big beat’ is a euphemism for a disastrous forecast. So, why bother with a new cycle of embarrassing predictions? Don’t fret whether it’s over. Smile because it happened.

3. The psychology of happiness [Source: trendfollowing.com]

We all strive to be happy. But what is happiness? How do you define it? What do you need to be happy? Or what should you do to be happy? These all questions are answered in this old post by James Montier, a member of the asset allocation team at global investment management firm GMO, and his colleagues. They give top ten suggestions for improving happiness. 1) Don’t equate happiness with money. People adapt to income shifts relatively quickly, the long lasting benefits are essentially zero.

  1. Exercise regularly. Taking regular exercise generates further energy, and stimulates the mind and the body. 3) Have sex (preferably with someone you love). Sex is consistently rated as amongst the highest generators of happiness. 4) Devote time and effort to close relationships. Close relationships require work and effort, but pay vast rewards in terms of happiness. 5) Pause for reflection, meditate on the good things in life. Simple reflection on the good aspects of life helps prevent hedonic adaptation.

  2. Seek work that engages your skills, look to enjoy your job. It makes sense to do something you enjoy. This in turn is likely to allow you to flourish at your job, creating a pleasant feedback loop. 7) Give your body the sleep it needs. Of course, we all need sleep to relax our mind and body, and recharge ourselves. 8) Don’t pursue happiness for its own sake, enjoy the moment. Faulty perceptions of what makes you happy, may lead to the wrong pursuits. Additionally, activities may become a means to an end, rather than something to be enjoyed, defeating the purpose in the first place. 9) Take control of your life, set yourself achievable goals. 10) Remember to follow all the rules.

4. 20 things I wish someone told me the day I started my career as an analyst on Wall Street [Source: Jefferies.com

Many a times you might come across or you might have already come across people who said I wish I had known this when I was younger. And that’s the question that Richard Handler, CEO of Jefferies Financial Group, answers in this blog. So what were the things that he wished that he knew? He writes…I wish… 1) …I made a stronger effort to develop relationships with the junior folks of every client I dealt with. So many of those junior people are today’s amazing leaders in various industries and even in society at large. When you take the time to truly develop a relationship with someone who is also at the age of fighting to become relevant, that bond can become a foundation that can last a lifetime.

  1. …I also took the time to learn what my peers were working on. Obviously, there wasn’t enough time in the day to become expert in everything, but by picking your head up and forcing yourself to be aware of as many aspects of our industry, products, geographies, and industry verticals, you will have a much better chance of pro-actively determining your best career path. 3) …I fully realized how wrong “group think” or following the general consensus truly is. Decisions about what firms, industries, products, groups, geographies, MDs, VPs, Associates, Graduate Schools or clients are the "hot" ones you desperately want to position yourself towards are usually wrong if you are just basing your decision on what “everyone thinks.” Do your own work and then make the decision for yourself.

  2. …someone told me that while all of the pressure induced by peers, seniors and myself were real, if I don't also find time for some degree of balance for personal health, family and relationships I will burn out and be of no use to my co-workers, my company, myself or anyone. 5) …someone told me (and I had the self-confidence at the time) to politely tell people who were taking advantage of me and showing zero respect that it was not acceptable and I wouldn't put up with it. 6) …I took more time to get to know more of my co-workers out of the office. 7) …I took more vacations and completely detached. There are more…. If you wish to excel in life, these pearls of wisdom can surely help you.

5. Do we live in a simulation? Chances are about 50–50 [Source: Scientific American

Movies like Matrix make us think whether we are living in someone else’s computer. Some have tried to identify ways in which we can discern if we are simulated beings. Others have attempted to calculate the chance of us being virtual entities. Now a new analysis shows that the odds that we are living in base reality—meaning an existence that is not simulated—are pretty much even. But the study also demonstrates that if humans were to ever develop the ability to simulate conscious beings, the chances would overwhelmingly tilt in favor of us, too, being virtual denizens inside someone else’s computer.

In 2003 Bostrom imagined a technologically adept civilization that possesses immense computing power and needs a fraction of that power to simulate new realities with conscious beings in them. Given this scenario, his simulation argument showed that at least one proposition in the following trilemma must be true: First, humans almost always go extinct before reaching the simulation-savvy stage. Second, even if humans make it to that stage, they are unlikely to be interested in simulating their own ancestral past. And third, the probability that we are living in a simulation is close to one.

Elon Musk gave further fuel to the concept that our reality is a simulation: “The odds that we are in base reality is one in billions,” he said at a 2016 conference. “Musk is right if you assume [propositions] one and two of the trilemma are false,” says astronomer David Kipping of Columbia University. “How can you assume that?” Kipping, despite his own study, worries that further work on the simulation hypothesis is on thin ice. “It’s arguably not testable as to whether we live in a simulation or not,” he says. “If it’s not falsifiable, then how can you claim it’s really science?”

6. The Hyderabad model of CCTV surveillance [Source: Livemint

Hyderabad was recently named as the city with the most number of CCTV cameras in India, and the 16th most surveilled city in the world, according to a July 2020 report by UK-based tech firm Comparitech. Over 10 million inhabitants of Hyderabad are being constantly watched through new web of cameras. The city police recently announced that the number of CCTVs in Hyderabad will be doubled to 1 million by the end of 2020, averaging out to one camera for every 10 citizens. “A lot of data is being generated through the feeds of the CCTV cameras which can be made useful using AI," says Jayesh Ranjan, IT Secretary of Telangana. “Images are matched with offenders and criminals through the master server. There is exceptional monitoring. Through facial recognition, a match is made."

In May, as the Covid-19 pandemic was raging, Hyderabad city police started repurposing their CCTV cameras to track people who weren’t wearing face masks in a public place using AI and then slap a fine on them. Five months later, in September, the northern city of Agra announced that they will be updating the 635 smart cameras in order to spot citizens without face masks and immediately write up a ticket. These smart cameras are connected with the city’s integrated command and control centre. Apart from Hyderabad, some of the other cities that have implemented wide-scale CCTV deployment are New Delhi, Mumbai, Bengaluru, Surat, Visakhapatnam, Nagpur, Jaipur and Gurugram.

The police department in Hyderabad claims that using technology for policing has led to a drop in the crime rate and has also helped in tracing missing children. Just recently, Telangana home minister Mohammed Mahmood Ali said that crime in Telangana is low when compared to other states, attributing this difference primarily to technology. “Video surveillance helps the state and the police know more about people. It helps facilitate their job by watching our movement," says Divij Joshi, a fellow at Mozilla. “But does it actually help reduce crime? That can’t definitively be attributed to just CCTVs because there are way too many factors involved."

7. Value investing is struggling to remain relevant [Source: The Economist

Value investing is a term coined by Benjamin Graham, the father of “value” investing, and popularised by Warren Buffett. For this school, value means a low price relative to recent profits or the accounting (“book”) value of assets. As the industrial age gives way to the digital age, the intrinsic worth of businesses is not well captured by old-style valuation methods, according to a recent essay by Michael Mauboussin and Dan Callahan of Morgan Stanley Investment Management.

In Graham’s day the backbone of the economy was tangible capital. But things have changed. What makes companies distinctive, and therefore valuable, is not primarily their ownership of physical assets. In service-led economies the value of a business is increasingly in intangibles—assets you cannot touch, see or count easily. There are three important aspects to consider with respect to intangibles, says Mr. Mauboussin: their measurement, their characteristics, and their implications for the way companies are valued. Properly understood, the idea of fundamental value has not changed. Graham’s key insight was that price will sometimes fall below intrinsic value (in which case, buy) and sometimes will rise above it (in which case, sell).

In an economy mostly made up of tangible assets you could perhaps rely on a growth stock that had got ahead of itself to be pulled back to earth, and a value stock that got left behind to eventually catch up. Reversion to the mean was the order of the day. But in a world of increasing returns to scale, a firm that rises quickly will often keep on rising. The appeal of old-style value investing is that it is tethered to something concrete. In contrast, forward-looking valuations are by their nature more speculative. Bubbles are perhaps unavoidable; some people will extrapolate too far. Nevertheless, were Ben Graham alive today he would probably be revising his thinking. No one, least of all the father of value investing, said stockpicking was easy.

8. The Ant saga should teach Western investors a Chinese lesson [Source: thearticle.com

Everybody knows about China’s aim to dominate the world in each and every way that can be possible. The recent pulling back of what was to be the world’s biggest initial public offering (IPO), of $37 billion of shares in his spun-off Ant Group in Shanghai and Hong Kong with 48 hours’ notice, is just another example. The Ant IPO on the STAR market, China’s NASDAQ equivalent, was oversubscribed by factor of about 800, and, had it gone ahead, would have given Jack Ma, China’s capital markets and China itself a lot to crow about at a time when China is keen to exploit the West’s pandemic and economic plight, and America’s political divisions and distractions.

The most immediate cause of the falling out between Ma and the authorities lies in the regulatory area. Ant straddles two of the most scrutinised sectors in business nowadays, finance and technology. The finance industry in China and elsewhere is developing so called “fintech” at a rapid pace, presenting central banks and regulators all over the world with new and sometimes daunting problems, especially as digital currencies and payments systems are developing. To try and keep Ant’s surging fintech presence under control, the regulatory authorities introduced new rules at the start of the month which would have made Ant keep more of its credit on its own books, and importantly, therefore, hold more regulatory capital. This would have treated Ant more like a bank, and crimped profitability and growth.

The Ant saga looks like a bog-standard row between a financial entrepreneur and the regulators, but it goes further, embracing the contradiction between financial innovation on the one hand, and control on the other. The Chinese government doesn’t want people like Ma to get too big or important: the integrity of the state banking system and rigid control over finance are, in the end, sacrosanct. New initiatives have been launched to recruit private entrepreneurs into the Communist Party’s “united front” of allies, essentially meaning that if they toe the line and support the party’s objectives, they will receive favours and privileges. The Ant saga has damaged China’s fragile capital market reputation and underscored why China will never have a truly global currency, let alone anything to rival the euro or US dollar. Pulling the Ant IPO should make investors and financial firms more wary than they have been about Chinese politics.

9. The new status game for companies: Fewer Employees [Source: summation.net]

Historically, companies would brag about the number of employees they have. But this is changing. There is a new status game brewing between companies concerning who has the fewest number of employees, centered around who is engineering greater amounts output with less staff. In the future, those who achieve the greatest results with the least number of employees will be admired above all others; the key statistic to look at is the go-forward net revenues per employee because it best encompasses the company’s leverage.

Every good CEO should be spending time trying to increase their employees’ productivity, which is the strongest form of leverage the company retains. So what should the companies do? Outsourcing non-essential tasks is the key. If you start stripping out everything that is not unique to your company, you’re left with just a few people who make the unique parts of the company. And then add a few people who need to explain its unique benefits to the market. Imagine your 100 person company going to 6 people. Imagine your 1000 person company going to 20. How much faster could you move?

So basically, companies should be spending time on what makes them unique. Companies with higher revenue per employees are more productive because their workforce is doing more with less. Companies in the past made do with thousands of employees because they needed to. Today, vendors help alleviate this problem. Every employee should think of themselves as a capital allocator because in a nutshell, all of our jobs are to allocate the company’s capital (physical and financial) for the highest return possible. Time is the one thing you cannot buy more of; therefore, we have to spend it wisely and on the highest ROI activities. The ideal goal is that everything else is outsourced.

10. The Covid villain in the story of India's co-living industry [Source: The Ken]

A January 2020 report by research firm Cushman & Wakefield put the size of the co-living market across the top 30 cities in India at $6.6 billion. This is expected to grow to $13.9 billion by 2025. Co-living companies found an edge over their unorganised paying guest (PG) counterparts due to their focus on streamlined services. They offer perks such as fully-furnished rooms, security in the form of CCTVs and fingerprint locks, common space designed for students and working professionals, regular housekeeping, and more.

But, Covid brought the travel and tourism industry to its knees. Even the co-living industry was hit the most as most people got back to their homes. Co-living companies saw which way the wind was blowing, however, and began cutting costs. If it was a discretionary expense, it was gone. Employees were let go, staff salaries reduced, even WiFi speeds were brought down. New Delhi-based student housing startup YourSpace says it had to slash its total monthly costs by 50%. The 2016 company currently has 40-plus properties in its portfolio across the 10 cities it was in. Occupancy levels are still only slowly climbing back up, but Covid has shown companies what to look for, especially with regards to long-term planning.

The pandemic has forced Zolostays, for instance, to track the work-from-home decisions of major companies across cities to predict demand. Companies have also been forced to change strategy. With colleges unlikely to open any time soon, student-housing startups have begun to woo working professionals. Yourspace’s popular properties in Noida’s Sector 62, Delhi’s Kailash Colony, Mumbai’s Vile Parle have all seen increased traction due to the offices nearby, despite the company primarily catering to students. The government is still working on plans to allow schools and colleges to reopen; large companies have already decided that coming back to offices before mid-2021 is out of the question. Until then, co-living companies will have to keep tinkering as they wait for a turnaround.

Click here to see Forbes India's comprehensive coverage on the Covid-19 situation and its impact on life, business and the economy‚Äč

Show More
Post Your Comment
Required
Required, will not be published
All comments are moderated
Photo of the Day: Lockdown eases in Australia
Cinema pods to become a reality soon, India a key market