Beyond the physical infrastructure (mostly decent, at least in the popular colleges) and faculty (mostly pitiful, even in the popular colleges), the most valuable function a college provides is to bring bright, energetic young people together. The more popular a college, the more ambitious a crowd it attracts, resulting in the well-understood power law phenomenon. It is this social function that is the most valuable service provided by a college. The peer pressure can be intense: if the popular students in a cluster are aiming to go abroad to get an MS or take the entrace exams towards a coveted IIM MBA, most students emulate them. Colleges also do effective marketing using their placement records and the percentage of students who go on to MS or MBA programs, so the already present peer pressure gets further amplified. Often the MS aspirants aim to publish research papers in conferences and journals, which would help land them at a good university abroad for graduate study. Such students team up, and the result is often surprisingly good work. But the key thing to note is that most such work is self-initiatied and self-directed on the part of the students, and not the result of guidance provided by the faculty. As usual, exceptions may exist, but the vast majority of interesting student projects are self-directed, with the college at best providing encouragement and moral support, and at worst, actively putting up roadblocks in front of bright students – yes, that is known to happen often too.
So what is the placebo in this placebo effect? It is the social function of bringing bright young people together, and letting positive peer pressure do its magic. Bill Gates mentioned this when he donated the Gates Computer Science Building at Stanford University a few years ago. He said during the dedication ceremony something to the effect that a university like Stanford brings great young minds together, and if we he had not met great collaborators in his youth, Microsoft may never have been born.
Archive for July, 2009
Sridhar Vembu on ‘Placebo Effect’ in education
Michael Lewis on Liar’s Poker & end of Wall Street
I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.
Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.
source:The-End-of-Wall-Streets
Sridhar Vembu on building a software product company in India
product companies have another dimension that is usually not a big concern for services companies: marketing. In fact, marketing can be as important in the success of many products as the quality of R&D. The reason is that even the largest services companies do business with a fairly small number of global corporations (typically a few hundred) so that their sales teams can reach them easily. Product companies have to reach a much broader audience, so marketing is crucial. Yet, this is easy to overlook, particularly for people with an engineering background. I certainly have made my share of mistakes in this area, so I can speak from personal experience here.
One of the hardest things about marketing is that it is so hard to measure its effectiveness. Internet traffic is easy enough to measure, but how do you measure brand perception or market credibility, which can be very important in understanding whether a product is successful or not? This lack of measurability trips up a person coming from a typical services project management background, where precise measurability is the gospel.
Against regulations
“The root cause was regulatory arbitrage at the banks. Regulatory arbitrage describes actions someone takes in order to avoid the affects of some set of regulations that might apply to them if they ran their business differently. Rather than buying some asset in a jurisdiction where it is taxed, you have a subsidiary buy it, or you buy an option, or you buy a company that already owns it. If one kind of institution can’t engage in a certain practice that looks like it’ll make money, then people will invent a new kind of institution that’s subject to different regulators which isn’t so prohibited.
Part of my long riff on the crash has been that practically every financial institution that exists now is the result of regulatory arbitrage of some kind. Consumer banks accept deposits, but their activities are tightly regulated in order to qualify for deposit insurance, so commercial banks don’t take deposits from consumers. Credit Unions have a different set of restrictions on their activities. Savings and Loans were restricted in the interest they could charge on loans, so when they had to compete on the interest they paid on deposits, they took excessive risks leading to the S&L crisis. Commercial bank investments are regulated and limited, so there are investment banks. Those have their own regulations, so we saw the rise of hedge funds which didn’t have to report to anyone except their investors.
“The regulatory arbitrage at the root of this crisis was that the consumer banks were restricted in what assets they can hold and what assets they can sell. So the mortgage-backed securities (MBS) they were selling stripped out the lucrative part of the loan repayment income stream and sold that for cash they could use to make more loans, while they ended up keeping the riskiest part on their books. Most of them found tools that appeared to insure against the remaining risks, but those were systemically flawed–all the banks relied on the same few institutions, and their back-up plans would only have worked if problems were isolated. When the crunch came it was general, and so all the back-up plans failed together.”
“Bad solutions attempt to forbid certain kinds of actions or investments, since they provide an incentive to find a new kind of institution that can exploit the abandoned opportunity. It’s better, when we detect a kind of transaction that is destabilizing in one way or another to find a way to allow it that makes its impact and extent visible and provides incentives to moderate the impact. That’s not easy, and it’s probably not the direction that regulators and legislators will want to go, but forbidding lucrative practices doesn’t prevent them, it drives them underground and out of sight.”
Source: Financial crisis: Regulatory Arbitrage
Origin of ‘brackish macroeconomics’.
Keynes appreciated the classical model’s elegance and consistency, virtues economists still crave. But that did not stop him demolishing it. In his scheme, investment was governed by the animal spirits of entrepreneurs, facing an imponderable future. The same uncertainty gave savers a reason to hoard their wealth in liquid assets, like money, rather than committing it to new capital projects. This liquidity-preference, as Keynes called it, governed the price of financial securities and hence the rate of interest. If animal spirits flagged or liquidity-preference surged, the pace of investment would falter, with no obvious market force to restore it. Demand would fall short of supply, leaving willing workers on the shelf. It fell to governments to revive demand, by cutting interest rates if possible or by public works if necessary.
The Keynesian task of “demand management” outlived the Depression, becoming a routine duty of governments. They were aided by economic advisers, who built working models of the economy, quantifying the key relationships. For almost three decades after the second world war these advisers seemed to know what they were doing, guided by an apparent trade-off between inflation and unemployment. But their credibility did not survive the oil-price shocks of the 1970s. These condemned Western economies to “stagflation”, a baffling combination of unemployment and inflation, which the Keynesian consensus grasped poorly and failed to prevent.
The Federal Reserve, led by Paul Volcker, eventually defeated American inflation in the early 1980s, albeit at a grievous cost to employment. But victory did not restore the intellectual peace. Macroeconomists split into two camps, drawing opposite lessons from the episode.
The purists, known as “freshwater” economists because of the lakeside universities where they happened to congregate, blamed stagflation on restless central bankers trying to do too much. They started from the classical assumption that markets cleared, leaving no unsold goods or unemployed workers. Efforts by policymakers to smooth the economy’s natural ups and downs did more harm than good.
America’s coastal universities housed most of the other lot, “saltwater” pragmatists. To them, the double-digit unemployment that accompanied Mr Volcker’s assault on inflation was proof enough that markets could malfunction. Wages might fail to adjust, and prices might stick. This grit in the economic machine justified some meddling by policymakers.Mr Volcker’s recession bottomed out in 1982. Nothing like it was seen again until last year. In the intervening quarter-century of tranquillity, macroeconomics also recovered its composure. The opposing schools of thought converged. The freshwater economists accepted a saltier view of policymaking. Their opponents adopted a more freshwater style of modelmaking. You might call the new synthesis brackish macroeconomics.
source: The state of economics
Cheap in price, high on cost.
“At the core of her argument is the idea that the wealth of cheap goods available to us doesn’t make our lives better; instead, it fosters an environment that endangers not just the jobs of American workers but the idea of human labor, period.
It’s impossible to grapple with the global economy without addressing the tricky subject of China, and Shell does so with the right amount of clear-eyed empathy. She notes that China as a nation has grown wealthier while its poor have become poorer. According to figures released by the World Bank, between 2001 and 2003 the income of the poorest 10 percent of China’s 1.3 billion people had fallen by 2.4 percent, to less than $83 per year. In that same period, the country’s economy grew by 10 percent, and its richest people became 16 percent richer”
“IKEA is the third-largest consumer of wood in the world and uses timber that comes mostly from Eastern Europe and the Russian Far East, where, Shell points out, “wages are low, large wooded regions remote, and according to the World Bank, half of all logging is illegal.” IKEA president and CEO Anders Dahlvig asserts that the timber his company uses is harvested legally, and the company does employ forestry experts to monitor the company’s suppliers. But Shell points out that IKEA has only 11 forestry monitors, not nearly enough to keep a watchful eye on all those suppliers worldwide, and five of those specialists are devoted to China and Russia, a vast spread of territory by itself. Dahlvig says that hiring more inspectors would cost too much; he’d have to pass the cost on to the consumer.”
source: Salon book review
I think underline question is : Do we as consumer care why a product is cheap?
Wafa mein Aab yeah hunar Ikhtiyaar karna hai
Wafa mein Aab yeah hunar Ikhtiyaar karna hai..
Woh sach kahay na kahay aaitbaar karna hai..
Yeah tujh ko jaagtay rehnay ka shouq kab say howa
Mujhay tu khair taira intazaaar karna hai
Hawa ke zad mein jalanay hain ansoon kay chiraagh
Kabhi yeah jashan sar rah’guzaar karna hai
woh muskura kay naye waswasoon mein daal gaya
Khayaal tha eh ussay sharamsaar karna hai
Misaal e shaakh e barhana khizan ke rut mein kabhi
Khud apnay jisam ko bay barg o baar karna hai
tairay firaaq mein din kiss tarhaan kattain apnay
Keh shughal e shab tu sitaray shumaar karna hai
Chaloo yeah ashak hee moti samajh kay baich ayain
Kissi tarhaan tu humain rooz’gaar karna hai
Kabhi tu dil mein chupay zakham bhi numayaan hoon
Qaba samajh kay badan taar taar karna hai
Khda khabar yeah koi zid keh shouq hai mohsin
Khud Apni jaan kay dushman say payaar karna hai
-Mohsin Naqvi
Noam Chomsky on learning by doing
BARSAMIAN: Let’s talk about propaganda and indoctrination. As a teacher, how do you getpeople to think for themselves? Can you impart tools that will enable that?CHOMSKY: I think you learn by doing—I’m a Deweyite from way back. You learn by doing, andyou figure out how to do things by watching other people do them. That’s the way you learn to be agood carpenter, for example, and the way you learn to be a good physicist. Nobody can train youon how to do physics. You don’t teach methodology courses in the natural sciences. You may inthe social sciences. In any field that has significant intellectual content, you don’t teachmethodology. You just watch people doing it and participate with them in doing it. So a typical,say, graduate seminar in a science course would be people working together, not all that differentfrom an artisan picking up a craft and working with someone who’s supposedly good at it. I don’ttry to persuade people, at least not consciously. The way you do it is by trying to do it yourself, andin particular trying to show, although it’s not all that difficult, the chasm that separates standardversions of what goes on in the world from what the evidence and people’s inquiries will showthem. A common response that I get, even on things like chat networks, is, I can’t believe anythingyou’re saying. It’s totally in conflict with what I’ve learned and always believed and I don’t havetime to look up all those footnotes. How do I know what you’re saying is true? That’s a plausiblereaction. I tell people it’s the right reaction. You shouldn’t believe what I say is true. Nobody isgoing to pour truth into your brain. It’s something you have to find out for yourself.BARSAMIAN: Let’s talk about propaganda and indoctrination. As a teacher, how do you get people to think for themselves? Can you impart tools that will enable that?
CHOMSKY: I think you learn by doing—I’m a Deweyite from way back. You learn by doing, and you figure out how to do things by watching other people do them. That’s the way you learn to be a good carpenter, for example, and the way you learn to be a good physicist. Nobody can train you on how to do physics. You don’t teach methodology courses in the natural sciences. You may in the social sciences. In any field that has significant intellectual content, you don’t teach methodology. You just watch people doing it and participate with them in doing it. So a typical, say, graduate seminar in a science course would be people working together, not all that different from an artisan picking up a craft and working with someone who’s supposedly good at it. I don’t try to persuade people, at least not consciously. The way you do it is by trying to do it yourself, and in particular trying to show, although it’s not all that difficult, the chasm that separates standard versions of what goes on in the world from what the evidence and people’s inquiries will show them. A common response that I get, even on things like chat networks, is, I can’t believe anything you’re saying. It’s totally in conflict with what I’ve learned and always believed and I don’t have time to look up all those footnotes. How do I know what you’re saying is true? That’s a plausible reaction. I tell people it’s the right reaction. You shouldn’t believe what I say is true. Nobody is going to pour truth into your brain. It’s something you have to find out for yourself.
Source:Liberating the mind from orthodoxies
