Sharks and Stocks: The Modern Portfolio Theory
100 million sharks each year are killed for their fins, as bycatch and a bunch of other silly reasons…but
The odds of being killed by drowning in your bathtub are 1 in 840,000
The odds of being killed by an asteroid are 1 in 1.9 million… and
The odds of being killed by a shark are 1 in 7 million
Even after several years, the perception that sharks are mighty dangerous shows to prove how difficult it is to change the status quo.
I will however do my bit and share a bloody (not) experience in Fuvahmulah, an island literally on the equator and part of the island nation - Maldives (in case you like hovering over google maps like I do - https://goo.gl/maps/1TaTUjSFJLGRTpeU8)
I was lucky to witness an age-old relationship between the locals and sharks surrounding this isolated island in Maldives. The fishermen on that island catch tuna and other local fish using traditional fishing methods (no large-scale fishing trawls, fishing nets or the likes). The local fishermen get off their dinghis, the sun gleams through the harbour sparkling the palm trees, moving towards the small market near the harbour. After their daily sales to the salami lovers, the fishermen naturally generate a lot of fish scrap (for example the tuna heads) that needs to get recycled back into the ecosystem.
What do you think happens next?
The fishermen discard this scrap back into the water surrounding the harbour. In a short whiel, huuuuuge tiger sharks ascend from the depths…
Having four-five of these 20-feet beasts lurking around you is exactly what you’d expect in a National Geographic documentary and not in reality! Tiger Sharks are known to be very inquisitive and love a good staring competition. One did come seriously close to me… right until I couldn’t stare at Pirate (the dive instructors have named them all) any longer, and then she gracefully swirled away. Unreal.
Coming back to tackling this status quo bias - the relationship between the locals and sharks is sacrosanct. The locals on the island tell me that they never caught sharks even when they can easily do so and make $$$$$, albeit for a short-term.
So do these locals at Fuvah have some rationale for not fishing these sharks? Is there a status quo that they have been attuned to? It is very likely that their ancestors knew the importance of sharks in keeping the ecosystem throbbing.
Finally, I would like to draw an interesting parallel that I thought of a few days ago. Let us look at Sharks as an asset in the portfolio of all the fish species in the ocean. What role does the Shark play in this portfolio? Sharks form the crux of the portfolio because they hold minimum risk and maximize returns. Am I making this claim out of fin air? Several studies have shown that sharks are crucial to the survival of the ocean ecosystem, a claim even acknowledged on the recent Netflix documentary, Seaspiracy.
So, the question remains - how do we save our sharks?
You’ve definitely noticed this in your city
A long long time ago, as I walked past the road leading to my grandparents home, I noticed something very ordinary - two chemist shops operating side by side - but still made me ‘Michael Scott’ level inquisitive. Why were they operating next to each other? Back in the day, I would usually confront my elder cousin with some of my questions - whether we could print money at home to get rich, how could we buy an F1 car, and the sorts. I don’t really remember what my cousin responded to this question, maybe he made something up, but it didn’t calm my inquisitiveness. The question remained unanswered… however, through the years, I still remembered this one point… why couldn’t the two shops be on two ends of the road?
Wouldn’t that just be better? Don’t you think you would be better off at one end of the road, away from your competitor (selling the same products at exactly the same price), than being right beside him?
In 2013, I chanced onto the Ed-Tech platform Coursera. Back then it was still at its nascent stage and I was curious to explore this new dimension of learning. So I did a few courses in Finance (that made it crystal clear why printing money indiscriminately will actually make me poor) and chanced to learn a bit on Game Theory. Voila.
That’s when I learned the answer to my age-old question: It is actually most profitable (in equilibrium) when both shops are side by side as against when both are on two sides of the same road. Why? Because of a Noble winning concept called Nash Equilibrium, named after Mathematics genius John Forbes Nash Jr. This is how marketplaces (online and offline) are eventually created, as more and more competitors come and set up shops side by side to eventually build a vibrant market!
I’d like to leave you with one final thought - next time don’t always learn or approach something with one or two pre-defined goals. Keep an open mind. You cannot fathom or compute the independent variables that can influence and affect our lives.
To those who are curious, one definition of Nash Equilibrium: “The Nash equilibrium is a decision-making theorem within game theory that states a player can achieve the desired outcome by not deviating from their initial strategy. In the Nash equilibrium, each player's strategy is optimal when considering the decisions of other players.”
Confusing? Try this: https://www.gametheory.net/Mike/applets/PDilemma/Pdilemma.html
Still not convinced? Learn some: https://www.coursera.org/learn/game-theory-1
Are you reading this on a weekend? Watch: A Beautiful Mind
My Foxy Start-Up Crash
Background - Big numbers:
There is over a trillion dollars in student loan debt in just the United States of America.
India’s GDP is approximately 2.9 trillion dollars.
Loan History:
After the financial crisis of 2009, non-mortgage component of consumer credit played a significant role. Post 2012, there was more than 1 student loan for every mortgage loan. This ratio continues to increase.
My journey:
Back in 2013-14, I was exposed to several different options of studying abroad. I needed to understand the fuss around this and get the math to make some sense. We students were all told the several positives of studying abroad and we were obviously enamored! But no one gave us an analytical approach to showcasing our cash outflows and its long-term implications.
I come from a middle-class family, like many of us! Money is central to every decision we make. We need it most desperately to increase our standard of living and we use it most prudently to insure ourselves against adversity.
Thankfully, I learned about capital budgeting and core financial concepts around the same time in college. This got me thinking… I wondered whether I could build an analytical tool that could be self-intuitive to me and my classmates. I had no knowledge in coding (read my blog about the un-engineered to get a little tech guidance) but I had MS Excel! I built my model on Excel and hustled my way into launching an online version of my edu tool – Fox Counsel. It is a study-abroad calculator that adds up all the expenses one can and cannot foresee to give an estimated pay-back period. It truly was and I believe still is a novel concept. I tried hard to market it (almost for free) and generated great momentum.
But did I have any experience running a company? Running a business post building the product? I learned my way to market and build connections. However, not enough to create a sustained momentum. I featured in several online digital platforms and offline newspapers (all for free) but I did not have a strong vision. Why was it so? I simply lacked experience. After several years of working in the field of early-stage growth investments, I definitely am armored to level max. Still I don’t regret the timing of it. Nor do I regret failing.
Finally I’d like to leave you with a phrase: Don’t give up. Start.
Check it out: www.foxcounsel.com
Tech for the Un-engineered
This writing is for those who seek redemption! For those who see the following requirements in their dream job:
Min Qualification – Graduate from a top-tier Engineering institute
This isn’t to diss Engineering programs or their students. However, it is to bring in a sense of reality amongst us others who are competing alongside them for similar jobs.
How can we differentiate ourselves if we want to step into the tech world – be it in any industry? How can we build an edge over the others?
Tech is not going way. It is only going to take a larger piece of the cake and also make the cake even more voluminous. I would like to put a disclaimer here that I have not worked in a tech company yet. I have however worked with and invested in a few of them and currently pursuing a program in data science. More on that later…
So, to everyone else – do not lose hope! There is between 40%-50% employment in the tech-space for non-engineers. Be it product manager, strategy, marketing, operations, business development, or accounting. The possibilities are wide and varied. What I would like to urge you to do is to have a general understanding of the industry and sub-industry (for example):
Technology
Fin-Tech
Robo-Advisory
So how do we go about this when we have no practical experience? We need to start with theoretical knowledge that can form a base for you to work on practical examples and in-turn help dig for more information. To give you an example, I was researching about Robo-advisory and I found a beautiful course on Coursera that gives an amazing background on this space with several case-studies. That got me to further read-up on the examples shared and through this I discovered several other companies in this space. Take that FIRST STEP!
This push and pull technique of gathering information can be used with several other ways to build the necessary acumen. Further, given that technology’s main goal is to make life simpler, having a real passion and sense of understanding of your purpose in your dream company can help truly sync your goals with those of the companies.
Coming to the real deal:
There are ample data science and analytics courses out there. I have thoroughly studied and researched several. These made my shortlist: IIT Roorkee and TSW, IIIT and UpGrad, Eruditus and IIT Delhi, Great Lakes/UT Austin and Great Learning
Coursera has several courses on Fin-Tech and Technology. This is one I did: https://www.coursera.org/specializations/wharton-fintech
Nein! Das ist nicht Richtig!
Take a crack at yelling out these words:
Kaftfahrzeug-Haftpflichtversicherung
Freundschaftsbezeugung
Siebentausendzweihundertvierundfünfzig
According to one definition of “Outliers”: An outlier is an observation that lies an abnormal distance from other values in a random sample from a population.
So what am I getting at here? I want to share my perspective on what you are already aware of - the importance of understanding and knowing the local language and culture. Through my travels around the world, I have noticed how it helps build positive engagements with people and afford us a greater sense of security and camaraderie. Cultures are different so people are bound to be different. It is the outliers that we must discount and stay away from generalizations.
So why do I learn German? I was ridiculed back in the day when I spent days and weeks learning the German language (I read and watched a lot of documentaries on WWII which then got me intrigued about this language early-on). I was told that this language is hardly spoken outside Germany and has no world appeal. This did not bother me because I did not look at it in this way.
But what I wanted was an alternative approach to a history class. You can learn a lot about a country and its culture through its language – people, cities, the love for wurst (sausage), approach to life, its relationship with neighbouring countries - and it becomes even more interesting when you complement learnings with shows and movies. This has made me love the language even more and I continue to learn in my free time.
So don’t be constricted in how you shape your life. Try to find reason.
Take that first step and learn what you think is richtig! You can start now on Duolingo, Babbel or the several other mobile apps and websites. Almost free ways to take your first step:
Watch foreign shows and movies
Find Instagram and Facebook accounts that focus on language learning, culture and life in that country
Take a trial Duolingo/online course