This is truly jaw-dropping.

I have a problem with the word “blog.” No, really. I don’t mind “website”, “web page” or “webspace.” On a particularly delightful day, I might even be hand-wavy at “weblog.” But the word “blog” is a downright irritant and has the unfailing effect of bringing out a wince on my face.

What the hell kind of a person calls a weblog a blog? What the hell kind of a word is it anyway? Frankly, it sounds as if a set of jovial air molecules bounced off the diaphragm, all excited about tunneling through space, made their way to the larynx in unquestionable earnestness, well motivated to script a masterpiece in the oral cavity, and then, suddenly, for no good reason, got all muddle-headed, chickened out, and ran off the nearest bodily orifice that they could aim at–producing in sum total what I can only describe as a greasy half-choke from a wet, clogged and dingy windpipe.

Surely, there is only one other word that is even more irksome.

If the appalling insult from “blog” wasn’t quite enough, someone who was smoking some serious pot must have come up with “bllll-ogg-O-sss-pee-errr.” Don’t even get me started on that. Every time I think of it, I am overpowered with a blistering cavalcade of emotions that it tires me physically to even try and condemn it. I spend all my energy trying to choose which ridicule to throw at it that all I can finally do is grit my teeth, sigh heavily, roll my eyes (strictly in that order) and then, slowly, gently, smilingly, try and think of a particularly delightful day.

Exactly one day after I wrote that Jeff and Joel are two of my favourite writers, both of them announce a joint venture they’re doing called stackoverflow.com which is the new Usenet/newsgroup. For the dear reader who perhaps has not seen the wonder that is the Usenet - I learnt most of my real coding through Usenet usegroups - comp.lang.c and the like, so this is a huge deal and if successful, could be insanely significant to pragmatic software development as a whole.

The idea is, prima facie, the perfect solution (massive information portal for programmers) that solves a diffcult and real problem (getting better at programming) which is borne from correct observation (programmers learn programming through Q&A with other programmers) and which has only a poor current solution (information buried in newsgroups, forums, blogs and scattered all over the Internet).

But I have to say I’m a bit skeptical of how exactly they’re going to execute this. How will it be different from a normal forum? How will they centralize the current knowledge-base of information into the new site? How will they replicate the newsgroup-like feel of the late 1990s?

At any rate, it should be very interesting to see two incisive and sharp observational software developers tackle this problem.

What does a talentless, soporific New Age writer do when he realizes he is all three? Simple: he points elsewhere.

1. Abnormal Returns: I’m not a fan of talentless, soporific New Age writers who point somewhere else, but this is a happy exception. The average quality of content being pointed to is very high and it’s updated daily (content and fresh content). Everything is about the financial markets, so if you are like me, you’ll just read and nod your head, pretending to understand what all that means.
2. Coding Horror by Jeff Atwood: Two of my favourite software engineering writers out there who talk about the one aspect of technology that everyone forgets–human beings–are Spolsky (of Joel on Software) and Atwood. It’s been a while since I compiled source in a real programming language, but I still ardently follow the human side of software very closely. And I still think it’s the ubelievably rare manager who understands the human side of anything. I’ve been reading them for ages (and to my credit, much before say, Joel became so popular), and I can’t speak highly enough of them to practising professionals of the software craft.
3. Noah Grey photography: Stunning work. Again, a long-time fan and follower of Noah’s work and I recommend her to you. Her ahem, greyscale shots are powerful.
4. Berkshire Hathaway shareholder letters: Absolute gems, each of them. If you have any interest in investing, you should read all of them, word for word, starting from 1977.

So there ya go, I’m now what you might call, “four point someone.”

WEDDING (n.) A ceremony at which two persons undertake to become one, and then spend the rest of their lives deciding which one.

Dear, Dear Reader:

(Nota Bene: The crucial details are right at the end, so if you are busy, maybe the scroll down button is a good idea.)

We find the prospect of authoring the perfect wedding invitation very daunting indeed – it is quite the Herculean task to string the right words in sequence, suggesting just just the right tone and quality and affection. Nevertheless, write we must, but pray allow us to indulge you in the slightly rocky path that led to it.

We tried everything. Believe us, we did. We tried the time-honored invite – “It gives us immense pleasure to solicit your gracious presence on the occasion of our wedding…”, but for some strange reason, copy-and-paste didn’t work, so that left us staring blankly at the keyboard again.

We then toyed around with the idea of creating waves by a brilliant and singularly ingenious piece of writing accompanied by a series of HDR enhanced photographs – but quickly realized that we had neither the creative genius nor the appropriate camera to perform such a feat.

Then came the idea of Pluto. There was a really, really, really cool idea about Pluto. Yes, most definitely something related to Pluto. And Godel. Pluto and Godel. (Sound of furniture against human head). Ah well.

Relentless in our pursuit, we thought maybe we should turn to China, with it growing 10% per year and all. Something about yin and yang struck us as a little, er, circular in logic, so we abandoned that as well.

(Now you get why it took us so long to get the invite to you, don’t you?)

But anyhow, throwing brevity to the winds and after much deliberation (some of which we have elected to impose on you in the above paragraphs), we finally came to a most surprising conclusion that the secret to the perfect invitation, of course, is to find the perfect name to put down on it and find the perfect person behind that perfect name. Voila! Double checking how to spell David Beckham and Victoria Beckham, we finally knew that we’d cracked it.

So. Where were we. Ah yes, the invite. Without much further ado (observe how we’ve not created much, ahem, ado), we’re just going to invite you to partake in our wedding as we embark on our journey together. Oil’s almost $100 a barrel and we have no car, so it would greatly help if you could bring along any of those as well. Just kidding! All we need is a private jet, actually.

But seriously, it would be wonderful if you could make it to our wedding and wish us luck – we already can’t stand each other. So scroll down to the very end for the details (venue, date and time).

We’d be delighted to make arrangements for you (however, we regret to inform you that due to unprecedented demand, time travel is currently fully booked) – so if you’d like us to, give us a shout and we can work out the logistics.

Hope to see you there, and do not hesitate to call either of us if you have any questions!

Much love and peace,
Ramesh and Rashie

Time for some trivia. I work out of the same building as the London Stock Exchange at Paternoster Square. Here is a view from the inside. What you see in the picture is the famed artwork of Greyworld called The Source, which is a physical representation of the stock markets, a full eight stories high! Wikipedia has this to say about it:

A cube of 9×9x9 (729 in total) spherical balls are suspended on cables that run the full 32 metres height of the main atrium of the newly designed building. These spheres, controlled by a computer running Python scripts, can move themselves independently of each other, forming dynamic shapes, characters and fluid-like motions that reflects the nature of the stock market itself. The sculpture opens the market each morning at 8am, with the spheres breaking free from their default cube arrangement to form elegant patterns and shapes. Throughout the day the sculpture responds to reputable news feed and displays snapshots of the current headlines, written in full height of the atrium. At the end of each day’s trading the spheres return to their cubed arrangement, resting on the sculpture’s base, and blue lights inside each sphere are illuminated to show the stock market’s closing price with an arrow to indicate how the market performed on that particular day.

Now this is the kind of stuff that geeks like me find way, way, way cool. Can’t help it!

Email

Email remains the same (both IIMB and GMail addresses still work perfectly). I am now able to access email through my mobile hand-held, so that’s the preferred first-stop mode of communication.

Wall Street is a game that’s played between the smartest people in the world with the highest stakes. –A portfolio manager

Ten years ago (that makes me sound like an 80 year old)…. anyway, ten years ago, I’d never have imagined a career other than programming, technology and software. And yet, here I am, a world away from that path, still a bit dazed as to how I got myself here. Nonetheless, these are exciting times and I look forward to learning everything about my new career. As the portfolio manager in the quote above puts it, it’s not an easy career, but it sure is thrilling and never lets you rest.

Here are the top cool things about my job that I’m pumped about (in no particular order):

• Exposure. Early exposure (we’re talking the first few weeks), first-hand, to businesses and company management (CEO, CFO, COO and senior management).
• Impact. Amazing opportunities to come in and create impact worth surprising amounts of money to hundreds of thousands of people.
• Divergence. A career in a business that rewards originality of thought, relentless curiosity and standing apart from the crowd.
• Learning. A job that pays you to learn more about business strategy, and more generally, about the world around you.
• Travel. Put simply, the mandate is to do whatever is required to get my job done, and get it done right. Go anywhere, do anything, no questions asked. Except, well, um, performance.
• Autonomy. Almost absolute autonomy of everything: working hours, travel, research. There are very few (if any) reins to hold analysts back. They get to define the rules of the game and play it in a way that suits them. The only pressure is from the capital markets, which, as you might imagine, is substantial.
• Resources: Amazing resources at our disposal to help us get our jobs done. Almost everything is either a click or a phone call away. It’s kinda scary. There are no real excuses for screwing up.
• Triangulation of careers. Investment management is unique in a lot of ways. But one way that appealed to me above anything else was the fact that it offered a career that combines the thrill of trading, the exposure of strategy consulting and the impact of investment banking. And it blends the best characteristics of each.

I’ll be jotting down more about what exactly my job is sometime in the future (most people don’t quite get it), this is more of a short snippet that I wanted to pen for two reasons: (1) so I don’t forget it myself, heh, and (2) I haven’t updated the blog in a while, so I thought it might be a good idea to put something up.

Warning: the content in this article is long, boring and oftentimes both.

During a meeting with company management for a project I recently worked on, I happened to have an interesting discussion with the CFO regarding the current liquidity in the global capital markets. He was an interesting chap and had quite a bit of his mind to offer under the topic of “Wall Street.”

One of the topics we touched on was asset securitization, a corner of structured finance (which is in turn, a corner of corporate finance) that no sane person would ever enter in the normal course of their living lives. He wasn’t particularly impressed with investment bankers, and called them, for instance, heartless. Who else, he asked, would ever think of profiting from the death of a fellow human being?

Let me explain.

Securitization

Securitization is a way of creating liquidity based on otherwise illiquid assets. For instance, let us say I lend you $10,000 (not that I have that kind of cash, but it’s easy to type extra zeroes than make some). Anyways, I lend you $10,000, charging let’s say, a 20% interest rate (since you don’t have to actually pay, you wouldn’t mind the atrocious interest rate). So $10,000 for you at a flat 20% per annum for let’s say, 10 years.

Now, in the normal course of our relationship, I get $2,000 every year from you for the next 10 years as well as the principal amount of $10,000 at the end of ten years. You pay me a coupla’ grand every year, I buy a new server class Dell system with dual Nvidia SLI graphics cards every year and we are both happy.

This expected cash flow of $2,000 per year is, from my point of view, an asset, though I can’t sell it to anyone as is. If I trust that you are a good Samaritan and will repay fully, and on time, I have no risk on that cash flow. The loan I’ve made is free of default risk. This kind of future cash flow can be made into a product and sold to someone else.

I can, for instance, call up Barren Wuffet (a purely fictional investor who likes to gamble in the financial markets) and tell him “Gee, Wuffet, by God, I’ve got something here you might like. I have a guaranteed $2,000 cash flow every year for the next 10 years with a repayment of $10,000 in year 10. It’s yours for $15,000. Take it, my dear fella, and be a baron instead of a Barren.”

Now, depending on Mr. Wuffet’s outlook on a variety of financial parameters, he might find my proposition attractive. (The most notable parameter that changes his view about my offer is the market capitalization rate or the discounting rate. Of course, there are other factors like the risk of default, but let’s assume that you are a good boy and will pay back on time.)

The capitalization rate is nothing but the rate used to calculate the future value of a present sum. If let’s say a bond pays $100 in a year’s time, and it is available in the market and you can buy it for $90, the capitalization rate could be calculated as 11.11% (which is (100-90)/90). In other words, $90 compounded at 11.11% for a year will reach $100.

My valuation of the cash flow would in turn, depend on my world-view and if I use a rate of 15%, for instance, I would value the loan at around $12,500. Mr. Wuffet might use 8%, valuing the loan at $18,000 and if so, he’d find my proposition attractive since he’s getting something that according to him is worth $18,000 for $3,000 cheaper.

Irrespective of whether you understand the nuances of market capitalization rate or not, it should be evident that I can sell the loan that I made to you, as a package, to Mr. Wuffet. Mr. Wuffet can buy the loan and whatever you’d pay to me normally would go to Mr. Wuffet, since he is now the owner of the loan. Nothing changes for you, the borrower, but I get back my $10,000 I loaned to you and a neat $5,000 extra. In doing so, I remove the loan from my books and place it in someone else’s. Your indebtedness does not, however, change.

Notice what I’ve done here: I’ve created a security based on the loan I gave you that can be traded between two consenting parties. Mr. Wuffet can sell the loan to someone else and so on and so forth. He could even collect a hundred such loans (of similar nature) and sell them as a pool to large banks. This is the basic idea behind asset securitization.

Life after death?

Once you get the basic gist, there is no stopping what you can use as the underlying asset on which to securitize, and that includes death policies or life insurance.

For example, people with terminal diseases who don’t expect to live more than say, 3 years, could sell their life insurance policies to different companies, who in turn could securitize them. The securitizing company has a monetary incentive, therefore, in the death of those people whose life insurance policies are being securitized. The more they live, lesser the value of the securitized instruments.

In the 1990s, people with AIDS used to do this. But with the advent of new drugs that helped combat AIDS, the attractiveness of the securitized pool went down and companies steered clear of the AIDS bunch, because, well, they didn’t die soon enough. Now they’re looking at senior citizens who are settling into the latter parts of their lives.

This is what the CFO alluded to. Investment bankers (or their kindred) will talk about life-extension risk, the risk that the people whose life policies they’ve securitized will actually live more than they expected. Stochastic calculus will be used with abandon and various numbers plugged into Excel sheets to find out if those people will live for longer than the “optimal” age so that Wall Street can make a pile of money.

We speak of life after death. Never in our dreams do we usually think of an after-life of this kind.

Of heartlessness and how it is achieved

Investment bankers are sometimes called ruthless and heartless, among other things. The former attribute is a pre-requisite in the profession and the latter a consequence (as you can see easily, by now).

Being in the midst of this madness, I can explain why. It is easy, oh so easy, to lose track of the bricks, mortar and human beings behind the 20-sheet Excel workbook you’ve meticulously developed. After a couple of weeks of digging through cash flow statements, doggedly gathering industry data and tweaking your earnings model, you begin to believe that even the Myers-Briggs personality of the CEO can be modeled into a string of neatly formatted “Accounting” cells in Excel.

Let me use a personal anecdote to throw light into at least some part of this–especially, the heartless part.

Once upon a time… oh whee, let’s cut the crap.

A little more than a year back, I was a little cog in the bulge bracket wheel that is Limen Siblings (named changed). One of the desks that I worked in was called High Yield Fixed Income, and my story largely revolves around this mysterious sounding piece of furniture. (Note: anyone who is not a Wall Street pro would call it junk bonds.)

High yield debt or junk bonds (as opposed to high grade debt) are bonds that are known to be highly risky. And since they are risky, they automatically offer higher returns. (To the 1% of the population who have heard of Moody’s or Standard & Poor’s, high yield debt is classified around BB/Ba or less.)

Anyway, my job was to basically assess whether the firm should invest in some high yield debt that was floating around in the market. I was handed over the ticker symbols of five companies who had market-traded bonds and asked to get to work. “Getting to work” meant digging up information about the industry, mulling through every line of published financial information about the company, dirtying your hand at charting with historical data, talking to the company management (CEO, CFO, IR etc.) and then incorporating all of this information into a detailed financial model that would magically prognosticate all kinds of vital statistics for the company for the next 10 years.

In short, all I had to do was to predict the future. How could it be any simpler?

At the end of the ritual, senior vice presidents or managing directors would ask me questions like “How does the PER stand against comparables?” or “What did management have to say about their capex guidance in their newly entered sector?” or “What do you make of EV/EBITDA?”; and if I uttered the right syllables in sequence, everyone would be happy, the junk bond would remain junk and I could sleep in the night.

It was all very well if you ate cash flow for breakfast and slept on balance sheets. Heh. Unfortunately for me, I didn’t particularly do any of these activities very well. So when I found out a particular company had their annual reports only in Taiwanese and the only person who could translate it for me on the team was on vacation, it made me quite empty in the stomach. All I knew was that I had to somehow figure it out (don’t ask me how), because in an investment bank, deadlines are taken surprisingly literally.

To make things even more interesting, I usually worked on 3, if not 4, assignments, simultaneously reporting to 2 different managers. Each had its own deadlines, its own pitfalls and its own diction and way of unreality. For instance, one of my duties every day (over and above the 3-4 formal assignments I had to work on) was to check out bond prices and update a database that tracks various parameters of the bonds over the months and years. This was done by a secretary usually, but spotting a neophyte in their midst, I guess my boss couldn’t resist the temptation.

Well, well. It took nothing less than 2-3 hours to pester traders for prices of bonds, calculate and enter yields, spreads and other such whatnots into an especially boring looking Excel workbook. Being a geek by up-bringing and too tied up for time to waste 3 precious hours every day, I tried to automate it. The team didn’t mind it–they’d stare wide-eyed at me when I showed them the basics of the API and my Excel file that would dynamically create and update reports saving a ton of work every day. The secretary was especially thankful: what used to take 2.5 hours of manual data entry and calculation every afternoon was now a matter of 2 minutes of punching a bunch of numbers into Excel.

Of course, none of them had ever programmed a computer before, so whatever I did with any piece of code was, in their eyes, pure magic. But I did not for a moment shatter their illusion. I let myself be proclaimed an Excel guru–a name that a few of us from the IIMs carry into Wall Street, and with good reason.

So when the vice president saw the report on her desk and the debt model in her inbox, she happily assumed that it was just another day at work because she didn’t have a clue that the Bloomberg API did not have the kind of functions I wanted to use to cull out the million data points needed and the cheerful if non-programmer tech support lady in New York left it to myself to build the macro in VBA, because she couldn’t quite comprehend it when I asked whether the function call was asynchronous. Such is life (whatever is left of it, rather) in an investment bank, though I have to say I didn’t mind the programming bit.

Once, seeing one of my senior vice presidents staring blankly at the model, I queried politely: “Anne (name changed), do you want to see the source code?” To which she raised her eyebrows and shot back, “The what?”

I said don’t bother.

As you can see, I had my moments, however rare they were compared to the ones my managers had in watching me trying to grapple with the intricate niceties of high finance I had never even dreamt of before.

What is my point?

I don’t think I will personally be comfortable handing securitized life insurance policies and/or trading them. It’s not the way I’m wired. I can’t do it. I can’t help but think about the people at the other end of the Excel sheet. What I’m trying to do here is to offer one possible (humorous, if I need to be explicit) reason why investment bankers are so insulated sometimes from the rest of humanity.

My point, as circumlocuitous as it is, is that when you’ve gone through a wringer of a time like this, your association with Excel transcends into an emotional affair. The numbers you punched and the punches you suffered are yours, and you take pride in both. After a while, each sheet in your workbook begins to symbolize a particular phase of your life, and any flaw in it would indirectly be taken as a flaw in your life. The cells dissolve into a magnificent Van Gogh and you pause in the middle of the day to admire your creation. So don’t expect me to take it lightly when you so much as raise your finger to point at my beautifully colored cells in a disrespectful manner.

No surprise then, that investment bankers don’t care if the numbers on those cells mean the profit margins of oil giants or the death of a human being–someone with dreams, aspirations, a family and a life full of fond memories.

It so came to pass that I was digging through my old archives of backed up files and folders; and lo, I find this piece of writing in the mishmash. I post it here since I think it is valuable enough to not lose, and valuable enough to share. I have no clue where I got this from, but I think it is a translation of an Indian regional author’s work. Anyhow, I thought it was quite a powerful piece, which is why I typed it in almost a decade back. Here it is:

The Invaluable Moment

You and I - the reality is going to end any moment now. And then, you alone will remain.

You, alone.

The time for my final journey is fast approaching. The anguish welling up in my heart will burst forth like a rain cloud and shatter my very being.

My friends are unaware of this sad fact. When they visit me, I crack jokes as usual and they cannot contain their laughter. To entertain them, I narrate humorous anecdotes. Laugh with them. They do not hear the rumbling notes of sadness in my laughter.

Here I am. About to merge with nothingness.

Nothingness.

An inconsequential event - or is it a very important one? Something did happen. Is that what is important?

Anyway, I am that invaluable moment caught between two planes of existence–the past standing on the threshold of the present, and today which is goig to merge completely into yesterday… with the countless yugas… the chaturyugas… the eternal… the infinite… the neverending yesterday.

I bid farewell. It is all over.

No. It is going to be over.

From the next moment onwards, I will be a part of those countless yesterdays cast into oblivion.

Many of my friends and those who I loved dearly have gone already. Where are they, the multitudes who left before me? Memory constantly returns to the beginning.

The beginning…

I feel as if I have finally reached the unknown boundary of eternity’s mystery. Here it is! A resonant echo of Pranava’s jubiliation?

Are you listening?

All this time, you loved me with boundless compassion. You suffered me. And you knew me. For you, I am an open book you can read and sense leisurely at your own convenience.

But you are still a great enigma for me. In all these years, it has not been possible for me to know anything about you. Unawares, I loved you. Unawares, I hated you. Have I wantonly ever caused you pain? Even if I had, you loved me. Suffered me.

I have divulged many of my secrets to you. You have witnessed all my actions. Will you make me a laughing stock?

Here, I leave you. Even as I go, I continue to love you. When was it that you and I got to know each other? Or, did we ever know each other? I tried, though. Eventually, I learned only to love you. No, I never could comprehend anything clearly. Essentially, I knew nothing.

Nothing.

Alone I came into this world. Alone I go now. The time for that journey is drawing near. And you alone will remain.

You, alone.

[Unknown author and translator: if you know the correct source for this piece, do drop an email]

Three links for your browsing pleasure. Not one more, not one less. Three it shall be.

1. The Best Page in the Universe: is arrogant, funny and uses language that might be termed offensive in most Parliaments. “This page is about me and why everything I like is great. If you disagree with anything you find on this page, you are wrong.”
2. The Secret Diary of Steve Jobs: is written by a “wanted dead/alive” anonymous blogger who writes the blog in first person. Well, in Steve Jobs’ first person. Hilarious! “I love beautiful objects. I love creating them. Negative people upset me.”
3. Yellowtext: is, as per Andy, a Colossal Waste of Bandwidth. Perhaps, but it sure won’t be a colossal waste of your time–if you like good-humoured writing, that is. Andy is a professional writer. He is also an entertaining comedian. And both traits show. “You Love me so much that you want to Hurt me.”

Bookmark ‘em away!