Average Beauty

If you have migrated multiple times in your life, you may have noticed a strange thing. The first time you end up in a new place, most people around you look positively weird. Ugly even. But slowly, after a year or two, you begin to find them more attractive. This effect is more pronounced if the places you are migrating from and to have different racial predominance. For example, if you migrate from the US to Japan, or from India to China. As usual, I have a theory about this strange phenomenon. Well, actually, it is more than a theory. Let me begin at the beginning.

About fifteen years ago, I visited a Japanese research institute that did all kinds of strange studies. One of the researchers there showed me his study on averaging facial features. For this study, he took a large number of Japanese faces, and averaged them (which meant he normalized the image size and orientation, digitally took the mean on a pixel-by-pixel basis). So he had an average Japanese male face and an average Japanese female face. He even created a set of hybrids by making linear combinations of the two with different weighting factors. He then showed the results to a large number of people and recorded their preference in terms of the attractiveness of the face. The strange thing was that the average face looked more pleasant and attractive to the Japanese eye than any one of the individual ones. In fact, the most attractive male face was the one that had a bit of female features in it. That is to say, it was the one with 90% average male and 10% average female (or some such combination, I don’t remember the exact weights).

The researcher went one step further, and created an average caucasian face as well. He then took the difference between that and an average Japanese face, and then superimposed the difference on an average face with exaggerated weights. The result was a grotesque caricature, which he postulated, was probably the way a Japanese person would see a caucasian for the first time.

This reminded me of the time when I visited my housemate’s farm in a small town in Pennsylvania – a town so small that the street in front the farm was named after him! I went with his parents to the local grocery store, and there was this little girl sitting in a shopping cart who went wide-eyed when she saw me. She couldn’t take her eyes off me after that. May be, seeing an Indian face for the first time in her life, she saw a similar caricature and got scared.

Anyway, my conjecture is that an averaging similar to what the Japanese researcher did happens in all of us when we migrate. First our minds see grotesque and exaggerated difference caricatures between the faces we encounter and the ones we were used to, in our previous land. Soon, our baseline average changes as we get more used to the faces around us. And the difference between what we see and our baseline ceases to be big, and we end up liking the faces more and more as they move progressively closer to the average, normal face.

Here are the average male and female faces by race or country. Notice how each one of them is a remarkably handsome or beautiful specimen. If you find some of them not so remarkable, you should move to that country and spend a few years there so that they also become remarkable! And, if you find the faces from a particular country especially attractive, with no prolonged expsosure to such faces, I would like to hear your thoughts. Please leave your comments.

  
[I couldn’t trace the original sources of these images. If you know them, please let me know — I would like to get copyright permissions and add attributions.]

There is more to this story than I outlined here. May be I will add my take on it as a comment below. However, the moral of the story is that if you consider yourself average, you are probably more attractive than you think you are. Than again, what do I know, I’m just an average guy. 🙂

If you found this post interesting, you may also enjoy:

  1. Why is seeing not quite believing?
  2. Sophistication

Trading Desks

At the heart of Front Office are the trading desks. In terms of prestige and power, they really are the reason for the whole infrastructure of Front Office, including economists, sales, structuring, quants, quantitative developers etc. After all, they make the profits. And consequently, the vocal and volatile traders hold enormous sway. At their beck and call, quantitative developers provide instant service on trading platform issues; quants develop pricing models based on their requirements.

Trading Desks

Trading desks interact with the external world of brokers and counterparties. They take their input on market moves from highly responsive market data providers and base their positional views on staff economists. They have an army of trading assistants (junior traders themselves) who help them book and monitor their trades with the help of risk management professionals associated with the desks.

Their interaction with the rest of the bank is mainly mediated by the trading platform. When the book a trade, for instance, it goes into the trading platform and ends up with some middle office professional who will decide whether to accept it or bounce it back for further modifications. Various risk management staff from the middle office also will take a hard look at the trade, as we shall see later in the trade lifecycle.

The desk risk management team get their cues also from the Middle Office risk management, in terms of approved limits and daily marked-to-market and sensitivity reports. All these channels of communication need to be facilitated in the trading platform.

Lose Fat, Not Weight

After publishing my secrets on losing weight in my late forties, one question I got asked most was how I fought hunger. The question is straightforward. If you ate only 200 calories worth of fruits for lunch, wouldn’t you feel hungry in an hour or two? Yes, you would. What you then do is to take a snack of say 100 calories — a banana, for instance, or 10 cashew nuts (yes, you do need to count them). Trust me, it gets easier. Another way to fight hunger is to drink a lot of water. You need water anyway. Personally, I am not very font of tap water; I like Perrier. (I know, snobbish, right?) When I run out of Perrier, I can take tap water with ice as well. What is most important is to try to stay away from all other forms of beverages, even the light or zero-cal variety, and even the healthy fresh-juice kind. They all have calories.

Growing Old is Not for Sissies
Growing Old is Not for Sissies

More important than any of these tips and tricks is to develop an ability to listen to your body. If you suddenly find yourself craving for something like a juicy steak or lamb chops, it may be that your body is telling you that it is running low on proteins. You’d better do something about it. On the other hand, if you feel like a snack when you have a truckload of work to get through, it may be that you are trying to procrastinate. You have to develop an ability to know the difference. If you are trying to get away from work, don’t use a snack as an excuse; just take a break, a short power nap or whatever rocks your boat. Don’t use food as a filler. If you really need to use anything as a filler, use exercise as one!

Losing fat and getting in shape is a dynamic process. You have to modulate your exercise and diet regime as you make progress. In the beginning, it may be important to just lose weight. Apart from the obvious medical and self-image-related benefits, it gives you an added advantage in exercising itself. In my case, after I lost 10 kilos (20 lb.), I found it a lot easier to do the 100+ pushups, and said goodbye to that knee pain after a vigorous session of badminton. Losing weight when you are overweight does mean tons of cardio (running, swimming, treadmill, cross trainer etc.) and a strict diet. But you cannot keep losing weight at a steady, fairly drastic rate of a kilo a week and then suddenly stop at your target. You have to kind of soft land when you reach your target. That means less cardio, and perhaps a different kind of diet.

One thing you may notice as you lose weight is that you are losing muscles as well. My web research seems to indicate that it is most likely an illusion, although too much cardio and too strict a diet can make you lose muscles too. Apparently, that happens only at near-starvation levels. But it is a good idea to ramp up your resistance training as get closer to your target weight because what you want to lose is fat, not weight in the form of muscles. Right now, my exercise time is roughly 50% cardio and 50% strength training. I plan to make it progressively more strength, perhaps up to 70%. But it used to be almost 90% cardio in the beginning of the year. The best form of cardio for me is what they call high intensity interval training (HIIT). In this mode, after a short warm up (of two minutes), you go flat-out for 30 seconds and then slow down for a minute, and repeat the cycle. Flat-out in my case means I get my heart rate up to what they consider the maximum (which is 220 minus your age). So I oscillate between the heart rates of 170 for 30 seconds and 140 for a minute. I think this is a pretty drastic cardio regime; I could do it because I have always had some level of exercise ever since I was a teenager. Your fitness levels may call for a different regime. So please be careful if you decide to take up this HIIT formula. If you have any doubts at all, please talk to your doctor first.

Finally, what about those six packs? Are you ever going to get those? The honest answer is, it is unlikely, especially if you are a man. If you are woman, and you really want the six pack, it may be easier for you. Let me explain. We all have good abs muscles. It is just that we have layers of fat covering them. It reminds me of that time twenty years ago, when I was trying to get my then housemate in Ithaca, NY to join me on a long bike ride. This big fellow (over 250 lb.) wasn’t budging, and I tried to egg him on, “C’mon Roger. It will be a fun work out! Get the body you always wanted.” His sleepy reply from the couch was to the point, “I got the body I want. And then some!” That extra “some” is the problem hiding your six-packs. In order to begin to see them, you need to bring your body fat level to less than 10%, or less than 20% if you are a woman. Given that the body fat level for a reasonably inactive, but healthy, man is about 30% (and 40% for woman), the target level for a six pack is pretty far off. My own body fat percentage, according to my last medical, was over 35%. Now it may have come under 30%, but still pretty fricking far from okay (to paraphrase Marsellus of Pulp Fiction).

Having said that, I will try to get there because I like impossible odds and lost causes; I always did. Here is the plan: first thing to realize is that there is no such thing as a “targeted” fat loss. You cannot lose fat just from your tummy. And there is no way you can do countless crunches and get a six pack, which is why you don’t see a six pack on a guy with puny, pencil-like limbs. It is an all-or-nothing deal, part of a package. You have to do a lot of strength training on your major muscle groups (legs, back, chest, hands etc.), which will then act as fat burning machines getting you closer to your target of low body fat percentage. This is precisely what I plan to do for the rest of the year.

I think I will have one more post on this series, describing some exercises that I consider good, and sharing some tips. And describing the results of my protein shake experiment, which I am getting into this week. I don’t want to make this blog anything like a lose-weight, build-body, live-strong kind of site because I am just not qualified enough to talk too much about these things. This fitness craze of mine is perhaps only a passing fancy. Then again, my life has been a series of passing fancies, which I guess is as good a way to live it as any. Probably even better than most.

Sales and Structuring

Those in sales tend to be personable, extroverted and persuasive people. A good salesman can sell a refrigerator to an eskimo, I’m told. IN the context of the front office in the global treasury or global markets, sales people are tasked with sniffing out trading needs from their customers and offer compelling products from the trading and structuring desks to fulfill them.

Sales

The life of a sales professional is a tough one. They need to meet progressively more aggressive targets in sales volumes to stay in the game. The moment they meet the target one year, it jumps the next year to an even more unattainable level. The sales staff, therefor, find themselves under constant (or even increasing) pressure. Knowledge of mathematical finance, while useful, is not a pre-requisite for sales jobs. In fact, mathematically inclined folks tend to be reserved and introverted, and tend not to have the qualities that make for a good salesman. In other words, if you are a quant, your most ideal role is not in sales, although the structuring side may offer some interesting opportunities.

Do You Believe in God?

I got in trouble for asking this question once. The person I asked the question got angry because she felt that it was too personal. So I am not going to ask you whether you believe in God. Don’t tell me — I will tell you! I will also tell you a bit more about your personality later in this post.

Ok, here is the deal. You take the quiz below. It has over 40 true-or-false questions about your habits and mannerisms. Once you answer them, I will tell you whether you believe in God, and if so, how much. If you get bored after say 20 questions or so, it is okay, you can quit the quiz and get the Rate. But the more questions you answer, the more accurate my guess about your faith is going to be.

[ezquiz]
q: When you walk into a theater, classroom, or auditorium (and assuming that there are no other influential factors), you tend to sit on the right side.
a: false
q: When taking a test, you prefer an objective style of questions (true/false, multiple choice, matching) rather than subjective (essays).
q: You often have hunches.
a: false
q: When you do have hunches, you follow them.
a: false
q: You have a place for everything and keep everything in its place.
q: When you are learning a dance step, it is easy for you to learn by imitating the teacher and getting the feel of the music.
a: false
q: When you are learning a dance step, it easier for you to learn the sequence of movements and talk your way through the steps.
q: You prefer to keep the same arrangement of your furniture; you don’t like to move occasionally.
q: You can tell approximately how much time passed without a watch.
q: It is easier for you to understand algebra than geometry (speaking in strictly relative terms).
q: It easier for you to remember people’s faces rather than their names.
a: false
q: When given the topic “school”, you would prefer to express your feelings through writing rather than drawings.
q: When some one is talking to you, you respond to the word meaning, rather than the person’s word pitch and feelings.
q: When speaking, you use few gestures. (i.e., you very seldom your hands when you talk.)
q: Your desk or your work area is neat and organized.
q: It is easier for you to read to grasp the main ideas rather than specific details.
a: false
q: You do your best thinking sitting erect, rather than lying down.
q: You feel more comfortable saying/doing well-reasoned things rather than humorous things.
q: In math, you can explain how you got the answer.
q: You always wear a watch.
q: You keep a journal.
q: You believe there is a right and a wrong way to do everything.
q: You have difficulty following clear step-by-step directions.
a: false
q: The expression “Life is just a bowl of cherries” makes no sense to you.
q: You like it when people stick to their schedule.
q: If somebody asked you for directions to get somewhere, you would give clear step-by-step instructions rather than draw a map.
q: If you lost something, you would try to remember where you saw it or used it last rather than look for it everywhere.
q: If you don’t know which way to turn, you would think taking a chance (tossing a coin, for example) is as good as going with your instincts.
q: You are pretty good at math.
q: If you had to assemble something, you’d read the directions first.
q: You are almost always on time getting places.
q: You set goals for yourself so that you don’t slack off.
q: When somebody asks you a question, you turn your head to the left.
a: false
q: If you have a tough decision to make, you write down the pros and the cons.
q: You would make a good detective.
q: You are musically inclined.
a: false
q: You believe there are two sides to every story.
a: false
q: You keep a to-do list.
q: You feel comfortable expressing yourself with words (writing), rather than pictures and colors (drawing).
q: Before you take a stand on an issue, you get all the facts.
q: You often lose track of time.
a: false
q: If you forgot someone’s name, you would go through the alphabet until you remembered it.
q: When you are confused, you usually try to figure it out rather than go with your gut instinct.
q: You have considered becoming a lawyer, journalist, or doctor (but not a poet, a politician, an architect, or a dancer).
[/ezquiz]

Once you have your Score (or Rate, if you didn’t finish the quiz), click on the button corresponding to it.

         

Here is how it works. There is a division of labor going on in our brain, according to the theory of hemispheric specialization of brain functions. In this theory, the left hemisphere of the brain is considered the origin of logical and analytical thinking, and the right hemisphere is the origin of creative and intuitive thinking. The so-called left-brain person is thought to be linear, logical, analytical, and unemotional; and the right-brained person is thought to be spatial, creative, mystical, intuitive, and emotional.

This notion of hemispheric specialization raises an interesting question: is atheism related to the logical hemisphere? Are atheists less emotional? I think so, and this test is based on that belief. The quiz tests whether you are “left-brain” person. If you score high, your left-brain is dominant, and you are likely to be more analytical and logical than intuitive or creative. And, according to my conjecture, you are likely to be an atheist. Did it work for you?

Well, even if it didn’t, now you know whether you are analytical or intuitive. Please leave a comment to let me know how it worked.

[This post is an edited excerpt from my book The Unreal Universe]

Photo by Waiting For The Word

Economists

Economists have too many hands. On the one hand, they may feel that oil prices are going to go up because of increased demand from emerging giants like India and China. On the other hand, there is a global slowdown, and the overall demand is likely to fall, putting downward pressure on the prices. Then again, the rampant corruption and inherent deficiencies in markets like India might push the prices high. On another hand, price-driven improvements on the supply-side (like better production techniques) may eventually push the prices down. My ex-boss, an economist himself, once told me that he wished he could chop off some of these hands!

Economists

But seriously, economists are the mouthpieces of the bank. When you see someone from an investment bank on TV making an intelligent observation about the market outlook, it is likely to be a staff economist. If you manage to navigate through the jumble of hands, you will hear what the bank wants to say to the world.

That is precisely why you have to pay close attention and try to read between the lines. You are listening to what the bank wants you to hear. When you listen to a Morgan-Stanley economist assert that Facebook is the best thing since sliced bread, should you trust him, given that they were the investment bank behind Facebook IPO? Of course, the lingo you will hear from the economist would be a lot nicer, subtler and more convincing than I can muster. But you should still ask yourself, “Is there a hidden agenda?”

Economists may seek to influence the market; they also distill and condense their take on the market and share it with the traders and executives so that they can formulate and fine-tune their tactics and strategies. Thus, they play an important role in the directional views that banks take when navigating the tricky waters of trading and speculating.

Another Pen Story of Tough Love

Once a favorite uncle of mine gave me a pen. This uncle was a soldier in the Indian Army at that time. Soldiers used to come home for a couple of months every year or so, and give gifts to everybody in the extended family. There was a sense of entitlement about the whole thing, and it never occurred to the gift takers that they could perhaps give something back as well. During the past couple of decades, things changed. The gift takers would flock around the rich “Gulf Malayalees” (Keralite migrant workers in the Middle-East) thereby severely diminishing the social standing of the poor soldiers.

Anyway, this pen that I got from my uncle was a handsome matte-gold specimen of a brand called Crest, possibly smuggled over the Chinese border at the foothills of the Himalayas and procured by my uncle. I was pretty proud of this prized possession of mine, as I guess I have been of all my possessions in later years. But the pen didn’t last that long — it got stolen by an older boy with whom I had to share a desk during a test in the summer of 1977.

I was devastated by the loss. More than that, I was terrified of letting my mother know for I knew that she wasn’t going to take kindly to it. I guess I should have been more careful and kept the pen on my person at all times. Sure enough, my mom was livid with anger at the loss of this gift from her brother. A proponent of tough love, she told me to go find the pen, and not to return without it. Now, that was a dangerous move. What my mom didn’t appreciate was that I took most directives literally. I still do. It was already late in the evening when I set out on my hopeless errant, and it was unlikely that I would have returned at all since I wasn’t supposed to, not without the pen.

My dad got home a couple of hours later, and was shocked at the turn of events. He certainly didn’t believe in tough love, far from it. Or perhaps he had a sense of my literal disposition, having been a victim of it earlier. Anyway, he came looking for me and found me wandering aimlessly around my locked up school some ten kilometer from home.

Parenting is a balancing act. You have to exercise tough love, lest your child should not be prepared for the harsh world later on in life. You have to show love and affection as well so that your child may feel emotionally secure. You have to provide for your your child without being overindulgent, or you would end up spoiling them. You have to give them freedom and space to grow, but you shouldn’t become detached and uncaring. Tuning your behavior to the right pitch on so many dimensions is what makes parenting a difficult art to master. What makes it really scary is the fact that you get only one shot at it. If you get it wrong, the ripples of your errors may last a lot longer than you can imagine. Once when I got upset with him, my son (far wiser than his six years then) told me that I had to be careful, for he would be treating his children the way I treated him. But then, we already know this, don’t we?

My mother did prepare me for an unforgiving real world, and my father nurtured enough kindness in me. The combination is perhaps not too bad. But we all would like to do better than our parents. In my case, I use a simple trick to modulate my behavior to and treatment of my children. I try to picture myself at the receiving end of the said treatment. If I should feel uncared for or unfairly treated, the behavior needs fine-tuning.

This trick does not work all the time because it usually comes after the fact. We first act in response to a situation, before we have time to do a rational cost benefit analysis. There must be another way of doing it right. May be it is just a question of developing a lot of patience and kindness. You know, there are times when I wish I could ask my father.

Front Office

The Front Office looks quite complex in the slide below. All we need to remember is that the “Front” in Front Office is for world-facing. So in the slide below, you can see functional teams, some of which interact with the external world. These teams are:

  • Economists who talk to the media and receive market inputs that they condense into useable intelligence for the rest of the bank.
  • Sales and Structuring teams who talk to customers to sniff out potential opportunities.
  • Trading Desks, interacting with their peers in other financial institutions and other counter parties.

Front Office

One level removed from this layer of customer or world-facing teams are the quants and quantitative developers of Front Office, along with the risk managing professionals associated with the desks. They play supporting roles to the first layer of teams. Quants develop pricing models, quantitative developers roll them out into trading platforms, and the desk risk management team helps traders monitor and hedge their exposures. Note that almost all the interactions among these teams are mediated by the trading platform. The platform also acts as a conduit between the functions of Front Office and Middle Office. The nature of these functions and interactions of each team will be the topic of the next few posts, starting with the economists. Stay tuned.

Pride and Prejudice

Swami Vivekananda gave a few speeches at the World Parliament of Religions in 1893. These speeches still fill us Indians with a good deal of pride. I managed to locate an old recording of them on the Internet and cleaned it up a bit. Here it is for your listening pleasure.

The skeptic in me, however, will not let it to go without a critical self-examination. What exactly am I proud of? I would like to say his deep thoughts on the Hindu philosophy and his lucid expose on it. But the fact of the matter is, I was proud even before I heard or read the speeches. If you are proud as well, let me ask you this: did you actually listen to the whole speech? If you did not, what are you really proud of? By the way, I have the latter part of the speech (his paper on Hinduism) posted below, for your reading pleasure. One way or another, you are going to pay the price for your pride!

Swami VivekanandaI suspect my pride is a throwback to the colonial era, and the reverence of the associated foreign language that we somehow assimilated from our parents or grandparents. May be it is a bit more than that — may be it is that Swami Vivekananda managed to impress the heck out of a bunch of them, the colonial masters, which is something all of us want to do at some deep level. May be it is just his strong and fluent diction, and his command of the language.

If you see a dog walking on its hind legs, it’s not so much that it does it well, as that it does it at all. Is it appropriate for other dogs to feel proud of a dog that can demonstrate this alien trait? Are we doing something similar when we admire each other’s command of this foreign tongue? After publishing a column on Reading Between the Lines in a local newspaper, I got a phone call from a fan. Let’s put aside the feeling of creepiness in getting a phone call from a stranger on your cell phone; the gentleman (who sounded kind of old) was pleased with the what I wrote and how I wrote it. Now, thinking back about that call, I feel as though his admiration was also perhaps a remnant of our shared colonial past (though, in my case, the past was one or two generations removed). May be he felt that I had finally learned enough English to make an efficient clerk. This dog had finally mastered the art of walking on his hind legs.

Whatever its origin, this pride of mine has a flip side to it. It is the rise of the evangelical TV talk shows in India, and the instant nirvanas offered by new gurus. A while ago, I published a piece warning of the dangers posed by the modern gurus. While conceding that I may be prejudiced against them, I would like to draw your attention to this video where a guru is demonstrating the magical powers of a newly re-discovered ancient concoction, manufactured and sold by his nephew. A believer sees in this spectacle a genuine miracle, or at least a good, albeit hidden, reason for the guru to be doing this demo. I see only a bad reason. Instances like this video (and the live show I happened to have caught) fill me with the opposite of pride — shame. But then, what do I know — may be a hundred years from now, long after I’m dead and gone and forgotten, at least some of these modern gurus may be revered the same way Swami Vivekananda is now; though I wouldn’t count on it. In any case, I am pretty sure that their descendants will be a lot richer than mine.

http://www.youtube.com/watch?v=Quf3Ynu-Qq4 (This video where the guru himself performed the demo seems to have been removed for obvious reasons.)

Here is another such demo in a different context where nobody will have problem spotting the trick.

These videos and their message may have offended some of my readers, and for that, I apologize. When people invest their time and energy into spiritual endeavors, they do not want to be made aware of the negative aspects of their path, because seeing something negative in their pursuit is, in their view, tantamout to questioning their intelligence. This peculier resistance to truth also gets masterfully and cynically exploited by the new-age spiritual movements. I only want to say that I mean well, for some of those affected are people very dear to me.

And as promised earlier, here is the paper on Hinduism by Swami Vivekananda that he read at the Chicago conference.

Photo by Premnath Thirumalaisamy cc

Structure of a Bank

The trading arm of a bank consists of three so-called “offices” — the Front Office, the Middle Office and the Back Office. The Front Office (which may go by the names Global Treasury, Global Markets etc.) is the customer facing part. It houses the loud and strong-willed traders, extremely articulate economists, personable sales staff along with some mathematicians with thick glasses and bulging foreheads. The Front Office is considered the profit-making part of the trading activity — it is a profit center. All other teams in the other two offices are cost centers, which is a fact that is well reflected in the compensation structure.

Trading Platform

The Middle Office faces the Front Office, not the external world. They busy themselves with trade validation, lifecycle management, risk calculation, monitoring, limits enforcements etc. The Back Office is far removed from the Front (and from the sphere of influence of a quant or a quantitative developer). They take care of vitally important aspects of trading — namely settlements, taking and paying money. They also control the numbers that appear in the very visible annual reports.

By the way, the naming of the offices has nothing to do with their geographic location — a fact I learned early in my banking career about seven years ago when my boss wanted to take me to meet someone in the Back Office. I couldn’t figure out why he wasn’t actually leading me to the back of the building, I am embarrassed to admit.

Trading Platform

All the Offices are supported by multiple departments in the bank, most notably the Information Technology (which may go by the names Group Technology or any other transmogrificaiton of it). Also supporting everything happening in a bank (or in any corporate body, for that matter) would be Human Resources, Finance etc.

Before we conclude this post, we have to highlight a couple of caveats. The structure described above is by no means the whole bank. It is only the trading arm of the investment banking side of a modern bank. This part happens to be the one most relevant to quantitative developers. Even in this limited remit, the details of the structure (which we will get to in the subsequent posts) are not cast in stone. Each bank may have its own partitions, naming conventions and organizational and hierarchical structures around the various offices. Despite such differences, the static topology of the various offices haas enough commonality that we can talk about it general terms. As we will explore how the omnipresent trading platform mediates almost all interactions among these offices and their teams in the subsequent posts, we will get into more details of the structure.