Who Will Break the Google Monopoly?

google

I first discovered the internet nearly two decades back. It was an era when the internet speed was slow and the charges were extremely high. One could end up paying as much as Rs 120 per hour at an internet café. In fact, the first few times I logged on to the web, I wondered what was the fuss all about.

It is worth remembering here that I am talking about an era when even the humble sms was yet to make an appearance and the mobile phone rates were extremely expensive, with one having to pay for both incoming as well as outgoing calls. It was also an era when people largely surfed the internet from internet cafes. Of course, all that has now moved to the smart phone and home WiFi connections.

After a few sessions at internet cafés, I was told that there are websites known as search engines which allow you to search for stuff on the internet. One such website was called Ask Jeeves and there were others like Lycos and Alta Vista. While, all this sounded interesting, rarely did these websites throw up what one was searching for.

As Tim Harford writes in Fifty Things That Made the Modern Economy: “In 1998… if you typed ‘cars’ into Lycos—then a leading search engine—you’d get a results page filled with porn websites. Why? Owners of porn websites inserted many mentions of popular search terms like ‘cars’, perhaps in tiny text, or in white on white background. The Lycos algorithm saw many mentions of ‘cars’, and concluded that the page would be interesting to someone searching for ‘cars’.” It was easy to game the system. This is something that I personally experienced when I first started to use the internet regularly in 1999.

And then came Larry Page and Sergey Brin with Google. Their original idea was not come up with a search engine at all. In fact, they were trying to do something different. They were trying to build a system in order to measure how much credibility a research paper had. In academia, a research paper published in an academic journal is said to have credibility, if it is cited by other research papers. It has even more credibility if it is cited by research papers which are themselves cited many times by other research papers.

This led to the basic idea behind the Google search engine. As Harford writes: “Page and Brin realised that when you looked at a page on the nascent World Wide Web, you had no way of knowing which other pages linked to it. Web links are analogous to academic citations. If they could find a way to analyse all the links on the web, they could rank the credibility of each page in any given subject.”

And this idea essentially led to Google throwing up relevant search results unlike other search engines. The irony is that Page and Brin were not really sure of the potential of what they had built. As Duncan J Watts writes in Everything is Obvious – Once You Know the Answer, “In the late 1990s the founders of Google, Sergey Brin and Larry Page, tried to sell their company for $1.6 million.” The story goes that the buyer thought that Brin and Page were asking for too high a price and decided not to go ahead with the deal.

Thankfully, they didn’t. And now they are in a position where they have a natural monopoly. Why? As Harford writes: “Among the best ways to improve the usefulness of search results is to analyse which links were ultimately clicked by people who previously performed the same search, as well as what the user has searched for before. Google has far more of that than anyone else. That suggests it may continue to shape our access to knowledge for generations to come.”

The column originally appeared on August 16, 2017 in the Bangalore Mirror.

On Selfie-Love

dhinkchak pooja

The latest internet sensation is a young woman who goes by the name of Dhinkchak Pooja. And her claim to a fame is a totally tuneless song called selfie maine le li yaar (My friend, I have taken a selfie).

For those who still don’t know what a selfie is, it is a self-photograph taken with a digital camera. To go a step ahead, once the selfie has been taken, it is posted on the social media.

A good selfie song would have talked about the current obsession to click selfies and post it on the social media. But sadly Dhinchak Pooja’s song doesn’t.

What explains this selfie obsession? In order to answer this question, we will have to look at some history.

As Seth Stephens-Davidowitz writes in Everybody Lies—What the Internet Can Tell Us About Who We Really Are: “When photographs were first invented, people thought of them as paintings. There was nothing else to compare them to. Thus, subjects in photos copied subjects in paintings. And since people sitting for portraits couldn’t hold a smile for the many hours the painting took, they adopted a serious look. Subjects in photos adopted the same look.”

And this created a problem for the film and camera company Kodak. People were not clicking enough pictures. In order to correct this, Kodak devised a strategy. As Davidowitz writes: “Kodak’s advertising began associating photos with happiness. The goal was to get people in the habit of taking a picture whenever they wanted to show to others what a good time they were having. All those smiling yearbook photos are a result of that successful campaign (as are most of the photos you see on Facebook and Instagram today).”

Over a period of time, the camera and the photo films, were replaced by digital photography. The irony is that Kodak developed the first digital camera, but did not cash in on it. As Mark Johnson writes in Seizing the White Space:In 1975, Kodak engineer, Steve Sasson invented the first camera, which captured low-resolution black-and-white images and transferred them to a TV. Perhaps fatally, he dubbed it “filmless photography” when he demonstrated the device for various leaders at the company.”

Sasson was told “that’s cute – but don’t tell anyone about it.” The reason for this was very straightforward. Kodak at that point of time was the largest producer of photo film in the world. And there was no way it was letting filmless photography destroy that market.

But nobody can stop an idea whose time has come. Digital photograph went from strength to strength despite Kodak. And the funny thing is that the association between photographs and the idea of having a good time continued, and only grew stronger. In fact, digital photography along with social media has made it even more easy for people to show that they are having a good time.

Digital photography has now moved on to smart phones and costs nothing after the fixed cost of buying the phone has been made.  Earlier one could only click a certain number of pictures with a photo film. After that a new film had to be bought and that cost money. These pictures had to be then developed in a lab and that cost money as well. Hence, people couldn’t go totally overboard while clicking pictures.

The digital pictures in particular selfies can be posted on to the social media to tell the world what a good time the person taking the selfies is having, which is why so many selfies are taken in the first place.

The camera companies which are the new photo film companies understand this association of photography with happiness and showing off, and that explains to a large extent why so many camera ads are now built around the idea of taking pictures in general and selfies in particular.

So, the more things change, the more they remain the same.

And we thought phones were something we used to talk to one another.

The column originally appeared in the Bangalore Mirror on August 9, 2017.

India@70: Where are the jobs?

indian flag

On August 9, 2017, lakhs of people belonging to the Maratha caste poured into the city of Mumbai for a silent march. 57 similar marches had already taken place in the state of Maharashtra, starting from Aurangabad on August 9, 2016. This was the 58th. The rallying cause behind the marches was to protest against the rape and murder of a teenaged girl belonging to the caste in Ahmednagar district in July last year. Other than the rallying cause, the Marathas have demanded quotas in government run as well as aided educational institutions. They also want reservations in government jobs.

Marathas are not the only land-owning caste in the country demanding a reservation in government jobs. Similar demands have been made by the Patels in Gujarat, the Kapus in Andhra Pradesh, the Jats in Haryana and the Gujjars in Rajasthan. The question is why do land-owning castes suddenly want reservation in government jobs, seven decades after Independence?

A major reason for this lies in the fact that the average size of a farmer’s landholding has fallen over the years. As the State of Indian Agriculture Report of 2012-2013 points out: “As per [the] Agriculture Census [of] 2010-11, small and marginal holdings of less than 2 hectare[s] account for 85 per cent of the total operational holdings and 44 per cent of the total operated area. The average size[s] of [the] holdings for all operational classes (small & marginal, medium and large) have declined over the years, and for all classes put together it has come down to 1.16 hectare[s] in 2010-11 from 2.82 hectare[s] in 1970-71.”

Take a look at Figure 1.

Figure 1:  Decline in the average size of agricultural landholdings between 1970-1971 and 2010-2011.

Source: State of Indian Agriculture Report, 2012-2013.

The agriculture census is carried out every five years. Hence, the latest available data is as of 2010-2011. The situation would have only gotten worse since then. The trend of falling farm sizes can be clearly seen from Figure 1. As the same piece of land has got divided among more and more family members over the generations, the average holding has fallen dramatically. And this has made agriculture unviable for many in the land-owning castes. Hence, the demand for reservation in government jobs.

The trouble is that the government doesn’t create jobs anymore, neither at the level of state governments nor at the level of the central government. Hence, what will happen once the land-owning castes figure this out? Will they demand reservations in private jobs as well?

The rate of unemployment

The irony is that the huge demand for jobs among the land-owning castes and others is not reflected in India’s rate of unemployment. The Labour Bureau carries out the Annual Employment-Unemployment Survey. This Survey is hardly annual. It was first carried out in 2009-2010. It skipped a year and was carried out for the next three years. It skipped a year again in 2014-2015 and was carried out again in 2015-2016. The 2015-2016 Survey is what will be discussed here.

The Labour Bureau basically measures unemployment using two methods. The first method is called the Usual Principal Status (UPS) approach. In this approach, “the major time spent by a person (183 days or more) is used to determine whether the person is in the labour force or out of the labour force.”

As per this method, the rate of unemployment was just 5 per cent.

The second method is called the Usual Principal and Subsidiary Status (UPSS) approach. Here, “a person who has worked even for 30 days or more in any economic activity during the reference period of [the] past twelve months is considered as employed under this approach.” As per this method, only 3.7 per cent of the workforce was unemployed.

Such low rates of unemployment are hardly surprising given the definitions of unemployment that are being followed. In the first method, an individual might have been unemployed for close to half the year but would still be considered to be employed. In the second method, an individual might not have had a job for 11 months during the year and would be considered employed.

Given this, the rate of unemployment does not tell us anything about the desperate search for jobs. But there is another set of data points that the Labour Bureau puts out, and that rarely makes it to the media. Take a look at Table 1.

Table 1:  All-India percentage distribution of persons available for work for 12 months (UPSS approach).

Source: Report on the Fifth Annual Employment-Unemployment Survey, 2016.

Table 1 basically tells us what proportion of the population which is looking for a job all through the year is able to find one. Around 61 out of 100 Indians in the workforce looking for a job all through the year are able to find one. In rural areas, only around 53 out of 100 individuals who are looking for a job all through the year are able to find one. These numbers point towards the huge underemployment of India’s workforce.

This is hardly surprising given that in the last two financial years, agriculture has contributed around 14 per cent to the gross domestic product and employed close to half of the working population. There is a clear mismatch here. Around half the country’s workforce is only contributing 14 per cent of the GDP.

What this means is that there is huge disguised unemployment in the rural areas. Disguised unemployment essentially means that there are way too many people trying to make a living out of agriculture. On the face of it, they seem employed. Nevertheless, their employment is not wholly productive, given that agricultural production would not suffer even if some of these employed people stopped working.

So, the unemployment numbers might not point towards India’s distressing job situation but the underemployment number clearly does. This is also borne out in Figure 2, which has been sourced from a recent report titled OECD Economic Surveys India.

Figure 2:

This report puts the rate of unemployment among India’s youth between the ages of 15 and 29 at more than 30 per cent. These youths are neither employed nor in education or training.

Regular unemployment data

The Fifth Annual Employment-Unemployment Survey was carried out in 2015-2016. It has been close to a year and a half since then and we haven’t had any fresh unemployment data being published by the government.

As Volume 2 of the Economic Survey of 2016-2017 released earlier this month, points out: “The lack of reliable estimates on employment in recent years has impeded its measurement and thereby the Government faces challenges in adopting appropriate policy interventions.” It then lists out 10 ways used by the government to measure unemployment and the problems with them. The problems listed are: “Partial coverage, inadequate sample size, low frequency, long time lags, double counting, conceptual differences and definitional issues, rarely used for the purpose of employment estimation etc.” This, of course, leads to the question why have 10 wrong ways of measuring unemployment and not one right way?

The government has tried to correct this by setting up a task force headed by [now former] NITI Aayog Vice-Chairman Arvind Panagariya to generate timely and reliable employment data. This is a step in the right direction. The tragedy is that this should have happened many years back, even before Narendra Modi took over as the prime minister. Of course, the previous governments are to be blamed for this as well. The Modi government also took more than three years to initiate something to solve this problem.

The trouble is that close to one million Indians are entering the workforce every month. That makes it around 1.2 crore Indians a year. And the government is still struggling with counting the number of the unemployed.

What makes things worse is that most of the individuals who are entering the workforce are not skilled enough. Over the years, the government has tried to correct this by outsourcing skill development to the private sector rather than just depending on the Industrial Training Institutes or the ITIs. But the scale of operation continues to remain very small.

As the Economic Survey referred to earlier points out: “For urban poor, Deendayal Antyodaya Yojana National Urban Livelihoods Mission (DAYNULM) imparts skill training for self and wage-employment through setting up self-employment ventures by providing credit at subsidized rates of interest. The government has now expanded the scope of DAY-NULM from 790 cities to 4,041 statutory towns in the country. So far, 8,37,764 beneficiaries have been skill-trained [and] 4,27,470 persons have been given employment.” When one million Indians are entering the workforce every month, this is not even a drop in the ocean.

Other data points

While we may not know the right rate of unemployment on a regular basis, there is enough other data that suggests that job creation is not happening. Take a look at Figure 3. It basically plots the bank lending to industry.

Figure 3:

Source: Reserve Bank of India.  

The lending carried out by banks to the industry has fallen over the years. In fact, in 2016-2017, the lending to industry shrunk by more than Rs 50,000 crore. This basically means that on the whole, the banks did not lend a single new rupee to the industry in 2016-2017. The reason for this is very straightforward. The industry has defaulted on its past loans and banks are no longer in the mood to lend.

This also shows us that the industries are no longer borrowing and expanding and creating jobs in the process. Of course, banks are not the only source of borrowing for industry. If we were to look at the overall flow of financial resources to the commercial sector it was down by around 11 per cent in 2016-2017 in comparison to a year earlier (Source: RBI Monetary Policy Report April 2017).

Over and above this, demonetisation had a huge negative impact on jobs in the informal sector. The Bharatiya Mazdoor Sangh (a trade union affiliate of the BJP) estimated that nearly 2.5 lakh units in the unorganised sector were closed down. Then there is the latest Reserve Bank of India (RBI) Consumer Confidence Survey. More people now believe that the employment conditions have worsened over the last year.

The leaders of the Bharatiya Janata Party like to claim that crores of jobs have been created through Mudra (Micro Units Development and Refinance Agency Bank) loans given out by banks. In 2015-2016 and 2016-2017, a total of 7.46 crore individuals were given Mudra loans. Hence, 7.46 crore jobs were created is the logic that is offered. But this is something that the CEO of Mudra does not confirm. As he told NDTV recently, when asked how many jobs had these loans created: “We are yet to make an assessment on that… We don’t have a number right now, but I understand that NITI Aayog is making an effort to do that.

The point being India has a serious jobs problem and we aren’t doing much to tackle it. And there are going to be no acche din without jobs.

The column originally appeared on Newslaundry on August 15, 2017.

बिना सनी देओल के कैसे बनी Dunkirk?

sunny deol

ऊ बोलिस के एक ठो अंगेरजी में Dunkirk करके सिनेमा आया है. देखेंगे का?

अरे एक बार बॉर्डर देख लिए उसके बाद भी कोई यो वॉर मूवी बचा है का देखने के लिए?

अरे बहुते अच्छा स्पेसल इफ़ेक्ट दिया है, हम सुने हैं.

अरे दिया होगा! पर एक्को ठो गाना नहीं है फिल्म में.

पर सुने के बैकग्राउंड म्यूज़िक बहुते बोवाल है.

अरे रहने दो. इ भी कोई सिनेमा हुआ, के हेरोइनवा एक्को बार रोइ नहीं, गणवा भी नहीं गाई. कुछ नहीं तो संदेसे आते हैं वाला गणवा ही डाल दिया होता.

हैं?

और नहीं तो का.  जे पी दत्त्वा से केवल राइट्स तो लेना था…और सोनुवा तो ऐसे भी बेकार है आजकल, फ्री ये में गा दिया होता.

हैं?

और बताईये, सनी देओल के ढाई किलो के हाथ के बगैर कोई वॉर मूवी बन सकता है का…

एक थे सुशासन बाबू…

220px-Nitish_Kumar

विश्वस्त सूत्रों से पता चला है के सुशासन  बाबू उर्फ़ निकु की ज़िन्दगी में बशीर बद्र की एक ग़ज़ल का बहुत ज़्यादा असर रहा है.

उस ग़ज़ल के चाँद अशआर कुछ यूँ है:

मुसाफ़िर के रस्ते बदलते रहे 
मुक़द्दर में चलना था चलते रहे

मोहब्बत, अदावत, वफ़ा, बेरुखी
किराये के घर थे बदलते रहे

अब कोई एक जगह जहाँ के मोहब्बत, अदावत, वफ़ा और बेरुखी का मिश्रण खूब चलता है, और लगभग एक साथ चलता है, वो सियासत है .

और सुशासन  बाबू इस बात को खूब समझते हैं…

Who Does Low Inflation “Really” Benefit?

rupee

Every month the ministry of statistics and programme implementation declares the inflation based on the consumer price index. Inflation is essentially the rate of price rise. The inflation for the month of June 2017, came in at 1.5 per cent.

This basically meant that prices in June 2017 overall were higher by 1.5 per cent in comparison to June 2016. This is the lowest inflation that the country has seen over the period of last five years.

Hence, not surprisingly, the government moved very quickly to claim credit. Arvind Subramanian, the chief economic adviser to the ministry of finance, said: “This low, heartening number is consistent with our analysis for some time now.”

This is one of those statements that makes economics the subject that it is, where equally convincing arguments can be made from the two ends of the spectrum.

Allow me to explain.

Low inflation is heartening because the rate of price rise has come down. It needs to be understood here that low inflation does not mean lower prices. It just means that the rate of price rise has come down than in comparison to the past and that is a good thing. Or so the chief economic adviser would like us to believe.

The question is why has the rate of inflation come down? The consumer price index that is used to calculate inflation is made up of a large number of goods and services. The government tracks the prices of these goods and services across the country, in order to arrive at the inflation number.

Food and beverages constitute around 45.9 per cent of the index. Food and beverage prices fell by 1.2 per cent in June 2017 in comparison to June 2016. In fact, prices of some of the constituents like pulses and vegetables have fallen at a much faster rate than the overall rate.

The price of vegetables fell by 16.5 per cent and that of pulses fell by 21.9 per cent. Vegetables and pulses together constitute a little over 8.4 per cent of the index.

So, what does this mean? It means that the overall rate of inflation is down because food prices have actually come down. Lower food prices essentially mean that the farmers growing food, have sold what they grew at a price lower than they had in the past. Also, these lower prices do not always reach the end consumers, with middlemen taking in a bulk of the benefit.

There have been many stories in the media portraying the plight of these farmers who have had to sell their produce at lower than their cost price and face losses and get even more indebted. In fact, it is not surprising that over the last few months, there has been so much demand for loans to farmers to be waived off, all across the country.

The larger point is that if inflation has become very low then someone is not being paid as much as he was in the past. And this can be due to various reasons. In this case that someone happen to be farmers. Farmers form around half the working population. If they face losses then they are less likely to spend as much money as they had in the past. This will impact rural growth and in the process, the overall economic growth.

Hence, when Subramanian finds low inflation heartening, he ignores this line of thought totally. As Evan Davis writes in Post Truth—Why We Have Reached Peak Bullshit and What We Can Do About It: “There are certainly such things as facts, and no one should persuade you otherwise. But aside from quite banal facts (‘the sun is shining’) we always have to use judgement in deciding what is a fact and what to believe: we have to apply a judgement as to the weight of evidence in its support relative to the weight of interpretation put on it.”

The column originally appeared in the Bangalore Mirror on July 19, 2017.

Of Exams, Luck and the Paradox of Skill

exam

In last week’s column, I wrote about the role that luck, skill and hard work, play in exams. In this column, I plan to get into a little more detail on the issue.

Over the last few years, the media has made it a habit to splash the pictures of toppers of competitive exams as well as board exams (10th and 12th standards). Other than the fact that any sort of success needs to be recognised, such columns make for an inspirational read, particularly in cases where the toppers come from a poor family.

When it comes to competitive exams (from engineering exams to UPSC exams), there are magazines which interview toppers, in the hope of finding out the formula for success, so that their readers can benefit. And typically, most such news stories and interviews have more or less standard reasons being offered for success. These are hard work, family support and following a regular routine.

Of course, topping exams needs hard work and family support. But are these the only reasons? And if that is the case, how come two equally intelligent candidates, putting in the same amount of hard work and having the same level of family support, don’t perform at the same level in any exam? Because there is something known as the paradox of skill at work.

As Michael Mauboussin writes in The Success Equation—Untangling Skill and Luck in Business, Sports and Investing: “As skill improves, performance becomes more consistent, and therefore luck becomes more important… In other words, if everyone gets better at something, luck plays a more important role in determining who wins.”

Mauboussin offers the example of a company. As he writes: “A company can improve its absolute performance, for example but it will remain at a competitive parity if its rivals do the same.” In this situation whether the company does better than its rivals, depends on luck. As Mauboussin writes: “When everyone in business, sports, and investing copies the best practices of others, luck plays a greater role in how well they do.”

How does this apply in the context of exams? Most people prepare for exams these days by going to coaching institutes and if not that, at least using study material provided by coaching institutes. This is typically true more for competitive exams. But it is also true for board as well as BA/BSc/BCom exams in many states.

Given this, a significantly large pool of candidates which has access to the same study material and is also more or less equal on other parameters, faces the paradox of skill. In this situation, who comes out on top or even qualifies in a competitive exam, depends on their luck on the day of the exam.

Let me give you an example from my life. When I first wrote the Common Aptitude Test (CAT) for admission into the IIMs and other MBA colleges, I had prepared decently for the exam. The city that I grew up in did not have a CAT exam centre. So, I had to go to another city to write the exam. I spent a sleepless night in the hotel overnight. And this clearly had an impact on my performance in the exam.

If the examination centre had been in the same city that I grew up in, my performance in the exam would have been significantly better. But this was how the luck of the draw turned out.

The same logic applies to toppers as well. Of course, they need to work hard, but they also need to be lucky on day of the exam. This could mean anything from sleeping well overnight to being able to reach the exam centre on time to not becoming obsessed with a question they are not able to solve.

The media focus on the toppers does injustice to many others who do not come out on top, but are equally intelligent. It’s just that on the day of the exam things didn’t work out as well for them, as they did for the toppers. And there is no second chance.

The column originally appeared on June 28, 2017 in the Bangalore Mirror.