RK's Musings

More than you know : Summary - Part 2

Continuing from my last post where I had left the juicy part of the book for this post, here I go :

The last topic contains ideas which I find fascinating. Markets are complex adaptive systems and one can understand it better if you have systems thinking. Peter Senge's Book "The Fifth discipline" had a great impact on my way of thinking and each essay in the last part of the book is a suggestion towards developing such a kind of thinking.

The author points out to the need for diversity in thinking. Reading about how stats is used in baseball to improve a team's performance can teach you a lot than trying to look for cases in your own domain. A healthy discussion with a ecologist can give you more insights about speculation in financial markets than trying to look at indicators from the same field. Google's search engine and the way it used eigen value decomposition can provide you with a far more insight in to the usual factor analysis of stock returns. Research evidence from study of ants, bee-hives can give clues about how markets aggregate information.

Decision markets, and readings like "Wisdom of Crowds", " Wikinomics" can give you insight in to taking positions on a stock or a derivative.
Study of fractals is more meaningful than studying and working on the same old academic finance theories which are based on normal and log normal distributions. Power laws and the ways Power laws are used in fields like economics, psephology and like can help one understand markets better.

The entire point of the essays under this section is to urge you to keep your mind active and open to things happening in fields which might not seem related at the outset. Markets as a system can be understood better by applying ideas and thoughts from other fields.

Take any branch of finance in today's date..It is crying for contributions from other fields..It is being flooded by sociologists, ecologists , psychologists, who know that finance as a discipline can grow only by fusion of ideas from various fields. Case in point , Mandelbrot's fractal finance. Finance literature has virtually nothing on fractal finance as compared to the other kinds of literature. I had a chance meeting with the Mr.Barone Adesi , the person behind closed form solution for american option. I asked him whether he would consider research in fractal finance a viable option for a budding researcher. He said, he had himself worked on it for 2 years and was hopeful that research will pick up in this area.

I remember another faculty giving an analogy of ants in research literature. If you place something that attracts ants and you see to it that there are only 2 possible ways, inevitable one of the ways gets used by ants and the whole path is jam packed, even though an alternate path is available. This is similar to academic literature where it is only by getting references and citations from similar research initiatives , can one publish papers. Coming back to the analogy of Ants, once in a while , a few ants move from the pack and explore new paths and that is how ants as a community survive. Finance has reached a stage where it needs such diverse thinking and one can only hope a few people from academia or a few practitioners will actively stray from the usual path and help us answer some of our questions on

• How do markets aggregate information ?
• What does aggregation mean from market efficiency ?
• Concept of risk remains incomplete
• We don't know how our brains work ?.........................and many more such questions that need to be looked at.
  
  This book reminds me of a set of essays I read a few years ago, "Essays on Derivatives" by Don Chance. Each of the essays revolved around a simple but powerful idea. I get the same feeling after reading this book.This book provides a lot of food for thought. If you want to think on the areas where finance concepts have to be worked on, read this book..Out of 30 ideas, I am certain that atleast a few will interest you.
  
  

More than you know : Summary - 1

This book contains about 30 essays , meaning 30 ideas which can be read, ruminated and possibly applied in real life situations wherever they are applicable. Though the book is about finance, it draws considerable amount of research evidence from Biology, Math, Sociology,etc . At a 10,000 ft view , actually each discipline is nothing but an effort to understand the world using a set of constructs.

I would term Finance as a soft science rather than hard science where the discipline needs to be understood from various eyes . For a number cruncher , it becomes all the more important to realize that numbers,statistics is after all ONLY one part of the story in markets. One must consider market as a complex adaptive animal where numbers is ONLY one part of understanding. The more the mental models one has, the better one is equipped to understand what's going on.

I will try to summarize the key idea from each of the 30 essays from the book.

Part I

1. Process is more important than Outcome in Investing
   Always consider success as a lucky realization unless you backtest it. Just because you make money using some trading rule does not mean that you are going to make it again. There is an undoubtedly a strong relation between good process used to make a decision and a good outcome. Think about it, this applies not only to investing but also to most of the things we do in life. Lets assume that you think that C# is the best language to create something that is needed, but somehow your skills are rusty and you would rather do it with VBA and build the same screens etc. Well, it might be probably good for short term, but can anyone use the tool apart from you? Is it Scalable ? Does it have a wow! element ? Is it extensible ?
   
2. Constant see-saw between Investing considered as Business or Profession
   This is the same point which Daniel Kahneman makes about the scale struggle. Money managers consider Investing as a business and work for the immediate goals and immediate returns (quarterly/yearly) but Business operates on a longer scale. I think instead of thinking of it as a Business or Profession, it is best if one can think of it as a Business and Profession. There will always be some assets which can be shorted at a professional scale and always some assets which can be longed at a business scale.
3. Babe Ruth Effect
   Well, this one is pretty well known. Focusing on frequencies and not on the Expected value can kill a risk manager. The same idea as Taleb's Pi Lambda. In Mediocristan, Frequencies are important because payoff is pretty much symmetrical. But in Extremistan, it is important to understand the payoffs are not symmetrical. Infact they are very skewed and following frequentist approach is equivalent to being a sucker.
4. Proper Categorization is the Key (Context based)
   Most often than not, we categorize things and do not check the stationarity of the categories. My best ever read on categorization is an essay by Clay Shirky (Ontology is Overrated). Categorization as a subject has always fascinated me. In this book however the author says theories based on static categorization are not good. Well, we all know it, but how many of us actually keep that in mind when we go about theorizing, categorizing world events.
5. Learn to translate uncertainty to Probability.
   Degrees of Disbelief, Propensities and Frequencies are three ways to get to probability . Academic world is orgasmic about Frequentist world.Successful traders love propensities and uninformed trades live in the world of degrees of disbelief. For a trader who wants to trade by numbers, it is very important that he follows all the three ways depending on the context. For a plain vanilla options, frequentist is not a bad path to take. Well, you can rise over the usual theories known , do your own analysis on whether to follow mixture models, poisson+ gamma , whatever. However propensity based path needs to be taken too based on the context
   
6. There is a Hot Hand in Investing, if not in baseball
   Long streaks of success typically indicate luck imposed on great skill
7. Equity Premium Puzzle
   Loss aversion and Myopia can explain the equity premium puzzle. Somehow I felt that is is the same time scale difference that is being brought out by the author
   
   
   
   Part II : Psychology of Investing
   
8. Link between Stress and Suboptimal portfolio Management
   Essay beats the same point. Money managers operate on Shortening horizons, leading to stress to leading to suboptimal portfolio performance
9. Persuasion
   Robert Caldini's 30 year work is wonderfully summarized in this essay. The construct that there are 6 tendencies that spur a behavioral change : Reciprocation, Consistency , Social Validation, Looking, Authority and Scarcity . Each of these 6 tendencies are important when you need to think about the trading behavior change that can be observed in the market or trading rooms
10. Emotion and Intuition in Decision making
    
11. Guppy Love : Role of Imitation in Markets
    Asymmetric information, Agency costs and Preference for conformity are three things which force traders to confirm. But this also leads to Herding.
12. Beware of Behavioral Finance
    This chapter was like a breath of fresh air in this book. Behavioral Finance follows the reasoning, Individuals are irrational and an aggregation of irrational individuals must lead to an irrational market. However the essay says that " Markets can still be rational when investors are individually irrational". Meaning there is a law of large numbers at play. The very fact that players operate at different time scales, investment styles and investment approaches means that diversity will always ensure collective rationality.. Which means whenever there are imbalances the market corrects itself. Well, Do I agree with this view ? I don't think I am knowledgeable enough to form a view. But as such as a basic premise,I do believe in collective rationality and individual irrationality. But again, it is just a belief with no evidence to back it up
    
13. Essay on Keynes Expectation theory
    Comparison of Markets to "Beauty Contest" and "El Farol Bar". The idea that is conveyed in this essay is about deductive Vs inductive reasoning. Inductive is how we operate and it brings itself with a variety of bias. Deductive is how economics tries to operate , applying general principles to specific. In the case of markets, it ought to have been deductive but looking at market players, it appears inductive.This debate of deductive and inductive reasoning is brought out clearly.
    
    
    
    
    Part III: Innovation and Competitive Strategy
    
    
    
    
    I had a very strong tendency to skip over these essays for the simple reason that I have grown indifferent to the words strategy, competition, innovation etc. These are words, I remember , back in B school days, I was so fond of. It seemed as though using these words and thinking on these lines was leading to productive thinking. Over a period of time, I have realized that these are just fillers in conversations when you don't have clear thinking. In fact all the buzz words that I learnt at B school, I have consciously tried to avoid over the past few years. These words look good in case studies and HBR articles ... that's all there is to it. If you have to do anything productive, I think it is better to ignore these words and think in simple terms.
    With this kind of strong aversion towards such words, I was in no mood to go over these essays on strategy. But then I gave in, thinking that I might get at least some simple & meaningful thoughts from the next 7 essays. What did I find ?
14. blah-blah-blah-blah
15. blah-blah-blah-blah
16. blah-blah-blah-blah
17. blah-blah-blah-blah
18. blah-blah-blah-blah
19. blah-blah-blah-blah
20. blah-blah-blah-blah
21. blah-blah-blah-blah
    
    
    As expected the entire part on strategy was like reading some old Bschool case..It bored me to death!! The only thing that I found was somewhat educative was about fitness landscapes. Again you can term it as old wine in new bottle. The other possible idea which deserves a mention is the analogy of chess players and traders
    -- Don't look too far ahead
    -- Develop options and continuously revise them based on the changing conditions
    -- Know your competition
    -- Seek Small advantages
    Again the above points are cliched, but the essay is a little better as it brings about nice chess analogies using these points.
    
    
    Part IV: Complexity Theory
    
    
    
    This part of the book rocks!
    
    Will summarize the last part of the book in my next post
    

Stumbling on Happiness : Summary

Stumbling on Happiness, is one of those books which I decided to read, mainly to take a break from the usual type of books that I read.

Last weekend I went to Boston to meet my friend Anoop as I was leaving US for good. As always, the 4.5 hr journey from NY to Boston gives any one a wonderful time to read. Generally, I tend to always remember distinctly some specific facts about books. About this book, I came across this book for the first time in 2006 while working at Fidelity. I remember it browsing through at South Station, Boston. My first impression was that it was some sort of a self-help book. After glancing through the contents a few pages, it did not smell of a self-help book. However I was too busy with my project and work at Fidelity that I did not find time to read this book. Anways , One fine day, I found myself strolling at Borders (near Penn Station, NY)when this book was screaming "Pick me up" from one of the aisles. So, made an impulse purchase knowing that the same book from amazon would cost me 40% cheaper.

After I purchased this book, somehow I did not find time for reading the book , probably thanks to my arb research. Boston visit provided me with one such opportunity to read the book.
Not to be over dramatic, but this book has made a definite impact in the way I think/ thought I think

Indeed, if you have even the slightest curiosity about human condition, you ought to read this book. Would it benefit you in your professional life? I don't know.
Would it give you "Ten tips to become happy", No.
Would it give you a recipe to live a happy life? No.
Would it tell you about the reasons you are unhappy? No
....... Well, I can go on and on. However this book does not belong to such category of books. The reason one should read this book is to not let your mind fool you in to believing something , especially believing stuff which you think might make you happy ?

Let me summarize this beautiful book in terms of broad themes it talks about.

This book is a scientific take on the errors we make when we try to imagine our futures. Book strongly argues that our errors are lawful, regular and systematic. A cognizance of nature of errors is very valuable and in that sense this book is an awesome read.

Subjectivity

In the initial part on "Happiness", the author delves on a scientific take on the subject and explores interesting aspects. There are 2 main arguments which the author makes on happiness. Happiness experienced by one person is dependent on specific context, life events, circumstances and can never be compared. Much to the chagrin of the scientific minds who want to compare happiness based on some scales, author says that such scales are meaningless. The second argument that the author makes is that , law of large numbers is the saving grace to deal scientifically with a subject like happiness, in spite of its extreme personal stampish trait attributed to happiness.

The author then goes to talk about three shortcomings of Imagination,which is used to think about future

Realism: Imagination works so quickly, quietly and effectively that we are insufficiently skeptical of its products

Mind remembers only parts of information of events. It tries to recreate the tapestry of events by filling in details and leaving out details. This process creates a strange narration of past by the mind, a narration which needs to be looked at with some skepticism. We expect the future to unfold with the details we have imagined and we fail to be critically aware of this mind trick.
It is very important to recognize that mind creates this synthetic past and future. Take away - Be aware of Synthetic happiness.

Presentism: Imagined futures often look so much like the actual present

This part says " Our imagination is heavily biased with the current state of thinking " . We find it difficult to disassociate our present feelings with our imagination of the future. This creates problems when we make decisions etc that we think bring happiness in our future lives.

Rationalization: We have hard time telling how we will think about the future when we actually get there

Context, Recency and Frequency play a big role in our future imagination. In most of the cases, we cook up facts and theories to make us believe things about future. But we have no clue whether those theories hold good, whether those theories make sense and ultimately whether our concept of happiness based on rationalization makes sense in the long run.

Corrigibility

• We remember endings and hence this effects the way in which we recollect the feelings
• We have theories about how we must have felt and that decides our ability to remember our feelings
• We remember specific things/ unusual events and base out experiences on it, rather than the complete event.

Takeaway is that the ability to recollect exact feelings is error prone and it is very very important to keep this in mind.

Is there a remedy to these shortcomings of our imagination ? Yes, there is one . However it is little difficult to put in to practice as we increasingly think we are unique, different from others, etc etc. We fail to comprehend or fail to choose to comprehend that it is easy to find surrogators who are facing our simulated situation currently. Since our imagination of the future is limited, we can at least find a surrogate who is currently facing a situation that we are imagining and look at how happy he/she is. This , according to the author, can cut down the bias we create when we imagine about the future.

This book makes one think about one's own imagination, biases that we carry on, reevaluate the way in which we have/are taking decisions. One takeaway for me is that I will keep in mind these bias while trading/speculating. I intend to keep a detailed log of trading results and my thinking behind those decisions. In that way, at least I can go back and retrace some of the thinking , with out these bias creeping in.

This book has so many important insights that it will delight any kind of reader!

For those who are time strapped / attention strapped, here are a few video links. ( These links might in turn motivate you to read the book)
Video Links
Dan Gilbert at Ted -1
Dan Gilbert at Ted -2
Dan Gilbert at Poptech - 1
Dan Gilbert at Poptech - 2

Pascal's triangle and Manhattan streets!

I guess this illustration serves as one of the best ways of explaining pascal's triangle to a kid.
If you at A, each intersections of street and avenue has a number which tells you the # of ways to reach that intersection.

By the way, the above model is exactly what is taught in binomial tree option pricing in most of MBA courses around the world!

Purple Cow : Ambient

Ambient - Design at its best

Data doesn’t have to be dry. We’re used to seeing online information delivered as boring numbers, dense charts, or incomprehensible tables. This is dramatically different from the way we think about the analog world. We know if the pond is frozen from the color of the water. We can tell the status of the gas in our car by glancing at a simple gauge. The smile on a friend’s face is all we need to know a lot of complicated data about whether we’re doing something right or not.

So Ambient is trying to bridge that gap by creating a series of analog devices that measure digital data. The first is the Ambient Orb, which receives signals to change color. It can be red, blue, or green, or somewhere in between.

Logging onto Ambient’s Web site, one types in the serial number of the Orb and tell it what to track. It can show tomorrow’s weather or the status of the stock market. If the Dow is up, the Orb glows green… in a bear market, it’s red, red, red. ..And yes, Ambient sold out their entire production run last Christmas, with more goodies to come.

Norm Entrepreneurship !!

Ever heard of the term Norm Entrepreneurship !! Business that fills the gap of social norms!
Here is an example ...

Via Tyler Cowen :

One of the hottest bars in the Chinese city of Nanjing sports only a sofa, a few tables, and tissue paper - a lot of tissue paper. The AFP news service reports that the city’s first "cry bar," where customers can sit and cry for $6 per hour, is growing in popularity. Owner Luo Jun says he opened the bar when clients of his last business said they often wanted to cry but didn’t know when or where it would be appropriate to do so.

Cannes Festival Winner

Indian version missing !

I have always felt that an Indian version of payscale.com would work.It has to. There is so much of discussion on "who makes what", that I will completely surprised if customized concept would not work.. Here's another new company in the same space.Glassdoor.com

It is just a matter of time when some Indian entrepreneur will pick it up and go for a concept arbitrage

Another Search Engine ?

Via Gigaom

Does the World Need Another Way to Search?

Twitter Idea

How did Jack Dorsey get the idea for Twitter ?

Link : twttr ( From the horse's mouth  ) :

On May 31st, 2000, I signed up with a new service called LiveJournal. I was user 4,136 which entitled me a permanent account and street cred in some alternate geeky universe which I have not yet visited. I was living in the Sunshine Biscuit Factory in Oakland California and starting a company to dispatch couriers, taxis, and emergency services from the web.

One night in July of that year I had an idea to make a more "live" LiveJournal. Real-time, up-to-date, from the road. Akin to updating your AIM status from wherever you are, and sharing it.

For the next 5 years, I thought about this concept and tried to silently introduce it into my various projects. It slipped into my dispatch work. It slipped into my networks of medical devices. It slipped into an idea for a frictionless service market. It was everywhere I looked: a wonderful abstraction which was easy to implement and understand.

The 6th year; the idea has finally solidified (thanks to the massively creative environment my employer Odeo provides) and taken a novel form. We're calling it twttr (though this original rendering calls it stat.us; I love the word.ed domains, e.g. gu.st). It's evolved a lot in the past few months. From an excited discussion and persuasion on the South Park playground to a recently approved application for a SMS shortcode. I'm happy this idea has taken root; I hope it thrives.

Some things are worth the wait.

Purple Cow : Guerilla Mail

Haven't we all registered at some site or the other to just check out the service ? And every time, we shuddered to give our email address .

Here's one fantastic service...Just go , create a temporary email and use it for the registration and then it becomes obsolete in 15 min.

GuerrillaMail - Disposable Temporary E-Mail Address

Guerrilla Mail provides you with disposable e-mail addresses which expire after 15 Minutes. You can read and reply to e-mails that are sent to the temporary e-mail address within the given time frame

Communication

One of the popular hospitals in Bangalore is Narayana Hrudayala founded by Dr. Devi Shetty.This hospital is known for cardiac and neuro surgerical treatments. The one thing that strikes markedly different from other hospitals is a special counter for ppl who communicate in bengali. The hospital is said to attract many patients from bengal, Bangladesh etc. A simple act of creating a separate front desk with bengali speaking personnel is sometimes all it takes for a hospital to show it is looking at a bigger picture. Now Dr. Shetty is building a hospital for the Arab world. Sometimes all it takes to build a great enterprise is effective communication.

Limbo - Bid Low and Win !!

In India, where mobile population is reaching 160 million, I think there is definitely a scope for a entertainment service like this. I think there are companies in India which would want to give away goods for free for brand promotion.
Check this cool site which has become a craze in US

Limbo 41414

Welcome to Limbo 41414

We launched Limbo 41414 in October 2005 for one simple reason - to help people get more fun out of their cell phones.

It's really quite simple;  It's a text-message based game where you compete against other (real live) players to find and retain the lowest, unique bid™.

Why play? Well, first of all it's really fun - just read what other players are saying. And you can win some pretty amazing stuff. Stuff that you've always wanted like new cars and expensive trips. Plus you get instant feedback, you can connect with other players AND you always win because you earn Loot for every SMS bid, which you can trade for things like T-shirts, CDs and ringtones.

How's this possible? We've created partnerships with big companies who give away stuff in sweepstakes all the time. We've just given them a fun, new way to reach people - through their mobiles phones. At the same time, we give you - the mobile user - a way to get more fun from your phone. And, it's on your terms! We don't buy or sell phone lists, and we don't spam. We just count on your interest in the prize.

Low Hanging Fruits - SMS

SMS can be used for a lot of low hanging fruits in India. One such service that has seen the light of the day is the Bus time table through SMS. Reports says that the launch of SMS has become a huge hit in Gujarat.

Via : Gujarat ST timetable through SMS

Gujarat Global News Network, Ahmedabad For the first time in the country, Gujarat State Road Transport Corporation has introduced SMS facility for the timetable of the bus service. This was announced by the Chairman of the Corporation G R Alloria today evening. Initially this facility is available for luxury and express buses. He said that ordinary buses will also be covered by this facility in next couple of months. Under this one has to type 'timing

' and send on 99988 05656.

Cybercafe as Office

Why cant employees sit in cybercafe and work , instead of you establishing an office for developers?
Thats what this Indian teen is doing
Via - Sify.com

Indian employees of Globals Inc work out of cyber cafes, where they have to pay 15 rupees an hour. "When I look around I see lot of guys of my age hanging out with their girlfriends. I do not feel bad as I have a mission to make my company another Microsoft," Gopinath said. "Bill Gates is my role model," he said.

Freakonomics authors view on Stars

via NYT : A Star Is Made

Ericsson and his colleagues have thus taken to studying expert performers in a wide range of pursuits, including soccer, golf, surgery, piano playing, Scrabble, writing, chess, software design, stock picking and darts. They gather all the data they can, not just performance statistics and biographical details but also the results of their own laboratory experiments with high achievers.

Their work, compiled in the "Cambridge Handbook of Expertise and Expert Performance," a 900-page academic book that will be published next month, makes a rather startling assertion: the trait we commonly call talent is highly overrated. Or, put another way, expert performers — whether in memory or surgery, ballet or computer programming — are nearly always made, not born. And yes, practice does make perfect. These may be the sort of clichés that parents are fond of whispering to their children. But these particular clichés just happen to be true.

Ericsson's research suggests a third cliché as well: when it comes to choosing a life path, you should do what you love — because if you don't love it, you are unlikely to work hard enough to get very good. Most people naturally don't like to do things they aren't "good" at. So they often give up, telling themselves they simply don't possess the talent for math or skiing or the violin. But what they really lack is the desire to be good and to undertake the deliberate practice that would make them better.

Is being a Prodigy predictor of Success ?

Malcolm Gladwell shares his views on Prodigy - Quite an insightful article
Link : The Myth of Prodigy and Why it Matters

Smart Thinker

You can do something the brute force way, the stupid, grind-the-problem-down-until-its-not-a-problem-anymore way ,or you can find the right approach and suddenly the problem just goes away. You look at the problem the other way and you have this epiphany: It was only a problem because you were looking at it in a wrong way.

There is a story of Carl Friedrich Gauss, the great mathematician which illustrates the above point. Gauss was in his school and his teacher was bored, so to keep the students preoccupied he instructed them to add up all the numbers between 1 to 100 .The teacher expected them to take all the day doing it.But the budding mathematician came back 5 minutes later with the correct answer:5050.

The solution is not to actually add up all the numbers, because that would be so frustrating and stupid. What he discovered was that by adding 1 to 100 it is 101 , 2 to 99 it is 101. 3 to 98 it is 101 and so on 50 to 51 it is 101..There are 50 such pairs and 50 times 101 is 5050..

The point is clear. Smart thinker doesn't solve a problem the long and boring way because he sees what the real pattern is behind the question and applies that pattern to find the answer in a much better way.

WOW! - Sound Recording Paper

    Unexpected property: This piece of cardboardlike paper works like a tape recorder, complete with record and play buttons. An ultrathin recording device and battery are embedded in the page. Step/stretch/leap: Personalized talking postcards; sticky notes that allow for longer, more-detailed memos; intelligent books that let you play "The Gettysburg Address" and record your notes on it.

Multiple startups ??

Via The Browser :

Stop me before I start-up again!
Hey kids! Want to start a company? Why not two, or three, or eleventy hundred?

Forget focusing on one thing for years and working hard to make it successful. That's so old media. Nowadays, if you're not working on at least two startups, you're just out of it. Take Digg cofounder Kevin Rose: He's also got Revision3, an online-video startup. The San Jose Mercury News recently examined the conflicts Rose faces in running multiple startups.

And then there's Evan Williams, the creator of Blogger, who's using the money he got when Google bought his first company to buy back Odeo, his second company, from his venture-capital investors. Williams himself admits he screwed up Odeo, and recently, his attention has wandered to Twitter, an Odeo spinoff. Now he's creating Obvious Corp. as an umbrella for Odeo, Twitter, and other projects, arguing that the Internet business is increasingly hits-driven, so it makes sense to have multiple projects going at once.

We can see that argument for financiers, who need to spread their risk. And if the Internet business is hits-driven, maybe the new model is Hollywood, where studios back multiple projects at once. But you don't usually see directors and stars filming multiple movies simultaneously. You get one movie in the can, and then you move on to the next one.

Williams, of course, is using his own money to back his multiple-startups theory, and says he's just in it to have fun. Well, all right then. But we'd point out to would-be imitators that if your goal is to have fun on the job, don't count on getting other people's money to do it.

What to make ?

 Paul Graham of Y Combinator :

The easiest way to make something people want is to make something you want. What do you wish existed that doesn’t? For example, back in the early 90s a friend of mine wrote some software for converting voice to data so he could talk to his girlfriend in Taiwan without paying for long-distance phone calls. That would have been a great project to turn into a startup.

If you’re a little older and/or have some particular domain expertise, you could try making something that you yourself don’t want, but you think other people do. This is a much riskier path, though. Most of the great startups seem to have begun with something the founders wanted: Google, Yahoo, Apple, even Microsoft.

Incentives lag

Was reading an article written about incentives by Steven Levitt( Freakonomics fame) . He says a lot of people enter very risky and sometimes even dangerous professions because they believe in making the same / equivalent money which the previous generation has made. Cockaine drug dealing profession is such a dangerous profession that foot soldiers have an annual death rate of 7% ( 0.5% is the annual death rate of people who fight Iraq war ). However the lure of making 400k per year ( who are at the top of the biz) lures them...Consider this, only 2000 people could make 500k+ in Goldman sachs in 2005. (source confidential) .

People enter startups with only esops as the carrot, precisely because they saw 90's as the age of millionaires. They feel that by going through the same path , they would become millionaires. This thinking is flawed as the data analyzed by author shows that most of the people end up as meagre salary drawees / paupers.....!!

Games and recruiting

Games bring the best amongst us. It shows our IQ, EQ , if used properly is the right mode for recruiting.
Google time and again uses this techinique for recruiting.This time for content writers in India

New essay by Paul graham

Another brilliant essay by Paul Graham .. The power of Marginal

Brokerage software on Mac

An article in wsj quotes that there are a number of trading platforms available for helping peripatetic customers stay in touch with their money like www.thinkorswim.com , www.siebertnet.com , E trade, Fidelity, www.mbtrading.com ,www.alphatrade.com .

Here's another side of the story : Most online brokers offering software-based trading applications that an investor downloads and installs have packages that run only on a Windows-based machine. So, there is a clear gap for a firm to provide these services

The Monk who built a business

Via Wired:

McCoy , a monk from Wisonsin, had to save the brotherhood from financial ruin. His solution: dust.

The idea came to him while he was replacing the toner cartridge for the abbey’s laser printer. Peeved by the high price, he searched online for a better deal and found several manufacturers that refill used ­cartridges with powdered toner for a fraction of what new ones cost. McCoy opened an account with the intention of ordering not only for the abbey but also for local churches and businesses.

What began as a $2,000-a-year ­enterprise has ­ballooned through word of mouth into a full-scale office-supply company that McCoy runs from a small corner office in the abbey. Dubbed LaserMonks, the outfit posted $2.3 mil­lion in sales in 2005 and is expected to double that­ this year.

Santamail.org : Purple Cow of the day

Santamail - founded by Byron Reese
SantaMail.org, which sells fully personalized letters from Santa Claus all across North America. With in 6 years, he has raked in a million dollar sales a year.

A year later : Little Miss Matched

Littlemismatched.com : I came across this PurpleCow a year back when they were in a beta stage. It was definitely an wacky edgy concept tht 4 people were trying to push. Forward it to July 2006, they have exploded the market with great success

A little about them :

The fledgling company sells socks that do not match, in a variety of colors and patterns. To ensure that every sock has its independence, they come exclusively in odd numbered packs of three and seven.

"The missing sock is never going to go away," said Arielle Eckstut, one of the company's founders. "This is a way to really have fun with a real-world problem: that people lose their socks ... Let's embrace the problem, and run with it."

Conceived of in 2003, LittleMissMatched has exploded in the past year. Today, more than 600,000 of its socks can be found in more than 600 stores, according to the company's three founders. One of them, Jonah Staw, has told National Public Radio that LittleMissMatched could soon be worth $100 million.

MetroNaps

MetroNaps , a Purple cow :

 

An Indian has come up with this innovative idea of having nap machines to take short naps at busy locations like airports.

Pricing : $14 for 20 minutes.

 

Frapper

A location based display of your buddylist. This concept might look cool, if only it had contact information of each person on the map along side the location.
Link :Frapper