Month: September 2013

I hadn’t checked out Audible membership plans pricing for over 3 years now. When I first registered my membership, there were only 2 real options (if my memory serves me right) – a “Gold” option that gave you 1 credit/book a month and a “Platinum” that gave you 2.

When I checked yesterday, I noticed something interesting – the Platinum “Annual” subscription that gives you 24 credits/year all at once costs less than the “Platinum” option that gives you 2 credit per month (24 credits/year). That’s $50 per year if you buy it now.

I switched immediately and thought that was interesting. My guess is that this is the work of some data scientist at Audible who has probably found 2 things –

1. Annual plans are like gym memberships. They are only reminded they need to renew once a year. The monthly plan probably results in more cancellations than the annual one where you pay upfront.

2. Irrational behavior is more likely in the annual plan. My guess here is that the annual plan results in users with low willpower to use up their credits quickly and then start paying for excess audio books because they are out of credits. Credits are what make Audible’s business model cool as you pay $9.6/book while buying individual books can get expensive very quickly.

Either way, I thought their pricing was very interesting. These are my guesses, of course, and I’d love to understand their rationale behind this.

The big lesson for this week is to take a quick look at the pricing plans of the subscription services you pay for. You might find an opportunity to cut costs and better still, you might get an opportunity to see how these companies use their data and understanding of human irrationality to make more money.

Jane introduces Pete to Sara with an introduction email. Pete is just about to follow up – he has 3 options –

1. Reply-to-all: Jane will continue to be in the loop – most likely not the best for Jane as she doesn’t need to know the details of when they will meet/have a chat.

2. Reply to Sara: Jane won’t know if Pete responded unless Pete forwards the response. At the other end, Sara won’t be sure if Jane knows they are chatting so she might forward her response too.

3. Bcc Jane: In the best available solution, Pete replies to Sara with Jane moved to bcc. He then starts off the note with a “Thanks so much Jane for connecting us. I’ve moved you to bcc so you aren’t troubled by our future exchanges.”

This solves the problems created above and ensures Jane is in the loop. If Jane wants to be part of the conversation, she can always be asked to be included but this is unlikely.

Bcc is a powerful email feature. Use it to improve communication and take people out of the loop nicely.

This week’s book learning is from How Will You Measure Your Life? by Clayton Christensen.

Many a book, blog post, and news article asks us to “find our purpose.” But, how do we go about doing that? Clay recommends a 3 step process to find and live your ‘why’ (addled with my interpretations)

1) Find your likeness. Ask yourself – what would you like to be like? How would you define your ideal you? Define your likeness when you are 30, 40, 50, 60, 70, 80, etc i.e. define how you would look, what your family be like, how you would be known, and what you would be doing.

Clay, a very religious man, asked himself – what does god want me to be?

2) Make commitments. Come back from time to time and revisit your likeness. Does it feel right? Is it you?

3) Define metrics. How do you measure ‘success’ in your definition? In his case, since his purpose was kindness, he always measured it by the number of people he helped. He points out that these metrics are rarely “make more money” or “get a promotion.” Define success and ensure your metrics are aligned.

Purpose must be deliberately conceived and chosen and then pursued. When that is in place, however, then how you gets there is typically “emergent” – as opportunities and challenges emerge and are pursued.

To remember – the world will not deliver a cogent and rewarding purpose to you. You have to craft one for yourself.

Clay also observes that these three parts – likeness, commitment, and metrics – also comprise a company’s purpose. Companies that aspire to positive impact must never leave their purpose to chance. Worthy purposes rarely emerge inadvertently; the world is too full of mirage, paradox and uncertainty to leave this to fate.

All the best with finding your purpose!

Once I like something, I’m the sort of person who plummets headlong into it. As a result, I know the Harry Potter books back to front, have watched the Lord of the Rings trilogy many many times, and keep a Master Yoda figurine on my desk. I doubt, however, that any of these works or perhaps any in the future will grip me the way I have been gripped by George R R Martin’s Game of Thrones.

I began watching Game of Thrones just 3 months back and I have been hooked. So, what’s so special about the Game of Thrones?

1. It’s like real life – there’s no good versus evil. The LoTR trilogy is a great example of traditional fantasy writing. You have the good (dressed in white) and the evil (dressed in black). The evil gets really strong before the good win, against the odds.

George R R Martin has been careful to have Game of Thrones resemble real life. There aren’t strong good or evil characters. Instead, most of the characters are morally ambiguous with a few “good” characters sprinkled across opposing sides. This makes the character development very interesting as you examine the motives behind the actions of these complex characters.

2. Power, love, and fear. The series is all about the 3 most powerful forces that exist – power, love, and fear. These 3 mess with our emotions and test our character. It reminds us that most can make it through adversity but very few survive the test of power.

It almost feels like George R R Martin asks us to put ourselves in the situation and ask ourselves – what would I do?

3. Complex plot lines and moving it forward from different perspectives. The Game of Thrones has many different plot lines. That isn’t so special. These plot lines keep coming together at different times. That’s not overly special either. What is special however is the fact that George R R Martin advances these plot lines from different perspectives. So, you’d hear one story line from one character’s eyes and return to move forward from the eyes of another. That’s incredible.

And if you think you’ve read books with many twists and turns, wait till you read these books..

4. A sense of fairness. George R R Martin seems to favor a sense of fairness in his writing. When there’s war, everyone pays for it in one way or the other. It isn’t obvious at first but every one is indeed fighting their own big battle no one else knows about. Much like real life.

5. No overplay of mysterious powers. While magic does make more than an appearance in the Game of Thrones, it isn’t decisive. The story is still about humans and human emotions and that’s what makes the story line so riveting. There aren’t traditional heroes or villains either. In fact, if ever there is a hero, you should worry.. as his/her death is probably on it’s way.

HBO’s production team have done a fantastic job with the TV series. It’s hard to call it a TV series as each episode could easily be a 1 hour movie and their casting is near perfect. I’m glad for the TV series as I might never have gotten to the books like many others and George R R Martin’s genius mightn’t have gotten the audience it deserves. In recent Real Leader interviews, I’ve been asking our real leaders about their favorite TV shows and “Game of Thrones” is a constant favorite. That’s amazing.

I head into a weekend knowing there will be plenty of Game of Thrones to keep me happy. My wife and I are onto the 4th book on our Kindle apps (there are 5 in total) and will do plenty of reading over the weekend. We will also be playing the excellent Game of Thrones board game when our friends come home today. There’s bound to be plenty of GoT lingo thrown about (“it is known,” “mummers farce” and many more quotes!) when we hang out.

It still amazes me that one exceptional man’s brain has created this whole universe that has touched so many lives. Thank you George R R Martin!

PS: If you haven’t watched Game of Thrones yet, I hope you’ll consider checking it out this weekend. You can thank me later.

If you’ve been following the financial news, you’ve probably seen a fair number of articles on the sudden and drastic slide of the Indian Rupee versus the US dollar in the past few days. I must admit I wasn’t paying much interest until I received a forward (one of those that requests you to forward to every friend “if you care”) that said the solution to this crisis was to stop buying non-Indian goods. I laughed.. but my curiosity was peaked about the real causes and decided to do some research.

I was expecting to find a link online that clearly explained the factors leading to the slide but was disappointed so I thought I’d take a crack at understanding the factors involved here and thus, form a thesis on how a currency’s value is determined. I was helped greatly by this excellent resource from Tutor2U.net and I’m borrowing heavily from it.

First, the situation – this graph documents the rather alarming slide of the Indian rupee versus the US dollar in the past months. As you can see, there’s been an increase from 54 rupees per US dollar to 67. That’s a 25% increase in less than 3 months and the slide may not be over yet.

So, why is this happening? Let’s first understand how the value of a currency is determined.

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Simple version

In theory, the right value of a currency (in this case Sterling or British pounds) is an intersection between the supply of the currency and the demand for it. We’ll follow the explanation from Tutor2U for the simple version.

So, how do you determine demand and supply for sterling? (formatted into a table for easier reading)

Thus, the fundamental factors that drive an exchange rate

1. Interest Rates: Interest rates in a country are largely derived by the value of government bonds. If the value of government bonds go down (i.e. if investors are less optimistic about British prospects), interest rates go up.  This is a fascinating process and you can expect a detailed post on how this happens in the next few weeks when we kickstart a book learning series on “The Ascent of Money.”

On the one hand, this could mean more investors put money in as they expect a higher return but on the other, it means borrowers within a country suffer since the interest rates on all home and car loans go up. This in turn means people consume less leading to a chain of potential negative effects for the economy.

2. Economic growth. Countries experiencing a deep recession often find that their exchange rate is weakening because government bond values go down, investors pull out, and speculators bet against the currency.

3. Inflation. When inflation is high, a country becomes less competitive in international markets causing a fall in exports (and thus, demand for a currency) and a rise in imports (a supply of currency overseas). A fall in the exchange rate may be needed to restore a country’s competitiveness in overseas markets.

4. Balance of Payments. Essentially, if a country exports more than imports, it runs a trade surplus and thus is a better place than one in trade deficits (or more imports vs exports).

5. Market Speculators. The consequence of global bond markets and global investors is that they can make it hard for a country performing poorly to recover since many factors are linked to each other. One key mover is market speculators who make money by betting on rises and falls. A feeling of pessimism about a market’s prospects can be very costly.

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Complex version

I won’t go on to explain the complex version in great detail because I can’t claim to understand it fully myself. But, here’s a synthesis – the currency value is indeed determined by 2 factors – aggregate demand and aggregate supply.

Aggregate supply is the total supply of goods and services that firms in a national economy plan on selling during a specific time period.

Aggregate demand, however, is a bit more complicated. It is proportional to the following –

1. Consumption or consumer spending
2. Investment
3. Government spending
4. Net export (or Export – Import)

Investment requires a deeper look, however, because it is directly proportional to investment by firms in the country but is inversely proportional to interest rate. This is because increase in interest rates increase the cost of borrowing resulting in a cut down of investment and consumer spending. (equation below)

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How does this explain the decline of the Indian rupee and what are the learnings on currencies in general?

My thesis is as follows –

First, the fall of the Indian rupee – the sudden fall of the Indian rupee is an aggregation of a few factors –

1. Poor financial reform => low confidence in the market. The financial reform announced of late has been received with pessimism. This means government bond values are likely to fall and speculators are like to flee. The economic growth hasn’t given the market reasons to change it’s perspective either.

2. Foreign investors are unwelcome. India hasn’t exactly welcomed foreign investment over the past decade by still subsidising prices in key industries and protecting local industry. That hasn’t helped.

3. Ongoing trade deficit. Linked to above points and unhelpful.

4. Spending and investment affected by above factors. As these factors are all interlinked, consumer and business spending and investment is affected.

5. Strengthening of the US dollar. For the long term investor in government bonds (which is almost all pension funds in the world), the US dollar’s strengthening means a massive shift in allocation of investment. The INR’s weakening means this process can be hastened.

So, how can this be solved? It will require a lot of structural reform to win the confidence of the market. It is possible that the spiral was over exaggerated and the rupee may be worth more than it is now. Time will tell.

My learning from attempting to understand this is that I’m able to appreciate the sheer complexity involved. Financial policy makers don’t have it easy. That said, the underlying principles are sound – if your core financials aren’t sound (e.g. good structural policies and higher money in versus out), no amount of massaging financials can save you from the realities of the market.

It’s the same in life – if you don’t have the skills and character, no amount of personality training can save you. The markets, like life, are tough. Only the fittest thrive.

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A final note – I am not a financial expert or Forex guru. So, while I’m sure the theory is directionally right, the details may not be perfect. I’m sorry if I’ve made any glaring errors.. and I trust you’ll let me know in the comments. Putting this together has been a great learning experience in itself. Hope it helps!

Most new year resolutions fail for 2 reasons –

1. We don’t build in room for misses – for example, we resolve to exercise 5 times a week every week of the year.
2. We hit ourselves so hard when we miss for the first time that we don’t allow ourselves to recover.

1 is not smart. However, that habit can be unlearned over time.

Hitting ourselves so hard when we miss is much harder to unlearn. The next time you do it, remember to tell yourself that it is not the right thing to do. It isn’t going to help you now or ever – you’re only being a coward indulging in sabotage. You’re allowing the resistance an easy victory.

The next time you miss a goal or target you wanted to hit, be nice to yourself. Allowing yourself to recover from a miss is not just the kind thing to do.. in the long run, it’s the clever thing to do.

A man went to his rabbi and asked him what he should do when bad things happened.

The rabbi said – “When things are good, thank the Lord and when things are bad, praise The Lord.

The man asked -“But rabbi, how do I know which is which?”

The rabbi replied – “You are a wise man. Just to be safe, always thank the Lord.”

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Hat tip to Ben and Roz Zander for this great story in their excellent book – The Art of Possibility.

You dreamed about growing up and living on your own income once. You dreamed about living in your own apartment and calling close friends over for a night out whenever you liked. Perhaps you dreamed about seeing your kid go to a great school, receiving a gift from your kid’s first income and having a great time at your kid’s wedding. Or perhaps you dreamed you’d one day travel to a new country or attend a great university.

Look at where you are now.

Sure, some of those dreams haven’t worked out exactly how you pictured them as a kid. Thank god for that. Many of them worked out much better than you could have imagined.

If you believe the media, the world is going down the drain. There’s too much war, too much politics, too much money in football, and too much unemployment. It doesn’t seem like the kind of world where dreams come true.

But, they do. You are evidence of that. They work out much better than you even imagine. So, before you get all cynical today as you dream about yourself 15 years from now, remind yourself that this life, today, was once your dream too. And what a great life it’s turned out to be..

Sure, we have had to work hard for them but let it not be said that dreams don’t come true.. life is the stuff of dreams. Smile, enjoy living the dream, and just for today, actively reach out to someone else to help make their dream come true. If we aren’t helping each other realize our dreams, what the hell are we living for?

If you expect to win or expect things to go well, there’s a good chance you’ll be disappointed. Disappointment often leads to fear which in turn leads to paralysis the next time you play. You don’t want to take risks for fear of disappointment and you prefer inaction to action. The dark side has won.

So, how do you avoid this? Stop pegging expectations to results. Never ever expect to win or lose. Just expect to play. Take it a step forward and perhaps even expect to give it your best shot when you play.

Pegging expectations to the process means you keep focus on things you influence – your preparation, your attitude, and your effort. If the result is good, incorporate the positives into the next game. If the result is bad, figure out what you can do differently. The best outcome of the infinite game is you learning from experiences to become the person you want to be.

Expect to give what you do your best shot.. and enjoy the game. The rest is just noise.