Tuesday, July 7, 2009

Traders, Guns & Money - Satyajit Das

The full title of this book is Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives. The author chooses to make an impression by spoofing Jared Diamond's Guns, Germs and Steel, while also introducing us to the cryptic world of derivatives by referring to Donald Rumsfeld's famous musing about Unknowns Knowns and Unknowns Unknowns.

The book is really an exposé, written in a slapstick humouristic style and Satyajit Das does not hold his tongue (pen) in castigating the sub-world of derivatives in the financial system. Das has worked in the field of derivatives for more than two decades so he knows a lot about them, and most importantly, the actors. The insider information he reveals is not flattering at all.

The leitmotif of this narrative is the Knowns and Unknowns in the derivatives sales process: many corporations do not know that they "need" a product - the sales person (representing some big bank), will present that to the corporation who then realises that it should buy it as the profits it promises are goo. this is an unknown known (how foolish were we not to have realised this! Well, most of them end up being even more foolish to buy this product!)

Then you have the Known Unknown, which refers to the cornucopia of esoteric derivatives with exotic names that we have heard about, but do not know what they do (or what use they have - do they have any use, really?). for example, what does a Double Knockout Currency Option mean? Ah, that, you see is a Known Unknown.

Finally, how much should I pay for a Double Knockout Currency Option? Bless me if I do! That is an Unknown Unknown. This bit is best left to those indulging in arcane models.

What is clear from Das' account is that the universe of esoteric derivatives does not create any further wealth. The derivatives world could be viewed as a system where a zero-sum game is played. What I make in profits is simply what another counter-party is losing. In the epilogue, Das makes an analogy to pari-mutuel auctions. I will say that most of this system is a pari-mutuel. The lsoing betters ultimately pay the successful wagers plus the bookmakers' profits. What this area does seem to create, if you take a magnifying glass to it, is a lot of deceit, misrepresentations and cosmetics to fleece investors and naive corportaions.

Another leitmotif is Das' constant reference to Weapons of Mass Destruction, or WMD (which harken's again to Rumsfeld and that dark era of US military impulsiveness), following Warren Buffet. Derivatives, if not used carefully - remember they are here to shift risk, or hedge against risk - can potentially turn into WMD's.

The whole narrative is held together by the case of a noodle making company from Indonesia and their massive theoretical loss from investing in derivatives peddled to them by a huge US bank. In the end, the parties reach settlement thanks to a change in management at the bank.

Wednesday, August 20, 2008

Life of Pi - Yann Martel

The novel is a fantastically woven story told by a pious and intelligent 16 year old South Indian boy, Piscine Molitor Patel, aka Pi Patel. As a teenager, I loved Edgar Allan Poe’s The Narrative of Arthur Gordon Pym of Nantuckett, a novel which Life of Pi inevitably harkens to.

The similarities between the two novels are numerous. Piscine Molitor Patel, like Arthur Gordon Pym, is a very young man and while clever, clearly impressionable. They are both shipwrecked, spend an inordinately long time at sea under tough conditions and along the way survive all sorts of peculiar events, including cannibalism. And of course, the most striking parallel is that both 'sailors' have a companion on their dingy who share the name of Richard Parker. The surprising difference is that while Pym’s Richard Parker is a cabin boy who ends up being eaten, the reader slowly comes to the realization that Pi’s Richard Parker on the other hand, is a 450 pound Bengal tiger who ends up eating a man! However, it may well be that the Bengal tiger is merely a figment of Pi's imagination, and that Pi projects an image of himself in a feline form in his fantastic allegory. I would further like to point that the narrative is reminiscent of Coleridge’s The Rime of the Ancient Mariner, from which, in all likelihood, Poe himself drew extensively to compose The Narrative of Arthur Gordon Pym of Nantuckett.


Yann Martel never fails to entertain either - in fact, he makes good use of humour in his narrative. I found certain passages and episodes quite hilarious. For a start the name of the narrator itself is surreal. The Piscine Molitor, which literally translates from French to Molitor Swimming Pool, is a real place in Paris which becomes the narrator’s given name thanks to the stories of his father’s best friend, a keen swimmer, who used to frequent the pool as a student in Paris. Pi lives up to his name and becomes a very good swimmer himself. Naturally, water is one of the leitmotifs in the story, as it is ever present throughout the narrative. In secondary school, the protagonist shortens his name to Pi in order to preempt being taunted by his new school mates (Piscine sounds like Pissing). Pi is an "irrational" number, and this should not be overlooked when considering the role of religion, belief and God in the story. Isn’t religion irrational for many atheists? Pi by the way, has a lot of respect for atheists because they sincerely believe in their creed. The chance meeting in the zoo between "Mr. and Mr. Kumar", a sufi mystic and an atheist-communist, is quite entertaining and devoid of all confrontation. Both religious man and atheist go their separate ways respectfully and without there being a clear winner. As for agnostics, in his opinion, they are neither here nor there and are therefore discarded.


Pi’s religious zeal leads him to embrace three religions: Islam, Catholicism and Hinduism. This act occasions some of the novel’s finest comedic moments as, for example, in the scene where the pundit, the priest and the imam meet the whole family on the beach, or as in the continuous lampooning by Ravi, the elder brother (Incidentally, Ravi's "So Swami Jesus, will you go on the hajj this year?" epitomises Pi's universal belief). Comedy aside, religion and belief in God, are probably the life force behind Pi's dogged fight for survival during his 227 days stranded at sea.


In the midst of all the pathos and suffering in the second part, Yann Martel can still afford humour. For example, when Pi, temporarily blind from an infection, chances upon another shipwrecked and similarly blind man in a lifeboat, the ensuing conversation turns solely to food in an exchange that is bound to raise a few laughters. Pi, like most Hindu South Indians, is raised a vegetarian but in order to survive, has had to eat all sorts of raw bits and pieces of marine life. Nevertheless, he is still appalled at the other survivor's preference for cow's offals.


As hinted at earlier, there are elements in the story that suggest that Pi’s narrative is fabricated. For example, quite early Pi reveals that in his childhood fancy, he enjoys dressing up animals in human forms and garbs. So why not dress up humans in animal forms? The alternate story he tells Messrs. Okamoto and Chiba in the third part could be the truer version after all. Another clue for me is that since Pi has read voraciously, he has a more than fertile imagination. He certainly would have a rich repertoire of ideas stemming from a variety of sources spanning from the spiritual such as The Ramayana, The Mahabharata, The Holy Bible and The Holy Qu’ran to the adventure genre such as Treasure Island, Robinson Crusoe and by extension, I assume, The Narrative of Arthur Gordon Pym.


There are many symbols and representations throughout and I cannot do justice to them all. I have mentioned that water is a recurrent theme – Pi’s real name is a body of peaceful water (still and fresh) and the main part of the novel takes place in the wide Pacific (brine, merciless, deadly water). Coleridge's "Water, water, everywhere, nor any drop to drink" is echoed in "I looked out at the empty horizon. There was so much water. And I was all alone. All alone". We also experience along with him his endeavours to capture potable water for survival and in a stunning episode, the reader is told of ponds of fresh water on the algae island where Pi drifts to. To Pi, this island is like an oasis that a lost, dehydrated traveler stumbles upon in the desert. I could not help myself drawing a parallel with the holy spring of fresh water, the Zamzam Well, in Mecca.


Pi is finally rescued and makes it to Canada where he gets a good education and settles. We learn through the author that he has a wife and a child, and eventually retires back in his homeland (Pondicherry) – which means that all is well that ends well. The novel after all is said, is about many things: religion, belief, family, survival, zoology and food.


The book is likely to be turned into a movie. Night Shyamalan had initially shown an interest, but word is out that he has abandoned the project. I guess he could not find the type of twist in Yann Martel's story that he is so fond of.