Monday, November 30, 2020

The inequality among virtues

There are two kinds of virtues. There are those that you should imbibe irrespective of the society, for your own good, like gratitude or discipline. The other kind includes those that are useful only if a large part of society adapts them.

For instance, honesty, often quoted as the best policy, carries values when everyone around you is generally honest. Otherwise, the wealth transfer is likely to be one way, from the honest to the dishonest. Tourist guides and street vendors learn this early at places that people are likely to frequent once in a lifetime and there is little risk of losing one's reputation (hotel owners cannot afford to be as devious because people can easily identify and badmouth them). 

However, a dishonest world would be extremely distressing to live in- where no man's word can be trusted and one lives in constant suspicion. In the few months after Lehman's collapse in 2008, global trade collapsed because no one, including banks, was willing to trust another. Therefore, society as a whole tries to place a great penalty on the dishonest to ensure compliance. 

Tolerance is another virtue of the second kind. Taleb articulates it very well when he says that 'the most intolerant wins'. The tolerant ones would always end up compromising. A tolerant culture will allow others to prosper, an intolerant one, when it gets the opportunity, will wipe others out. It is easy to guess who will survive in the long run.

Honour is a particularly strange one. Highly valued among feudal societies, especially among the Japanese, it can be puzzling to a bystander. As an individual, there is no upside in committing hara-kiri. You can hope to gain nothing after you are dead. As Tyrion Lannister says in the Game of Thrones, “Death is so final. Whereas life, ah, life is full of possibilities.” 

A man who lays down his life for society either does it for the welfare of his family, that they are looked after well, or to prevent his name from being sullied. The implicit assurance is that the society will honour its share of the agreement. However, in a war with the unprincipled and for the greater good, honour can be overlooked.

For one, history is written by the victors. A belligerent might have fought an honourable battle, but if he is on the losing side, history can still be unkind to him. Churchill or Stalin are rarely considered monsters despite their war crimes because the Allied Powers were victorious. Two, there is the wisdom of Krishna behind it. If honour harms Dharma in the long run by giving the opponent an unfair advantage, it is no longer a virtue.

Forgiveness is an interesting one. It provides a sense of comfort that the offences of the one who forgives would also be looked upon kindly when the chance comes. Perhaps that is what the Lord's prayer also talks about - 'and forgive us our trespasses as we forgive those who trespass against us'. Forgiveness (or mercy) is another interesting virtue. It provides a sense of comfort that the offences of the one who forgives would also be looked upon kindly when the chance comes. That is what the Lord's prayer also talks about - 'and forgive us our trespasses as we forgive those who trespass against us'. That said, neither was the Church forgiving during the Crusades or the Inquisition, nor were the Conquistadores when they expanded into the Americas under the banner of the Church. On the other hand, Prithivraj Chauhan suffered for his folly of being soft on Ghouri.

Charity is a similar one, albeit with a difference. One can argue that it does provide value to the giver by instilling a sense of pride ('I am among the few who can afford to give'), or promises a divine reward. The wealthy also get a sense of comfort that they would be looked after when they fall upon hard times. Sometimes, charity is just the price one pays for peace. To avoid a civil war or an uprising of the extremely poor.

A lot of other virtues can be discussed on these lines, but I stop here. Perhaps what we can take away from the discussion is to choose which of the buckets a specific virtue falls in before extolling it. The first kind of virtue should be stuck to even if one is marooned on an island with no one around. Such as hard work, hope, or patience. The second kind is contingent upon the kind of society and times you live in. Just as Krishna was ready to bend the rules of the battle in a war where the opponent played unfairly. Or forgiving an enemy who you know would seethe with vengeance. Most importantly, the framework is important simply because it would prevent you being manipulated by those foes who rarely play fair.

 

Sunday, November 22, 2020

Tip for young credit analysts

As young analysts learning the ropes, a piece of useful advice that we received from senior DB credit analysts like Juergen Fiedler was to resist the temptation of investigating and explaining 10-12 credit risks. Most companies have just 3-4 credit drivers that make or break them. The extensive list of business risks mentioned in the 10K is not worth a deep dive, as they are largely mitigated (the worthwhile ones are usually brushed under the carpet).

It reminds me of a tale that Osho used to narrate.


In a district, it was customary to welcome the archbishop by a tolling of the bells. One day, when the archbishop visits a church, the bells stay silent. Puzzled, he decides to quiz the priest. Now it so happened that the priest was particularly fond of the phrase 'There are 50 reasons for this'. When asked about the uncanny silence of the bells, the priest, as usual, explains - 'There are 50 reasons for this.' He then adds, 'the first one being that we do not have any bells. They have gone for repair.' The archbishop interrupts, 'You need not tell me the rest. That is enough.'