Tuesday, November 29, 2011

Quiz Time: Bayesian Judgement

My friend rates himself as a pretty good connoisseur of wine. To his credit, when I gave him a taste-test some time ago, he could correctly identify a wine variety around 80% of the time.

Last week I bought a mixed case containing 10 bottles of Merlot and 2 of Shiraz. I then took a bottle at random and poured my friend a glass. He said he thought it was a Shiraz.

What is the probability that the bottle actually was a Shiraz?

Friday, November 25, 2011

Analytics in Financial Services

The financial industry usually thinks of analytics in terms of models, pricing and risk metrics. However, at last week's Hedge Fund Conference in Singapore, people were talking about more strategic applications.

Tuesday, November 22, 2011

The Human Side of Analytics

Analytics is ultimately about better decision making and, by implication about people. If your aim is to get someone to do something, you might be better off having them do something sub-optimal with enthusiasm than force them to do the "right" thing begrudgingly.

Monday, September 19, 2011

Data Visualization and Analytics

"Do you know or do you think you know" is an oft repeated adage around the offices of Maroon Analytics, as we peer through clients' data sets and search for insight to enhance their businesses. While cleaning, filtering, and analyzing data will reveal which products, services, or even customers are the most profitable, and lead to a profit maximizing strategy, communicating those insights to clients is an entirely different matter.

Monday, September 12, 2011

Analytics, Metaphors and Asia

Metaphors and language might go some way towards explaining the varying acceptance of analytics in different cultures, particularly the low take-up in Asia.

Metaphors are known to significantly affect decision making. They trigger analogies and help us compare things that we are unfamiliar with; metaphors allow us to understand one concept in the context of another. They can also be dangerous because, although being ubiquitous, they are hidden within our language and often unnoticed. James Geary has an excellent talk in this subject on TED.

Monday, August 8, 2011

Performance Fees and Step Functions

Fund managers might be missing out on performance fees if their variable dividends are based on a stepped performance scheme (i.e. one that rewards a higher share of the proceeds for higher levels of return).

Monday, August 1, 2011

Feng Shui Analytics

Last week I fortunate enough to chat to Tom Davenport at a recent presentation on analytics. The seminar was hosted by Deloitte, which has recently opened its Analytics Institute in Singapore with the assistance of the Economic Development Board. While it is admirable that the Singapore government sees the need for analytics in Singapore and the region, a recent post on the Analytics in Asia Linkedin Group gives rise to the question of whether Asian businesses see the need for analytics in making business decisions, as they may prefer to make business decisions by consulting a feng shui master.

Friday, July 22, 2011

Thai Planes and Cross-Cultural Contracts

I just returned to Singapore from a trip to Bangkok, where the headlines of The Bangkok Post and The Nation where reporting the latest international incident. The German government had impounded the Thai Crown Prince's plane in an attempt to force Thailand to finally pay more than € 30 million in damages and legal costs, which were awarded to Walter Bau, a now defunct German construction company, by an international arbitration panel in 2009. It seems that the Thai government had long been in breach of contract with Walter Bau, which had continued to pursue legal action long after its bankruptcy, and the German government saw fit to impound Crown Prince Maha Vajiralongkorn's plane.

Four Fours Puzzle

A friend of mine was discussing a shopping centre on nearby Orchard Road which is sometimes known as the "Four Floors". I misheard him and assumed he was talking about the famous mathematical puzzle "Four Fours" first posed by WW Rouse Ball in his 1892 publication "Mathematical Recreations and Essays".

The challenge is to find

Fun with Fees - Incidental Leverage

While helping a client design a fund performance fee model for a family office, I had to explain an interesting anomaly that can inflate a managers fees, common in most models but not well documented. Probably because it's quite subtle and something most people would rather not think about.

If an investor redeems shares that have increased in value, there will likely be some performance fee due. That portion of the fee essentially becomes "locked in" but stays in the fund until the variable dividend is paid out at the year end.

Origin of 2+20

According to my friend in the pub last night, the familiar "2+20" fee model of hedge funds can be traced back to over 3000 years to Phoenician boat captains.

Records show that

Saturday, February 12, 2011

The Neuroscience of Analytics

Analytical thinkers are often criticized for their lack of soft-skills. As this blog has mentioned many times before, this is something far more acute in Asia, where balance and harmony are an important part of the business landscape.

UCLA professor Matthew Lieberman might have a suggestion of why this is. The HBR Blog discusses his presentation at the the recent 2011 NeuroLeadership Summit on our ability to predict other people's emotional states. Evidently this takes quite some effort, we are generally poor at it, and get even worse when under even mild stress.

To compound matters, however, it appears that the brain circuity for analytics actually switches off the circuitry for thinking about others and those who spend a lot of time being goal-focussed even find their social-skills circuitry diminishes.

No reference was made as to whether this might happen in the opposite direction too!