Saturday, July 23, 2011

IIM F

The HRD Ministry today approved the setting up of a new IIM, IIM-F, short for IIM - Fake. This will be first IIM which will not be in India, and the ministry has chosen a central European city of Fucking, as the location of the new institute.

The admission process to this institute will also be different. The first hurdle, which the aspirants have to pass is clear the FAT, abbreviation for Faltu Admission Test. The format of the test is yet to be finalized, but sources said that the test will aim to judge mainly one quality of the aspirants, FATe, thus justifying the name given to the test. Inside sources said that, the test might consist tossing coins for 2 hours and 15 minutes, with top 1% of the aspirants who turn up the most number of heads will be given a chance to move to the next stage of selection process, the interviews.

The interviewers are expected to check whether the candidate can think "into the box" or not. Inside sources also said the interviewers do not want alumni of the top engineering institutes, like TII-B, TII-D, etc to get into this IIM, because they don't think in this way.

The course structure is yet to be finalized but an outline has been made. There will be periodic assignments given in each of the courses. Credits will be given only if the student copies blatantly from a source. Negative credits will be given if the assignment is found to be original. When a company called Xerox came to know about this course structure, it immediately agreed to come to the institute for placements, promising that it will take atleast 100% of the students. Thus, It's poised to become the first institute with 100% placement guarantee even before its inception.

The ministry has decided to reserve 50% of the seats in this prestigious institute for the residents of Fucking. Although this move might improve the economy of the city, its believed that rampant corruption among the administrators will make it very easy to prove that the candidate belongs to the city.

Friday, July 8, 2011

The Realty

Living in Mumbai for four years and seeing the real estate prices there made me think, why the hell are they so high! Conventional wisdom says, Realty prices are determined by three factors: first, location, second, location, and third, location. While this is definitely true for a city, I wanted to know what made Mumbai as a whole so expensive, compared to say, Bangalore.

Hence, I did a small study of my own to find the various factors on which it depends, and how strongly these factors explain the actual Realty prices observed in the city.

The first and most important factor has to be demand for land. Supply is fixed, and hence only demand determines the prices. But how do you measure demand? The population of the city is definitely a measure of demand, but we do have a better measure. Consider one sq. km of land, fixed supply. The demand for that piece will depend on the number of people living on that one sq. km. Hence, the density of population should to be a better estimate of demand. Lets first do a regression of Real Estate prices versus Density of population.

City
Delhi
Rate
15000
Density
12000
Mumbai 25000 22000
Kolkata 17000 24000
Chennai 13000 22000
Bangalore 12000 8000
Hyderabad 11000 18000
Ahmedabad 12000 22000
Pune 12000 7000
Surat 8000 15000
Jaipur 7000 19000
Lucknow 4000 3000
Patna 3000 1800
















This table shows the data I used to do this single variable regression. Rate represents the average rental value per month of a 2BHK, approx 1200 sq. ft. apartment. The value is an average of the first 20 results I got on 99acres.com, when I searched for properties in that city. Density represents the Density of population measured in persons per sq. km in the city, as taken from census data and wikipedia. I get the following from the regression:

R-squared = 0.3893

hmm...Density does explain about 40% of the variation in realty prices, but this doesn't sound convincing. Intuitively, there must be other factors which also play a part. Lets just list some of those "other" factors.

If the city's infrastructure, especially public transportation facilities are very good, people can always live in the outskirts and travel comfortably to their place of interest. Good infrastructure facilities should relax the pressure on realty prices. Factors like good climate, job opportunities will put an upward pressure on prices. There will be other factors also, like safety of living etc. There is no objective way to quantify these factors. So, I will just put another independent variable called "other" and do a multiple regression analysis. This variable can have values from 1 to 5. 5 representing the maximum pressure on prices. This is a highly subjective variable and disagreements may exist.

Thus, Mumbai with its pathetic transportation and great job opportunities should be rated pretty high on this scale. Delhi, with good transportation and great job opportunities should be in above average range. Patna, a fairly unsafe place with few job opportunities should score a minimum in this factor.

Thus, I get the following table:

City Rate Density Other
Delhi 15000 12000 4
Mumbai 25000 22000 5
Kolkata 17000 24000 3
Chennai 13000 22000 3
Bangalore 12000 8000 4
Hyderabad 11000 18000 3
Ahmedabad 12000 22000 2
Pune 12000 7000 4
Surat 8000 15000 2
Jaipur 7000 19000 2
Lucknow 4000 3000 1
Patna 3000 1800 1


'Rate' is the dependent variable, which is being explained by two independent variables: 'Density' and 'other'. I get the following stats from regressing this data:

R-squared = 0.8780
R-squared adjusted = 0.8509

This definitely looks better. These two factors combined have done a good job by explaining more than 85% of the variation in realty prices.

If, on the other hand, I regress the rates with only one factor 'other', R-squared is 0.711, which means that other factors single-handedly explain about 70% of the variation in prices. The result is simple to interpret, that is, non-quantifiable 'other' factors play a more important role in explaining the variation than density of population. Nevertheless, Density is important because it is the only variable which is deterministic in this analysis.

In conclusion, there is no complete objective way to estimate realty prices. Subjective factors play a major part and they have to be taken into account to undertake such a study. I feel this framework is a decent starting point to identify cities with undervalued properties. I am also pretty confident that this framework can be applied in an international context, provided we account for purchasing power parity variations, but I leave this international perspective to an institutional study.

Disclaimer: This is a completely independent research without plagiarism (except that some data was taken from websites, but I've acknowledged them). Any resemblance to a prior research is coincidental. I claim no copyright on this study. For the full analysis, I can be contacted on my gmail address.

Thursday, July 7, 2011

Start up, Shut down

Hey, you know, I am an IITian. I am the most brainy person in the world. Any company, any job is just not good enough for me. No manager can manage me. I am the captain of my life. I ought to be doing my own "things". Why should someone else reap the benefits of my work? CRAP, all of this is crap.

I am now two years into my job life at the moment, and its high time I said something on some of my beliefs in this respect.

No offense to some of my friends who are intending to open their own company in near future or have already done so, but if one or more of your reasons for doing this were listed above, I am afraid, your start-up will just make-up the numbers and belong to the 'crowd' of start-ups, which you know, fail.

But then, you could well have a great idea and the ability to think and plan about all the numerous nuances, and the hard work to back it all. Chances are your start-up could well be "the chosen one". Go ahead! Change the world for good!

The problem is, people are obsessed with just the 'idea' part. Ability and hard work are the ingredients often missed by people to make a successful dish out of it. You really think Apple is successful because of its products and breakthrough technologies? Wrong. Its the marketing champion called Steve Jobs who has made you believe in that bullshit. "Introducing iPhone 5, as much as 5 nanometers thinner than iPhone 4, so that it can slickly fit into your pocket".

Then, there are some people who want their own start-up, but are constrained. Lack of risk appetite, lack of knowledge and work experience, and so on. No urgency, time will come. And then, there are some who don't want a start-up at all. A hearty congratulations to them, you are doing your dream job. Your life is perfect! I envy you.

Hey wait, I know the recipe of a successful start-up, so why don't I make one from it? That's simple, I don't have the ingredients with me at the moment, but I promise, I will have them sometime soon.