Interviewing at the Indian Institute of Science

I spent most of Thursday interviewing job candidates at the prestigious Indian Institute of Science (IISc). The dynamics were completely different than interview dynamics in the US, and some of the rules of the interviews help me understand why there is such job churn and turnover.

The organization with jobs to offer pays a fee to reserve a day for interviews. The placement office collects resumes from interested candidates, and provides a list of their names, majors, and GPAs, along with the stack of resumes.  The organization makes a presentation with a question and answer session. At this point, or even before the presentation, some firms will give the candidates a test.  And then the candidates mill around and wait to be called for interviews. It's not clear who is supposed to make the interview schedule, as you don't really know who will show up or not. In our case, we had 28 candidates on our list, about 18 or so attended our info session, immediately afterwards we had only 5 that were interested in talking to us (!) but by the end of the day we had interviewed about 20 candidates. However, at least 7 or 8 or them had not attended our session, nor were on our list of pre-candidates.   The oddest part of the process for me is that the rules of IISc recruiting is that you need to make the offers at the end of the day, and let the selected candidates know what their compensation package will be.  No call backs, no "let's see how the candidate blends in with the other personalities." Once a candidate receives (and presumably accepts) an offer, then they exit the pool of candidates.

Some things about these rules seem fair -- you avoid everyone chasing a few (generally the best)  candidates that you get in US schools, you help everyone get allocated through the process -- but it seems like a rushed process which leads to suboptimal matching. No wonder there is such turnover in the formal job market, there is insufficient time for exploration and matching of skills, interest, and approach -- on both sides.

Perhaps we had a batch of unrepresentative students, with all the stars already taken, but no one asked us a substantive question, no one appeared to have visited our web site before to get a better sense of who we were, no even even asked if we worked on Saturdays! 

"the end of capitalism in the US" ????

Watching Treasury Secretary Paulson was far more reassuring that listing to Pres. Bush. The BBC, on which I watch international events here in India, said we perhaps were seeing the end of pure capitalism in the US. Well, we haven't have pure capitalism in the US for a very long time. But this certainly is a big step in the other direction. To watch Mr. Bush decry partisanship when he has invoked it repeatedly, and to watch him say that the government needs to intervene, makes me wonder if we have been catapulted to a parallel universe, and the answer is that yes, we have. I was fairly calm about all of this until this morning -- somehow hearing about the ban on short selling of financial stocks as well as the guarantees on money market funds shocked me out of complacency.

Some of you probably don't know that I have been teaching a course on International Banking for almost 15 years. In it, we regularly talk about the silly structure of US financial regulation (both before and after Financial Modernization that repealed Glass Steagal) and how the rapid movement of capital around the world makes any kind of national regulation less effective. In the past few days I've gotten lots of emails from former students talking about discussions from our class over the years, which is tremendously gratifying. Unfortunately, this is a hard problem to solve both economically and especially politically.

Paying for all of this will be yet another of the sad legacies of this Administration. But I think that they probably did need to propose this kind of massive intervention. Now that I am an old person, I actually have lived through (and, in some cases, worked on) several of these financial crises and bail-outs. I was also out of the US (that time in Mexico) for much of the discussion on the Savings and Loan bailout, but I was working in banking during the first Latin American debt crisis, working at the State Department during the Mexican peso crisis, and working at a small firm providing analysis to the financial services industry during the Asian crisis, and one does see certain parallels. But each time, as soon as the crisis passes and the next boom occurs, the need for substantial reform seems to recede. Several times now we have heard about how the credit rating agencies either were villains (or, in rare cases, saviors); how regulators have been asleep yet are expected to be the saviors; how you need an overwhelming response (which I actually believe) in order to prevent a panic; how capital markets are far more important to "save" than anything in the "real" economy; and how the end of world is near. As mentioned in a previous post, I hope that we are least able to use some forensic accounting to figure out what happened, but we clearly need to find a better way to align the life of rewards and payments. If we can do that, hopefully the financial sector will return to its important yet not inflated role in the economy, and allow other sectors to attract (and reward) talented people who are producing things for the good of society.

I'm looking forward to seeing the details of this rescue plan. And yes, you'll get more comments on my Chennai trip some time soon, although I probably will write about my fascinating day interviewing job candidates at the prestigious Indian Institute of Science.

A Failure Tax?

The idea of compulsory insurance for catastrophic risk in the financial system, as outlined in a piece by Jonathan G.S. Koppell seems like an idea worth investigating, pronto! Too many (actually any) too-big-to-fail firms would/do cause far too many resources that should be strengthening our health, education, and infrastructure systems; this would be a way to make the financial services sector absorb some of those costs. I'll be on the lookout for more of these ideas, any of you that have any, let me know!

The NYTimes covers the Nano land controversy

Good New York Times article on Sept 17 with an impressive picture about counterprotests in Bengal, in support of the Nano project.

On the land issue, I think that one way to help might be to let the farmers share in the benefits of the growth on their former land. Why can't they give the farmers shares in the firm as well as some money?

The harder issue is how to prepare Indians for the new economy, as the existing system is doing a bad job of it for the majority outside the tiny slice that is actually part of the globalized economy. This issue of education here is one to which I will return over and over I think. Tomorrow I'm going to the Indian Institute of Science, one of India's premier universities, to interview job candidates. Should be interesting.

Various levels of playing "chicken" - financial crisis, driving in India, engaging in any economic trasnaction here

For those of you who aren't American, playing "chicken" (at least one variant of it) involves two cars driving at each other from a distance, and the chicken is the person who veers out of the way not to crash first. It is terrifying (I suppose, I am far too "chicken" to even consider watching it, let alone playing it), but it presumes that self-preservation will win out in the end and a crash will be avoided. Driving in India is a constant game of chicken, and it appears that engaging in many economic activities here is as well. But at the global level, we seem to be seeing this in financial markets around the world, centered around the game on Wall Street. There the question seems to be how the Chinese (specifically those entities managing their huge fx reserves) will react. Other Asian sovereign wealth funds are also relevant, but the overwhelming size of the Chinese funds makes the rest look small (even if we are talking about hundreds of billions of US$).

On the AIG nationalization, wow, who ever would have thought that would happen, even under the clueless Bush govt. I don't think that nationalization is so bad, benefiting from profits as well as losses, instead of the losing one sided proposition of recent reality where profits are private and losses are socialized, BUT I certainly hope that this is accompanied by a few things:
-- a serious look at the books to figure out what happened and who was responsible (maybe going after some of them to get back some money?,) -- something that needs to happen across the board;
-- a serious revamping of financial regulation. I think we need something like the UK's FSA, so that we don't have the OCC fighting with the Fed's regulators fighting with the state bank regulators fighting with state insurance regulators fighting with the SEC and on and on. However, we should learn from the FSA experience and clarify the Treasury-Fed-regulator relationship. But certainly someone in Washington needs to revamp insurance regulation, which is a mismash of state regulation as part of this.
-- more transparency on capital market transactions all around, on compensation, and some sort of deferred compensation that is tied to the life of an instrument, not just to its creation and sale.
-- a rethink (really hard) of how not only to regulate, but also capture the financial state in terms of accounting when markets are moving so fast. Mark to market makes sense sometimes, but how do we reconcile this with such volatility?

I need to think more and harder about this, but want to get this up before it is all too old news.

Watching Wall Street from afar

I can't say that I'm sad about the collapse of Lehman, not so much because I don't like Lehman (actually, one of my favorite ex-students works (maybe now it is worked?) there), but because I think that the financial sector needs to fall flat on its face to get asset values -- and payment packages -- closer to reality. The financial sector has distorted so much of the rest of the economy -- through inflated asset values, lack of transparency in derivative exposure, pay packages so out of line that all kinds of talent that could be (and needs to be) applied to other areas goes off to it -- that no rescue package seems to me to the right policy. The bad part, however, is that the rest of the economy will be socked by it, and many of the folks who got all that money for all those years are long gone. Some of them will lose in the current crash, and that is how it should be. This would be a fun time to be teaching my Banking class. I will draw on a quotation from Allen Meltzer, not my favorite economist, generally " Capitalism without failures is like religion without sin. It does not work."

The view here seems to be a grave concern about a slowdown in the US economy and the effect of fewer contracts from the financial services industry for the service export industry here. I think that one thing that is overlooked is the effect of lower oil prices leading to fewer flows from the Gulf, and a slowdown there's effects on the Indian economy.

The happenings in the financial sector certainly merit more analysis, but I'm just too tired to write more now, or even link to insightful analysts elsewhere. Hopefully tomorrow.

Bombs in Delhi

Saturday night in India. A bunch of bombs in Delhi. Most of them seemed fairly low tech, placed in small garbage cans. 20 are dead so far, more are expected. More scarily, many bombs were found that hadn't gone off.

We are fine, and far away from Delhi. But Sub was across the street from one bombing here in Bangalore a few years ago. And remember, we moved from Washington, one of the biggest terrorist targets in the world.