What’s better- commonsense or being rational?

My wife looks upon me as a more “rational being” than having “commonsense”. I have very few instances in last 15 years of our relationship to prove that I am also a “being with commonsense”. Is it possible to have both traits? If both traits exist in humans (usual assumption for social science subjects like psychology etc.) when are they used? Finally, which is better to have?

“Humans being rational” is a fundamental premise of portfolio management theories. Investors are assumed to make investment choice (preferring one firm/sector over the other), post an objective evaluation of their risk-taking capacity, fundamentals of sector being considered, market potential of target firm/sectors, expected investment horizon (years before withdrawing), historical performance on bourses, valuation etc. etc. Will they ever arrive at a decision if they have to consider so much.

So called fund managers and quant analysts have used advanced modeling techniques from mathematics, physics, biology to have forecasting models that throw-up some regressional equations, the coeffecients of which clearly determine the quantum of each of the decision-making variable. So our consultants approach us (of course a disclaimer in font size of 2 below every research recommendation) with a set of firms/avenues to consider post robbing us of all our private information.

Despite all this, trends in security prices reflects nothing more than outcome of significant amount of “irrationality” on part of investors. Behavioral finance has emerged as a new offshoot of social science premised on the rationale of “humans not being rational- atleast not always”. So what defines “rationality” and “commonsense”?

Rationality or being rational entails using logic/reason backed by use of all factual information available at that instant of time when the decision is being made. The outcome/decison taken explicitly lists out the perceptions/beliefs etc. in form of assumptions. “Commonsense” on the other hand is better understood as “exhibiting native good judgement”. As per me the element of reasonablness adorns “commonsense”. Few instances- Wife tells you to be home by a reasonable time, girfriend expects a gift almost everyday you meet, boss expects you to atleast wish him good morning on messenger, it’s commonsense for men to give extra attention/courtesies/preferences to women.

Can we reflect upon some real life instances that clearly let us know when to be rational and when to use commonsense? Agreeing to recommendations of your fund manager/consultant on considering a particular set of firms/sectors for investment may be commonsense since this saves you the effor to be rational. But them missing out the “disclaimer” is what?- “lacking in commonsense” or “paying for not being rational”.

Deciding on an appropriate mix of “rationality” and “commonsense” calls-in for rationality. My personal experience suggests that appropriate mix of rational-commonsense is an inherent component of “art of communication”. Just like the concept of parent-child ego, you need not be “rational” when people are interpreting it using their “commonsense”.

So what’s better having commonsense or being rational? When did I commit on answering this, have some commonsense.

Responses to the poll at http://polls.linkedin.com/p/75743/gjrbs will be highly appreciated.

Getting Paid for Work Done and not for hours spent- Is it possible?

Long jazzy and jargonized emails are a routine in corporate world communicating just two things. First, time spent on composing them. Second about being proactive/smart in avoiding responsibilities (calculated risk) but ensuring “credit” to self for success. For god sake, how can we be playing a “position” game of being a valuable contributor and not being specific. After all effective communication is of utmost criticality.

India’s GDP growth is hinged on increasing contribution of IT outsourcing industry. Over the last decade or so the India’s IT outsourcing industry grew basis the hours spent on the job. BPOs/KPOs are all services driven by hours served. Management Gurus capitalized with their GYAN on driving efficiencies etc. etc…

What’s the way forward when newspapers are already carrying articles how India seems to be losing out the “hour spent” advantage. So what’s in store? Billion-sized population may not be the advantage anymore. We need to do that requires more “intelligence” than “ability to slog for hours”. The key to success is ensuring “right” side of brain is used more. This is where the “developed world” countries are moving to.

Some of us may reason that government has a greater role to play. But one thing that we as corporate diligent workers can gift to our entrepreneurs is- ensuring that we focus more “doing the work” rather than focusing on “getting it done” or Pretending to Work (PTW).

Guys “credit” me with the revolutionary thought that is set to change the definition of a manager..:)

Learning to use “Bandwidth Choked”

My friend coined a term called “Corporate Slave” when he saw me coming late from office in Mumbai and working during weekends. This happened 5 years back. Qualifying “Corporate Slave” a little since it may sound offensive to some we coined a term called “Capitalist Slave”.

My opinion about capitalism is not very supportive despite being a diligent worker of a capitalist society struggling to make economic profit. Under the notions of capitalism the theory of modern corporate finance rests on one important goal of “Shareholder Wealth maximization” and “The carrot and stick approach” works just perfectly in corporate world to help achieve this. How do some of us cope with increasing work pressure, to be always at the receiving end of “carrots” and not “sticks” – while both may hurt equally badly?

While exercising a trade-off between a carrot or a stick, some of us end up doing multiple tasks at a time and often reply to calls from home or boss as “my bandwidth is choked, call you back or I cannot take this up”. Taking rescue of Wikipedia to understand “bandwidth” – “Bandwidth refers to the range of frequencies (not the speed), or the measured amount of information, that can be transmitted over a connection: the higher the frequency, the higher the bandwidth and the greater the capacity of a channel to carry information.” Decoding this in real life- mental ability of an individual to undertake different tasks, please note it’s not the “speed” but the “frequency”. So guys with higher bandwidth likes of IIMs/IITs are more in demand since they have the higher capacity to execute and sustain. For weaker ones, theory of “survival of the fittest” is the best justification.

Real world definition of “bandwidth” from Wikipedia- “It is often heard around the office to describe ones inability to think about or do multiple things at once, as in, “I don’t have the bandwidth to deal with your request right now.” If a person is described as having “low bandwidth,” it means he or she is considered slow on the uptake ;-)” Decoding this further- Dimension of time is introduced when simultaneity of tasks in a short instance impacts bandwidth. After all we are talking of humans and not computers…:-)

So how should one use the term “bandwidth choked” efficiently? Here is an example “I have the ability to think and execute this single handedly and I am ready to risk it. However, given the time constraints it will be better if I have someone working with me (reporting me) so that my bandwidth is not choked.” This way you have assured yourself a “carrot” if it works and “stick” for your team mate if it fails. I hope this is self explanatory for the smarter lots. All the best to capitalist slaves for earning more “carrots” 🙂