Credit Swaps explained like I'm 5 in 10 tweets 👇 

1) I sell ships from India. I've sold 100 ships to a shipping company in Japan. 

The shipping company can't pay me at once so they plan to repay me within 10 years with Japanese interest rates.

2) To make these 100 ships, I borrowed money from an Indian bank which I plan to repay in the next 10 years with the money I get from the Japanese company annually.

3) Now, if Japanese interest rates go down, I collect less money from my customer.

And if Indian interest rates go up, I will have to pay more money.

This is a "worst case scenario" for me as I won't be able to my loan back.

3) So, I take an "insurance" for this worst-case scenario in the form of an Interest Rate Swap. 

I pay someone an amount based on the Japanese interest rate (plus a fee), and they pay me an amount based on the Indian interest rate.

We basically pay each other's interest rates.

4) This allows me to pay back the Indian loan's interest rate at any cost.

Now, a "worst case scenario" is actually good for me.

I might make a profit because I pay a lower Japanese interest rate and get a higher Indian interest rate.

5) If "worst case scenario" is good, then "best case scenario" should be bad, right?

Not really.

6) If Japanese interest rates go up (I collect more money), and Indian interest rates go down I have to pay less money). 

I lose money on the interest swap I made but I'd still be able to repay my loan.

7) This is called hedging (your bets).

When you have a risk that your interest rates might move in undesirable directions you mitigate the risk by bringing in a third-party who is responsible for paying you the interest rate you need to pay back the loan.

8) Alternatively, you might have to worry about repayments instead interest rates, but you are concerned that your repayments will go up if interest rates go up. 

In this case, you might buy a different kind of  a swap.

9) You swap a fixed $$$ for a variable $$$.

The variable $$$ will be tied to your repayments, and the fixed $$$ will be agreed at the start. 

Same funda as the interest rate swap, only in this case you do it to make sure you make your repayments back.

10) Fin.

On which other finance dude bro topic, should I make an ELI5 next? Lemme know👇

Credit Swaps.

The concept of "dogfooding".

An often overlooked term while building anything.
(1/n)

I personally came across this term an hour ago while I was reading the JD of a product manager role at @Meesho_Official.

Ended up Googling it and then went down a rabbit-hole.
(2/n)

The term comes from a 1976 TV ad for Alpo dog food FT. In the ad, the actor feeds Alpo to his own dog. 

Since then it’s become the symbol (and the namesake) for trialing a product internally before it goes to market. 

https://www.youtube.com/watch?v=cHUMaKWgfS0
(3/n)

Now, why would a company “eat their own dog food?”

For starters, it helps them sort out bugs.
And additionally, it's important for every stakeholder to understand what are they building.

And I wouldn't buy my parachute from someone who wouldn't use it themselves.
(4/n)

This graphic by @centrecode shows how "dogfooding" was standardized as a concept throughout history.
(5/n)

Fin.

Also, I am trying out writing threads on concepts which I am learning myself. Here's another one.
(n/n)

https://twitter.com/thevisahan/status/1499673146751733760?s=20&t=mXf73Bx9v7lqmrxu_2k1fg

Dogfooding.

Imagine this Internet world, but with no owners...

A thread:
(1/n)

All the data we see on our screens is possible due to Hypertext Transfer Protocol aka HTTP, the protocol layer.

Anyone with an Internet can publish their ideas with HTTP but it had no "functionality" of its own.

It's essentially a "stateless" protocol.
(2/n)

There were no browsing, retail, messaging etc. platforms on HTTP's "functionality".

This "functionality" was brought on by Meta, Amazon, Google etc, the application layer.

They are the constituent "states" to the HTTP protocol who pretty much dictate what our Internet is.
(3/n)

Now, what if HTTP makes those "states" on its own.

This makes sure everyone with an Internet is an equal owner to that "state".

But what's the incentive for HTTP to do so?
(4/n)

Think of HTTP as a carnival. It's free to enter the carnival but you pay for the tickets to take those rides. 

HTTP distributes sells those tickets and keeps some tickets.

Hence, HTTP makes monies. 
Not Facebook, Google or Amazon.
(5/n)

The hypothetical HTTP we're speaking about is the blockchain.

On blockchain, there would be no more monopolizing of the Internet because there would be a negligible need for the existence of applications like Amazon, Google, Meta etc.
(6/n)

The protocol layer would be mature enough to offer its own decentralized services for those "tickets".

But wait, wouldn't the makers of the protocol have a monopoly if they are selling the "tickets"?
(7/n)

The for-profit protocol makers get $$$ when people buy their "tickets" and use their "rides".

If the tickets are too expensive or the rides are too shit, it's far more lucrative to make another "carnival" with the same rides & cheaper tickets.
(8/n)

Tickets in the analogy refers to cryptocurrency native to a protocol. eg. Filecoin.

Rides are the "constituent states" of the carnival. All the companies we see now currently own these "rides" but on Blockchain they are owned by everyone with a ticket.
(9/n)

Now, how will these tickets be seem by regulators is an interesting question.

Will do consider them as securities/assets and regulate or just treat them as tickets to a carnival of the world?
(10/n)

I plan to read a lot about Web3 and the best way to assimilate knowledge is if you can ELI5 to anyone. Twitter threads are a crude ELI5 IMO.

I plan to write more threads on Web3 trying to not sound like crypto dudebro-ish.

Fin.
(n/n)

Credit Swaps.

Dogfooding.

Blockchain.