Former British PM Tony Blair has been justifiably skewered by all and sundry following the publication of the Chilcot report on the Iraq war.

To me, the most striking part is not Blair's role- that was plain enough even without the report. It is the role played by the rest of the British establishment- the spineless characters in the cabinet, the acquiescent bureaucrats, the willingness of MI6 to oblige a war-mongering PM and, not least, a jingoistic and baying media (supposedly the 'free press' of Great Britain). Every part of the establishment was party to the American effort to oust Saddam Hussein by force and in defiance of the United Nations.

Leaving aside a few luminous exceptions such as Robin Cook, the foreign secretary who made a terrific speech in the House of Commons and then resigned, the barbarity and manifest injustice of what the British government embarked upon did not evoke outrage or protest. After the horrors of the Third Reich became known and the Nuremberg trials highlighted the enormity of the atrocities perpetrated, the question was asked: how could a whole nation have been complicit in such thing?

Well, after the Chilcot report, it is worth asking: how was the behaviour of the British establishment different from that of the Germans in the time of Hitler? That was a totalitarian regime and dissent would have carried a huge price. But what about democratic Britain? Is the price of dissent so high that nobody is willing to pay it? Or is it simply that even the modest price that dissent involves- such as losing a ministerial job or lack of career progression in the bureaucracy- something that supposedly decent people are not willing to pay?  For all the claims that democracies make, a culture of dissent is noticeably absent in all walks of life- politics, the bureaucracy, the corporate world, the media and even academics. It's so much easier to simply toe the line.

I was thrilled, therefore, to read the story of a whistle-blower from GCHQ, the British equivalent of the National Security Agency in the US. The whistle-blower, a lady, received an email from somebody in NASA asking for information on countries on the UNSC that were holding out against a vote in favour of a war. She leaked the email and ended up getting charged by the government for violation of the Official Secrets Act. The charge was dropped when it became clear that pursuing the case would not be rewarding for the government. The leak of the email should have prompted scrutiny from parliamentarians and others of what the Blair government was up to. It didn't happen:

I believed that on receiving the email, UK parliamentary members might question the urgency and motives of the war hawks, and demand further deliberations and scrutiny. I thought it might delay or perhaps even halt the march towards a war that would devastate Iraqi lives and infrastructure already crushed by a decade of unrelenting sanctions. A war that would send UK and US service men and women into harm’s way, leaving hundreds of them dead, disfigured and traumatised. Unfortunately, that did not happen. It couldn’t, for now we know via Chilcot that Blair promised George W Bush he would be “with him, whatever”.

Amidst the yes-men and sycophants everywhere, there is the odd brave soul that is willing to speak up. There were a few other heroes and heroines-  amongst them, the head of MI5 who warned Blair of the dangers of Muslims everywhere being radicalised.

How do we nurture a society where more people are emboldened to express dissent? Unless we do so, all so-called democracies are seriously flawed. The mindset is essentially totalitarian with only one difference- you get a chance to vote every few years.

There's one other aspect of the Chilcot report that Robert Fisk, the well-known journalist, highlights. We do not hear the voices of the victims, the people of Iraq. The Chilcot enquiry did not seek their testimony:

The Arabs of Iraq – and now Syria – endure human disaster on an unprecedented scale because of the Blair-Bush lies, yet all Chilcot can produce with his seven years of literary endeavour and volumes to break the strength of any library shelf is a puny little domestic report on British politics and the self-righteousness of the midget who got it all wrong.

Every once in a while, we talk about (in some wonder and amazement) how we came to meet each other, and eventually got married. Most of it is usually the same story, (chinese-whispers induced much-mauled) versions of which are known to quite a few people. But each time we talk about it, there’s something new that comes forth, which makes the discussion enlightening.

So the part about how we first got talking is well-established. Priyanka was excited to find Manu, a distant relative of hers, on Orkut. From his Orkut page, she landed at his website, where back then there was a list of “blogs I follow” (in the standard of mid-2000s websites).

And from there she ended up at my blog (the predecessor of this blog), where she chanced upon this one-line post:

noticed a funny thing at the loo in office today. a number of people tie their janavaaras (sacred thread) around their ears while peeing or crapping!!

She got interested and started reading, and presently landed at this post. Then she started her own blog, scrapped me on Orkut and then disappeared after I’d scrapped her back. And so it went.

A year and half later I saw her at Landmark Quiz, and she messaged me a few days later (when I didn’t know it was the same cute chick I’d seen at the quiz) asking if I remembered her and giving me a puzzle, and then we got added to each other on GTalk, and got talking.

Cut the story two years forward, and we met for the first time in Gandhi Bazaar in 2009. A day later, I wrote this blogpost on “Losing Heart“.

Yesterday I met a friend, an extremely awesome woman. Once I was back home, I sent a mail to my relationship advisor, detailing my meeting with this friend. And I described her (the awesome friend) as being “super CMP”. I wrote in the mail “I find her really awesome. In each and every component she clears the CMP cutoff by a long way”. That’s how I’ve become. I’ve lost it. I’ve lost my heart. And I need to find it back. And I don’t know if I should continue in the arranged scissors market.

And a couple of days later I apparently told her I liked her (I don’t remember this, and our GTalk conversations had gone “off the record” then, so there is no evidence).

And today’s conversation revealed that Priyanka completely misunderstood my “losing heart” post and assumed that I didn’t like her. In her hurry of reading my post (perhaps), she had assumed that I had “lost heart” after meeting her, and had taken it to mean that she was unattractive in whatever way.

Then, when I told her a couple of days later that I liked her, it was a massive boost to her confidence, which had been (rather unintentionally) “pushed down” by way of my blog post.

She had been skeptical of meeting me in the first place, afraid that I’d turn out like “another of those online creeps who hits on you the first time he meets you”, and said that if I’d directly told her I liked her after meeting her, she would’ve got similarly creeped out and never married me. But coming after the blog post that had pushed her confidence down, my telling her that I liked her was enough of a confidence boost to her that she stopped seeing me as “yet another online creep”. There’s more to the story, but we ended up getting married.

From my point of view, the moral of this story, or at least the part that I discovered during our conversation today, is that women are like edge-triggered rather than level-triggered flipflops (the wife is an electrical engineer so I can get away with making such comparisons in normal conversation).

The reason Priyanka liked me is that something I told her caused an instant and massive boost in her self-esteem. The level to which it was raised to wasn’t as important as the extent by which it was raised. And she said that it’s a standard case with all women – it’s the delta to their self-esteem that turns them on rather than the level.

She went on to say that this is a rather standard trick in “the game” – to push down the potential partner’s self-esteem or confidence so that you can raise it by a large extent in the next move and win them over. I admit to having no clue of this back in 2009 (or even now). But like in a typical comedy movie, I had unwittingly stumbled into a great strategy!

So many of us who have a choice about when we want to retire keep saying “I want to retire”. Do we really mean it? Many of us just mouth it. We may have no clue about what to do when we retire. Lost 2 friends recently – both under 60 – they had no […]

The public servants (country’s damaad) are treated very differently than how the country’s sons of the soil (farmers and defense personnel) are treated. So all of them have now received a small lump sum from the government. Obviously the first question to ask is what to do with the small bonanza amount. First of all […]

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

Thus wrote Thomas Jefferson in the Declaration of Independence. The 13 British colonies in North America had been at war with Britain for over a year by June 1776. At the urging of John Adams, between the 11th and 28th of June, Thomas Jefferson had drafted the “Declaration of Independence” which was adopted by the Continental Congress on July 4h, 1776. Adams went on to became the 2nd president of the US and Jefferson the 3rd. Curiously, both died on the same day — Independence day, 4th of July, 1826.

The US is a large country today with a population of over 300 million. The population of the United States in 1776 was only 4 million — or about 0.33 percent of India’s population today (take a guess before highlighting the preceding blank space).

Well, today evening I am going to be up in the Los Altos Hills watching the Independence Day fireworks in the Silicon Valley. Perhaps I will take my camera and post some pictures tomorrow. Happy 4th of July!!

PS: Did you know Swami Vivekanand passed away on a July 4th? July 4th, 1902.

Myntra made headlines by deciding to go only the app way and shut its website. The headlines had to rewritten soon as it had to relaunch its website. What explained this move? Well, people continue to prefer desktop shopping.. Earlier this year, a K@W article titled “Can an App-only E-commerce Model Succeed in India?” looked […]

This is one item I have been following with disbelief- and, of course, I am assuming that ET has got the facts right.

The story, as you can see for yourself, is that IIIT Dharwad has plans for constructing buildings which were to be financed by MHRD (50%), the state government (35%) and Keonics, a state PSU (15%). After Sudha Murty was appointed Chairperson, she proposed that Keonics be replaced as a partner by Infosys Foundation. In return for the funds that Infosys Foundation would provide, the buildings at IIIT would be named after Infosys.

The MHRD referred the proposal to the law ministry. The law ministry objects on grounds of conflict of interest involving Ms Murty. I have a more fundamental objection: how can an institution funding 15% of a project want its name to be assigned to the project? At best, there could be a plaque in the buildings thanking Infosys Foundation for its contribution.

The story doesn't end there. Ms Murty apparently wants the mentoring institution, NIT Suratkal, to be replaced by IIIT Bangalore of which she happens to be a board member- another conflict of interest.

This little episode reinforces a point that I have long been making and that readers will be familiar with: it is most unwise to leave the governance of public educational institutions entirely to boards of governors in the name of autonomy. Those sitting on these boards have little stakes in these institutions and cannot be expected to take care of the long-term interests of the institutions. The government needs to keep a watchful eye through its own representatives and by requiring the institutions to obtain government approval in important matters.

This is the reason I favour the IIM Bill. TOI reports the Bill is being held up following objections raised by the PMO to certain provisions. The PMO does not want the HRD minister to head the IIM council and it also has reservations about the President being the Visitor to the IIMs. The PMO does not think that the IIT model is appropriate for the IIMs.

I'm afraid the PMO is mistaken on these counts. Matters cannot be left to the IIM boards- there has to be an independent authority to oversee the boards of the IIMs. This is because there would otherwise be no checks and balances otherwise on the functioning of the boards. Boards are ineffective even when they are subject to the discipline of the financial market. Where market discipline is absent, boards can become seriously dysfunctional and harmful.

This is not just my view. Matters haven't been put to vote at the leading IIMs but my sense is that a majority of faculty feel that way. We feel that faculty autonomy is better safeguarded by having the ministry watch over the boards than by leaving matters entirely to boards. Our greatest apprehension is that faculty autonomy will be undermined if matters are left to IIM boards as, in practice, this would result in unchecked powers for the directors of the IIMs. We see the government as the saviour and protector of faculty autonomy, not as a threat. As long as we are governed by the rules of service of the government of India, we believe we can express ourselves freely as academics.

It would be worthwhile for MHRD and the PMO to engage faculty at IIIT Dharwad and at the IIMs in these conversations. The PMO may be well-intentioned but it seems unware of the facts on the ground. It would benefit by eliciting faculty views on these matters.

=-=-=-=-=-=-=-=-=-

Rates can go lower from here.  For as long as I can remember, I have been told by many experts that rates can’t go lower, or, that they must go up — there is no way they can go lower.  I have argued with that idea, as has Hoisington (Lacy Hunt), Gary Shilling and a few others.

Note also that the Fed and most central banks have been on the wrong side of this as well.  They keep saying that inflation will come, economic activity will pick up, and that interest rates will rise.

The Fed keeps saying that they will tighten policy.  I’ll tell you this — with only 0.82% between the yields on 10- and 2-year Treasuries, the Fed is not tightening.

WIth debt levels as high as they are (both government and private), trying to influence economic activity though interest rates is a dumb idea.  Incenting borrowers to borrow more is difficult, aside from the government — and they rarely do anything with the money that helps produce opportunities for greater economic activity.

We would be better off without “policymakers” trying to “stimulate” the economy, “manage” it, “stabilize” it, etc.  (But where is the political will to change things — the populace wants easy prosperity, and who is there to tell them to accept a rough world where work and competition is tough, and there is no “Big Daddy” to make life easy?  The people are the problem.  The politicians are only a symptom.)

There is one thing that could change this, but it would lay bare the intellectual and moral bankruptcy of what policymakers have been trying to do, which is try to maintain the real value of debt claims while still trying to “stimulate” the economy.  They could burn away the value of debt claims through an inflation greater than that of the 1970s.

So far, they aren’t willing to do that.  But their existing policies will prolong the stagnation.

And as such, rates can fall further — with a lot of noise/variation around it.

“Wealth comes from successful individual efforts to please one’s fellow man … that’s what competition is all about: “outpleasing” your competitors to win over the consumers.”
— Walter E Williams.

Part II.

I ended the previous bit of this essay with these questions: First, why is it that central planning appears to work in familial situations and in firms but not in economies? Second, does planning really work for firms and corporations? Finally, if it is indeed true that centralized planning does not work at the economy level, why do petty despots (like Nehru) go for it despite the ruin it causes?

I will address the first two questions here and the third question in the next part.

Let’s see why planning works in families. The parents are emotionally motivated to do what’s best for the family and are best placed to plan for the family simply because they care. They know the preferences of family members, know the means available, the tradeoffs involved, and so on. The information and computing power required to get to an approximate solution to meet the objectives are well within their cognitive capacity. Though not trivial, planning for a family is a manageable task.

Planning at the firm level is non-trivial and therefore there are significant failures. We should remember that most firms fail. We get to know only of those that survive in the competition. Their plans worked. Furthermore, like all things, firms are not immortal. They are born, live for a while and then die. Most die in infancy and only a few grow up to be mega-successes. The relentless force of market competition weeds out those that are unable to plan successfully.

The corporate plans that work are due to a combination of perseverance, diligence and a great deal of luck. It is hard to pick winners. It has to be so because if you could pick winners, you would be fabulously rich by investing in those firms that win and make it big. This is lesson number one: that you never know with any certainty which plans would work and which won’t. Fortunately for us, even though most firms fail, we can be certain that some will work and that’s what is important for the economy. The corollary to that is when anyone is deluded enough to think that they can pick winners, you can safely bet they can’t. Economy-wide central planners engage in trying to pick winners, and end up picking losers. The numbers are against them.

It is a numbers game, start to finish. Assuming that a startup’s survival into the next year is, say, 10%, then out of a 1000 firms that started on a particular year, you would expect only one to be around after year three. Further assume that after three years, the infant stage is over and with maturity, the survival rate climbs. Of these surviving firms, some go on to become large firms and some become humongous.

In the Silicon Valley, an area of about 25-mile radius in the San Francisco bay area, there are many fabulously successful firms (Apple, Google, Facebook) and hundreds more big, important firms. These helped push the economy of California to be the 6th largest economy in the world. How successful is California’s economy? California’s population is around 3% of India’s but California’s GDP is 125% of India’s.

Part of the reason for the Silicon Valley’s successful corporations is that it is relatively easy to start a company here. There are tens of thousands of startups every year, which guarantees that a handful will win the numbers game. No central planning board of wise men from some government agency is needed to choose winners. The market picks winner.

Let’s dig a bit into what “the market picks winners” means. There are two major market forces involved: the investors and the consumers. The investors are motivated to pick winners because it’s their money on the line. If they choose wisely, they win — meaning that the company they invested in is profitable. Being profitable means that the company’s products are bought — chosen — by the consumers, and that the cost of making those products is less than the benefits. It’s profits all around: the investors, the firm, and the consumers.

Note that all this is decentralized decision making. Investors choose which firms to back, firms choose what to make, and consumers choose what to buy. There is no compulsion involved. That’s what is meant by the “free market” — people freely choose what they do in the marketplace. They are all motivated by the single-minded pursuit of profits. But wait, that’s not all. The carrot of profits in the market is balanced with the stick of losses in that same market. The free market is a “profit and loss” system. The discipline of losses keeps all marketplace participants from making rash decisions. Those who err systematically are weeded out by the impersonal judgement of the market.

I am the average consumer, not an entrepreneur or an investor. All I care about are my own needs and whether I have choices in the marketplace. I don’t care what goes on in the insides of corporations, how they make their decisions, etc. When I think of buying a tablet, for example, I choose among the various producers. I cannot make or break a tablet company but if enough consumers feel one way or the other, the company can go belly up. The consumer is the king in a free market, and the company merely a serf trying its best to please the king.

This is what I mean when I say that planning appears to work in firms. Firms that are incompetent in their planning, fail. Eventually, every firm fails but there are others to take the space so vacated. A modern, advanced, industrialized society depends on firms successfully competing to produce goods and services that consumers value enough to buy them.

In the next bit, we’ll see why centralized planning cannot work in any modern economy. Let’s close with another quote from Walter E. Williams:

“What we call the market is really a democratic process involving millions, and in some markets billions, of people making personal decisions that express their preferences. When you hear someone say that he doesn’t trust the market, and wants to replace it with government edicts, he’s really calling for a switch from a democratic process to a totalitarian one.”

when we have a problem…we just give up. My RM for example calls me and asks ‘you have sent me this reminder no. 234 this is for which matter’. They actually do not care a fig about what you need…so you do give up..but this man did not..read on You need to take on the […]

I do not know why the CA Institute calls them ‘Accounting Standards”. See this latest leeway given to companies

http://www.thehindubusinessline.com/markets/stock-markets/new-accounting-standards-sebi-extends-timeline-for-reporting-results/article8812121.ece?homepage=true

The leeway has been given by SEBI, but surely, it is what the industry wants. Soon we will come to a stage where the company will be given an option to just say that accounts have been audited and disclosing numbers is optional.

Consolidation of accounts, doing away progressively with information disclosure and increasing level of obfuscation has been the trend in accounting disclosures over the last three decades. The story telling in the annual reports now extend to almost a 100 pages and numbers are mere annexures with minimal information.

The ICAI is not to be blamed. After all , they have to serve the masters that pay them. It is only on paper that ‘shareholders’ appoint the auditor. In reality it is the promoter who does. And fees has many components. Soon we will just do with ‘directors’ statements. After all, not even analysts read annual reports.

Prof. Ashok Gulati, (perhaps) the lone agricultural voice in media writes on how 1991 reforms have barely touched agriculture sector: Unfortunately, there was no reform package for agriculture as a sector — unlike industry and trade policy. There was only minor tinkering with agriculture policies, as in the case of fertiliser pricing or opening up exports […]

Prof Sanjay Reddy of New School has a piece on the topic: The Brexit referendum is nothing less than an earthquake. But when an earthquake happens, seismologists try to understand how and why the tectonic plates had been shifting, and the pressures that had been building to bring about the event. The causes underlying every earthquake […]

One of the main reasons why the Goal setting exercise is difficult is that we do not give importance to the thought process of goal setting. Let us look at some questions that we should be really asking: are our goals really OUR goals or goals laid down by society? for e.g. do you really […]

In my view, freedom of speech is a non-negotiable right that free people have. It is a natural right, not a right that is artificially conjured. Human dignity is lost when the right to express what you think is restricted. I regret the fact that Indians don’t have genuine freedom of speech. Here’s a piece I wrote for the June issue of India Currents. Excerpt:

Publishing anything that the government is likely to take serious offense to is akin to publishing an invitation to officialdom to please come and shut down the business on some pretext or the other; and also to audit the accounts; and to get an income tax raid done on your home immediately; and file a few cases against your business which the courts will take decades to settle.

For the record, I reproduce the full piece below.

Speaking of Freedom of Speech

Many of my NRIs friends, generally a well-informed group, are often surprised to learn that their resident Indian cousins don’t have the kind of freedom of speech they routinely enjoy in the US. They assume quite reasonably that in India too, just like in the US — both celebrated as exemplars of robust democracy — there are constitutional guarantees against governmental restrictions on the freedom of speech and the press. This is unfortunately not so.

Some time ago, while discussing the details of the content the editorial staff of an Indian newspaper would expect in a column, I was told that I was free to write about anything I wanted. But I was cautioned to stay clear of any criticism of the powers that be. Not just in general terms, I was told not to find fault with two specific politicians in power, whom I cannot name here for obvious reasons (privacy being only one of them.)

That happens in India but will not happen in the US. Here’s why.

The difference arises from the constitutions of the two. The First Amendment to the US Constitution (the first of 10 items that is the US “Bill of Rights”) states, in part, that “Congress shall make no law . . . abridging the freedom of speech, or of the press . . .” The important bit is that the US constitution does not grant the freedom of speech because that freedom is not for it to grant or withhold. The freedom of speech exists prior to the constitution; the amendment merely recognizes that fact by explicitly prohibiting any law that may tamper with it.

As it happens, the First Amendment to the Indian constitution, introduced by Mr J. Nehru in 1950 also, among other matters, deals with the freedom of speech and of the press. There are two major distinctions, though. First, I cannot quote the Indian amendment in its entirety here. The US 1st amendment is only 45 words long and is in plain English; the Indian counterpart is around 1750 words of impenetrable legalese.

Second, the Indian amendment grants the right to free speech. What the constitution grants, the constitution can also take away. In the finer details it says in essence that Indians are free to speak or write whatever they wish — provided the government agrees with it.

In short, you may speak or write admiringly about the emperor’s new clothes but you cannot point out that perhaps the emperor is naked. In fact, you are tacitly urged by the emperor to write encomiums on the brilliance of his attire.

You may ask, what does “tacitly urged” mean here? It means that when money speaks, you don’t need to. The Indian Ministry of Information and Broadcasting has a very, very large budget. (Why India has to have what amounts to a ministry of government propaganda is a matter for another day.) Currently it’s about Rs 4000 crores or about US$ 600 million a year. That’s the central budget; I presume the states have their own I&B budgets. Part of that humongous amount is spent on government advertisements in newspapers. Ruling politicians have the power to financially ruin any newspaper by withholding ads.

Even cognitively challenged people — and people who run newspapers are not stupid — know which side the bread is buttered, if you get my drift. But even if you lay that carrot aside (pardon the mixed metaphor), you have to mind that heavy stick. There are literally thousands of pages of rules and regulations that apply to all kinds of organizations, including publishing. No one really knows everything about what they are but it is quite easy to run afoul of some regulation or the other, if an inquiry was to be initiated against any business.

Publishing anything that the government is likely to take serious offense to is akin to publishing an invitation to officialdom to please come and shut down the business on some pretext or the other; and also to audit the accounts; and to get an income tax raid done on your home immediately; and file a few cases against your business which the courts will take decades to settle.

The freedom of speech and of the press forms part of the foundation of a free society. The other rights such as the right to choose who shall be entrusted with governance — democracy and all that — are rendered meaningless if one is ignorant about the deeds and misdeeds of those who govern. The search for good governance is bound to be fruitless if one has to do it blindfolded, which is what it amounts to when people lack the freedom to examine the government critically, fearlessly and frankly.

Perhaps Indians need to fight and win some real freedom, and not just be satisfied with dubious nominal freedoms that are granted only provisionally and exercised rarely for fear of government reprisals.

“The life of wisdom must be a life of contemplation combined with action.”

***

Life is full of problems. We can moan about them or we can solve them. Scott Peck argues in The Road Less Traveled: A New Psychology of Love, Traditional Values and Spiritual Growth that discipline is the toolbox for solving problems.

Peck’s argument is based on the notion that most of us want to avoid problems – they are painful and often lead us to confront our humanity. They are frustrating. There are false starts. We lack consistent frameworks for improvement. They cause us to feel sad and lonely; things we’d rather avoid. The mental pain and strain often rivals physical pain. Yet Peck argues it is in this “whole process of meeting and solving problems that life has meaning.”

Problems call forth our courage and our wisdom; indeed, they create our courage and our wisdom. It is only because of problems that we grow mentally and spiritually. When we desire to encourage the growth of the human spirit, we challenge and encourage the human capacity to solve problems, just as in school we deliberately set problems for our children to solve. It is through the pain of confronting and resolving problems that we learn.

As Benjamin Franklin said, “Those things that hurt, instruct.”

This is why some of us come to welcome problems. Most of us, however, fear them.

Fearing the pain involved, almost all of us, to a greater or lesser degree, attempt to avoid problems. We procrastinate, hoping that they will go away. We ignore them, forget them, pretend they do not exist. We even take drugs to assist us in ignoring them, so that by deadening ourselves to the pain we can forget the problems that cause the pain. We attempt to skirt around problems rather than meet them head on. We attempt to get out of them rather than suffer through them.

Ultimately however the suffering from avoiding reality is more painful than reality itself. You can see where this goes right? Now we want to avoid the pseudo-reality that we created to avoid the reality. And so it builds, layer on layer.

Avoiding problems avoids the growth opportunity. Most of the time problems don’t go away, rather they grow.

This inclination to ignore problems is once again a simple manifestation of an unwillingness to delay gratification. Confronting problems is, as I have said, painful. To willingly confront a problem early, before we are forced to confront it by circumstances, means to put aside something pleasant or less painful for something more painful. It is choosing to suffer now in the hope of future gratification rather than choosing to continue present gratification in the hope that future suffering will not be necessary.

The Four Tools of Discipline

What are these tools, these techniques of suffering, these means of experiencing the pain of problems constructively that I call discipline? There are four: delaying of gratification, acceptance of responsibility, dedication to truth, and balancing.

Easy to learn and yet hard to employ. These are the tools to confront problems and thus pain.

1. Delaying Gratification

Delaying gratification is a process of scheduling the pain and pleasure of life in such a way as to enhance the pleasure by meeting and experiencing the pain first and getting it over with. It is the only decent way to live.

2. Accepting Responsibility

The extent to which we will go to avoid responsibility should come as no surprise. Accepting responsibility is emotionally uncomfortable. We often feel, incorrectly, that we can solve a problem by saying “That’s not my problem.” Other times we hope that someone else will just solve it for us.

I can solve a problem only when I say “This is my problem and it’s up to me to solve it.” But many, so many, seek to avoid the pain of their problems by saying to themselves: “This problem was caused me by other people, or by social circumstances beyond my control, and therefore it is up to other people or society to solve this problem for me. It is not really my personal problem.”

There are extremes of responsibility.

The neurotic assumes too much responsibility; the person with a character disorder not enough. When neurotics are in conflict with the world they automatically assume that they are at fault. When those with character disorders are in conflict with the world they automatically assume that the world is at fault.

Just remember …

Whenever we seek to avoid the responsibility for our own behavior, we do so by attempting to give that responsibility to some other individual, organization, or entity.

3. Dedication to Reality

This sounds a lot like Joseph Tussman’s wise advice. Most of us have problems confronting reality because it does not line up with how we want the world to work. The rise of a political figure that we don’t support baffles us because in our mind the world shouldn’t work that way.

What Peck outlines below is a version of the map and terrority problem.

Superficially, this should be obvious. For truth is reality. That which is false is unreal. The more clearly we see the reality of the world, the better equipped we are to deal with the world. The less clearly we see the reality of the world— the more our minds are befuddled by falsehood, misperceptions and illusions—the less able we will be to determine correct courses of action and make wise decisions. Our view of reality is like a map with which to negotiate the terrain of life. If the map is true and accurate, we will generally know where we are, and if we have decided where we want to go, we will generally know how to get there. If the map is false and inaccurate, we generally will be lost.

While this is obvious, it is something that most people to a greater or lesser degree choose to ignore. They ignore it because our route to reality is not easy. First of all, we are not born with maps; we have to make them, and the making requires effort. The more effort we make to appreciate and perceive reality, the larger and more accurate our maps will be. But many do not want to make this effort. Some stop making it by the end of adolescence. Their maps are small and sketchy, their views of the world narrow and misleading. By the end of middle age most people have given up the effort. They feel certain that their maps are complete and their Weltanschauung is correct (indeed, even sacrosanct), and they are no longer interested in new information. … Only a relative and fortunate few continue until the moment of death exploring the mystery of reality, ever enlarging and refining and redefining their understanding of the world and what is true.

This biggest problem isn’t that our maps are inaccurate but rather that we fail, especially as we age, to revise them. The world is always changing. As Heraclitus said, No man can step in the same river twice.

The world itself is constantly changing. Glaciers come, glaciers go. Cultures come, cultures go. There is too little technology, there is too much technology. Even more dramatically, the vantage point from which we view the world is constantly and quite rapidly changing.

When we’ve worked so hard over so many years to create a map that we believe represents the world, we tend to ignore information that would suggest we need to redraw our map. We become defensive. Often we don’t even passively ignore this information. We go further. We denounce it or crusade against it. We feel that people who listen to it are idiots and we are the only ones who see the truth. Rather than change our map, we often try to (mentally) destroy the new reality and those that subscribe to it.

Pride and ego come into play.

Truth or reality is avoided when it is painful. We can revise our maps only when we have the discipline to overcome that pain. To have such discipline, we must be totally dedicated to truth. That is to say that we must always hold truth, as best we can determine it, to be more important, more vital to our self-interest, than our comfort. Conversely, we must always consider our personal discomfort relatively unimportant and, indeed, even welcome it in the service of the search for truth.

Openness to Challenge

What does a life of total dedication to the truth mean? It means, first of all, a life of continuous and never-ending stringent self-examination. We know the world only through our relationship to it. Therefore, to know the world, we must not only examine it but we must simultaneously examine the examiner.

The only way we can ensure our map is correct and accurate is to expose it to the criticism of others. There might be a better answer than the one you have. We need an outside view, otherwise we live in a closed system. The tendency to avoid being challenged is a characteristic of human nature.

4. Balancing

Balancing is the discipline that gives us flexibility. Extraordinary flexibility is required for successful living in all spheres of activity.

[…]

To function successfully in our complex world it is necessary for us to possess the capacity not only to express our anger but also not to express it. Moreover, we must possess the capacity to express our anger in different ways. At times, for instance, it is necessary to express it only after much deliberation and self-evaluation. At other times it is more to our benefit to express it immediately and spontaneously. Sometimes it is best to express it coldly and calmly; at other times loudly and hotly. We therefore not only need to know how to deal with our anger in different ways at different times but also how most appropriately to match the right time with the right style of expression. To handle our anger with full adequacy and competence, an elaborate, flexible response system is required. It is no wonder, then, that to learn to handle our anger is a complex task which usually cannot be completed before adulthood, or even mid-life, and which often is never completed.

[…]

Balancing is a discipline precisely because the act of giving something up is painful.

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The Four Tools of Discipline.
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The Road Less Traveled is a fascinating exploration of what it means to be human and to struggle to get better.

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You would all have read about Brexit (Britain’s exit from European Union).

It would take years for us to understand its impact on the global economy. The majority view is that it would be negative.

The general feeling across the world, especially among poor and middle class is that of anti-globalisation and anti-immigration.

After 2008 crisis, global economy is plagued by deflation, slow growth, unemployment and rising inequality. So there is lot of fear and uncertainty in the minds of the people.

China, which was growing at higher rate for last 3 decades has fallen to around 4% growth rate now (nobody  believes the data Chinese government provide).

There have been questions around even our own GDP data but even the critics acknowledge that we would be growing around 6%. Our official rate of growth is around 8%.

In a slow or no growth world, even 6% is an excellent growth rate.

This government has been doing a lot to ensure that we continue to grow at a good rate. I was having a very high opinion of this government and it has come down few notches after seeing the way they handled Raghuram Rajan issue.

We are an extremely poor nation with only $2 trillion GDP and around $1500 per capita. We need to grow at 8% to 9% for next 2 decades to catch up with where even China is now.

I’m fairly confident that the government would continue to work to make this happen.

Hopefully, if all goes well, we may be a $10 trillion economy with $7500 per capita in 2030. We would then be a middle income country. A majority of our population would be out of poverty.

The biggest challenge would be generation of employment. We are able to create only 5 million jobs a year whereas the requirement is 12 million. On the other hand, many countries in the world face labour shortage.  The best option would be to focus on skill development (no country would want unskilled labour) and encourage emigration. If the employment gap continues to persist, it would become both a major social and economic problem.

As I’ve mentioned before, the journey from $2 trillion to $10 trillion provides us excellent opportunity to grow our wealth through equity investments. In a slow growth world, our growth at a higher rate (though from a very low base) is a boon for equity investors like us.

It is very difficult to guess how Brexit would play on our stock markets in the months to come. Though Brexit has less impact on our economy, it may have a significant impact on the markets, if foreign investors decide to pull the money out.

However, as always, please do remember that in the long run markets grow in line with earnings. As long as the economy and corporate earnings are growing, these short term blips can be completely ignored.

There is nothing new you need to do now. Stick to your SIPs and stay the course.

The banking system is floundering. The NPA burden, which seemed manageable a few months ago, threatens to get out of hand partly because the government has not moved decisively to fix the problems in the banking sector.

We are in a situation where public sector banks (PSBs) don't want to lend or are not in a position to lend to corporates. At the most, they may provide working capital. Project finance is a no-no. Like private banks, they are happy to seek to retail loans.

PSBs don't want to lend because they don't have enough capital and because of a pervasive fear psychosis. They don't have enough capital because they are unable to effect recoveries on loans (on which they have made provisions), because the government is not infusing enough capital into them and because they are not generating enough earnings for want of adequate credit growth.

How to get out of this low-level equilibrium? First, the government must provide them enough capital- and the Rs 70,000 crore earmarked under Indradhanush just isn't enough. Secondly, they must be empowered to effect recoveries but taking suitable hair-cuts on loans and seeing viable projects through to conclusion. This isn't happening because any banker who takes a loss on a loan exposure will be implicated as a 'scamster'.

Bankers are not going to do what it takes to get projects completed and effect recoveries until they have the assurance that they won't be hauled for writing off some portion of loan dues. I have been saying for long that an apex authority which vets all loan proposals is required, otherwise bankers aren't going to lift their little fingers. The news is that such an authority is being constituted. It will have to get cracking on large loans quickly.

Some banks don't have chairmen or MDs. The Bank Board Bureau must remedy these lacunae as fast as it can. Amidst all this comes the talk of the decision to merge SBI with its associate banks. This could well go down as one of the worst decisions in banking ever. SBI needs to focus on sorting its bad loan problem first. Trying to assimilate associate banks will drain the energies of the bank for at least two or three years- and even after that one is not sure of the outcome.

Make no mistake: the SBI merger has the potential to weaken one of the strongest banks in the country and a key pillar of the banking system. A good way for the next RBI governor to give an early demonstration of his independence and assert the RBI's autonomy would be to dissuade the government from staying with this ill-advised course.

More in my article, Banking revival must be a priority.

Also read Montek Ahuliwalia's article on the subject.

This is a work in progress. It is my take on what is wealth, how it is created, what motivates that creation, what are the barriers to it, and what can be done to remove them. The series so far:

Part 1. What’s wealth and where does it come from.
Part 2. Competition and the creation of wealth.
Part 3. The Nature of wealth. (The current part below.)

The topic is very exciting if you are the kind of person who like me is interested in figuring out how the world works, and are not that interested in the shenanigans of politicians and other such lowlife. Otherwise all this is very boring stuff that you’d be well advised to give a miss. So with that warning . . .

The Nature of Wealth

We care about wealth because it helps us meet our needs. Food, clothing, shelter are the usual categories of goods that partly constitute wealth. Two broad generalizations apply to them. First, these are essential for our survival. Second, like all wealth, they are human creations and do not exist in nature. They are unlike other two essential items for our survival because they are found in nature — air and water. Clean breathable air and drink water are there for our use without our intervention. With a few minor exceptions in the plant kingdom (coconuts, for example) and some animals (fish or deer), unaided nature did not “create” the food we eat. Certainly, the wild ancestors of the food we eat were provided by nature but nearly all of what we eat at present has been “created” through human effort. Clothing, shelter and nearly all the food we eat are clearly man-made.

Let’s call air, water, food, clothing and shelter primary wealth to distinguish it from “secondary wealth.” Primary wealth is what we directly consume. Secondary wealth is everything else that is of use but not directly or are not essential for basic survival. One category within that group is “producer goods.” These are tools like shovels and computers. They are valuable because they help in the production of primary goods or other producer goods. Secondary wealth also has another group we’ll call “quality goods“. They improve the quality of life. Quality goods and services are those we do not absolutely need for survival but without them the quality of life would suffer. These are things we need for play, entertainment and recreation.

So there we are with a rough taxonomy of wealth: primary and secondary, and within the latter, producer goods and quality goods. All wealth is produced by human beings and involves effort. The effort merely goes to re-arrange the basic matter that is provided by nature. How much effort is involved in creating wealth depends on what we know. This know-how is called knowledge or technology. Three words that are nearly interchangeable are know-how, knowledge and technology.

We’ll go into why creating a taxonomy of wealth is helpful a bit later. For now, let’s make a few generalizations about wealth. To repeat, wealth is man-made. It does not arise unbidden from nature. At some point in the life history of the planet, there was no wealth. Then one particular life-form evolved on earth — humans — that was capable of creating wealth. They began to create wealth slowly and learned how to do so with less effort. That is, they learned how to create wealth. That is what we call technology.

Electronics is technology but it comes much later in the story. The first technologies were quite primitive: how to plant what seeds, how to hunt game, how to make a fire, how to build a shelter, and so on. There’s a word for “how to do something” — recipe. Technology is a recipe or a collection of recipes.

So we have wealth creation, and that depends on technology. Technology is what we call an “information good.” If you know how to do something, and I learn it from you, I too know how to do that but it does not diminish your ability to do that something. Information good can be shared indefinitely without reducing the amount available. This is quite distinct from other goods whose stock goes down with use.

With time the stock of technology grew and with it the ability of humans to create wealth. More people meant more recipes got discovered and eventually shared. New recipes got discovered that built on previously known recipes. For example, someone discovered how to use flint to build a fire. Someone else discovered how to fire to make a durable pot out of clay.

The wealth produced by humans grew in parallel with their discovery of novel and better recipes. That wealth gets created has an important implication: there is no fixed amount of wealth that exists in nature. Human agency and effort is involved in the creation of wealth. The creation of wealth is not a zero-sum game. Meaning when someone creates wealth, it is not at the expense of other people’s wealth.

If you figure out how dig a well and collect the oily stuff to use as fuel, you have created wealth where none existed before.

Of course, one can enrich oneself by taking away other people’s wealth. That’s not creation of wealth but a transfer of wealth, and thus a zero-sum game. Creating wealth is a morally and ethically superior way of enriching oneself than stealing. No doubt the world is plagued with quite a bit of theft but fortunately it is not catastrophic. Worse than stealing is the destruction of wealth — which is a negative-sum game. Someone breaking window destroys but without enriching himself. Destruction of wealth is immoral and stupid. But there’s one activity that is even worse than that: preventing people from creating wealth.

If we consider creating wealth good and destroying wealth bad, then preventing wealth creation is evil. We’ll go down that path later.

Here we’ll focus on wealth creation. And a related topic of wealth distribution. Wealth is unevenly “distributed.” What does that mean? If there was a fixed number of something — say, 10 apples — and someone were to distribute them among two people, we recognize it as a distribution and we can judge whether the distribution was fair, or equitable, or justified. Given that there was some agency that was doing the distributing of the fixed amount, we can instruct (or force, or require) that agency to make the distribution fair or equitable for some other than that which was obtained.

But what if there is no fixed or a given amount of something, and what if that something has to be produced through the effort of some people, and that there is no one that is charge of distributing the produced amount among them? In that case, it is possible that the amounts of the production (wealth) held by different individuals to be different. In what sense can this distribution of wealth be said to be not right? And since we have posited that no one was in charge of this uneven distribution, what agency can be employed to correct the unevenness? Those matters need to be discussed at some length.

There’s another matter related to the distribution of wealth that’s worth our attention. Whenever wealth is created, everyone within that trading area where the wealth was created gains. Wealth cannot be contained and necessarily gets distributed to one and all, though certainly not evenly. Moreover, there is not way to spread the newly created wealth evenly because no agency is in charge of doing the distribution anyway. The distribution of wealth is a natural process which cannot be interfered or improved upon in any orderly way. I find this the most enchanting feature of the nature of wealth.

Let’s briefly examine my claim that whenever any wealth is created everyone within the trading area where that wealth was created gains. The gains from the creation of wealth do not reach everyone instantaneously but eventually it leaves no one unaffected. The time required for a part of the gains to reach someone depends on his physical and logical proximity of the wealth creator.

Imagine that someone in the Silicon Valley invents an awesome music player. The players fly off the shelf. That implies that the benefits to consumers must be greater than the price they pay for the player. Let’s estimate how much wealth was created. Suppose the average buyer paid $100 for it, and gained $150 worth of music listening pleasure. (This assigning a dollar value to pleasure is a handy mechanism to quantify something but is not critical to the argument that follows.)

Assume further that the cost of production of the players is $80 each. So for each player sold, the total surplus of value (the benefit $150 minus the cost $80) is $70. The total surplus is divided between the producer ($20) and the consumer ($50.) Suppose ten million units were sold. That means the inventor’s wealth increased by $200 million, and the consumers enjoyed an aggregated $700 million of net wealth.

So far we’ve only included the inventor, the manufacturer, and the buyers of those players. How does everyone else in the larger trading area (the whole world) figure in this? The fact is that each of us is connected with every other person on earth through a network of trades. What you produce, consume, buy or sell has an effect on others although that effect may be infinitesimally small, it is non-zero and those effects add up.

Ah, but one may say here, this was merely re-distribution of wealth, not really creation of net wealth. Each consumer paid $100, of which $20 went to the inventor and $80 toward the cost of production — which was given to the various factors of production such as the factory workers, etc. This argument is not correct. Why? Because there is a monotonic increase in total wealth in the world. There is more of everything in this world (with one caveat, we can go into later). There is more of everything that we collectively use: computers, cars, houses, shoes, roads, planes, clothes, or whathaveyou. There is no doubt that all of those things were produced by human effort and through a process not unlike the made-up story about a music player. A similar story can be told about everything.

Just to repeat the main point of this piece: Wealth is created by people, and does not fall out of the sky. At some point in the distant past there was very little wealth on earth. At some point there were very few people on earth. (A few hundred thousand years ago, it is estimated that the human race went through a bottleneck when the total world population was down to fewer than a thousand individuals and that the population did begin to increase until around Neolithic times.) Both facts are related.

Now there are seven billion humans, and growing. And the amount of wealth is clearly incalculable but orders of magnitude larger than it was when the human population was orders of magnitude smaller than today. Mere rearrangement of wealth could not have been the process which increased the total amount of wealth.

I will continue with my obsession with wealth the next time.

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At a time like this, when the Brexit Boogeyman goes “Boo!” it’s time to take stock of the situation amid panic.

Though the UK will face some political unrest as the Prime Minister resigns, and article 50 is likely but not certainly invoked, the nature of political discourse hasn’t shifted in full.  Though an important question, it is only one question, and more things will remain stable than change.

At least that is most likely.  If you think of “real options” theory, you could say, “Okay, a door opened today that was previously locked.  What new doors beyond that one could be opened?”  Other countries could leave the EU and/or Eurozone [EZ].  The EU/EZ could dissolve.  The odds of other countries leaving isn’t that high.  For the EU or EZ to dissolve would take a lot of doing, and the odds of that happening is very low, though higher than the odds yesterday.

As I said a week ago:

Governments are smaller than markets; markets are smaller than cultures.

What I am saying is that almost everything affecting the needs of people will get done when there is sufficient freedom.  If Brexit occurs, the UK will negotiate some agreement that is mutually beneficial to the UK and the EU, and most things will go on as they do today.  Even with a subpar agreement, perfidious Albion is very effective at getting what they need completed.  This is especially true of their very effective and creative financial sector in the City of London without which most effective international secrecy, taxation avoidance and regulatory avoidance business could not be done.

Whatever happens, it will happen slowly.  Leaving a complex multinational group like the EU takes two years at least.  How it all works out in detail is not predictable.

I can say that human systems tend toward stability.  People act to preserve the things that they like.  Only under severe conditions does that cease to be true, and even then typically only for short periods of time.

I can also say something a little more controversial.  Wealth, assets, and money [WAM] act like they are alive and have more votes than people do under most conditions.  Why am I saying this?

Governments come in, and go out, but for the most part, the same things get done.  Those thinking that radical change will come are usually deeply disappointed.  WAM tend to maintain the status quo, not because their owners bribe politicians and suborn regulators pay political action contributions,  but because people want the streams of goods and services that help make WAM valuable.  Only a genuine crisis at least as large as the Great Depression or the Civil War can create truly radical change that reshapes the basic desires of most of the people in a nation.

Capitalist democracies that respect the rule of law (e.g., the government is also governed by a higher law) are usually pretty stable; systems that don’t have significant capitalism or democracy may last a couple generations, but tend to fall apart.

All that said, there is significant economic pressure to do two things after the Brexit:

• Rethink the single currency and common laws
• Maintain a free-ish trade zone in goods and services

The Eurozone does not allow for the necessary economic adjustments across nations in a fiat monetary system.  Nations need their own currencies, central banks, etc.  They also need to govern themselves via their local culture, not someplace far away with misguided idealists who think they know what’s best for all.

Free-ish trade maintains most of what is needed for human needs.  The European Union is a political construct meant to prevent war from ever recurring in Europe.  The best way to do that is through trade.  Severe wars rare start between nations that rely on each other and interact through commerce.

My view is that ten years from now, the goods and services that people want will get delivered, regardless of the governmental structures in Europe.  I will invest accordingly.

Practical Implications

Things will be rocky in the short run, and there will be more bumps along the road as the Brexit negotiations go on.  I will be resisting panic and euphoria in modest ways.  This isn’t the sum total of my strategies, but I expect that profitable business will continue, and that people and nations will pursue generally intelligent long-term self-interest as events unfold.

When I say modest, I tweak my portfolios at the edges.  Brexit does not comprise more than 5% of what I would do with assets.  As with any investment idea, spread your bets, diversify, don’t bet the farm.

And, I would say the same even to governments — if you don’t have contingency plans for the possibility of the EU shrinking or even disappearing, you are not truly prepared for all contingencies.  As Warren Buffett once said (something like) “We’re paid to think about the things that ‘can’t happen.'”

In closing, many thought that Brexit could not happen.  Now, what else “can’t happen?”

In a major step to curb rising air pollution in Indian cities, the centre has launched first of its kind … (Read On...)

The post Hawa Badlo abhiyaan – Pilot Programme to run two wheelers on CNG appeared first on Capital Mind.

Yesterday I predicted that Britain will vote to remain in the EU. I also said that it would be better for them to leave. I am thrilled that the popular vote proved me wrong. A little ray of sunshine in the general doom and gloom.

There’s too much news coverage of the decision. So let me point to two excellent voices that were arguing that Britain should and must leave. Watch these, not just for understanding a point of view but also how that point of view was expressed. These are object lessons in persuasion and oratory.

The shorter one first — Daniel Hannan, Member of the European Parliament. Yes, Hannan is an MEP and he argues that Britain must leave. I feel sorry for the person who has to make his/her opposing case after Hannan’s impassioned argument. It is part of the Spectator debate on “Should Britain Leave the EU?” held in April.

The other video is from a hero of mine, Pat Condell. This was recorded in May.

Pat Condell lists other videos related to Brexit at his “The Moment of Truth” page..

The issue of Brexit is a mix of politics and economics. It’s been fun and instructive for me. I hope you will take the time to enjoy the two videos.