Games Indians PlayHave you read Games Indians Play! by Dr Raghunathan? Very interesting book with pertinent examples of issues we face, many a times overlook and are facing worldwide. In that book he says – “We are individually very smart but collectively dumb”. I think we are collectively dumb and therefore we are in the economy-related mess we have created.
I did not know that I would be referring to my new year blog so early in this year. Newspapers of 3-Feb-2012 made me do so. The news was about the 2G scam which had been under scrutiny for a long time now. In my opinion the verdict clearly stated that power corrupts and it gives you confidence that you can get away with murders too (many such cases pending in India)!
I thought hard – really very hard – to find a solution. I think I will go back to TRIZ (theory of Inventive Problem Solving) to decide conflicts and resolving them. Until I find a one size fit all ‘man made’ solution, I could think of only one possibility. This solution is self restraint, and owning responsibility to make sure we are morally correct.
This word ‘Moral’ reminds me of my economics and business ethics class of MBA where we discussed moral hazards with Prof Mankad and Prof Arun Ramanathan. I was reading this article on Moral hazards at Wharton. The article talks about authorities and new stringent rules. This regulatory authority will tomorrow need another (other set of rules) and so on and so forth. How long will we create such authorities? Moral hazards would end very easily when each one takes responsibility and become accountable for his/her action. This accountability has to come on each level and for all the actions. The problem lies with a reality that – ‘We are individually very smart but collectively dumb’. This ‘being individually smart’ begets moral hazard. The solution for this problem is one’s own self. Take responsibility own it and be accountable. Perhaps initially we (as individual) will fail but collectively we will start succeeding.
I am hopeful that once we start from ourselves (individually), each one of us would be able to avoid situations where we would talk about Newspapers of 3-Feb-12 (2G Scam), other scams and the bad shape of world economy. Hoping that we would save our energy to concentrate on something constructive.
Our maid – Sarala – works at about 4 homes. She works close to 6 hours a day. With this hard work she earns more than INR 15,000 per month. There are laborers who work at construction sites and as daily wage electrician or carpenter – Kishore – in our area. Assume laborer earns INR 250 per day that comes out to be more than INR 6,000 per month. I am giving these numbers for Mumbai’s unskilled workers. So, I did some back of the envelop calculations. Here are some questions that make us believe Why socialism fails?
Now let’s review
a probable scheme NYAY announced few days back. NYAY is promised by Congress
party (erstwhile Congress (Indira)). In this scheme they intend to offer 6,000
per month to the bottom 20% poorest people of India.
Many of the people identified in the beginning, will fall in that category. Why? Because there is no way you can define bottom 20% poorest people. The reason is none of the above are in tax bracket. There is no way you can define their being “poor”. You may argue that there is a Below Poverty Line (BPL) cards. Many of the Indians know that our systems are such that this card – like a Bangladeshi illegal immigrant can get an Aadhar – is easy to get. If you do not remember any such card being made, read here. At the same time, if without such verification a scheme is run – you would get to see a misuse like this. Both the points are seemingly contradictory, however this is how manipulation happens with Government schemes. Most of the money allocated goes to the corrupt party’s politician’s pockets.
This corruption is just one part of the story. Let’s dig a bit on how it can impact country’s economy. Now, since Sarala and Kishore are immigrants from different parts of India either they can get the benefits in their respective villages or the worst migrate back to the village – because they can get 6,000 for free per month. A village may not be as expensive so survival can be easy there. If they get the benefits staying here the NYAY scheme becomes UNNYAY (injustice) in itself. If they migration and so possibly many others. The shortages of unskilled labor in cities certainly will result in expensive labor. This expensive labor will translate in expensive stuff – be it real estate (the industry is in a tight spot anyway) or a house maids.
Assuming some numbers and bringing others numbers, I did some back of the envelop calculations, references are attached herewith. Click on the images to enlarge.
The worst is yet to come – one of the Congress’s think tanks Sam Pitroda says we will have to increase tax on income to manage in this expensive scheme. The outlay of NYAY can be as much as 22% of GDP. The numbers are calculated based on population estimates of 2017 and GDP estimates of 2017. Please check screenshots. This scheme would most likely cross defense budget of India. Effectively, it will reduce savings of middle class due to tax burden and higher inflation.
I will leave you with few questions on this scheme – why would Sarala or Kishore want to up skill him/herself and ADD to the economy if such free money is available to him/her? Would not there be a competition to show oneself poorer than the poorest to get this free money? Should not job creation and up skilling be the priority of government rather than splurging tax money? Just imagine if up skilling program gets such fund (3.8 trillion or 3.8 lakh crores INR) how much skilled labor we can create? How successful is MGNREGA? If it really was, we must have had pukka roads across country by now. If a report writes positively about the scheme – can it possibly be PAID for?
And the last question to you – if you were Sarala or Kishore what would you prefer – free money or a dignified earning, up skilling and job opportunity? If your answer is former – read individually smart collectively dumb.
Note: numbers of 2017 are taken as those were readily available on Google Search
When Alan Greenspan said in 2008 – “I really didn’t get it until very late.” It was as if someone was digging under his feet and Mr AG did not know. May be Mr AG really did not know, because he was keeping his eyes and ears closed. May be he was so inebriated in the wheel of growth that not just Mr AG but any banker was not willing to feel the “overheating economy”, hear or see that someone was digging deeper – under their feet.
These words overheating and digging remind me of environment and when I received the above video* from someone on Whatsapp I could relate this video to one and only thing – economy.
When I was watching this video, I was having strange feelings in my mind that the economy is going to do in down turn once again in 2015-16. “Everything just works as perfectly as it can…until it stops working!” That seems to be the case yet again for the economy.
There are other reasons to believe that we are going to have a tough time. Though I do not want to be a doomsayer or conspiracy theorist, but here are few things – Developed world wages freeze analysis (The Economist), ISIS is likely to help economy sustain (wars have helped bring economy back on track), Upcoming elections in the USA, France unhappy and rise of EU opponent leader there. Though when it comes to EU, I wish it remains an integrated unit, that is a start for unifying the world in the lines of – interdependent co-arising.
Watch that video once again – remember Economy goes down like this. Have we ever questioned the actual reasons for these things? Dig deeper! This digging deeper to make some extra pound creates the problem. Economy crumbles like this when we do not nurture it the way we – as a collective group – fail to maintain the hill which just crumbled in the video. As capitalists too – we are individually smart collectively dumb.
*The origin of this video is unknown to the author – video shared by Dr Mala Kapadia.
I read a book – Games Indians Play by Mr Raghunathan a Professor in IIM-A and CEO of GMR group. I have written on this book earlier too – Individually smart collectively dumb. The problems with Indian – supposedly sharp – minds is given below in story format.
This story is from a book – ‘The prayer of the Frog’ by Father Anthony de Mello, S.J. This book has very interesting stories on religion, spirituality and human relations etc. The story precisely explains how we – Indians – think and act.
…
A great festival was to be held in a village and each villager was asked to contribute by pouring a bottle of wine into a giant barrel.
When the banquet began and the barrel was tapped what came out of it was water. One of the villagers had had this thought: “If I pour a bottle of water in that giant barrel, no one will notice the difference.” But it hadn’t occurred to him that everyone else in the village might have the same thought.
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This happens in Indian political system. Everyone thinks that yes there is corruption, but I am paid 100/- let me vote this corrupt politician. Others would not vote him… similar to the story above. Every poor person gets an incentive to cheat – that cheating is a responsibility of politician – development Vs one time benefit to voter – 100 rupee note or a quarter of alcohol etc.
The interesting part is we Indians more complex yet cheat always. We think in two fashion. 1. the way story suggests above and 2. why should I do it when everyone else is cheating?
Option two suggests that every Indian knows what others are going to do and thinks why should not I do the same?
A couple of weeks back I wrote about problems with Socialism and probably how it can be improved with lesser gaming of the system. It is not that capitalism does not allow gaming the system, in fact there is immense lobbying that happens which is no less than corrupting the system. A few examples are – unsubstantiated loans to corporate houses (ICICI bank gave to Videocon group), Kingfisher Airlines and Jet Airways playing their own lobbying tactics to either get better slots / airports or getting competition out of the system.
The point is, in capitalism too many wrongful act are done at higher level too besides on personal level. Which is basically a case in Socialism too. The advantage in capitalism is everyone is trying to be rich whereas in socialism mostly the government control most of it. In many of these high level and individual level we tend to look at our own’s benefit over the collective good of the society. Effectively, we are individually smart and collectively dumb.
The technology enhancements are helping people game system can be done at various levels. A couple of days back I came across this small video on Twitter. In China, insurance companies offer discounts in the premiums of health insurance if a person is physically active. So, people have devised “a solution” to look fit. The point here is not to stay fit, but to let the insurance company believe you are fit. This step counter does the trick.
The above system is not only for fooling insurance companies but also to fool oneself. It defeats the purpose of having step counter, healthy life style and own’s health at large. Besides loss to the companies it is a bigger loss to individual – you only get on life to live.
Net net I would emphasis – you only get on life to live – live truthfully, why game the system? If you look at recent Indian businessmen’s examples be it Naresh Goyal of Jet airways, Vijay Mallya of Kingfisher airlines or Mehul Chowksi and Nirav Modi of Gitanjali group; by the way there are many more in the list; what is the result? Whole banking system and many consumers are at the receiving end. Why game the system – live life truthfully, isn’t it?
Recently I went to meet one of our relatives. We were generally speaking and his plumber came, I asked what happened? He said – Pravin, we requested our plumber to fix the leaking pipe. Later we asked him to put blocker from where the leaking pipe was having water inlet. I said why did you solve the problem of leaking pipe twice? He said the fixing the pipe with m-seal and other plumbing means was cheaper. But second time you had to put a blocker, isn’t it? It costs and your plumber might have charged you twice too. I curiously went to check the place – being an insider to this family it was alright. I repeated – you tried to fix a wrong problem and you did it twice! and also by putting blocker you made the pipe irrelevant too…
I was speaking with my wife today, she said “loan waiver is not a permanent solution”. Yes she is right. This endemic was started by government of our own very famous economist Mammohan Singh and his another gem of an economist finance minister Chidambaram in 2008. It was a waiver of 60,000 cr, largely to win upcoming election. Manmohan Singh government won that election too, just to end up embroiling themselves in scam after scams. The scams resulted in public anger and protest – India Against Corruption. There are long lists of corruption under the Manmohan Singh government however the point of discussion currently is farmer’s loan.
The kind of waivers offered mostly result in moral hazard. Just imagine, if I am a farmer – this year monsoon is expected to be good – why would I care to pay my loan EMIs when everyone is getting sops? The other trouble is – even after 70+ years of independence of India we are more dependent on monsoon rather than our skills of farming! Connecting all the rivers was a dream project of Atal Bihari Vajpayee 10+ years back, yet it has to see light of the day. Furthermore, we ignore solving the problems we created ourselves such as depleting underground water level. Mostly, the reason is – we are individually smart but collectively dumb. We assume that I cannot control where the underground water goes – why should I?
Imagine, the amount of 60,000 cr farm loan of 2008 – had it been utilized in making canals and rainwater harvesting, educating farmers for better methods of farming and technology interventions in agriculture and post harvest we might have been able to solve the problem to some extent if not completely. The other thing to note is – how can we ascertain the benefits are transferred to the right people? Those who have small land holding may be taking loans from local private lenders, also they might not even have their credit ratings for bank to offer them loans. Where exactly does such huge amount go?
Now think again about where the government gets this huge amount from? Have you ever seen your bills? Did you see Krishi Kalyan Cess? Government generates parts of such sops from us when we pay taxes – indirect tax. This is a problem to worry for middle class only. They earn and pay income tax, they buy and pay Krishi Kalyan Cess and when farmer’s are on strike they pay exorbitant amount for buying vegetables too. Mostly this expensive vegetables are procured by middlemen at cheap prices – all cash business less or least tax with black money. A better option for middle class Indian is to either become a farmer and get loan waiver or become an industrialist take loan and leave India!
When I completed my sentence – “you tried to fix a wrong problem and you did it twice!… …The leaking pipe was old and rusting, you should have changed it at first instance. why don’t you fix it permanently? My relative said “why should I? It is a rented property? I may go next year, someone else will come, so I am fixing it temporarily.” Same is with the governments – they solve a problem as temporary fix – farmer loan waiver for winning next election and not solving problem which causes farmers to take extreme step of committing suicide or protesting for loan waiver.
According to the Bank of America Merrill Lynch the farm loan waiver will cost 2% to the GDP of India by 2019. This wrong precedence was set by two of the most knowledgeable economists of India – Mammohan Singh and Chidambaram. Go figure what it means to be subject matter expert!
I was watching Gulal (A Hindi Movies by Anurag Kashyap) yesterday, somehow, it is available on Youtube.
That movie revolves around State of Rajasthan, kings of that state and their wish to get independent Rajasthan – independent from India. At first it sounds very weird, as the story unfolds different characters start playing their strategies for their own benefits. Whatever happens in the movie, that movie reminded me of Brexit – British Exit from the European Union.
After watching the movie, I was going through the documents of European Union. EU came into existence after two consecutive world wars. The wars which involved almost the whole world but centered around Europe. Just imagine a Europe between 1920 to 1938 (between the two world wars, or the Europe just after 1945. There was enmity, conflicts and the fight for economic dominance. This all actually ended with economic agreement! Isn’t it interesting?
The foundation of EU was more on economic development, social development – let me call it human development. Quote from EU website – “The EU regional policy starts to transfer huge sums of money to create jobs and infrastructure in poorer areas.” Such a wonderful concept that people can cross man-made borders, do business without trouble and follow one set of rules yet their countries do not lose their identity. Just imagine all European countries making a team to compete in Olympics or Fifa world cup!
The EU regional policy starts to transfer huge sums of money to create jobs and infrastructure in poorer areas.
The union started 21st century with a couple of aims – Peace in member states, Citizen’s security, economic and social solidarity. Such lofty goals require enormous efforts. These efforts at times become lobbying for one or the other. No doubt there may have been political and business interest groups who might be trying to get better deals or benefits for themselves. This type of lobbying – or cheating in some ways – can only be stopped when there is genuine connect to develop others and heartfelt desire to help those in need. EU adds close to 20% to the world GDP, what is more important to note is – its population is only is only 7% of the world population.
Just imagine if we get to see such geographic unions in other parts of the world, such as South East Asian Union or South American Union. These type of geopolitical, economical and social unions would require building trust first. A caution the union must only be on two fronts – economic development and social welfare. No! don’t even think of religion – religion is and must be an individual pursuit, those who make religion a group’s belief they mostly want to gain power. Also, religion is only used mostly for generating fear in the heart and mind of followers.
The movie Gulal had a very selfish and political motive. Can we compare that story of Gulal with British Exit from European Union? At times my mind says yes and other times no. No because it was a democratic decision, based on votes from common people. The statistics says older people were not in favor of remaining in EU. Reason – they were getting affected in many respect on personal level. By the way, these old people are the same who had benefited some or the other ways from being a part of EU.
My mind says yes because who says canvassing was not done? Who says there was no political motives, selfish goals? Who can deny all these? It has repeatedly proved that we select being individually smart and therefore we are collectively dumb – British exit from EU is an example of the same. Though we may argue that parts of Britain was against it and 51 to 49 cannot be generalized.
Also heard that those who voted against were fearful of immigrants. I wonder how big is the problem of immigrants in Britain! Of late, the fear of immigrant is evident in a way – every morning I am waking up to a city trending on twitter. There is some or the other attack at some place, European Union was built for peace and social uplifting – not for terrorist attacks.
My question came a full circle from the movie Gulal to British Exit to Gulal again – What drives people? What drives an individual? Ambition, selfishness or fear? I wish in future we would not be driven fear and selfishness and, in future we would see such union and countries coming together to prosper together, instead of people terrorizing and killing fellow human beings. This wish includes economic and social development – religion is a very personal affair, it should not come on streets and should not be forced.
Disclaimer – Author supports such collaboration and unification as done by the European Union. Such unions would one day make our world more connected and the interdependence will help us embrace each other with our respect, trust and support to each other as fellow human being rather than black or white, European or Asian or for that matter capitalist or socialist. We indeed are interdependent.
The air I breath you too breath the same so does the ex-CEO of VW Martin Winterkorn.
Recently, there was a huge issue of VW vehicles cheating emission testing, it resulted in heads being rolled and stock price plummeting. What Volkswagen did was – it programmed its models starting 2009 till 2015 such that during US standards testing (NOx) were met only during laboratory testing. According to Wikipedia the NOx emissions during normal driving was ~35X higher.
Similarly Toshiba had been involved with accounting fraud. Toshiba continued doing this under three different CEOs. Had it been under only one we would have thought that it was more on personal level and not on organizational level. There are many more such cheating by the way. These things affect not just one person, it affects everyone – irrespective of whether you drive VW car or you are a Deer (may be a lion) for that matter. I wonder if those sitting on the top wants to go where from there! These cheating made me think – who are these people cheating? It was a question during rainy seasons in Mumbai. Roads of Mumbai get terrible during rainy seasons. You can barely avoid seeing a pothole on road. This is a normal scene – generally – across India. I asked this once on Twitter –
I wonder if the road constructors of Mumbai drive on these
roads! @TrafflineMUM so pathetic conditions in one rain..
The point I am trying to make is – the constructors of Mumbai roads are driving their vehicle on the same road, the employees of VW are also breathing the same air which is polluted by their vehicle. Similarly, Toshiba employees must be holding shares of Toshiba! Who are they trying to cheat? And why?
Wish these people who are involved in such activities realize that they are effectively cheating themselves too. If they do world would become little better.
I am sure some or the other interest groups, political circles must be pickin’ and grinnin’ and enjoying those events – VW and Toshiba. Wonder if those pickin’ and grinnin’ now would help improve the overall system instead of being selective.
The topic of LBC was pickin’ and grinnin’ (Generally, I change topic of LBC) suggested by Lin for the weekly Friday Loose Bloggers Consortium where currently eight of us are supposed to write on the same topic every Friday. The seven other bloggers who are expected to write regularly are, in alphabetical order, Ashok, gaelikaa, Lin, Maxi, Padmum, Rummuser and Shackman. Do drop in on their blogs and see what their take is on this week’s topic. Since some of them may post late, or not at all this week, do give some allowance for that too!
Recently Dr Raghunathan shared a link of his interview with Wharton with me We are individually very smart but collectively dumb. The very first paragraph of the interview has an example of a farmer. A farmer whose corn won top awards year after year. When a reporter asked about the secret of his success, the farmer attributed it to the fact that he shared his corn with his neighbors. Why, the reporter wondered, would the farmer want to share his seed when those neighbors also competed with him for the prize? The farmer’s reply was, “The wind picks up pollen from the ripening corn and swirls it from field to field. If my neighbors grew inferior corn, cross-pollination would steadily degrade the quality of my corn. If I am to grow good corn, I must help my neighbors do the same.”
I am writing time and again on interdependent co-arising and how it applies to businesses, I think this small story on BUSINESS – a winning business – states a lot about ‘interdependent co-arising’. This example applies beyond India, the long term gain for world economy would be working on the concepts of interdependent co-arising.
These things affect not just one person, it affects everyone – irrespective of whether you drive VW car or you are a Deer (may be a lion) for that matter. I wonder if those sitting on the top wants to go where from there! These cheating made me think – who are these people cheating? It was a question during rainy seasons in Mumbai. Roads of Mumbai get terrible during rainy seasons. You can barely avoid seeing a pothole on road. This is a normal scene – generally – across India. I asked this once on Twitter –