Today I met life…

Today I met life…
It was clinging on…amdist a storm

It looked frail and tired

Jaded after a long and ardrous battle

Struggling behind a body that was a mere shadow of its past

But today I also felt spirit…

It was shining bright

Infact brighter than ever

Through the glint in your eyes

Through the silences you spoke to me with

It illuminated a bulb that was fused within me

Today I realised…

You are ether, an endless ocean of light.

With you shining the way you did, life is a mere mortal.

Thank you, the illuminated one.

Demonetisation, Satya, Bay of Pigs & Unknown Unknowns

Ok my intention here is to talk Demonetisation, but not just yet…

Let’s build some context and see this through the prism of some totally unrelated events.

Satya

Most of us have seen this 1999 superhit and IMHO  it is still gold standard for mafiaso movies in Bollywood. So let me pick your memory on this movie…
Remember the scene when Satya takes his girlfriend Vidya to watch a movie “Border”. Inspector Khandwilkar gets wind of this and decides to bust the Gangster. The plan is simple, It’s a single screen Theatre which has only one exit, The inspector gets Police to swoop the building and stations himself at the solitary exit, each person is checked and let off. This is it, Satya has no way out… Payback time… But then… Boom!!! Satya fires a bullet and all hell breaks loose, there is pandemonium all around, people run for their lives and push through the barricades, causing a stampede, women children die and Satya escapes…

Inspector Khandwilkar is suspended and subjected to a Police inquiry. The question is very simple, “Inspector Khandwilkar, You knew that Satya is a dreaded gangster and he would have done everything in his ability to protect himself, why did you choose to put so many lives in danger.” Inspector’s answer, “Sir, I did what I felt at that time was appropriate”.

Now chew this for some time…

Khandwilkar at that moment had no clue that Satya would react the way he did and his step though in hindsight totally fool hardy looked perfect at that time.

Donald Rumsfeld & Unknown Unknowns

Donald Rumsfeld, The secretary of State was conducting a press conference in 2002. The background, America had invaded Iraq because it allegedly held droves of WMD, Weapons of Mass Destruction. But there was none to be found and the whole exercise was looking silly, When queried about this Donald Rumsfeld had this to say,

 “Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”

Now this line “Unknown Unknowns”  created quite a furore, there were multiple views on this observation, some felt this was a vieled acceptance of an earlier false position that America held, but largely it is considered as the articulation of the Blind spot in decision making, i.e the unknown unknowns, all the things that we don’t know about that could go wrong or play a part, when we take any decision our decision is largely based on cause and effect variables within our comprehension, what if there are others that could go wrong..

Bay of Pigs – The Brilliant Disaster

In the March of 1960, right after Kennedy had taken office, he was breifed about the brilliant plan to attack Cuba using 1400 Cubans with the help of the Mighty American Navy and Airforce at the Bay of Pigs on Cuba’s south coast. The aim was to overthrow Castro, however from day one nothing went as planned. On the first day the Cubans sank one supply ship and the others had to turn back. On day two Castro’s army completely rounded up the army and sent them to the prison. In hindsight  it was the most ridiculous plan ever envisaged and executed, for.eg in the event of an emergency the Americans planned to plant themselves in the Escambray Mountains and launch a covert attack, only to realise that the mountains were more than 100 miles from Bay of Pigs with a swamp separating them. How could the mighty Americans bungle up in this magnitude. Did they underestimate Castro’s power?

Demonetisation

On 8th November 2016, Narendra Modi appeared on National Television and announced that from the midnight of 8th November Rs.500/- and Rs.1000/- won’t be legal tender. There were multiple reactions to this decision. I must admit that I myself at that moment felt it was a master stroke, the rationale was simple, All black money would need to come back to the banking system, the people who have legit money have nothing to worry and the others would have to take a call on burning their stash or explaining to the tax man their source of funds… Either way all the money would be  back in the banking system and would leave a trail back to the real owner, this was the best thing to curb black money. The wide expectation was that atleast 20% of the money about 50 billion$ worth would never come back and would make the RBI a neat profit and reduce  our budgetary deficit. It was decisive, bold and most of us believed it was  a master stroke, Today we are all eating our words.

Some big economists warned on the pitfalls, Dr.Manmohan Singh  said this was a terrible move and had the potential of shrinking GDP by 2%. The ex RBI governor Raghuram Rajan when queried didn’t support the move.

Today the RBI has announced that almost 99% of the money did actually comeback to the banking system, and the popular consensus is that Demonitisation was an abject failure, turns out Dr.Manmohan Singh was spot on, Demonetisation gave a body blow to the unorganised economy and had a domino effect on job creation and output creation.

What went wrong?

How did all the money comeback?

Was there no black money in the system?

Some Conjectures I heard..

1.The people who had black money laundered it through people who had the resources to justify a 50k incremental deposit and got their money back or the ones who had the muscle power laundered it through helpless poor people through their ZERO balance bank accounts opened by the Govt

2. Co-operative banks, which are quasi owned by Political parties and are operationally outside RBI’s perview reported the most mismatch of nos on accounting.

3.Real estate companies worked as fronts and in connivance with interested parties  to help launder.

The Govt’s view is that we still have a trail and we will reach the last person, while it looks hopeful, one’s fear is this will turn out to be like finding a needle in a haystack. The ones who did this would have taken enough steps to come up with explanations that could distance themselves from this money if investigation reached their door step.

The founding principle of economics is that rational people think at a margin, which means that given a certain stimulus or a circumstance, rational people will behave in a particular way. All behavioral models tend to have this assumption, but what if the decision taken in rationality affects people who have an incentive to behave irrationally? 

Like why is it that the Govt took so much time to catch Veerappan? 

Or why did Columbia take so much time to catch Pablo Escobar?

These people were irrational and they manipulated the system in all possible ways to ensure they went scot free. So they knew the breaking points of all constituents who would be instrumental in catching them, then they manipulated them, making the system look absolutely foolish.

The moot point in all the above eg.s is why is it that we are not able to judge the fallacies of the decisions while making them and why are the pitfalls clear only in hindsight?

Let’s define this as the Decison Blind spot

To my mind there are mental fallacies at two levels which make these decisions perfect blinders.

  • Fallacies of the People who make them
  • Fallacies of the ones who believe them

I had once read a book written by Rolf Dobelli, “The art of thinking clearly” which articluated thinking biases held by people and some of the fallacies strike a chord in uncovering this Decision blind spot.

I would like to bring about a few biases

Fallacies of the Decision Makers

  • Deformation Professionele: Mark Twain once said that if the only tool you have is a hammer then all you will see is nails. Basically a thinking fallacy where one looks at every problem through the prism of their limited knowledge. If you state a problem like say “Intolerance” and ask a banker, an army man and a Psychologist about the reasons. The banker may say it’s coming out of lack of money, the army man may say shoot the pschophants and the psychologist may say it’s because of collective depression..the answer may not be any of the above mentioned reasons, it may be all of them in some measure or none of them. So Demonetisation may be a political solution that a totalitarian regime may come up with, like history has shown, Demonetisation took place in Nigeria, Ghana, Zimbabwe, most of them totalitarian regimes run by dictators. There could be many other economic solutions to tackle black money, infact India’s best step ever to counter black money was Liberalisation, removing the need to generate black money, the current regime has shown to have totalitarian tendencies and wider consultation might have brought out this thinking fallacy.
  • Group think : The calamity of confirmity.  Let’s go back to the Bay of Pigs eg, While the decision was made by the close coterie of Kennedy  they never estimated how far they were from reality. Group think is categorised as a behaviour were people collectively make wrong decisions, albeit individually they hold a different opinion. The reasons why closed groups like a board of directors or Kennedy’s coterie or shall I say Modi’s coterie came up with erroneous decisions is because they suffer from some fallacies like, Fallacy of Invincibility, Collectively they feel they are invincible and have a chip on their shoulders giving them the right to take the decisions they are taking.Next is the illusion of Unanimity. There is this urge to confirm to the popular vote and the dissenting voice quites down for fear of being frowned upon
  • Hyperbolic discounting: I give you two options, You can take 1000$ right now or 1100$ after a month, what will you take, intuitively… First option. Let’s assume we give this option to rats, one portion of cheese today or two portions tomorrow, same answer, option 1. We are the descendants of foragers and our DNA is programmed such that survival or immediate fulfillment is most important. Look at Demonetisation. The immediate effect of Demonetisation was that banks immediately were recapitalised, the future impact was yet to be assessed but the money was a big carrot, Hyperbolic discounting anyone?

Fallacies of the Believers

  • Social Proof: We are the descendents of hunters and foragers, imagine if you were in the Savana, and someone shouted “Tiger”, survival instincts would mean we would run before looking back, this ensures our survival. Sadly we don’t live in the Savanna and the Tigers are fending for their lives. The issue is we still carry the same genes, so the moment we hear on Social media that Demonetisation is a good thing and we don’t necessarily hold an oppinion ourselves, we allign with the majority opinion, it helps to be part of the herd.
  • Confirmation bias; This is the mother of all biases. Simply put you will look at all events outside basis your view of the world. So for eg if you are a Modi Bhakt, then Demonetisation is good, irrespective of any of its objective failures, conversely if you are a baiter  the converse would hold true, but majority in India I believe swing the other side and hence still believe that Demonetisation was a great move, isn’t that why they won the UP elections?
  • False causality: Many people believe if there are books in your house, children will naturally be intelligent, because it is seen that intelligent kids have lots of books in their houses, now this could also be because kids who have a lot of books also have intelligent parents, which is conveniently forgotten. Similarly during Demonetisation people were told that standing in line to deposit your own money was similar to the sacrifice done by the soldiers at Siachen and this was infact nation building, most people bought this argument, but was this false causality at play?
  • It will get worse before it gets better fallacy: Now imagine this, you are holidaying in a remote location, suddenly you have a stomach upset, some one gets you a doctor who prescribes you a pill, before handing over the pill the doctor cautions, it will get worse before it gets better. You brace for it, and as told by the doctor, the pain gets worse, you hold on thinking this is exactly what the doctor said, until your appendix bursts… Point being, this exactly what Modi said, “This is a Yagya” ” I ask for 50 days” ” Our Jawans are dying in Siyachen can’t we stand in a line?” All for a great cause, and we did for the Acche Din to come. Well did it come? Did we buy the argument? We did.
  •  Halo effect: In the early part of 2000 before the crash obviously, the Fed chief Alan Greenspan was a prophetic figure, his words were gospel, he continued reducing interest rate and America continued to grow, until well the economy crashed… And the same people who were hero worshiping him questioned him. Similarly Modi has carefully built an image in his campaign, of a crusader against black money, he had promised to give 15 Lakh in the account of each Indian if elected to power, A common man, a pragmatist who became India’s Prime Minister. He embodied hope. So when he says Demonetisation is National service, all his voters take him for his word, The question is, is the Halo slowly disappearing?

    There could be many more cognitive biases that could explain why the decision makers and the subjects bungled up at this scale when it came to Demonetisation, but the point to ponder is that every action you take has an equal and opposite reaction and assumptions based on rationality don’t work when you are dealing with irrational people.

    As someone said Common sense is seldom Common Practise. 

    Holi- The message to Humanity

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    Millions of years ago the ultimate charmer was born. Our friend had a weird blue colour, the reason for which I won’t get into at this point. Playful as he was, there was a special someone in his life who teased him for his weird blue colour. After a point when he couldn’t take this any longer our friend confides in his mother, who tells him to colour the girl’s face with whatever colour he pleases. The man in question is Krishna of course and the girl is Radha. Thus began the legend of Brij ki holi.

    The way I look at it is Radha got coloured in the colour of Krishna. The colour of love. The ultimate truth. A little metaphorical I might say. The colour of Holi also made them one.

    If we look at this in the modern context, the message is so relevant. So many lives have been lost and so many civilizations finished because of manmade barriers of race, cast, creed, sexual orientation.

    Each trying to prove one’s point more emphatically than the other. It has become so difficult for us today to stand a differing point of view.

    Holi is a message to the entire humanity that all of us must be ready to take offence once in a while and once coloured all of us look the same. Once coloured you can’t differentiate an athiest from a thiest, a rightist from a leftist, a coloured person from a non coloured person, or gay from straight. Its a gentle reminder that love is the only true emotion which cares two hoots about these man made barriers and is the only thread that binds the entire humanity.

    So let Holi be a reminder that once in a while you should let your hair down, lock in all those extreme views in your closet and just love everyone around. Take some offence for god sake, after all you are nothing more than a small dot in this magical cosmos.

    Happy Holi