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One of the great problems with India is the relationship between the state and society.
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The perfect balance is when the state exists to serve society and the rights of citizens
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Yet, in India, as I have been saying for almost all my adult life, we behave like subjects
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We behave as if the state is there to rule us and not to serve us.
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We have a state that does not do what it is supposed to and meddles in our ability to
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solve our own problems.
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And with this dysfunctional state, we have entered a modern world of great complexity
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where you need a state that can manage this complexity.
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But our state is a primitive state designed to colonize its own people.
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And to see its struggle with this modern world is like seeing someone trying to fix a bug
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in a computer program with a hammer and a wrench and some nails.
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And we see this most in the growing regulatory state.
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The financial system is complex and dynamic and an engine of growth.
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Does it need regulation?
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What form should this regulation take?
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What are the guiding principles?
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If we get these wrong, everything goes to hell.
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And to understand what's going on with the regulatory state, we need to examine these
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foundational principles, we need to examine the history of regulation worldwide, and we
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need to peer into the belly of this beast.
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Welcome to the Seen and the Unseen.
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Our weekly podcast on economics, politics and behavioral science.
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Please welcome your host, Amit Verma.
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Welcome to the Seen and the Unseen.
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My guest today is Bhargavi Zaveri Shah, a scholar and policy person who works at the
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intersection of law, economics and funky out-of-the-box solutions.
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Bhargavi trained in law, got interested in economics, got interested in larger questions
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around how the state operates, became a policy person, helped draft the bankruptcy
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code and designed some of the new institutions that were coming up, and is doing important
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research and writing and work within the system, which helps form the sedimentary layers on
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which future knowledge and action will be built.
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She is also an all-around interesting person, and in this conversation we discuss the importance
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of ideas and idealism, her time working with government, including in the finance ministry,
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the history of regulation around the world, and complicated questions like the balance
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between independence and accountability when we talk of regulatory institutions.
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She also has the finest solution I have ever heard for bringing about change within our
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state, which comes towards the end of the episode.
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But I loved her entire conversation, which shed so much light on a subject that may otherwise
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seem kind of dull and difficult, but she makes it seem anything but.
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Before you start listening to the conversation though, let's take a quick commercial break.
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Hey, the music started and this sounds like a commercial, but it isn't.
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It's a plea from me to check out my latest labour of love, a YouTube show I am co-hosting
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with my good friend, the brilliant Ajay Shah.
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We've called it, Everything is Everything.
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Every week, we'll speak for about an hour on things we care about, from the profound
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to the profane, from the exalted to the everyday.
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We range widely across subjects and we bring multiple frames with which we try to understand
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Join us on our journey and please support us by subscribing to our YouTube channel at
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youtube.com slash Amit Verma, A-M-I-T-V-A-R-M-A.
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The show is called, Everything is Everything.
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Please do check it out.
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Bhargavi, welcome to the Seenandian scene.
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It feels great to be here.
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We've been talking about this for a long time, but you have assiduously been avoiding me.
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Oh, I finally managed to get the confidence to be here.
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The recordings, I mean, I've heard a lot of the episodes and everybody sounds so accomplished
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So, I mean, that makes you feel like, okay, am I doing enough?
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You get a little bit of FOMO as well, I guess, but no, I mean, everybody's really candid
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So that gave me the confidence that it's okay, I just have to, you know, tell my story as
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And let's see how that goes.
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FOMO versus imposter syndrome is a very interesting and, you know, all the women who come on
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the show have this whole imposter syndrome thing and they'll be like, why are you calling
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You know, since we are sort of on this subject, let me take that note, you know, since you
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mentioned it, and I give this example to a lot of people around me, which is that, you
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know, when you're talking to accomplished people, there's a very distinct conversation
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that you can have with an accomplished man versus an accomplished woman.
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You talk to an accomplished man, say, whatever, the CEO of a company, whoever you regard as
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accomplished, you know, they'll normally talk about their work and how did they get
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where they did and what kind of trials and tribulations they had to go through.
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Whereas a woman will generally within a span of three minutes switch to where her children
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go to study, what are they fond of, what are their hobbies, what is their schedule like?
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So, you know, it just comes across that way that women generally, I feel, are a little
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I don't want to talk as much about themselves.
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I don't know if it's nationality specific, but this is what I've observed of people around me.
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So, yes, you're absolutely right.
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Women need to talk much more about themselves.
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And I've actually often been told, and I'm sure you'll agree that, you know, many of
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my really memorable episodes are with women.
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I try to, you know, wonder why that is.
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I mean, one possible reason is that there's finally a man who's actually listening and
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But also that, yeah, it's weird to me.
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I've had great episodes with men, but it's rarely, mostly with women that, you know,
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one can really have these genuine, authentic conversations where they just sink into themselves
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and they're not worried about, you know, how they sound or what point they are trying to
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make and et cetera, et cetera.
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Do you have any theories about this?
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I guess it's a little bit of the former, which is that for the first time, maybe they are
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asked to speak about themselves, so they come across as more candid.
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They haven't formulated, they haven't prepped for this.
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They haven't practiced having conversations about themselves, describing their lives,
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So maybe just the authenticity of the conversation takes it up a notch a little bit.
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I guess women are also very comfortable with self-deprecating humor.
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So they'll always laugh it out, right?
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Oh, you know, when I was young, I did this.
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I don't know how I managed to get into that program.
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I'm not saying men are not.
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I just feel like women tend to be that way and maybe that's what makes the conversation
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a little more enjoyable.
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They can take jokes on themselves.
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Have you seen these differences in your workplaces as well?
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For example, Indian workplaces are famously toxic.
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I've had many women complain to me about how, you know, they'll be in a meeting and they'll
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constantly be interrupted and they'll come up with an idea everyone will ignore, but
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10 minutes later a guy will say it and everybody will be like, oh, good idea, Ranjan or whatever
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And therefore men and women just behave differently in the sense men are just themselves, like,
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you know, you can say whatever, you know, there's no other layer of thinking or calculation
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While women are just a little bit more aware and a little reticent.
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Is that kind of been something you've observed as well?
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So I have been very lucky to have been in workplaces where everybody is allowed to speak
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exactly what they want, short of foul language.
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You can pretty much say whatever you want, but even then, you know, I think women are
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so conditioned to be self-conscious without anybody sort of imposing these rules on them.
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They just have molded themselves into this zone where they think twice before asking
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a question, you know, making a point, even the speed of responses in meetings, right?
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Like the speed of ideas in meetings, a woman will think twice or thrice.
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Most women begin their sentences with sorry, but I just wanted to say, or sorry, am I understanding
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I can assure you there's nobody else in the meeting who's understood the point better
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She's actually thought it through.
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And so, yes, it's a good question.
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And if I break my life down into phases, yes, there might have been phases where I would
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have been in a workplace where it's harder for a woman to speak up simply because she's
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Nobody, at least in urban settings, I haven't experienced somebody telling a woman explicitly
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that, you know what, just sit down right now.
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And it's but it happens in very subtle ways.
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I would say it happens a little bit in government circles.
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That's where I experienced it the most, where what you wear, I generally tend to speak a
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So your volume, et cetera, matters, the assertiveness matters.
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And it's not looked upon in a very friendly way.
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People just assume that you're being aggressive because you're being assertive in a certain
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way or if your volume is at a certain level or if you're wearing certain kind of clothes.
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Was it so bad that it hampered me from doing my work?
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At some point, you also take in the social cues and you mold yourself to that atmosphere.
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So I would say that exists in very subtle ways, but nothing to the I haven't experienced
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it to an extent where it actually hinders my thought process or it hinders my work at
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And I was just thinking that, you know, you are actually in a field where I would expect
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less of that, you know, in the knowledge economy and researchers and academics and all that,
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though in government, I would expect more of it.
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I think one of my guests, I think Shriyana once told me that, you know, she works in
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So if she would, I think it was her.
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So forgive me if it wasn't in someone else.
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But basically what this person told me was that they would go with a male subordinate
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to a government office and they would be speaking to the secretary or whatever the guy is.
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But that he would be speaking to her male colleague and not to her directly, you know.
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So I had those phases where initially where they don't know you and to equally, I would
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just put it this way, junior young people walking into an officer's room and the eye
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contact is only made with the male colleague and not with me.
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And I always used to wonder, is it because of what I'm wearing or am I too loud?
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Or whereas the male colleague wouldn't even give it a think.
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He wouldn't probably even notice that, you know, this is something that's going on with
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somebody else in the room.
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But like I said, at least I haven't faced it to an extent where you can't really, I
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mean, you've got to absorb those social cues and mold yourself to that atmosphere.
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And then at least I'm the kind of a person who will just assert myself irrespective.
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So maybe I don't face the worse of it.
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You know, our mutual friend Ajay once told me that one of the fundamental problems of
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India is that Indian men don't know how to speak to women.
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And I think that eye contacting at least could also be coming from that, that they just
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find it too awkward to make eye contact with a woman.
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So that, you know, could be part of it, especially if they've been to a boys school like I had,
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So you just don't know how to talk to them or how to behave with them and so on and so
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I went to a girls school as well.
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But I feel like you grow up in a very, actually in a society that you're fully surrounded
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by people of the opposite gender and you haven't really figured that out then.
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I mean, it's a conditioning story.
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Is there a systematic conditioning story going on here?
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It's a very weird kind of social tragedy.
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I did this episode with Snigdha Poonam long ago and she wrote this book called Young India
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and Young Indians Everywhere in Small Towns, especially.
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And one of the things that stood out there is that the girls have progressed in a way
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And the girls know how to speak to boys.
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The girls know what they want.
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The girls are, you know, sort of have the means to sort themselves out.
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And the boys are just completely clueless.
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And I often, you know, Nikhil Taneja made the same point in his episode with me, The
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Loneliness of the Indian Man, about how women have frames that explain the world to them.
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You can go online and you can read about feminism.
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Men are equal victims of patriarchy and they have no fucking clue that something is wrong.
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Just to add to that, you know, and men have this, I completely empathize with that because
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men have to keep on this charade of confidence going on no matter what.
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A woman can afford to come across as, oh, you know, non-confident, why?
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Because every woman around her is that way.
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So she's very comfortable saying that, oops, I made a mistake.
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It's much harder for men who are generally supposed to be that way.
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So probably that hinders them in ways that, in ways very differently from women.
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And it's a mess because for the men, the lack of humility and self-awareness would stop
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them from growing as people.
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And for the women, that lack of confidence would, you know, stop them growing and getting
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to where they might have.
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So let me ask you a question since you said you were sort of apprehensive about coming
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One journey among the many journeys that you made, which we'll talk about, but one sort
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of journey is you and many of your colleagues, et cetera, et cetera, have made is that you've
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kind of been moving from a place where you are in a world of ideas and knowledge production
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to also being in a place where you get those ideas out there and you enter the public discourse.
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And I just feel that that is supremely important.
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You know, just the other day I mentioned Ajay and said that, you know, your number one job,
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your most important thing is to be part of the public discourse.
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You know, you're going to at the most make a tiny difference to the Indian state, possibly
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But the public discourse is where all of the action is.
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And I've strongly felt that people who are, you know, engaged in knowledge, engaged in,
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you know, being like if you're an intellectual, I think if you feel that your work is worth
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something, you also have to be a public intellectual simultaneously.
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That sounds very sort of grandiose and snobbish.
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You know, I use the term for Ram Guha once and he got very embarrassed and said, I'm
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not a public intellectual.
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And I'm like, if you are not who is.
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But so what is sort of your sense of that over the last few years?
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Because you've written a lot, you know, you write for Business Standard, you've done lots
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of papers, your work comes in the lead blog, we'll link all of those from the show notes.
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Do you also feel a sense that it is not just about the work within that, you know, confined
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ecosystem which doesn't have public visibility, but your ideas need to go out there?
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Do you have that sense as well?
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So I'm often caught in this, you know, how do I put it, dilemma.
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It's a very big dilemma as to how should I look at myself.
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That's number one, because that decides how should I divide my time.
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So a person like Ajay or, you know, even Susan for that matter, they've been academics
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at heart, they are academics.
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They will emphasize that it's important to work on an idea that you have.
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And working on the idea wholeheartedly, and I think this is something that you will be
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able to relate to, requires a certain amount of detachment.
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It requires to be a little bit isolated, and it requires you to, you know, just kind of
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take out the noise, okay.
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And that makes you think that actually, let me just work on this idea and keep working
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at it, because the moment I put it out in the world, a lot of noise is generated and
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that will distract me from taking the idea to its natural conclusion.
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So I'll give you an example of this, okay.
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Something that I'm working on right now, which is about Indian courts are a problem.
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However, can we predict for a litigant what his case lifecycle would look like?
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Now, this is an idea that requires tremendous concentration, and at times not telling people
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that you're working on it, although, I mean, I'm just doing the exact opposite, but the
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point that I'm trying to make here is that the dilemma is not whether you want your ideas
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out there in the world, you do want them out there in the world.
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At some level, we all are working for validation, okay, whether we like saying it or not, but
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we want validation from our peers, from people who we respect, who we look up to, sometimes
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the users of our information, we want validation from there.
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So you're right, very, very important to get them out there.
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But at times, it's just too soon to get them out there.
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And then it becomes too late to get them out there.
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You know what I'm saying?
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That you keep working at it, at it, at it, and then you are fed up of it and you are tired
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and you just abandon it.
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The idea which was in a semi-baked state could have been out there, somebody else could have
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added to it, and it could have been taken to its logical conclusion, but you didn't
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do it because you thought that, you know, you've got to concentrate and then it got
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So yes, to answer your question in short, very important to get your ideas out there.
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In fact, if you see the mantra of any entrepreneur, okay, who's gone through the Y
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Combinator launch process, the first mantra is launch today.
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It's okay if the product is half-baked, you learn from the feedback loop.
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So to get it out there is very important, but you've got to figure out the timing
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because also getting the product to its deserved quality level requires a certain level of
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detachment and isolation, which if you get it out there, it's going to be hard to get.
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I love this Abraham Lincoln quote that if I had six hours to cut down a tree, I would
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spend the first four sharpening the axe.
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And the key point there is that at the end of that four hours, you have to cut the tree,
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So, you know, just thinking aloud, like I've stolen a frame from economists to apply to
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the creative process and I'll invert that slightly here and the frame is of stock and
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And in the context of a creator recently, I've been thinking that we are engaged in
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both producing a flow and producing a stock and like a regular blog or a newsletter or
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a weekly podcast is like a flow.
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You're constantly putting yourself out there and, you know, often it's a two way thing
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And then there is a stock and a stock is like a book.
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You know, you work five years, you do a book, you work another five years and maybe you
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work one year or if you're Pranay Kutasana, you work two weeks and you have a book, right?
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So, and that's a stock.
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And what I've been telling creators is that, listen, the stock is important.
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I see you doing the flow, but I don't see you doing the stock.
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But with you, I'd invert that and say that what you're then doing is you're doing the
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stock, you're doing the papers, you're doing whatever, but that kind of constant flow where
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you're engaging, you know, I wonder how that works.
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Like I'm reminded of a former guest of mine, Alice Evans, who, so it was interesting.
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I was in Delhi and I was recording with Alice Evans and I'd also invited Ashwini Deshpande
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and at one point I realized that there was a Twitter battle going on and they were at
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opposite ends of it and I soon realized it was down to a misunderstanding and the
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misunderstanding was this, that Alice used her Twitter for two things.
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One was talking about her work, which was rigorous and just fantastic and done really
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well and the other was thinking aloud and people would often confuse the thinking aloud
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for work and say, hey, you know, what is a rigor?
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You call yourself this, you call yourself that, where is the data?
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You know, where she's probably just been to a wedding and she's seen something and
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she's musing aloud and that conflation kind of happened and I was in that awkward thing
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of recording with both of them and I think Ashwini Ji would now perhaps agree with me
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that she was a bit harsh on poor Alice and Alice was just interacting in good faith.
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But I thought that even if that conflation happened between thinking aloud and whatever,
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I think that is exactly the right way to do it.
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Like I love what Alice does all the time or philosophers like Agnes Callard use Twitter
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for that where they're constantly out there and they are engaging and they're throwing
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their ideas and people are throwing ideas back and of course it is harder today than
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it was 10 years ago because Twitter has become so incredibly toxic.
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But regardless of that, you can find a space where you sort of do that.
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So, you know, how do you feel about this tussle, you know, between sort of doing the work and
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also being a little more open in the world of ideas?
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So here I would, you know, really use the frame of what is the journey of an idea?
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What is the journey of a good profound idea?
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As you know, Karl Marx wasn't really popular when he wrote the Communist Manifesto.
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By then maybe a little bit more popular than what he was before.
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But that is an idea that actually posthumously has affected significant portions of humanity
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much more than ideas that might have been popular at that time.
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So, okay, so I would say that this is my experience and from my reading I can say
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that the journey of ideas is that it normally starts in an academic environment where you
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don't have to deal with this noise, where there's no urgency to get that idea out and
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to convince people about it, etc.
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The work that you do in those formative stages of, you know, is extremely important.
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In fact, sometimes it is so hard that you spend most of your life doing that work and
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then you didn't have enough time to put it out.
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So I feel in society there are people who work on the formative stages of the idea in
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isolation in a detached way and then by the time, you know, they're way past their prime,
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somebody else picks it up, maybe builds up a little bit on it and then puts it out.
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So I feel that ideas, we really underestimate the amount of thought that really goes into
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an idea and maybe one life cycle is not enough to develop an idea fully and to communicate it
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to the masses and to convince them that the idea is right and to convince your detractors as well.
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So if you think about it, it's a little bit like division of labor where the idea is actually
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born in a university setting in amongst the people who are actually interested in the
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They need not be interested in it because it will affect the world and maybe you think
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that's not a great way to be, but actually maybe you need somebody as detached to work
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on that idea in an impassioned manner that if it fails, he is invested enough to say,
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okay, this is not a good idea and, you know, it's too late to go back on my position because
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I've taken it publicly.
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So I would say that you've got to divide the journey of an idea from its formation stages.
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Maybe social media has now made it possible to do both parallely, but I feel the people
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who pick up the idea are people like you, people like journalists, people who either pick up the
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idea, add to it and then put it out there.
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So it's okay to let that cycle be spread across many people.
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I don't think that, you know, it should be that one person who's the originality of the
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idea should be able to communicate it.
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It's perfectly okay if it's spread across many people.
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It also depends on your propensity to be both.
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You know, not everybody has the capacity or the interest to actually communicate it and
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be a mass communicator.
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I'll sit in British Library and write the Communist Manifesto and, you know, somebody
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else will pick it up and run with it.
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Somebody known as Vladimir Lenin will pick it up and run with it and implement it and
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then say, oops, it's Soviet.
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I mean, there are a hundred communist manifestos nobody picked up and that's the, you know,
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and in a couple of sentences, you also gave Darwin's biography because this is exactly
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He sat with the foundational idea for like 20, 30 years and then suddenly he's told that
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there's this guy called Wallace and he's got the same idea and he's going to publish and then
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Darwin goes out there and says, no, no.
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So I think there's a very famous saying that actually a lot of science, a lot of inventions
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in science are due to professional rivalry more than you being passionate about the idea.
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You know, you're just so insecure that somebody else will pick up the idea and run with it.
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I better finish my work and get it out there.
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So that's exactly the story of Darwin and Wallace as well.
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That's a classic economist insight, you know, incentives, rivalry, what better sort of
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incentive and, you know, Keynes once said that, quote, practical men who believe themselves
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to be quite exempt from any intellectual influence are usually the slaves of some
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defunct economist, stop code.
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And we see it all around us.
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And here's sort of the other thing that I totally buy your point that not everyone plays
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the same role within the ecosystem.
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There are some people who are popularizers.
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There are some people who do the dirty hard work and, you know, people do what their
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interests drive them to, what their personality drives them to.
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But at the same time, I think there is sort of a point of conflict where on the one hand,
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and I see this with many of my friends, that on the one hand, you can tell yourself that
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I'm playing a long game, that nothing's going to happen in the short term.
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You know, it's a 30 year process, 20 year process.
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My dharma is to do my bit.
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I don't change anything.
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But that runs up against the fact that you might feel that there is an urgency to your
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ideas that you feel strongly.
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You have to express it now.
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For example, and we will talk about this in much more detail later, but you've written
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about Aadhaar, for example.
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There's not enough accountability built into that, right?
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Now, the popular narrative of Aadhaar is, you know, the anti narratives would be about
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The pro narratives will be about how good the tech is and all of that.
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And I've had people argue for both of those on my show and both of those have a point.
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But the hidden sort of narrative which you talk about is what are the regulatory mechanisms?
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Who is it accountable to?
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How do you keep it accountable?
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What are the mechanisms we built in place?
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What are the governance structures?
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Nobody is giving a shit about any of this now.
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It's going to bite us in the ass in 10 years time, 20 years time.
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This whole digital public infrastructure thing is as well.
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And therefore, it is natural to feel that this should be part of the freaking discourse.
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They are arguing about all those irrelevant things which don't matter so much as this
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matters in a democracy.
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So then how does one sort of kind of balance that out that some things are of urgent importance
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and on the whole, you know, you're playing a long game.
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There is that long arc.
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On that Aadhaar argument, we were actually just riffing off an idea that has been there
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for a very long time, which is trust the process.
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You build in the right processes with the right incentives for the various stakeholders.
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And all your concerns about privacy and authentication failures and people being excluded
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will be taken care of through the process.
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Right. But even to get to the evolutionary cycle where humans are able to say actually
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the process matters more than the output or the outcome, it must have taken at least a
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century for people to say that, you know what, we trust the process.
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I mean, that is the story, frankly, of, you know, of American constitutionalism,
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which is that if we put in the right process and we build in the right institutions,
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hopefully things will then no one person or no one bad intentioned actor can actually
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skew anything towards anybody's favor.
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So I would say that we are actually drawing upon theory when we talk about Aadhaar
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and accountability frameworks that has existed for a very long time.
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It's not something that is very original to us.
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We are actually taking inspiration from other jurisdictions and what has worked elsewhere.
#
But truly original ideas, in my opinion, take much more time and require much more of an
#
isolation. And I'm not only talking about academic research ideas, even when you talk
#
to an entrepreneur who's working on a new product, which is not simply I'm going to
#
copy that platform and, you know, which is a different product, he or she requires a
#
certain level of isolation to be able to say, to be able to even test out that product with
#
five people to see what kind of responses he's getting.
#
So I think we totally undermine the amount of, let me just put it as detachment, detachment
#
required for you to be able to make a really good product.
#
And then you just bank on whatever it is, luck, destiny, whatever you want to call it.
#
If the product is good enough, it will figure itself out and will reach the masses at some
#
point. So if I were to divide the amount of attention that one has to give to creation
#
of an idea versus dissemination, I would put it at somewhere between 80, 20.
#
And if you can't do the 20%, it's perfectly okay because you know what, you spend those
#
four hours chopping the axe, somebody else will cut the tree.
#
I'm really glad you said it's okay if you don't do the 20% because when people ask me,
#
what do you do to market seen unseen? And I'm like a good product is the best marketing.
#
So that's kind of like my dharma is to just have the best conversations I can and put
#
them out. Baki is, you know, whatever happens happens. So here's a question, you know,
#
when you were talking about the fundamental question about Aadhaar that resolves everything
#
is about, you know, just focus on the process and all of that. And in India, that's never
#
been the discourse. In India, it's all tribal warfare on both sides. And that leads me to
#
thinking and it's a thought I had even earlier while I was going through your notes and reading
#
some of your pieces that is it the case that we have a primitive way of thinking about
#
the state? The whole idea of American constitutionalism emerges from the fact that
#
the constitution is there to set the rules of the game, to control the state, to protect
#
the people from the state. The people are, you know, what really matters. The state is there
#
to serve them. And the constitution is that bag of rules, meta rules, which, you know,
#
enables that to happen. And here, by default, we've got into an opposite mindset where
#
the mindset of continuing the colonial state only instead of brown rulers, you've got white
#
rulers, the state is there to rule us. It's a my Bob thing. And therefore, it is not so much
#
institutions, but people who become the focus of our attention on the state. And even more so
#
that at a deeper level, I would imagine that at some fundamental level and tell me if you agree
#
or disagree that within India, when you are the state and you're setting up a regulatory
#
institution, whether it is a SEBI or an RBI or whatever, you're setting up some kind of
#
agency that will do some kind of regulation, your mindset is not that this will help the
#
state function better and serve the people better. And so you build an accountability
#
and so you built in all of those safeguards. Your mindset is that this will help me govern
#
better, rule better. And therefore, those safeguards and accountability take a backseat
#
because it is not part of your mindset only. It is not that you are, you know, inefficient
#
at designing a state properly. It is that you don't even consider this a necessary part of the
#
design. Okay, no, this is a very interesting question. Why did we have, why do we set up
#
these regulatory agencies? Why did we have to set up a UIDAI? And maybe not so much in the
#
context of UIDAI, who I necessarily see as a social security administration agency more than
#
a regulator, but a SEBI, etc. So the origins of this is extremely interesting. And most people
#
take it back to the New Deal and there were scandals and people couldn't trust the private
#
sector anymore and therefore we needed more agencies. Actually, the origins of this goes
#
back to the 19th century. So, okay, place yourself in 19th century America. Okay, late 19th century
#
America, the technique of oil drilling has just been discovered. Steam engines have been around
#
for a very long time. The civil war has just ended. And you are seeing new cities are springing up
#
and cities are figuring out how to connect us to each other. Okay, so new railroads coming up and
#
all of these are private railroads. And what happens is that you're somewhere around 1887
#
and railroads which are private entities then start distinguishing between the senders of packages
#
and they start arbitrarily fixing different tariffs for different kinds of senders of packages.
#
And that's where the state and when I say state, I mean their state level government steps in
#
saying that, listen, if you're a carrier of packages, you can't do this arbitrary pricing
#
business and I'm just going to make sure that you're fair to everybody. Okay, that is the,
#
I would say the classical role of the state, which is to ensure equal access, right? And that
#
somehow fails because the United States being United States, it challenges it to the courts
#
and the courts say that you cannot intervene on private property. Railroads are private companies
#
and you should allow them to do what they want. And then what happens is they set up this agency
#
known as ICC, the Interstate Commerce Commission. Okay, the Interstate Commerce Commission is
#
supposed to be regulating railroads that run across states. And the reason I'm trying to
#
tell you this to answer your question is because you're right that we brought in regulators before
#
the markets had even taken off. On the other hand, where it originated, the markets had already taken
#
off and then regulators came in because people saw that there were some arbitrary unfair practices
#
and the idea of regulation was to make sure that the private sector is playing this game in a fair
#
way. The idea is not to, you know, sort of regulate the hell out of railroads. For example, it was just,
#
I will make sure that you're charging everybody in a fair manner. Okay, we've taken it out the
#
other way around, where we've said in nineties, when our regulators were set up, okay, we said
#
that we don't have a private sector right now. We want a private sector, but first we let's just
#
have our regulators in place. You know, so before even the first company could actually access the
#
capital markets in a free pricing regime, we had our securities market regulator set up. We don't
#
even have a market. We don't even know what kind of arbitrary practices are we likely to see in this
#
kind of a market. And maybe that has governed the mindset of evolution of regulators in India.
#
And every time we see a market or we want a regulator. So for example, right now we have
#
the data protection law coming up. The data protection laws presumably just sets out
#
principles on which people can, you know, share data and use other people's data. Before the law,
#
I mean, the law, we don't know whether it will be enforced, et cetera. They want a regulator for it.
#
I mean, so what I'm trying to say is that whilst regulators originally came up as a solution to
#
identified problems with the market in India's case, as in the case of most countries that
#
actually came up with regulators in the nineties, before the markets came up, we had our regulators.
#
So their job was to basically, yeah, I mean, regulate. See, once you are in existence,
#
you'll find some job for yourself and you'll tend to overregulate if you already exist before
#
the time the market comes up. But to go back to the America story, because that's a very interesting
#
history of how regulators came up. The federal, the interstate commerce commission that I'm
#
talking about that regulated railroads at that time, it was not supposed to be independent
#
of the government. Okay. So today regulators are believed to be independent. They're supposed to
#
be independent because there is a belief that they will regulate the market in the interest
#
of not their political masters, but in the interest of the market. It's so interesting
#
that the origins is actually not that the regulator was independent. He was actually
#
an agency of the executive, but one of the lawyers of a railroads company was elected
#
the American president. Okay. And then people said, but listen, you are the interstate
#
regulator of railroads. And one of the railroads owners has become the lawyers has become the
#
president. You have to make sure there's no conflict of interest. And therefore please make
#
sure that the regulator is not reporting to the owner, ex-owner, ex-lawyer of one of the railroads
#
companies. And that's how the first ever independent regulator sort of came to being. But
#
it was just to make sure that there's no arbitrary pricing on railroads. That's the whole thing. And
#
whereas in India, we've come to a different mindset where we believe that the moment there's a new
#
industry, there's got to be a new regulator. Yeah. And that's a classic engineering mindset
#
of the state and also the tendency of the state to just keep expanding wherever it sort of sees
#
an opportunity. So a couple of questions to just double click on that. Like that's a fascinating
#
story about how the happenstance of the president being a lawyer of a railroad company leads to
#
this whole independent thing. But conceptually, how should we think about an independent regulator?
#
Because on one hand, if you go back to the meta question of why is a state legitimate,
#
where does it take its legitimacy from? And then we know how it arises, how it evolves,
#
but where does it get its legitimacy from? And the simple American answer to that at the start
#
of the republic was it gets it from the people. But if your independent agency is going to be
#
independent of the state, then who is it accountable to? Why is that legitimate? How do you
#
sort of keep track of what's going on there? So just conceptually, without looking at
#
independence here or independence here, like people here will say that, oh, you know,
#
the RBI should be independent of the government or the election commission should be independent
#
of the government. And at one level, the argument for that is, you know, like, duh, yes, obviously,
#
because you don't want politics to, you know, you want our institutions to be
#
safeguarded from the politics of the day. I mean, and that's really the great victory of
#
America. Why, despite January 6, you know, one Trump or you put the worst person in the world
#
you think of as president of the USA, which some would argue we've done twice, you simply
#
can't do too much damage, right? Because the institutions are so strong and the institutions
#
are so strong because you have those safeguards built in and they're independent. But where is
#
the balance between independence and accountability? You know, somebody could even buy the election
#
commission. Some rich businessman could just buy the election commission and, you know, sway the
#
whole thing hypothetically. Independence is not a guarantee of anything. Accountability is a
#
guarantee. So how does one think about this? So I'll tell you what, all the reasons that I can
#
offer for why there should be independent regulators is ex post reasoning. Okay. So there's
#
a very famous quote by Oliver Wendell Holmes, who was a judge of the US Supreme Court that the life
#
of the law is not explained by logic, but by his, by experience. Okay. So there is, I think we've
#
got to take the historical view here to understand why they exist. So the mechanical answer to your
#
question would be regulator should be independent because we want these industries to be regulated
#
not as per electoral cycles, but as in the interest of the consumers of this industry. Okay. That's
#
the mechanical answer. That's the independence question. We want regulators to be independent.
#
Why? Because it's easier to change rules and regulations than change parliamentary law.
#
Okay. They'll tell you, we want regulators to be, you know, independent because we actually
#
want experts to be regulating these industries. But how do you explain all of this? When you
#
divide regulation between regulators who are not accountable to the people are unelected
#
and between a government, by that logic, everything should be outsourced to an
#
unelected expert body, right? So these reasons are all, I would say retrofitted into making sense
#
of why regulatory agencies such as SEBI, IRDAI, FSACI exist. But the truth is that the history
#
of it is actually a lot of it is just historical accident. Okay. So the one example that I gave
#
you was the FCC, right? Where it just so happened that one of the railroads lawyers became the
#
president of the United States and the carriers were really, the senders of the packages were
#
really businesses. They got together and they told FCC that you can't be reporting to an
#
ex railroad company's lawyer. Okay. So that's how the first independent regulator came into being.
#
And if you actually then go on to how this whole thing developed in the 19, early 20th century,
#
we're talking before World War I, there was a lot of corruption in American government. And I'm
#
sorry, I keep referring back to American history because unlike colonialism or unlike the history
#
of the constitution, a lot of regulatory agencies, their history can be traced back to the United
#
States and not the European continent or UK. So again, beginning of 20th century, pre World
#
War I, cities are being built, railroads, highways are being built because suddenly,
#
it turns out that oil is actually not so expensive. So moderable highways are being built.
#
And there is a lot of corruption going on in government contracts and people have
#
generally lost their faith in government. They believe that, but at the same time,
#
they believe that government alone can answer these problems. Only if we elected the right people,
#
actually these problems wouldn't exist. Now just think all your theories of public choice,
#
the rationalist thinking that we now apply to political science is really a product of the
#
40s and the 50s, mostly 50s onwards. The first time the word public choice was used was in the
#
1950s. So we are still in the beginning of the 20th century when people thought government is
#
the answer to corruption. Okay. More government. So they said only if we get the right people
#
elected, somehow we'll be able to do this. So low trust in government, but still government remains
#
the answer. And that's how you see one or two more independent agencies who are not full of
#
corrupt people who will be put in charge. And people said, we should actually, this is a good
#
idea. These guys are experts. They are not answerable to our corrupt government and they
#
will solve our problem. Okay. And then World War I happens and nothing much is going on.
#
And then the 20s, okay, which was really the roaring 20s that they speak of in the American
#
sense, was actually a movement of great progressive reform where government was also expanded to a
#
great deal. Because as people move to cities and as they start demanding more of their government,
#
as Max Weber says, as you demand more of the government, bureaucracy is going to increase.
#
So in 20s, again, you see a few more new regulators and it's the post-war normalcy
#
period. All is good. And then comes the great depression of the 1930s, where there are a couple
#
of stock market scandals in 1931, 32, and you have your securities exchange commission and a whole
#
bunch of new regulatory agencies being set up. And there they are just mechanically applying,
#
what did we do when people did not trust the government? We actually set up an interstate
#
commerce commission, which regulated railroads in a very impartial manner. The experience was mixed,
#
but we don't know any better. Let's just set up these independent agencies who will report
#
to nobody. It's okay if they are full of experts right now, trust in government is low. So let's
#
just do this right now. And that's how you get this full regulatory agency movement going on in
#
the United States, where you see a proliferation. Naya industry set up a regulator. So they all
#
believe this would prevent concentration of powers in the president essentially.
#
And then, I would say 1946 was some sort of a pivotal year because the United States realized
#
that actually we set up all these regulators. They're all independent from the government
#
and therefore there's no way the elected people can actually send their feedback loops.
#
We've got to do what we do best. We'll trust the process. And they enacted a law known as
#
the Administrative Procedures Act, which required these regulators to put every regulation through
#
a cost and benefit analysis, take public feedback and so on and so forth. A lot of administrative
#
lawyers believe that 1946 was the equivalent of, in politics you have this paper, end of history.
#
Francis Bukoyama, end of history and something of the man or something like that.
#
The paper was end of history question mark. People miss a question mark at the end. And by
#
end, he didn't mean end as in terms of finish, but the means and end. So a very misunderstood
#
paper. I'll link it from the show notes. Listeners can read it for themselves.
#
I always thought it was the paper which summarized the end of the ideological battle between
#
communism and capitalism. No, it was end as in the means and end. And there was a question
#
mark at the end of the paper, but when the book came out, there was no question mark.
#
But the meaning of the end was still the same. So people sort of criticized Bukoyama as if he
#
got it wrong, but he wasn't saying what people think he was saying. But anyway, separate point.
#
So 1946 people thought, okay, we've figured this out. We've set up these expert agencies and we've
#
set up a process under the Administrative Procedures Act. And the expert agency is not
#
political. We'll make sure the expert agency testifies before our Senate committee hearings.
#
That's how we'll get their accountability going. Even at this stage, independence was not so
#
important. And what started happening is, now we are in that trajectory, we are sitting in the 60s
#
and 70s, where every single agency in UK and the United States was focused on just basically
#
rebuilding war-torn economies. The United States was doing it for France and the rest of Europe,
#
and UK was doing it for itself. And at that time, there was no independence as such. Every agency
#
is supposed to work with the politically elected executive to mobilize resources, to rebuild
#
economies, and independence did not matter. So, heydays of Keynesianism, I don't know.
#
Buggers should have had a simpler name. Yeah, Keynes should have a simpler name.
#
Okay. So, even central banks supposed to be so independent, right? We take it for granted
#
that central banks are supposed to be politically independent. They were used for national
#
development projects. Their deficits were monetized all the time, right up to the 60s.
#
And then we enter stagflation, where actually there were significant advancements in research,
#
which showed that the trade-off between inflation and growth is real. And the Phillips curve doesn't
#
hold for a very long time and things like that. And then you have your Milton Friedman's,
#
et cetera, coming up with papers like, should we have an independent central bank with a question
#
mark? Okay. So, this connects me to that old point of why the origin of the idea is actually,
#
sometimes you just got to work at it in a detached way, because by the time the world
#
needs it, at least it's ready enough to be pushed out in the world and be put to some real use,
#
right? So, we're standing in the 70s, all these researches coming up, which shows that
#
governments shouldn't be monet, automatically monetizing their deficits using central banks.
#
If they do that, inflation is a real possibility. And if inflation exceeds certain threshold,
#
growth and employment suffers anyway. Okay. So, in the 80s and 90s, we started having a
#
lot of research papers that measured the independence of the central bank. Okay.
#
And IMF and World Bank took it upon themselves to, they bought this framework and they said that
#
central banks have to be independent if you want to keep inflation within tolerable limits in
#
different countries. Now, that is the whole sort of history of the idea of independence of regulators.
#
Once central banks were, it was conclusively established that an independent central bank
#
is able to manage monetary stability better than a non-independent central bank. That idea was
#
mechanically applied to every single field of regulation. And therefore, all other regulators
#
who came after that, independent regulation became like a mantra, you know, without really
#
applying your mind. Do you really need independent regulation? Do you need regulation by the
#
unelected, by independent regulators for something like, I don't know, agriculture? Do you need it
#
for insurance? It doesn't seem obvious to me that you need an independent body to be regulating
#
who gets an insurance license. I mean, the vulnerabilities of that are as high as,
#
you know, the government licensing, I don't know, telecom broadcasters, for example.
#
So, I think independence is sort of a force-fitted explanation for something, which is
#
for an idea that has actually been influenced by a long arc of history. The other thing that was
#
going on in the 1990s was this whole, you know, institutional economics literature that was coming
#
out by the droves, right? Which is the idea that actually some countries are successful
#
more because of the institutions that they build. And therefore, independent regulation became
#
a mantra that was replicated in every country that was either separating from the Soviet Union,
#
you know, once the Soviet Union broke up, so particularly in East Europe. And then India
#
still didn't have this, by the way, the independent regulation thing going on for itself, because
#
when we got independence, the only agency that we had outside of the government was the Reserve
#
Bank of India. Reserve Bank of India was not into banking regulation at that time. It was just in
#
the business of managing the exchange reserves. And then I can talk about the development in
#
India, but to answer your question about the balance between independence and accountability,
#
I just want to make the point that it is not obvious that for every new market that comes into
#
being and that needs regulation, you need an independent regulator. You can very well have
#
the central government regulate it. You've then got to build processes to make sure that the
#
regulation happens in an impartial manner. This whole business of setting up regulators by the
#
droves, we should be a little bit warier than what we are because there is a charade of
#
independence when none is needed and it's not like it actually exists. And second is we trust
#
the experts way too much then. Fabulous sort of potted narrative that you just sort of gave.
#
Three or four things I'll double click on before I sort of come to the next big question. One is
#
you sort of mentioned the growth of the regulatory state in the 30s as a response to the crash of 29
#
and I recently read Thomas Saville on that period where Saville wrote and I'll quote Saville now.
#
As for the 1929 stock market crash, unemployment never reached double digits in any of the 12
#
months following that event. Unemployment peaked at 9 percent two months after the stock market
#
crash and began drifting generally downward until it reached 6.3 percent in June 1930.
#
That was when the federal government made its first intervention in the economy with the smooth
#
holly tariff. After that intervention, the downward movement in unemployment rates reversed
#
and shot up far beyond the level it had reached in the wake of the stock market crash
#
and so on and so forth. He goes on with the narrative about all the, you know, and what states
#
seem to do, what I think the American government did then and what states generally seem to do
#
is trying to manage a world that is deeply complex. They come up with simple answers that seem to
#
intuitively make sense but often, you know, make no sense at all. Amity Shlaes also, by the way,
#
has a great period about the 30s and the 40s are linked to that from the show notes and, you know,
#
and the easy answers are the most satisfying and obviously when the world is spinning out of
#
control or when you don't really know what's happening, the easiest answer is you set up
#
another government body, you set up, you know, another sort of independent agency which will do
#
whatever it has to be done. Secondly, just to sort of demystify what you said about the independence
#
of the central bank and you can tell me if I'm sort of summarizing it for the listeners correctly,
#
is the reason it is so important is that the money supply in the economy is essentially controlled
#
by the central bank, by the interest rate that it sets. If it is, if the central bank is controlled
#
by a government, the temptation for any government, especially if you're facing elections,
#
is you lower the interest rates, you pump money out there, so there is a sense of exuberance.
#
In the short term, the economy seems to be doing well and that is a natural temptation because you
#
have the next election to win. But the result of that, of course, if the money supply goes up,
#
is inflation and inflation, as we know, thanks to people like Milton Friedman and his early,
#
lonely pioneering work, inflation is a tax on the poor. You know, in the long run, that's
#
really who it affects. So the whole very sound basis for the independence of the central bank
#
is that you keep it away from political considerations. And it would seem that
#
friends of ours like AP Krishnan and Ajay Shah also pushed inflation targeting in India,
#
which finally happened in 2015. And that seems like a fantastic mechanism that you can sort of
#
keep it independent, but you give it a target that keeps it accountable, that boss, this is your
#
target, you have to achieve this target, you figure out how to do it, and then it really doesn't matter
#
what the level of independence is, because the mandate is sort of set out there. And that is the
#
the core incentive in play. Now, speaking of incentives, you mentioned public choice
#
theory again, for those of my listeners who is rather an unlikely event, if regular listeners
#
haven't heard this phrase from me, but public choice theory is basically it looks at people
#
in government as individuals responding to incentives. So you don't look at the government
#
as this benevolent beast, which will do all these beautiful things you want it to do,
#
but they are individuals responding to incentives, you have to see what those incentives are.
#
Ajay and I had an episode of Everything is Everything on it, we linked that from the show
#
notes. Now, and there also one of the core incentives is that the state always tends
#
to expand, you know, Parkinson's law states that every bureaucrat will want to maximize his own
#
budgets and have as many people as they can have under them. So those are where the natural
#
incentives go. Now, in the light of this, where a lot of the thinking around this seems to be
#
reflexive, it is reacting to something that oh shit, inflation is out of whack, it hurts growth,
#
it's attacks on the poor, what do we do, independence for, you know, that particular agency.
#
So a lot of the thinking on this, you know, we seem to be leading to these axioms, but tend to be
#
sort of reflexive and are not really coming in a first principles kind of way on what a perfect
#
design is. So give me a sense on how the thinking has evolved over the decades on this, both in the
#
world and in India, about what this balance should be, this balance of independence and
#
accountability, like if any, and I'm thinking aloud here, but when I look at a regulatory agency,
#
you know, what are the factors which could make me say that this should be independent?
#
And what are the factors which would make me say that, no, it doesn't need to be independent,
#
it can be part of the state. If it is part of the state, what are the safeguards we built in?
#
If it is independent, how do we keep it accountable? So how has the thinking on that
#
really evolved over the decades as such? Right. So, okay, so two, three things,
#
okay. One is once in a, okay, first is the, I think one is to say that, yes, the government has
#
to be in the face of a crisis, the government has to be seen to be doing something. Okay. And you
#
said that you're absolutely right. They just take the most simple notion of how do we get better?
#
And we say, okay, we'll actually make this politically insulated. The truth is very few
#
regulatory decisions can be truly devoid of political considerations, but that's a separate
#
matter. So there's a very interesting anecdote, example given by Dr. Subbarao in his latest book,
#
where he says that, look, what is, if you even apply public choice, right, a goalkeeper,
#
okay, in a football field, there's a 26% chance that the goalkeeper will actually,
#
that the striker will actually strike straight. Okay. In a football field, that striker will
#
actually strike straight. There's a 26% chance, but there's only an 8% chance that a goalkeeper
#
will not move. When a striker strikes straight, the goalkeeper has got to be in his place. He's
#
not supposed to move. But despite these numbers being known, despite the goalkeeper knowing that
#
the striker has a near one fourth of a chance that he will strike straight. And I didn't do
#
anything but stand here. The striker actually stands this way only 8% of the times, because
#
at an individual level, at a human level, we always want to be seen as doing something.
#
The striker wants to be seen as having moved his leg or hand towards the right or the left.
#
And I think that scales to an organizational level. An organization wants to respond
#
in the face of a crisis. And if it means that people get confidence that a regulation is being
#
made not by elected people, at that point in time, then so be it, although it may have
#
adverse long run consequences. So once these agencies were in place, there was no going back.
#
They will find reasons for themselves to exist. Once you are employed in an organization, you will
#
find a reason for yourself, either because it gives you meaning for your work, or you genuinely
#
believe that I am a better place to protect the world than the elected officials are. Whatever
#
it is, they are in place. And the United States' answer to this was the Administrative Procedures
#
Act. They said, we will trust the process. So what do they do? They say that, look,
#
when you put on any regulatory agency, it actually performs three kinds of functions,
#
which under our constitution is supposed to be done by three separate wings of the state.
#
So the parliament makes a law, a regulatory agency makes regulation that binds everybody.
#
The executive, so our government licenses establishments, it does investigations.
#
The regulatory agency itself licenses firms, it does investigations, conducts inspections,
#
audits, et cetera. And courts are supposed to be doing the punishment and, you know,
#
enforcing of the law. In the agency's case, the agency itself does this. So there is a big
#
problem here, which you can easily see, which is that all the powers which were supposed to be
#
separated in a separation of powers function are now fused in one agency. So the kind of checks
#
and balances that you need to have on that agency are much more than what you would normally sort
#
of want to put in place when three different bodies are doing this work at the level of the
#
government. So what the Administrative Procedures Act and other countries which have regulators do
#
is that when the agency performs its regulation-making power, which is the equivalent
#
of parliamentary law, it's supposed to put the regulation through a cost-benefit analysis.
#
It's supposed to actually draw feedback. It's supposed to explain why they didn't take into
#
account some feedback and not others. And here there is a real danger of capture. So if you're
#
talking about, say, for example, a banking regulator or an insurance regulator, my predisposition
#
towards listening to a depositor versus a banker who I'm actually dealing with on a day-to-day
#
basis, I have a certain congenial sort of attitude towards him is, I mean, the chances that I'll
#
actually listen to a banker and trust his expertise is much more me as the regulator than a depositor,
#
who I would believe that actually, you know, it's a small guy, not a big problem.
#
So that is why the process will actually take care of these kinds of things. For example,
#
if a banking regulator says that no bank should make a loan against gold deposits,
#
okay, a lot of households would be quite upset with that in India, I suspect. A lot of households
#
in India own a lot of gold. And the ability to get credit against that gold is a fantastic
#
way to monetize that asset. And I suspect a lot of households would be upset if the banking
#
regulator would come up tomorrow and say that banks shouldn't be lending against golds and
#
NBFCs shouldn't be lending against gold or making it more expensive to lend against gold, right?
#
On the other hand, the banks would come and say that, you know, whatever you say,
#
our license actually depends on you. So me as a regulator, I'm much more likely to be
#
captured by the industry than by households whose interests are actually going to be
#
disturbed by this kind of a measure. So you put your regulation, if you are going to come up with
#
a prohibition on lending against gold, you put it out for cost benefit analysis, you get feedback,
#
you publish the feedback so that people know what have you taken into account when you were
#
actually making this regulation, okay? At the level of executive, which is when you're licensing
#
banks or when you're licensing insurance companies, you're licensing mutual funds,
#
there you have basic transparent licensing processes so that people know on what
#
considerations licenses are granted and not granted. It's not like banks in India,
#
where you get a license once every 20 years, you know, one random license is given to something.
#
You don't want that scenario playing out for your own, for the sake of your own legitimacy.
#
Also, the other thing is investigations, right? Who are you choosing to investigate versus not?
#
I mean, we all know that every time a law is violated, it is not necessary that enforcement
#
follows. Enforcement is rather selective. It is often discretionary and rightly so,
#
because the regulator has to optimize his resources and cannot go behind every possible
#
violation. So what are the considerations influencing those investigations? What are
#
the considerations influencing the penalties and open hearing, a show cause notice being given
#
to the person who will be penalized? All of this seems pretty basic in my opinion, hygiene
#
for anybody who's exercising these kinds of powers. And this is exactly how regulatory agencies who
#
are unelected and full of experts, this is how they build legitimacy for themselves by being
#
transparent, by putting out, when you're punishing a person, following as close a process as a court
#
would follow when they are punishing a person, having open hearings and so on and so forth.
#
The second level of, this is all that you will build inside the organization. The second level
#
of checks and balances is oversight institutions. Since these regulators are supposed to be
#
independent, okay, many of them are in fact, counter majoritarian, a central bank is essentially
#
counter majoritarian, right? You cannot expect them to report to the central government about
#
their activities, their financial audits, even their performance audits, but they're supposed
#
to be accountable to the people and therefore you make them accountable to the elected
#
representatives. So it is very common, for example, four times a year, the chairperson of the
#
federal reserve goes and testifies before the Senate on why certain interest rates were cut,
#
were not cut. What is his anticipation over the next six months? What does he expect inflation
#
to see if the inflation game doesn't play out the way he thought? In the next hearing,
#
he'll have to explain what went wrong. Inflation targeting, yes, is one part of how you build
#
checks and balances, but that's like a pilot. You've got to do that for every other function.
#
Now you may say, but our parliamentarians have been interested and we can come to the
#
effectiveness of oversight institutions separately. The third is courts. A lot of
#
these are quasi-judicial decisions, especially when regulators punish people. Think of the
#
recent Paytm story, right? Paytm's bank license was cancelled with a press release that was not
#
more than half a page long. We don't know what went wrong. So the usual process for doing this
#
is that if a regulator passes a quasi-judicial order, there should be an appellate tribunal,
#
which people should be able to approach. In the UK, on the other hand, regulators don't
#
have quasi-judicial powers. So a regulator will do the investigation, will prepare the
#
investigation report and will submit it to a court that bases my investigation. I believe this
#
person is guilty of having violated my regulation. And then the court will decide what is to be done,
#
whether the person is actually guilty and whether he should be punished. And this seems fair to me
#
that I shouldn't be the judge of my own cause. I shouldn't be the writer of the law, the enforcer
#
of the law, the punisher of the law. That just doesn't make sense to me. The police cannot be
#
the prosecutor, the prosecutor in turn cannot be the judge. It is just basic hygiene, which
#
a lot of countries have managed to put in place because I believe regulatory agencies are now
#
inevitable. As much as I may say that they were an accident of history, they are inevitable. People
#
somehow value the experts anyway. But then you basically trust the process and you put in a good
#
enough process that is trustworthy. And has that kind of happened in the West? Can we look at best
#
practices from elsewhere and say that, okay, the US has sorted this or EU has sorted this, etc. And
#
is there a danger of overreach there? Because on one hand you can and you should say who will watch
#
the watchman. But on the other hand, who will watch whoever is watching the watchman as well,
#
which can, I think, come into play when you talk about oversight agencies. So certain best
#
practices like in your pieces, which of course are linked from the show notes, you've spoken
#
about ex-ante accountability mechanisms like independent directors, regular internal audits,
#
performance oriented goals, etc. You also laid out ex-post accountability mechanisms like having to
#
report to parliament, allocating resources towards the next year, reports, performance audits, etc.
#
But is it a settled question about what exactly these processes should be? Or is it something
#
that there is always a constant tussle about? And we'll come to India after this, of course,
#
which is in a much more primitive stage as far as all of this is concerned.
#
So it seems that, yes, Western countries, and I say Western, I include Australia,
#
because it is, you know, it's actually done pretty well on this front of building in enough
#
processes to make sure that we are not all subjected to the tyranny of the unelected,
#
right? These processes seem very, I mean, they're very much there in the United States.
#
You can doubt that on and off, they do not function. Sure, that's possible, but they exist.
#
Okay, so the example that I gave you of the UK, let's take the case of their financial regulator.
#
Suppose a mutual fund, okay, is found guilty of having miss-sold certain schemes to old people,
#
okay? So it's your classic ULIP story, which is that actually a financial investment,
#
which is supposed to be meant for young people, is miss-sold to old people. And it's pretty risky,
#
so it's obvious that it's not a perfect product for a retiree who actually needs an annuity kind
#
of an income. And this miss-selling is happening at some scale. So what does a financial regulator
#
do? They have something known as a consumer-facing authority, and the consumer authority will
#
do the investigation, will write out the report, but will not have the powers to punish that
#
mutual fund. It will actually apply to the court, and the court will look at the report,
#
there will be arguments from both sides, and then the court will decide what is to be done.
#
So you'll find that these processes actually exist in a pretty established way in some of
#
the more mature markets. And I mean, I'm not saying anything that's rather radical, it just exists.
#
Yeah, and yeah, you've pointed out how agencies can often, regulatory agencies have, you know,
#
can exercise three kinds of powers, quasi-legislative, quasi-executive, quasi-judicial,
#
and there's no separation. You know, there are some, especially in India, which will kind of
#
do all three. Take me through sort of the Indian story of what's been happening here. You know,
#
like you've spoken about, you've written in the past about how, you know, the different concerns
#
about these agencies include, number one, weaker links between the people and agencies, which of
#
course is the case here. Number two, unfettered discretion, and your illustration for that was
#
SEBI and RBI never being challenged and all the things that they have done. In 30 years,
#
no order issued by RBI has been challenged by the person penalized, which sounds incredible to me,
#
which basically means that it's so difficult to do, and that mechanism is in there.
#
And you've also spoken about the ever-growing footprint in administration of public affairs,
#
and you've pointed out that the annual expenditure of the RBI is larger than states such as Goa. So
#
if any Goans are listening to this, they should outrage you. What the hell is going on? RBI,
#
do they have beaches? What is this? Right. Okay. So India is a story that actually begins
#
in the 80s. I mean, as in every other aspect of India, I feel some of the best stories of
#
India actually begin with liberalization. Okay. So like I mentioned, we did not have regulators
#
prior to 1990. Okay. We had just had the Reserve Bank of India. Of course, in the 1940s, the Reserve
#
Bank of India was given the power to regulate banks, but that power was also to be jointly
#
exercised by the central government. What you see through the years is that the government,
#
although it believes in setting up regulatory agencies, it is not willing to cede its full
#
sovereignty and make it fully independent. Okay. So in the 1940s, if you see a lot of
#
the parliamentary debates, they were actually, there was a clear predisposition towards making
#
Indian banking a nationalized industry. Okay. So you will see that there are parliamentarians
#
who are saying that, look, this was during, this was in 1948, when, as you can imagine,
#
the country had just got an independent and there were parliamentarians sitting and they
#
were debating whether who should be regulating our banks. Okay. The obvious answer was, of course,
#
the government, our new government will also regulate banks. But who has experience dealing
#
with banks? And they said, actually, the Reserve Bank of India has experience in dealing with
#
banks. But Reserve Bank of India said, and there's a very interesting conversation amongst the board
#
members of Reserve Bank of India, that our new government will be capable enough and will
#
regulate banks in a much better way than the British have been abusing our capital and our
#
government will actually nationalize all the banks so that the money of the banks can be used to
#
serve the farmers and the small businessmen of India who have always been wronged by these
#
banks. And these banks have always preferred British businessmen and things like that. Okay.
#
So those debates are absolutely incredible. The point is that at that point in time,
#
there was no clarity, the clarity that we have today of independent regulators and what purpose
#
they serve that didn't exist at that time. And therefore you have a hot porch of regulatory
#
powers for banks between RBI and the government. But that's about that. That's what we knew. In
#
the 1970s, when banks were nationalized, RBI's powers as a regulator were also increased,
#
but the whole idea of independence was not yet there. Even in the world, we had just discussed,
#
70s was the time when independence of central banks was just bubbling up in the discourse.
#
So people did not have that clarity. By 90s, people had the clarity that there's some value
#
in keeping independent regulators. And then the whole deregulation movement that started in India
#
in late 80s onwards, two things were going on. One is if you want to deregulate things like the
#
capital markets, you've got to give a certain assurance to the companies that will be raising
#
capital, that you will be able to raise capital for whatever purpose you want at whatever price
#
you believe will get you the best subscriptions. And the government will not suddenly suspend your
#
IPO or suspend your company. At about the same time, we had the Harshad Mehta scam.
#
So it just made sense. I guess it was just optimal to separate out regulation from the
#
government of India into a separate body known as the Securities and Exchange Board of India. And
#
that gave us our first regulator. The first casualty of the liberalization movement as such
#
is this body known as the controller of capital issues. The controller of capital issues was
#
within the government of India. It used to decide who can raise capital in India, for what purpose,
#
at what price, because all this while, the idea was that we should be using household savings
#
for national priorities. So there's total capital capture, capital market capture by the government
#
of India. And therefore, the first casualty of the liberalization movement is really this
#
of capital issues. Now, SEBI was set up as a body that would regulate the capital markets in the
#
interests of investors as well as firms raising capital. But at the same time, the government
#
was not used to the idea of independence of regulators. So even with the RBI, if you remember,
#
the idea was that we are regulating banks jointly. With SEBI, therefore, if you see the SEBI law,
#
there is a provision which says that central government may give directions to SEBI
#
in public interest. Now, that's a classic way to undermine true independence. So
#
once we had the SEBI experiment going for about four or five years, and then just like how the
#
idea of central bank independence scaled to all other regulators, the same ideas, how do you,
#
SEBI was kind of, it became the cookie cutter solution, so to speak, of every segment of the
#
economy that you want to liberalize. Somehow it gave people more confidence that there is a
#
separate regulator, so we should be better. Keep in mind that it's also easier to capture a regulator
#
as compared to the government. So if you are an industry, it's much easier for me to build
#
long standing relationships with a regulator because there is some continuity of bureaucrats
#
there. Unlike the IAS officers who get transferred from ministry to ministry and
#
departments to departments within a regulator, since experts are being recruited outside of the
#
civil services system, they are within the organization for a very long time and therefore,
#
it's much easier to build long standing relationships and capture becomes easier.
#
The industry was very happy with having these regulators because they could build long standing
#
relationships. I don't know what consumers felt, to be honest. So for example, am I more
#
comfortable as a consumer of banking if RBI regulates banks versus government of India?
#
It's a tough one. I don't know. Maybe I am because I have had this experience of
#
nationalization of banks, but if you talk about, am I more comfortable as a
#
trader in the stock exchange when SEBI regulates versus government regulates? I don't know. So I
#
don't know how consumers felt about this. Maybe it gave them more confidence. Maybe it didn't. I
#
don't know. But then from the 2000s onwards, after SEBI experiment had worked for a little bit,
#
they started setting up the other regulators such as the insurance regulator, the telecom regulator,
#
the Food Safety and Standards Authority of India. So think of a sector and you probably have a
#
regulator for it in India by 2005 or so. Having said that, three caveats. One, the government
#
was not fully confident of setting them up truly independently and therefore you have these
#
anomalies in the law. In each of these laws, saying government may give directions from time
#
to time. Second, the whole package of accountability was also not correspondingly imported. So this
#
whole idea of regulators having to do cost-benefit analysis, putting it through feedback loops,
#
et cetera, wasn't there. Oversight institutions. These regulators were supposed to present there,
#
are supposed to lay down their reports before the parliament on an annual basis. But to what
#
extent are oversight institutions have capacity to actually take interest, review them? Question
#
is open to discussion. I'm not sure parliamentarians really pay as much attention to
#
anything that is tabled before them, except when there's a scam. So in times of scams,
#
you do see parliamentarians actually questioning the regulators as to how things blew up. But
#
otherwise you see, I think Dr. KP Krishnan and a couple of his co-authors have a paper on how
#
often do parliamentarians review or raise questions on annual reports of regulatory agencies and they
#
find that the response rates are abysmal. So these are the three problems with which our regulators
#
are functioning in India today. And the fourth problem is that we are not able to replace them
#
as people because they are not elected. I'm going to talk about cricket now, not because
#
I'm bored with finance, but I'll tell you why I'm talking about cricket. So in the early 2000s,
#
I worked for this British company called Wisden. They famously bring out the Wisden Almanac and
#
et cetera, et cetera. And at one point we bought Crickenfoe. And later on, of course, we sold
#
Crickenfoe to ESPN, Wisden exited, Wisden later came back as Wisden, forget all that. So I was
#
in this company called Wisden and we buy Crickenfoe and I'm the managing editor of Crickenfoe.
#
And then obviously we want to make the site much better, et cetera, et cetera, which is a long
#
process that we embark upon. And we realized an interesting technical problem that the way
#
Crickenfoe was built is initially it was a spectacular open source, almost Unix like
#
collaboration with various people coming together and building the site in different ways.
#
But by the time we bought it to circa 2003, it was just a complete mess in terms of all the legacy
#
software and all the legacy issues. And my thing was that if we could just build it from scratch,
#
it would be great, but we didn't have the time or resources to do that. So everything was you're
#
adding features you want in your new content management system on top of the old content
#
management system. And there are all kinds of jugars and all kinds of things going wrong.
#
And that messy process continues. And the more you invest in that messy process, the harder it
#
goes to the harder it becomes to actually make a sort of a clean start and start from scratch.
#
And I think anyone who's been in a big software company, et cetera, et cetera, must know what
#
that is like. And it feels like what happened to the Indian state is a little bit like that,
#
at first glance, I may not like the idea of SEBI as a regulator. On second glance,
#
you tell me about the CCI, as it were, which was controlling who can go to the public market
#
with an IPO and who can't. And just the thinking behind that is so regressive. It is just so
#
profoundly stupid that you all have to do a collective thank you to a God who does not exist.
#
That was a casualty of liberalization. And then you look at SEBI compared to that and you say,
#
wow, this is beautiful. It's such a step forward. It's so liberating. And then the years have to
#
pass for you to take a further step back and say that no, actually SEBI as it is, is a deeply
#
suboptimal solution. All these things kind of are wrong with it and are a problem and all of that.
#
And by the way, you mentioned the term capture a few times. So I should clarify for the
#
listener that what you mean is not that people from a company will go inside a regulator's office and
#
hold them at gunpoint. Regulatory capture basically is that you take over the working
#
of a regulator either through bribery or other subtle incentives and so on and so forth. And the
#
idea there is what in public choice theory would be called diffuse cost concentrated benefits,
#
that for the consumer at large, they don't even know what benefit they have from a good regulator.
#
So they are not going to go out and fight for that. But for the companies within that field,
#
they know that it's big bucks if regulators make regulations that might harm the consumer by keeping
#
out competition or whatever the case might be. So that's where regulatory capture comes from.
#
But my question is when I think of this sort of metaphor of a sort of legacy software system
#
where everything is all over the place and therefore all you can do is make little
#
incremental changes and do Jogaru things. And in that sense, SEBI is like a Jogaru thing. It is
#
a creature of the moment and it is mind blowing and fantastic and a step for freedom because you've
#
got rid of the CCI. But devoid of that context, if you look at it for what it is, you can find
#
500 things wrong with it. So my larger sort of meta question before we dive into the weeds about
#
SEBI or India's regulatory agencies is that my worry there is that a couple of forces take over
#
here. One is a force of inertia, that the state has to do something. And it's like that last
#
minister line. We must do something. This is something. Let's do it. One, the state has to
#
do something, but then it does that. And then inertia takes over until the next crisis. There's
#
no need to change anything. There is a status quo bias and things kind of drift along like that.
#
And the second part is that, you know, weak state capacity, and I'm thinking aloud here,
#
can lead to a vicious cycle where it leads to more weak state capacity. So for example,
#
if you made a SEBI and you're saying, okay, now let us build the processes and frameworks like the
#
West has, so it's accountable and all of that. But who's going to do that? You don't have the
#
state capacity to do that. So therefore your state capacity in the form of SEBI or whatever
#
agencies you have remains weak and the vicious cycle and inertia come together. And the same
#
kind of shit just perpetuates through the years and through the decades, which is why it is a
#
long game. So what is your sense of this? Does this metaphor kind of work? Is that really what
#
is happening? Yeah, in a sense, you're right. Okay. So this is where I would bring in the experts
#
element of this. We believe that experts are in charge. They know what they're doing. Okay. So
#
we make no effort at improving what exists. And that is exactly what is happening at the
#
level of the oversight institutions. Parliament believes that actually SEBI is in charge. SEBI
#
knows what it is doing. So parliament is very happy to expand SEBI's powers, even if it actually,
#
they're most vulnerable to misuse, even if there is no way to figure out if they are being used
#
in the right and in the most proportionate manner. That is the parliament's reaction to inertia,
#
which is that SEBI, I use SEBI as an example. This is true of every regulatory agency,
#
that the, you know, the, the veneer of experts gives a certain legitimacy, which makes you
#
very comfortable. Okay. So that is at the level of the oversight institution, that the inertia
#
really manifests itself. Similarly, at the level of the courts, okay, the inertia manifests itself.
#
Courts rarely ever intervene with regulations that are made by regulators. Okay. So already
#
there is a presumption of constitutionality. What do I mean by that? If parliament passes a law
#
saying everybody has to wear blue ties to work from tomorrow onwards, if it is challenged,
#
when it is challenged, the court presumes a certain constitutionality and it is for the
#
challenger to show how that provision violates a fundamental right. Okay. So already you,
#
whenever a regulation or a law is made, there is a presumption of constitutionality.
#
So to override that is, the onus is on the challenger. Second is you couple this with
#
experts, but experts have made this. Okay. So can you imagine how hard a barrier it is for anybody
#
who wants to challenge any regulation made by an expert body to prove before the court that this
#
actually makes no sense. So the inertia sort of manifests itself in ways where the oversight
#
institutions just go by what the regulator is doing and the regulator has no incentive then to
#
improve. Okay. Now I'll give you some, now of late the trend has changed. Okay. So the classic
#
doctrine here is again from the US and we've imported it blindly is the Chevron doctrine,
#
which is that if a regulation or a rule is made by an expert body, the courts will generally be
#
deferential and say they know what they're doing. The purpose of their existence is this. So they,
#
why should we get into it? Okay. And Indian courts do that rampantly all the time.
#
So things like, I don't know, it's too technical, so forget about it. But what I'm trying to say is
#
that the inertia manifests itself through these oversight institutions. The regulator has no
#
incentive to then improvise and all feedback loops are essentially drowned out. So you say that
#
SEBI actually makes us feel that we are liberated from the control of capital issues. And that's
#
true. But then if you think that actually since the last two, three years, something like a
#
commodity derivatives and key commodities have been banned and that ban has been existing for
#
the last three years, it makes you wonder, are we even better off? I mean, maybe, and I'm a Hegelian
#
at these things where I believe that the cause of history takes its natural cause anyway. And
#
one particular event wouldn't have changed the cause of history. Maybe the school of thought
#
of having capital issues being controlled by the government would have evolved anyway with the
#
control of capital issues, where its powers would have been diluted to a point where it aligns with
#
the prevalent economic ideology. And just setting up a new institution actually made no difference.
#
It would have actually anyway lent itself to more freedom for raising capital and more freedom in
#
trading of financial instruments. So I don't know. So the inertia definitely manifests itself in
#
oversight institutions. I don't know how else to measure it, to be honest.
#
So let's take a quick commercial break now. And on the other side, we'll finally get to
#
your biography. I know nothing about you. Who are you? What is your name? We'll talk about that
#
after the break. Have you always wanted to be a writer but never quite gotten down to it? Well,
#
I'd love to help you. Since April 2020, I've enjoyed teaching 27 cohorts of my online course
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here out of clear writing. And an online community has now sprung up of all my past students. We have
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In the course itself, through four webinars spread over four weekends, I share all I know
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about the craft and practice of clear writing. There are many exercises, much interaction,
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and a lovely and lively community at the end of it. The course costs rupees 10,000 plus GST
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or about $150. If you're interested, head on over to register at indiancut.com slash clear writing.
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That's indiancut.com slash clear writing. Being a good writer doesn't require God-given talent,
#
just a willingness to work hard and a clear idea of what you need to do to refine your skills.
#
I can help you. Welcome back to the Scene on the Unseen. I'm still chatting with Bhargavi
#
Zaveri, who as you know, plays a long game. So this podcast is very much a long game.
#
So let's let's talk about your life a bit. So tell me about, you know, where were you born?
#
Where did you grow up? What was your childhood like? Okay, so this is a tough segment, huh?
#
Okay, got it. This is an easier segment. You know this, you can't go wrong.
#
No, so I was, I'm actually a Bombay person. I'm born and brought up in Bombay. I grew up in a very
#
classic Gujarati suburb of Ghatkopar, which is known for its actually, which is more Gujarati
#
than Gujarat itself at times. And you'll have the best Navratri dandyas and the best Gujju
#
snacks, etc. being served on the roads there. And yeah, that's that. It's an interesting place.
#
What did your parents do? My dad was an engineer. My mom was a homemaker. And the rest of my family
#
was of course, as my surname suggests, in the jewelry business. But so my dad was a bit of a
#
black sheep as a professional, black sheep in the family. So as you were growing up, and I'm
#
guessing this is 80s, 90s? Yes, 90s. 90s. So what was that sort of childhood like? Because,
#
you know, being perhaps half a generation older than you, I think of myself as being on what is
#
really a cusp generation, where you grow up in a world that's a closed world, and there are very
#
few options open to you, and the world is close to you. There's no internet, you don't really know
#
what to do, you have limited ideas, are you going to be doctor or engineer or IAS? And I chose the
#
one thing that was outside of that as it happens at the time. And then suddenly everything is open,
#
and you know, the possibilities just increase, you're no longer confined by communities of
#
circumstance, you can form communities of choice, your way of looking at the world opens up. So
#
what was it sort of like for you? Like, what was the world for you as you grew up? And what was your
#
perspective of yourself, your self-image as it were? Yeah, no, actually, my trajectory was very
#
similar to yours, and but maybe in a different context, because I would just, just thinking
#
about it now, right, I would divide my life into two parts. One is where I was the conventional,
#
you know, I actually was a very, I was very conformist. So I was a Jain temple weekly visitor.
#
You know, I was surrounded by generally, you know, kids of brokers or business people. And so my
#
thinking was also very much influenced by the usual conventional, early 90s, late 80s, whatever
#
you can imagine that Indian society, Bombay urban society to be that that that was the milieu in
#
which I grew up. And even after college, I went to school, actually, in, in a convent school, which
#
was honestly, it was quite radical for my family. And had my mom not fought for it, I would have
#
never been in a convent school, I would have been going to a Gujarati medium school, which is also
#
fine. I see a lot of my friends from Gujarati medium schools, and they grew up fine. And they're
#
doing very well wherever they are to the extent that they're working right now. And, but I guess
#
that might have been the most profound decision that that most important decision that affected
#
my life in profound ways, I wouldn't be half the person that I was if I wasn't in the school that
#
I was in. So luck, you can call it luck. I just lucked out there. See, the Hegelian view doesn't
#
work for individual lives. Okay, now, okay, I can equally argue that, you know what, the school
#
didn't matter. I would have turned out this way anyway. No, but no, I completely agree. Maybe,
#
maybe at an individual level, it doesn't work out the way Hegel claimed it did. So unlike a lot of
#
your guests, I've lived my entire teenage life, young adult life in one city, pretty much in one
#
suburb. And I went to government law college, which is also a very conventional decision for
#
somebody who in Bombay who wants to do law, okay, and you're faced by the usual pressures of,
#
oh, don't you want to become an engineer? I was a decent student. Don't you want to take up science?
#
You know, why would you do law? At that time, in the early 2000s, taking law was not a very
#
prestigious career option. People didn't quite know about the fact that law firms pay so much
#
or that their perception of a lawyer was somebody sitting outside a court under an umbrella,
#
charging 100 bucks to notarize an affidavit. Okay, that is the perception of a lawyer,
#
of the average lawyer standing in the early 2000s. So, GLC, Government Law College in
#
Churchgate was my first exposure to a very, very different heterogeneous group of people,
#
because GLC has a 50% reservation for notified classes from Maharashtra. So that was really my,
#
and my class were extremely heterogeneous. So you could be coming to college as a child of a judge
#
or the most high profile senior IAS officer or IPS officer, or you could be from a suburb like
#
mine where I have no background in law. So you could be from an income class like mine,
#
or you could be from the reserved section as well. And that was my first exposure to a very,
#
very heterogeneous group of people. But that was really a time when I was extremely conformist,
#
I would say in hindsight, all of this is very good in hindsight, I wanted to be the lawyer that
#
you see in suits, you know, the one, the cool guy who wears, the cool girl who wears high heels and
#
wants to do all the corporate financial regulatory negotiation stuff. And I ended up joining a law
#
firm when I was in my third year of law school, because like a lot of law schools in India,
#
GLC doesn't offer much. Okay, you got to learn on the job. And that's why most people start
#
working by the time in their third year. And I ended up giving an exam known as a solicitor's
#
exam, which is supposed to be a harder exam than the average law exam, very few people pass and
#
it's meant to train you in commercial law, property law, tax law, pretty much in line with my
#
idea of a lawyer from suits. And yeah, that that was that, that that's my early life.
#
So you know, knowing you the little that I do today, I think of you as someone who is
#
an independent thinker, who's got great clarity, who's got positions that are thought through and
#
articulated well, and etc, etc. But obviously, it's something that you arrive at over time.
#
So I'm very interested in the shaping of yourself as you were like you spoke about your path as
#
being a fairly conventional conformist path, you wanted to be in suits, law sounded like fun, etc,
#
etc. But give me a sense of, you know, were you what were the things you cared about passionately
#
and deeply and thought about, like, one of the subjects I thought we could chat about either
#
now or later, is your, you know, deep commitment to vegetarianism. Now that is vegetarianism per se
#
something that you would have just have inherited as part of the family, but it's also something
#
that you have thought about deeply and you have your own ethical frameworks and your arguments
#
and etc, etc. And that's something so what were the things that you were thinking about?
#
Were you deeply committed to certain things? Like when I look back on myself as a young person,
#
I think in 80 to 90% of things, I was just drifting through life just doing whatever is a norm,
#
not really thinking about anything or thinking through anything, you know, kind of like sort of
#
being almost a zombie. So what was it like for you? Tell me about the shaping of yourself.
#
Yeah, so I mean, what I narrated, what I just narrated was the part of life where I was
#
just surrounded by conformists and therefore tended to be part of the mainstream conventional
#
thinking. What really I think changed everything was I moved to Boston after working for a couple
#
of years over here because I joined my husband in Boston. And I was very clear, I didn't want
#
to do the classic master's program and then kind of join the workforce there. By that time, to be
#
honest, I was bored of the law firm work. Okay, so everybody who goes into law following suits
#
ends up getting bored. So please don't go into law thinking that suits is going to be a real life,
#
it won't. So I mean, on a more serious note, I was bored because, you know, the thing with a law firm
#
life is that you end up doing the same thing over and over again, monotony gets to you.
#
And at some point, you feel like I'm not going to learn anything new over here. So the timing just
#
turned out to be right. And at that time, I got a research fellowship at the Harvard Law School,
#
where I had proposed to them that I'm going to be studying the interface between lawyers and the
#
state, that how do lawyers really advocate for their position, not before courts, but before
#
the executive, because it is very clear that lawyers have given the extent of involvement
#
of the state in the day to day life of businesses, it is very clear that lawyers actually have to
#
deal with the state outside of the courts as well. So how do lawyers interface with the state? What
#
kind of lawyers get the ear of the bureaucrat? How does the bureaucrat view the lawyer? Does
#
the bureaucrat view the lawyer as necessarily a partisan person or does he view it as a feedback
#
loop and so on and so forth, right? So at Harvard and in Boston, I think it's such a special place.
#
And, you know, a lot of people go to the Harvard Law School and think that they're going to get
#
great education. I think the education part is overrated. What there are two things really nice
#
about the institution are your peers. So what you learn from people around you is just incredible.
#
And second is just the rate of failure. You know, so Boston is such a special place because you
#
have the MITs and the Harvards there and everybody, pretty much everybody is working on an idea
#
that has either not been tried before, or maybe it's been tried, but you know, in some other
#
format and the rate of failure of people failing around you is just so high that it's almost a
#
chip up your shoulder to say, hey, I started something and it didn't work out and I'm doing
#
something else. So the positivity and, you know, the, let's just say the spirit to do something
#
that's that not everybody is doing is just so entrenched in that city that it fires up your
#
imagination. It inspires you that, you know, even you should try and do something unconventional
#
if you haven't already tried. And it's okay if you fail, what's the worst, right? By that time,
#
you figured yourself out enough to understand that, you know what, I'll just go back to a
#
law firm job if things don't work out. Although I've got to say that I have two recurring dreams.
#
One is of getting arrested and second is going back to a law firm job. So you can imagine
#
how, you know, at what level I place those experiences.
#
If you get arrested, you'll be fine because you're not lawyers. You are one.
#
Oh yeah, that's true. You never know. So anyway, so yeah, so Boston basically gave me the courage
#
to say that it's okay, you know, I can try something that I'm not familiar with,
#
step out of my comfort zone and I'll be fine. And incidentally, at that time, I read a book by,
#
it's not a great book. It's just, I just read it at the right stage of my life,
#
Accidental Prime Minister by Sanjay Bharu. And, you know, the workings of government,
#
etc. really got me interested. And at that time, the macrofinance group at NIPFP led by Ajay and
#
Ela Patnaif were recruiting lawyers or people who, you know, they wanted to build an interdisciplinary
#
team. They already had economists and statisticians. They wanted a person of a different skill set.
#
And I just happened to be interviewing Ajay at that time. And he said that I'm looking for
#
lawyers. And I said, okay, cool. I think I'll be interested in joining and trying this out.
#
And for me, it was a big step to step out of Bombay, to step out of that little suburb and
#
life of mine to move to Delhi. And the perception of Delhi is that it's not safe for girls. So,
#
you know, the backlash that I got from a conservative household, it was, it was something,
#
but fortunately, it all turned out to be fine. Spent a lot of, spent two years in
#
Delhi, working at NIPFP with the Ministry of Finance, interacted with the government
#
so closely for the first time. And I've got to say that I was really lucky because I feel like
#
I interacted with the best in the government, you know, working with the Department of Economic
#
Affairs on think on questions like, how should, how should we regulate mutual funds? How should
#
we regulate commodity derivatives? How should we regulate foreign exchange? All of that,
#
and working along with the economists, it just widened my perspective to a great extent,
#
sharp learning curve, but it was an experience that completely changed the way I think about
#
life and what I want to do with my life. So that that's what really shaped my thinking at that
#
time. So a bunch of things I want to double click on. And the first is this, that I think,
#
you know, Bob Dylan once said, he not busy being born is busy dying. And at some point you were
#
busy being born, but whenever people are busy being born, it's really, I think, think of it
#
in two ways. And I'm completely thinking aloud and winging it, but there are two possible ways
#
in which you can do it, or there are two possible ways in which you can be filled with life and
#
meaning. And one is where you like a quest, you are embarked upon something, you like the processes,
#
whether they are processes of intellectual inquiry, or diving deep into something or whatever,
#
and you're invigorated by that. And that gives meaning in and of itself. And the other is that
#
you have some higher purpose that you say that I'm playing a 30 year game, that maybe every
#
difference that every incremental tiny difference I make to the state can impact millions of people.
#
And oh, my God, that is so inspiring. And then that purpose sort of drives you and kind of gives
#
your life meaning. So what what is and my sense is that when you that it is more of the first that
#
you mentioned that you were at Boston that you felt invigorated at new ways of thinking and new
#
ways of doing things. So I want you to double click on that. But also what is the balance between that
#
and this greater sense of purpose like over the years as you worked at an IPFP and beyond,
#
was there also a greater sense of purpose that I'm part of this project, and I might be a tiny
#
cog and my contributions may be invisible at large, but it's important. So.
#
So I think for different people, it plays out in different ways. Although I think both things
#
happen for most people. Okay. For me, it played out with starting with intellectual curiosity,
#
I was curious that. So whilst I was very, very familiar with financial regulation laws,
#
I know that the loop wasn't complete the in my head, I just couldn't understand
#
why does the state regulate this, but not that and why, what does the RBI really do?
#
So all those questions, the law itself cannot answer. And for that, you need a different
#
disciplinary perspective. And so for me, what drove me in the beginning was intellectual
#
curiosity. I was not motivated by some high purpose of, you know, making a difference to
#
people's lives, et cetera. But one as in how that intellectual curiosity starts getting satisfied,
#
you start looking for meaning in other things. And maybe what then gives you meaning is this
#
sense that you are actually making a difference. So for me, the way it played out, and you know,
#
my time at NIPFP was all about learning, you know, answering, following this intellectual
#
curiosity and answering these questions. But by the time I, you know, I finished my learning at
#
NIPFP, I realized that now I think I have a sense of, you know, what drives policy and what drives
#
the decisions to regulate something versus not, what does the history of ideas look like? I think
#
by then I was looking for meaning in through contribution to real life. And that's when I
#
moved to Bombay when, again, luckily enough, there was a team led by Susan Thomas at IGIDR,
#
it was called the Finance Research Group, mostly statisticians and economists. She was looking for
#
lawyers because they were actively involved in the drafting of the insolvency and bankruptcy code.
#
And for me, that made, that just made too much sense to just join that team and build up their
#
legal capacity. And that's how I ended up being part of such a community even in Bombay, although
#
I've got to say that in Bombay to find such a community is not easy. Such communities thrive
#
in cities like Delhi, which has always been a center of intellectual learning. Bombay is
#
much more transactional when it comes to these things, you know, much more business and trader
#
oriented. Now you'll see some of it in Bangalore and cities like Bangalore and Pune, but moving
#
to Bombay and then being part of a team that continues to do this kind of work was just,
#
call it a stroke of luck, call it something that I was anyway, you know, sort of being driven towards.
#
So by the time I moved to Bombay, it was about, okay, now let me see how I can contribute to this.
#
The learning was largely over and it would of course keep happening throughout the years,
#
but by then it was something else. So I feel both the phenomena that you mentioned play out in the
#
cause of a person's life. Some things drive you at some phase in life, maybe the drivers change in
#
some other phase. Yeah, you said everybody goes through some combination of both, which is like
#
total selection bias because everybody doesn't, most people don't have either in their lives.
#
Yeah, I meant that everybody who follows one ends up following the other or vice versa.
#
Yeah. Tell me about the roles that law and economics, studying law and economics,
#
particularly, and economics obviously not formally in that sense, but by osmosis,
#
the roles that they played, like firstly, in the context of law, I'm interested in whether it taught
#
you to think in a particular way, a systematic way, taught you to dive deep into things, taught
#
you to absorb knowledge and et cetera, et cetera. Like how does a causation really work? Like I
#
guess it's a virtuous cycle, but do you already have to be inclined to think in those ways to
#
get the most out of studying law or does studying law just naturally make you a better and more
#
rigorous sort of thinker in that sense? And I'll come to economics later, but just in terms of.
#
Yeah. So I think law teaches you to think in a very rules-based framework.
#
But I wouldn't say that it equips you with a lot of critical thinking skills, at least not the way
#
law is taught in India. So some of the things that I notice are things like basic concepts of limited
#
liability, basic concepts of the difference between constitution versus rule, the difference
#
between constitutional challenge versus an appeal before a tribunal, all of this now seem like,
#
they seem obvious to me. I don't think they would have been so obvious had I not gone through the
#
law training. The difference between an executive body and a judicial body, the difference between
#
a judgment of a court and a law made by parliament. All those things just wouldn't
#
be so obvious, but for that training. So in a way, what law teaches you to do is think through
#
structures, structures of decision-making, structures of, yeah, I would say decision-making
#
primarily, but also structures of organizing things. So it's a very rule-based understanding
#
of things, but it doesn't give you the opportunity to question much on how those
#
rules came to be that way, because there's no time either left in your training, and then you
#
are at work and you stop questioning naturally. But economics, on the other hand, I'm sorry to
#
jump to that, economics gives you a much more first principles understanding of why is the law
#
structured in this way? And does it make sense? Does it align with human behavior? Does it shape
#
human behavior at all? So economics for me completed the cycle of understanding of why the
#
law is the way it is. And of late, I've become a big follower of legal history. And I feel like now
#
legal history is supplementing that understanding that even if something doesn't make sense, how
#
did it survive the test of time? And then you realize actually, if you look at history, a lot
#
of it is just accident and there's no great thought process that is being given. A lot of it is just
#
people reacting. So like you were telling me that even I find myself really lucky that I'm able to
#
now form a complete understanding of the questions that I'm interested in. If I see a phenomenon,
#
I have some sort of a framework to apply. Okay, let's see what the rules are. Why did the rules
#
become this way? If it doesn't make economic sense, maybe there was an accident of history
#
that led it to be this way. So I think completeness of understanding is what law and economics gives
#
you in ways that either field in isolation can't. You know, I love economics as a study of human
#
behavior. I think it applies to absolutely everything. And what I find kind of fascinating
#
about your journey and want to dig into next is that in a sense, you were learning economics and
#
you were learning about the Indian state and regulation almost simultaneously. If you had
#
learned about economics earlier, you get all the theory and you get the principles and all that.
#
If you get exposed to the state first, you might explain all the shit that is happening in different
#
folksy ways, but you're learning economics that gives you the frame. And then there's a perfect
#
application of that frame on what you see in your everyday life, not just in terms of the markets,
#
whose regulation you're helping with, but also in terms of the state itself, what it looks like from
#
inside, how people behave, et cetera, et cetera. So tell me about this process of being in the
#
belly of that beast, like literally in the ministry of finance, working with NIPFP with Ajay Neela.
#
And so take me through that sort of... Yeah. So completely agree with you, right? I mean,
#
you almost make it sound like a lab where I'm being exposed to different things to complete
#
my understanding, as if this thing has been designed to complete my understanding of things,
#
but absolutely very well put. NIPFP, early days were a culture shock, okay? Because I was used
#
to working in Bombay, which culturally is a much more open, frank city. You can pretty much at the
#
workplace speak your mind, and you can be frank and you can be honest and you can call out things
#
and you'll be fine, at least in the workplaces that I worked at. But Delhi was a different ball
#
game because once you work in the government, I don't know if it's a Delhi thing or if it's a
#
government thing, maybe it's a mix of both. I realized that, as I was saying in the beginning,
#
there are some attributes which are just not appreciated at the workplace, okay? So
#
being frank, being candid, et cetera, wasn't an attitude that was appreciated much in the north
#
block, I've got to say. You learn that over time, it took me almost six months to realize the
#
mistakes that I was making. Maybe it wasn't that I was a woman and that's why the joint secretary
#
or whoever wasn't talking to me or giving me eye contact. Maybe it was just the way I was putting
#
across things that wasn't being appreciated. So culture shock, absolute culture shock in
#
the beginning. Part of the culture shock was also linked to the fact that, oh, there's another
#
discipline of economics, which is actually probably a little more important to understand than law.
#
Learning that from peers, that was also a sharp learning curve. Some of the
#
lessons were very harshly taught to me. Another culture shock was the fact that you work in the
#
north block and I will narrate this incident to you where for about two, three months,
#
we were sitting in north block and north block looks very grand and everything,
#
but it's not most efficiently designed from a work organization perspective. I don't know if
#
you've been inside, but there's a courtyard in the middle and I'm sure even south block looks like
#
that. There's a courtyard in the middle and then there are galleries and offices are organized
#
around those galleries. So you're going in round and round and then there are no directions.
#
And the way you would identify a senior officer's office is if there are a lot of
#
peons sitting outside, you would figure that that's a senior officer's office and you would
#
make your way around that way. I realized that, look, the bathrooms here aren't clean. I was
#
just not used to that kind of stuff. I realized that food delivery doesn't happen over here.
#
Nobody wants to come to north block and deliver things because they'll have to go through a hell
#
lot of security. So one day I went back to NIPFP in the evening and I complained. I was stopped
#
into Ajay's cabin. I told him, listen, this is not what I signed up for. And at that time I
#
was very new. So in hindsight, I've got to give it to my guts, but whatever. So I went to Ajay
#
and I went on a rant about how it's not done that we are being made to sit there. The bathrooms are
#
not clean and the food doesn't come on time. Nobody listens to me. I did all that. And he
#
heard me out. And after about a seven or eight minute rant, he said, point taken, but do you
#
realize that any other person of your age would probably give the right hand to be where you are
#
right now. That really sort of put things in so much more perspective. So that was just an
#
example of how my early days at NIPFP were. But on the work front, seeing one thing that really
#
surprised me is that the law student is made to believe that a law was drafted this way and it
#
was passed by parliament. Every law is actually a negotiated outcome of many interests. And I don't
#
mean that in a pejorative way. There are so many interests at play here. There are so many biases
#
at play here. And you see that negotiation happening when you're sitting in government
#
and you're working with government officers. And it's just beautiful. It just opens up your mind
#
to just a whole new world of how laws are made. And at the same time, you see that all the things
#
that we complain about once the law is made, it's not like people don't think about them.
#
So for example, when check bouncing was made a criminal offense, it's not like people didn't
#
realize that, listen, but we don't have prosecution capacity or courts are overburdened. It's a little
#
bit of like what you said in the beginning, which is that the government must look like it's doing
#
something. So all of it playing out in real time in front of your eyes and you having a
#
ringside view of things was just great. This especially in the context of inflation targeting,
#
I was just very lucky to be there when the law governing inflation targeting was being drafted.
#
You are getting to see an institutional reform that has been worked upon for over maybe what,
#
12 years, 15 years. And you just happen to be there at the time when it comes to fruition.
#
How lucky you got to be placed that way. And then you've got to see the negotiation between
#
the RBI and the government of India, the discussions between the government of
#
India officers before those negotiations happen. What are the considerations that
#
wait for each parties? And then you end up going back home and reading all the literature that
#
exists, explaining their positions. A lot of this is about being at the right place at the
#
right time, opening your mind enough, not having so much for more that, oh, but if I was in a law
#
firm, maybe I would be doing much better. You've got to let go of that. You've got to detach
#
yourself from that because policy and research will not pay you commensurately as a law firm job
#
or an investment banking job would pay you. I think it requires a little bit of unlearning
#
of a lot of things that you've already learned, but you get to see the process play out in front
#
of you and that's just beautiful. Was there sometimes a sense that
#
counterfactual seemed more attractive to you sometimes? For example, your Gujju Ghatkopar
#
family must have said, oh, I would have earned so much in a law firm. Or perhaps you see your
#
colleagues in the law firm suddenly doing well and going on fancy holidays and blah blah blah.
#
And was there ever a sort of a sense of that? You referred to one time when it was difficult
#
when you went and stormed off to Ajay, you know, you don't get food, toilets are bad, etc.
#
So were there times like that and what would you tell yourself to convince yourself this is worth
#
doing? Like what was the story about yourself that you told yourself?
#
No, luckily this never happened to me. So once I moved to the policy and research space,
#
I've never had the FOMO of wanting to go back to a law firm. Like I said, in fact,
#
it's a recurring nightmare that I have to go back to a law firm. But I know that, I mean,
#
one is that I was lucky that I didn't have to think so much about supporting a family.
#
I just had to support myself and I had to pay my rent and my bills and that's it.
#
But if I had to support a family, yes, it would be a tough one. But to be honest,
#
once you see this lab around yourself, where theory is, you know, actually playing out in reality,
#
but in ways different from what you imagine, and where you're talking to people who know the law
#
that you're talking about, but are telling you why the law is this way, you know, it's just very hard
#
to unsee it and to say that, okay, I'll go back to that law firm job where I'm interpreting an
#
is or the or shall or may and trying to convince an RBI official about why approval should be
#
given for some hundred thousand dollars that are to be remitted into India. I mean, it's just,
#
it's very hard to unsee what else can happen with your life if you choose to give up that.
#
Paint me a picture of the engine room of government. So you were in the Ministry
#
of Finance. Now people will have stereotypical views of how government works, what the belly
#
of the beast looks like. You've got all your classic Yes Minister, Yes PM sort of impressions
#
and the mental image is immediately of a Babu surrounded with lots of files and you know,
#
chai and samosas break takes two hours and etc etc. All these caricatures exist.
#
But you were actually in the belly of the beast. And like one question I often have a question that
#
I've asked Ajay and I'm not sure I can agree with his answer like both Ajay and KP
#
Krishna and I've asked him the question that were you guys outliers? Because it seemed to me that
#
the way the system is designed, you know, if you just follow public choice theory to its natural
#
conclusions, you will have a schlerotic state which will not move which will be a lumbering beast
#
where your incentives aren't aligned with public service etc etc. And therefore all the outstanding
#
civil servants, some of who have been on the show like Krishnan and Montaigne and so on,
#
seem to me to be outliers. But they insist that no, no, there is hope they're not outliers.
#
So what was your sense working there? You mentioned earlier that you met some outstanding
#
people there, the Department of Economic Affairs and all of that. So is it the case that yeah,
#
sure, there are the standard public choice incentives, but there are also other incentives
#
which drive human beings, which is there's an incentive to do good things, to leave a legacy,
#
to rise in your own self esteem by feeling that you made a difference. Was that also in place? So
#
paint me a picture of that engine room. What was it like? What did your typical day look like? What
#
are the kinds of things that you do? What are the kinds of discussions that were had? Give me a
#
picture. Yeah, so here I think my take would be slightly different from Ajay and Dr. KP Krishnan
#
because I happen to have interacted with a lot of young IAS, IRS officers as well. And I see a very
#
remarkable distinction between the young guys and the older fellows, right? So first of all,
#
bias on the table, which is that I have, when it comes to the older cadre, I've only dealt with
#
the Department of Economic Affairs, Ministry of Finance, which has arguably some of the best IAS
#
officers over there. In amongst the older cadre, I did, I mean, every person is different, but
#
by and large, I did see a certain drive to make a difference. You may not agree with the view of
#
the officer on how the difference is to be made, but I wouldn't say that they were not motivated
#
or they were undriven and they were actually just doing, coming to office and just doing their job.
#
I've seen some extraordinarily hardworking officers who stay back after work, who actually
#
put in a lot of thought to before signing a file and are not just driven by
#
this bureaucracy. So amongst the older officers, that is my observation,
#
but it's very different amongst the younger people. I think they have,
#
they know that they have to rise in the system. So if you look at the conversations that you have
#
with them, I find that they are driven much more by the next posting. How do I get a year off at,
#
I don't know, IMF or OECD, or they get a year or two off for conducting higher studies, et cetera.
#
So the conversations and discussions are pretty much about getting those benefits that your
#
recruitment offers you, as opposed to the larger worldview of, why am I here? Why am I an IAS
#
officer? Why am I an IAS officer? So maybe when you're young, your prime consideration,
#
you're driven much more by those questions of how do I rise in the ranks, as opposed to when
#
you're old, when considerations of legacy become important to you. That when I retire,
#
I want people to say this. I want to be known as an officer who did this. So I see that difference.
#
Having said that, every officer is, I mean, at least the ones who I met in DEA were very
#
different from each other. Some were, I would always classify on the spectrum of socialism to
#
capitalism. So where do they stand on that spectrum? Because it would tell me something
#
about their willingness to intervene, their willingness to keep their hands off and their
#
approach towards a specific question. And there I would say that you would find, it's a wide
#
spectrum. You would find everybody on pretty much every point of that spectrum. But it's worrying
#
that the younger ones don't even think about that spectrum. And most of the younger ones I meet are,
#
I happen to, so my PhD is at the National University of Singapore at the School of Law.
#
And we shared a campus with the early QANU school, where a lot of IRS and IAS officers
#
come for their mid-career education programs. And talking to them gives me a sense that
#
they somehow do not have the worldview, are not even interested in forming a worldview at all.
#
Either they've been conditioned to think apolitically, or maybe it's just a function
#
of age. And as you grow older, those considerations of legacy, et cetera, become important.
#
I'll come back to the engine room question later again. But a larger question and something that I
#
think about is that where does idealism or where does purpose come from? Like my dad was an IAS
#
officer circa, I think, 64, 65 bats, something like that. And what he once lamented in his last
#
years was that in his days, in his batch, they were driven by idealism. You know, we were a new
#
nation. That Nehruvian zeal was there. They were driven by idealism. Maybe they believed in many
#
of the wrong ideas. But the point is they wanted to actively make a difference. And one could say
#
about the present generation that everything is instrumental. It's just another career. It's not
#
necessarily like that. The design of the state attracts a different kind of person to the job.
#
But you know, that middle generation, the KP Krishnans and maybe Vijay Kalkar, of course,
#
would be a holdover of my dad's generation only. But KP Krishnan and perhaps those, you know,
#
in the 10 years below him had that idealism, many of them, as you put it. And yet they weren't that
#
Nehruvian generation either. So I wonder where does the idealism come from? Is it partly sometimes
#
a function of age, that if you are young, you're just looking to get ahead and then you reach a
#
certain point and you realize ki sab kuch to mil gya and now what? And then you start thinking of,
#
you know, you move up the pyramid, as it were. Is that the case? Or is it the case that 95% of
#
people in any job, you know, and the percentage will be lower for you because you've had the
#
selection bias of being where you are, where more people are purpose driven. But 95% of people in
#
any job are just ticking boxes and going through the motions. They don't really care. So when you
#
describe these young IAS officers as, you know, not having, you can't place them on the capitalism
#
socialism spectrum, it's because that it's a waste of their time to think about all of that stuff.
#
They don't need to, you know, they need to take whatever boxes they need to do,
#
stay on the right side of whoever is in charge, plan their next hour strip, etc, etc. And whatever
#
it takes to get there. So what is your sense of that? And it's a larger question. It's not
#
a question that anyone is an expert in. I'm just, I'm just like wondering that
#
where does idealism come from? Where does purpose come from?
#
I think two are different. One is idealism, which is that, you know, do you truly value
#
ideas? Okay, that or do you believe that everything is a given and everything was meant to be the way
#
it is? You know, so I think that is sort of, I would take them as two separate questions.
#
Purpose is very individual specific, you know, maybe being good at your job gives you a sense
#
of purpose. Maybe your job doesn't give you a sense of purpose, and it's actually playing
#
music in the evening and getting better at it gives you a sense of purpose. Maybe reading books
#
just gives you a sense of purpose. So that is different. But I honestly think that people
#
underrate the value of ideas and that undermines idealism. You can be idealistic if you actually
#
value ideas and if you value the contrary idea as well, if you believe that the contrary idea
#
is important enough, but guess what? I have a better one. You have to be thinking constantly
#
about what made it possible to organize our society the way it is. And I think generally
#
speaking, maybe capitalism puts you in that stupor, you know, maybe this is what Marx was
#
referring to as alienation, which is that you stop, you stop valuing ideas for what they are,
#
and you think that this is the routine and this is what it is. And maybe 90% of the people are
#
that way. And I would attribute that a lot to partly your lived reality. I mean, and partly
#
because, I don't know, you don't read enough. I don't know, like, you know, reading, of course,
#
suggests and emphasizes, you know, the value of ideas. So idealism is something that
#
maybe we don't find it amongst the young because they're too preoccupied with other things. And
#
they generally, I generally think the value of ideas has is something that we don't speak
#
enough about. Purpose is, I think it's age driven. At different stages of your life,
#
different things drive you, different things give you a sense of purpose. And I'm hoping it's,
#
that is what I'm seeing in the difference between the young IAS officers and the older IAS officers,
#
right? What drives the older ones is the willing, you know, the desire to leave a legacy,
#
the desire to leave a reputation, whereas what drives the younger ones is just to get the next
#
best posting. So yeah, I don't know if that answers your question, but I was just thinking
#
that they're two different things. Questions don't have answers, they only have more questions,
#
ideally, right? So that's leading me to another one, which is bad. Again, I'm thinking aloud,
#
but it strikes me that you could say that there are two kinds of idealism and one kind of idealism
#
is where you are enraptured by ideas and that intellectual quest is what fuels you and therefore
#
you're driven by that. And that's where idealism comes from. But another kind of idealism is almost
#
the opposite in the sense that it is like, it is like a lazy passion. You have a fervor,
#
but the fervor is not so much for ideas in the abstract, but particular ideas in the concrete.
#
So what happens is you're trying to explain the world, you come across, you know, a set of ideas
#
or a framework that appears to explain it, and that's it, your cognitive work is over. For the
#
rest of your life, that is a one hammer with which you will beat every nail and you become idealistic
#
about that. So Lenin would be an idealist in Marx's ideas, for example, and alas, many people
#
still are today. And that's one kind of idealism where you choose a cause and then it is like a
#
tribe. You are in that thing and you're idealistic and you're full of, you know, there's this old
#
quote about how the worst are full of passionate intensity. And I forget what the quote says about
#
the best, but the best are just like, you know, whatever, not really engaged. And that's why the
#
world gets where it was. And I think there are those two kinds of idealism and one kind of
#
idealism really springs from intellectual laziness, from just, you know, this desire in
#
your own eyes and in the eyes of the world to be doing important things or to be aiming towards
#
something. And sometimes it's well intentioned, but sometimes it is wrong minded because you're
#
not really always challenging your own priors. And therefore that better kind of idealism that
#
you and I aspire towards, I would imagine, requires not just a willingness, but a drive
#
towards discomfort, towards always making yourself uncomfortable and questioning your priors and,
#
you know, getting into arguments which don't have easy answers, et cetera, et cetera.
#
So what is, from observation, what is your thinking on that? Because again, selection bias,
#
I think you and I are more likely to have experienced more people like that than are
#
actually out there in percentage terms. But for me, I still find them vanishingly small,
#
vanishingly small. You know, most people either don't care about the world or to the extent that
#
they care about the world, they care about an image of the world they painted when they were
#
18 or 20 or whatever. And everything is just, you know, confirmation bias and incremental additions
#
to that, but nothing else. But the task of being an intellectual and an idealist in that better sense
#
is the task of always, you know, stripping yourself bare again and again.
#
Yeah. So I think there's one word that explains this, which is curiosity, right? Now, just for
#
Vladimir Lenin, by the way, towards the end of his life, he did start questioning the value of the
#
communist cause and he did start valuing the market and seeing that actually central planning is not
#
the answer to everything. So even an idealist as strong as an ideologue called Vladimir Lenin
#
actually started questioning his priors. But to come back to your point, right, I think it's about
#
curiosity, what fuels your curiosity. A lot of the times become prisoners. There are two things.
#
One is cognitive laziness, which is what you are referring to, where people become prisoners of
#
their own ideas. The second is you've actually entrenched yourself in a community that
#
is just reinforcing everything that you already believe and you believe that there is no world
#
beyond this. So that is the classic echo chamber effect. And the third I would say is that actually
#
you positioned yourself in the public so much for one particular viewpoint that it's very hard for
#
you now to accept, to even convince yourself that you know what, that viewpoint deserves to
#
be more nuancedly stated or it's plain wrong. And then you just double down on what he was
#
thinking already because it's too expensive now to go back on what you already said.
#
I think all these three effects may actually affect idealism generally, even amongst the idealists.
#
You're right. Maybe the people that we meet overwhelmingly happen to be idealists who
#
may fall into one of these three categories or may not, but the rest of the world.
#
So I would say that I find it hard to believe that people don't think as much about the world.
#
Sometimes I believe that they just don't tell me about it because they believe I'm too opinionated
#
and they just don't want to get into fights. Who wants to get into an uncomfortable situation over
#
dinner? I think people are largely non-confrontational and having difficult
#
conversations, et cetera, is just either they're not, they just don't want to get into that
#
conversation. I don't think that they don't have an opinion on what the world should be like.
#
We otherwise wouldn't have the kind of rhetoric that we see around
#
current Indian elections and majoritarian outcomes. I think enough people feel strongly
#
enough about who should rule them and how should the state regulate buildings and terraces and
#
signals and spitting on the road. People have very strong opinions about these kinds of things,
#
but they just don't want to think deeply enough or they don't want to get into uncomfortable
#
arguments with people like us who are, I would say, on the more vocal side of what we believe
#
the world should look like. The weirdest majority of the world is
#
opinionated. My good friend Pranay Kotasana introduced me to this phrase, not his original
#
phrase, he was quoting someone, strong opinions weakly held. I absolutely love that. That is an
#
opinionated and open person. I am now again thinking aloud and wondering if all of these
#
people in our family WhatsApp group or our dinner tables who may avoid certain subjects with us
#
actually have weak opinions strongly held. That kind of can then lead to the tyranny of mediocrity
#
where you are surrounded by people who strongly hold weak opinions because it is convenient for
#
them and there is no cost to it etc. We get trapped by that. Paul Graham wrote this great essay
#
called the Four Quadrants of Conformism where he spoke about the intensity of your belief and
#
whether you are a conformist or a non-conformist. In his articulation the most dangerous kind of
#
person was the person who is the aggressively conventional minded. You are conventional minded
#
which means you are not really questioning anything, you are going with the flow and you
#
are aggressive about it and they are the enemies of progress and we are surrounded by them on
#
social media etc. There are aggressively conventional minded on both the right and the
#
left. They will believe opposite things but they are believing what are conventions of the tribe
#
and discussion sort of becomes impossible. I am just kind of thinking aloud and obviously
#
in family circumstances it is best not to fight because sometimes human relationships matter more
#
and I have many friends and people I am close to who believe very different things. I think even
#
there there are litmus tests and certain things which would be off limits for me. Is that the
#
case with you? Would you stop being friends with someone if they did X and if so what is that X?
#
So I always used to believe that I am never going to sacrifice friendships over politics but
#
I am increasingly coming to the conclusion that I just cannot be friends with the person who
#
believes one thing or another. Maybe it is a reflection of me and my tolerance levels
#
or my patience levels or whatever you call it, my openness so to speak. So it is funny just a couple
#
of days ago I think over coffee or something I was discussing with a group of friends would you date
#
a person of the opposite political ideology and what they said is that actually this question
#
is much more relevant in the United States not so much in India because in the United States
#
it is very well articulated. If you are a democrat you stand for certain values, if you are a
#
republican you stand for certain values. In India whether you support Shiv Sena, Uddhav Thackeray,
#
Shiv Sena, Eknath Shinde, BJP, INC, NCP, BJP is a bit of a you know out there but NCP. I mean what
#
do they stand for and would you really give up on a good potential mate opportunity simply because
#
you know you believe they stand for something that for a party that actually doesn't itself
#
stand for anything. So maybe positions in India except in some matters are not as
#
deeply thought about or clearly articulated. So on the question of would I actually stop
#
being friends with a person because of a certain kind of conduct I think knowing me I would stop
#
but when I say stop I mean I stop interacting and I stop hanging out but would I really pick a fight
#
with that person over something like this. I increasingly don't have the capacity to do it
#
because actually their position is not even well thought out like you said. So it's kind of pointless
#
having a discussion with them but yes is there a yes or no answer to this. You forced me to
#
think in absolutes which is hard. I don't know I would definitely stop reduce my level of interaction
#
I'm already doing that so. Yeah and I also think about sort of how ideas and values interact with
#
each other. For example the position that I have come through in terms of what do I believe in
#
is that as far as facts are concerned I'm open change my mind you know I'm there's no view of
#
the world that I'm going to hold on to dogmatically. As far as values are concerned I'm completely
#
rigid and dogmatic by now that there are things I value like individual freedom and like consent
#
and I'm against coercion and I am dogmatic about those but as far as the facts of the world are
#
concerned fine change my mind I'm completely open but the two bleed into each other right.
#
Like at a recent party I got mad at an acquaintance because he was arguing for degrowth
#
right and now in it's no more a battle of ideas for me when you talk about degrowth. Degrowth
#
would hurt the poor in a country where it is important to get people out of poverty. It is
#
okay for you to sip your single malt in an air-conditioned room and say oh we should have
#
degrowth but it hurts the poor. It's a worst form of sort of coercion and keeping people in
#
poverty in that manner and therefore it bleeds into values and I don't know what to make of that
#
and I keep telling myself that listen when you're arguing ideas don't because I only get emotional
#
when it comes to values and I can lose my temper and kind of lose control. When it comes to ideas
#
I don't really care I'm dispassionate we'll talk about the facts of the world but they bleed into
#
each other either way right. So how is that for you? Do you think about these distinctions and
#
have you ever gotten emotional about ideas and you know got mad where you know what is otherwise
#
a standard argument is kind of happening? How does that sort of work? Yeah so I like the
#
typology that you set out right there's values ideas and facts okay. On facts I think it's
#
obvious that everybody should be open to listening to them yeah that's true actually that is so true
#
so just yesterday I was at an old relative 95 year old I'd just gone to pay a visit and
#
she told me BJP won from my constituency I said no that's not true the person who won was from
#
Eknath Shinde, Uddhav Thackeray's party which means she was not in alliance with BJP. She just
#
refused to believe me she's like no no you know so yes I mean maybe it's the age factor or whatever
#
yes absolutely right there are some people who don't want to learn facts. Ideas and values okay
#
good point. What is happening with me is that except for the group of people who actually
#
think deeply about ideas and who to put it in your phraseology have strong ideas strongly held I don't
#
end up talking about ideas to many people because simply I either I don't want to create that
#
confrontational situation or they don't want to create one with me and therefore I don't end up
#
talking about ideas and values so much because I feel like the average person of my age who's in
#
the same class you know economic class as mine is extremely statist. It's very hard for me to
#
convince them why terrace gardens shouldn't be regulated. It's very hard for me to convince them
#
why people urinating in the public or spitting in the public shouldn't be publicly flogged.
#
These views are very casually held and they are thrown around like nobody's business and at some
#
point it's fatigue and you just that's what I'm saying that I end up reducing my interaction with
#
them but I don't really go around I mean it has to get really bad where I'm being prodded to give
#
my idea so I'll give you one example. At a family dinner once the topic came up about inefficient
#
courts and how judges misbehave and lawyers also misbehave and I mean everybody's just doing whatever
#
the hell that comes to their mind in a courtroom. Now most of the people in this family group that
#
I'm talking about are senior council or are extremely entrenched in the conventional legal
#
fraternity and I knew that whatever I say will offend them so I did not say anything and then
#
they said no no but tell us what you think tell us what you think and I said that I think there
#
should be cameras in court rooms because that way the litigant gets to see how the lawyer's behaving,
#
how the judge is behaving, whether he wants to change his decision on the lawyer. Right now the
#
litigant has no way of knowing and that deeply offended their sense of justice. They said that
#
how can there be cameras in the courtroom you're policing the judge. I said but even our
#
parliamentarians get police we have courtrooms in the parliament they may well be performing
#
for the cameras you know for how do you know this and at some point that performance will
#
stop because you have you end up being your natural self you cannot be keep on being somebody who you
#
are not for a very very long time and that broke into a family fight of I've got to say
#
disproportionate proportions where you know so after that experience I feel like on ideas and
#
values unless you want to have a meaningful discussion with me I will generally not bring
#
it up in social situations. Apart from the assertion that no there should be no cameras
#
in courtrooms what is an argument against having cameras? That judges will perform for the camera
#
that was their answer to which I said but beyond a point they cannot perform so in the long run
#
that performance will stop they'll start getting immune to the camera the way you and I are immune
#
to you know those scanners metal detectors when we enter malls and stations we ought I feel like
#
even if that metal detector was wasn't there I would probably stop at the entrance of the metro
#
station for half a second because I'm so conditioned by it I mean you just become a it becomes a part
#
of your daily life and my so their main response was that you'll end up making judges perform for
#
the camera and then one thing leads to another and then it coming back to the black sheep part
#
right which is that the Gujarati family doesn't understand what I do for a living so they're like
#
oh you don't even come to a courtroom how do you know what a courtroom looks like and what goes on
#
in a courtroom and I mean the natural answer to that is that I don't have to be an amoeba to
#
understand an amoeba to study an amoeba you know I mean so discussing ideas values especially today
#
in Indian society on the dinner table is not as easy as it used to be in fact my family if you
#
think my immediate family also it's highly polarized polarized so two people in my family
#
are extremely pro-bjp two people are pro-congress one is willing to be is a swing voter willing to
#
be swayed anyway so but these are not easy conversations these days I don't know if it
#
was always that way because it seems to me that at least in my consciousness this is the first time
#
that you know since the time I start was capable enough of understanding the world the first time
#
an authoritarian government a majoritarian government has come to power for so long
#
otherwise I always I remember my childhood as being the coalition years and I've never had to
#
have these debates with so much aggression I've never seen these debates with so much aggression
#
even amongst my family members and I wonder if it is a function of today's time or was it always
#
this way and you just happened to be part of it much more now I think it's absolutely a function
#
of today's time in the sense that back in the day there was no reason to be aggressively tribal
#
I think social media has you know increased the incentives of being performative you know the
#
facebook like the twitter retweet and therefore and and the other thing that happens interestingly
#
is that you know thank god there was no social media when I was 20 because I had the weirdest
#
views and I was also reading marks by the way and and and the thing is today what happens is a young
#
person goes online one they are comparing their real lives with the projected lives of others but
#
that's a whole different problem Jonathan Haidt has written so much about it in the construct of
#
instagram but what happens in terms of political rhetoric is that it is so tempting for you to
#
join one of the tribes online whether on the left or the right and then you want to raise
#
your status in that tribe so you're signaling signaling you're attacking people on the other
#
side on your own side for not being pure enough never engaging with nuance because you'll
#
immediately be cancelled by everyone as a centrist and you get into that that sort of loop and the
#
worst part is that if you're 19 and you've gone online and you join one of these tribes and you
#
express your opinion and you express some random thing that you just thought a weak opinion weekly
#
held but you get 50 retweets and then somebody attacks you and then you double down because
#
you want more of that validation and then that casually expressed opinion which could have been
#
one of a hundred contradictory casually expressed opinion becomes who you are because you've doubled
#
down and you've owned it and i think that's a great tragedy and you know we don't know the
#
counterfactuals but i think that people get hardened in these sort of positions i mean there
#
is therefore a part dependence to the virtue signaling and that to me is horrendous i can't
#
fathom it like if if i was forced to become the same person i was at 20 you know how do you grow
#
how do you sort of kind of get out of that so i i think that what has happened is that there is
#
just more expressive tribalism these days and i think that's going to also obviously come in the
#
way of families because just thinking aloud again back in the day you're restricted to communities
#
or circumstance and the closest tightest community is a family today you've got communities of choice
#
all over the place so maybe that you know places a discount value on the value of you know what's
#
happening at the dinner table so on the tribalism point maybe we should tell pranay that we found a
#
new term you know a public position irrevocably held you just cannot go back on it for a strong
#
week it's irrevocable yeah yeah the screenshots will circulate for like 30 years you know so i
#
still get people screenshotting things i wrote like 10 15 years ago and it's just like uh you
#
know uh anyway so moving on i'm going to come back to the engine room question because this is
#
something i'm deeply fascinated with about how do the governments actually work how does a process
#
of change happen like can you uh if you don't mind taking a specific example can you pick a
#
specific example and talk about you know its evolution through the corridors of power and
#
what were the kind of conversations that were had what were the kind of processes what was a typical
#
day of your life in the ministry of finance yeah so uh you know uh the way governments actually
#
work is through as max weber described in 19th century which is through files i think even
#
dr kp krishnan might have told you that everything in government moves through file notings so uh the
#
way this at least worked in my time is that the home of ideas typically is not a bureaucrat's
#
office the home of ideas is a is a paper written somewhere or a practice adopted in other
#
jurisdictions or a reaction to a scam and then you know the bureaucrat has to go and look for
#
a solution and uh once there is a set of solutions that are presented to him or her it normally
#
starts with in my time the person who was responsible it's mostly the joint secretary
#
so there are three levels there's the joint i mean at the senior decision making level there's a
#
joint secretary there's the additional secretary and there's the secretary the secretary is the
#
topmost uh officer in the pyramid who reports to the minister right uh but the minister also
#
i've seen the minister interact with the joint secretary and the additional secretary as well
#
uh ideas originate at the joint secretary level where he picks up where basically there's a felt
#
need now that might have come from either the secretary or the minister how did the
#
minister or the secretary get to know it he either read about a problem being highlighted in a
#
newspaper so it is very normal for a secretary level person and the minister to read a newspaper
#
or ped columns and figure out what is it that is going wrong in the portfolio that i'm in charge
#
of and just send that newspaper article to the secretary that what what what is to be done the
#
secretary in turn sends it to you know downward pushes it down the chain saying what is to be
#
done and the joint secretary is a person who's much more in touch with the industry etc and he
#
gets up he either calls up people who he knows and says what should we do about this so for example
#
let's take okay it's been a while um yeah honestly i'm not able to remember one
#
a single tangible proposal that i could see through the entire life cycle
#
but uh it's uh the proposal is then typed up by one of the officers who is below in rank to the
#
joint secretary the joint secretary signs the file now if that proposal requires coordination
#
with other departments it goes to them um and then it is elevated up every single officer who
#
to whom the proposal goes at the joint secretary level has to give his comments and sign it he may
#
choose not to sign it and keep actually the best you know if he doesn't agree he can keep sitting
#
on it and nothing moves forward and um uh and then the file goes to the additional secretary
#
additional secretary in turn takes it to the secretary secretary in turn takes it to the
#
minister so it's really just i know this sounds really boring but it is what it is and which is
#
that all of government moves through files and file notings so this sounds incredibly uh scary
#
but it conforms to that old stereotype also because it seems here that there are multiple
#
points of failure that anywhere down the line one random guy can not sign the file and then
#
it's kind of just uh stuck there and that to make anything happen you actually need a perfect storm
#
now on the one hand this is great because uh you know it it just uh slowness of the process builds
#
in certain checks and balances time is going to pass so uh that's a good thing but on the other
#
hand whether it's political will like what modi did with demonetization for example you know the
#
entire process is bypassed and you just do whatever the hell you want so so how was it
#
like you know from the first perspective i can just say that oh my god it's very dispiriting
#
because nothing will ever get done here and the second perspective is that is the arbitrary whim
#
of the guy in charge and you know how do you manipulate that and you know as a policy person
#
would you not just think about the the value of the ideas that you're presenting but would you
#
also have to strategize on how to present it depending on the person you're presenting it to
#
yeah so i think um depending on the timing often the push comes from the minister
#
okay and that in turn is used to push everybody else to give their views and generally the
#
minister will not say sign the file he'll just tell you give me your views and uh so i don't
#
think anybody can be indefinitely sitting on things which require more expedited work but yes
#
on reforms that are non-urgent yes this can very well happen if it is um non-urgent
#
see the one way to think about this and this is i saw this numeral on numerous occasions during
#
my time at the north block is that the joint secretary will generally say let's put this out
#
for public consultation and see what people say so to that extent i would say my experience
#
wasn't as uh confirming to the stereotype story that we are told in a yes minister etc
#
i personally value the slowness of this process because i feel that at every level there is a
#
check now you may not agree with the person's views but if he writes down his views at least
#
the next officer can say that i do not agree with this and that brings the people to the table
#
to discuss this out uh i think often what might happen is that it's just the reform
#
the timing of it is lost or for whatever reason it's not an urgent reform and that's where the
#
files may get lost but otherwise uh largely in my opinion this process works okay yeah the slowness
#
of it is particularly important otherwise you may well have an overnight decision such as
#
demonetization and 21-day lockdown and things like that so to that extent the process is useful
#
i'm just thinking of the of one example if i can give you but i can't think of any right now
#
one of the ways i have of identifying tribalism is if you have identified yourself as either
#
pro-modi or anti-modi if you're anti-modi the question i'll ask you is tell me one good thing
#
you did and if you're pro-modi i'll say okay what do you disapprove of among the things he's done
#
and you know the easy answer for an anti-modi person like me when you when it comes to good
#
things will be infection targeting or the insolvency and bankruptcy code of which you are
#
someone who you know worked closely with that you and susan and the entire team you know it was your
#
baby and so just as you know for me that's in a sense a perfect example of a great reform so take
#
me through that sort of that process what was it like from you know at what stage did you enter
#
the picture who were the different parties involved in that how did that kind of play
#
itself out so i was in working with an ipfp which in turn was working with the ministry of finance
#
in 2014-15 and therefore i happened to be in the early years of this government where reforms was
#
a priority in itself reforms were not in response to any specific crisis they were already sitting
#
in the pipeline and they just had to be pushed through right so i think the insolvency and
#
bankruptcy code is often described by many people as a reaction to the npa crisis which i think is
#
a very wrong positioning of because of the way the law is even inflation targeting right it is
#
not a new idea it was sitting in the pipeline for quite some time and it was already approved
#
by the previous government if i'm not mistaken it was it was and it was just about the file being
#
signed by the minister so it all comes down to whether the minister thinks this is important
#
enough to sign it and he did think it was important arun jetli was the finance minister when i was
#
there and i think from 2016 onwards is when the pace slowed down because actually in the first
#
three years you had land reform you had monetary reform you had bankruptcy reform but somehow from
#
2016 the pace slowed down i don't know what went wrong so without there's a there's a story i like
#
to tell so i'll quickly tell that for those of my listeners who may not have heard it is and it's
#
something i learned from doing episodes and what happened with inflation targeting was that the
#
whole thing was there at chidambaram's desk and then mr chidambaram's stand to kp krishnan was
#
that no listen as a courtesy there are elections let's leave it for the next government so krishnan
#
takes it to jetli and he gives it one evening to jetli the next morning jetli says let's go ahead
#
and krishnan is like whoa whoa hold on a bit you know i totally agree with it i want to do it
#
but this is huge this basically redefines the rbi completely so you want to take some time to read
#
it and jetli is offended by this as if you know he hasn't read it and he says that listen you know
#
if our country's finest legal and financial minds have agreed to this i have nothing to add any men
#
chidambaram and manmohan and i find this a very moving story and a similar thing happened with
#
the nps a new pension scheme the vajpayee government handing it over to the next government
#
and the exact same thing happened and you are right that 2016 it stops and it goes to hell
#
and 2015 in fact at some point and it kind of goes to hell for political reasons and to me that's a
#
great tragedy because all through all of these years of shrill politics and blah blah blah you
#
had politicians talking to each other parties talking to each other understanding that there
#
was a greater job they were doing which was the good of the country and that's you know kind of
#
completely eroded so you mentioned that so i thought i should throw that story in there
#
because you know we had times like that and we had leaders like that yeah so i think the sense
#
of continuity completely stopped maybe at some point in mid 2016 and maybe that's got to do with
#
the continuity even within bjp who knows right so that was also the time when i think a lot of
#
senior leaders of a bjp expired and maybe that just kind of gave the sense that no need for
#
more continuity and we can do exactly what we want but i don't know to be honest i mean
#
everything that we say here is speculation about what really happened post 2015 post 2016
#
but it seems to me that once these laws were enacted you've got to have a bureaucracy that
#
will actually implement them right so maybe one way to think about this is to take heart from the
#
fact that they've not been rolled back i mean it's a very low standard yeah but that's kind of
#
inertia right once it happens who's going to make the effort and so tell me about the bankruptcy
#
what was it like whenever i've in the past heard you or susan talking about it it is with a passion
#
that people generally don't have for policy you know musicians have it for the music they create
#
and writers have it that i worked on this novel for seven years but you know so i got involved
#
in the much later stages of its implementation okay and that was really my beat because you
#
get to work on setting up courts and regulators to to enforce and implement the law and you know
#
what are the problems with the current set of regulators and courts and therefore you want to
#
avoid those and you have the chance to design institutions that avoid those but it seemed to
#
me that once the law was enacted and the first six eight nine months had gone and regulator was
#
set up after the first 12 cases that went to the nclt which rbi sent which were the large npas and
#
i think ajay and susan have written a lot about this about how they ended up overloading the
#
system before it could even find its feet at some point the enthusiasm for it was lost and the
#
biggest evidence of this was not notifying half the law so the first half of the law deals with
#
insolvency of corporations okay and the second half of the law deals with bankruptcy of individuals
#
now both are equally important but somehow they never found the political will to notify
#
the second part of the law so what so what we have on our statute book
#
only half of it really isn't notified today and is being applied so
#
um but the work that i was involved in involved designing a regulator so exactly everything that
#
we discussed in the first half of this episode which is that how do you do you really even need
#
an independent regulator for bankruptcy it seems to me no there is no logic what is the conflict
#
of interest in the government itself having a department regulating bankruptcy there is no
#
conflict of interest except that okay public sector banks so maybe they'll be more creditor
#
friendly but the law is anyway creditor friendly so you know so but now like i said regulators are
#
a given and they're inevitable and so you just take take it as a given maybe there's some benefit
#
to continuity of people who are within the regulator and things like that um so i was
#
involved in designing the regulator and there we wanted to make sure that to the extent possible
#
we come we abide by the separation of powers principle now first of all what does this
#
bankruptcy regulator do okay it regulates it makes rules and regulations for how once
#
a company goes into insolvency what do the shareholders have to do what do the creditors
#
have to do what does the management have to do also the law creates a class of insolvency
#
professionals who are regulated people and who are supposed to take over once the company goes
#
into insolvency all of this was very similar to what a sebi does and what an irda does and
#
so the idea was now that we make a reg when we design a regulator we don't follow that inertia
#
and cookie cutter models of existing regulators and we provide for a separate quasi-judicial
#
function which is independent of the regulation making function which is independent of the
#
licensing function so all those things we try to build into the design of the regulator and
#
so if you think about it ibbi which is the bankruptcy regulator is the only regulator that
#
has actually issued regulations on how it will put all its regulations through a cost and benefit
#
analysis how it will actually do the public consultation no other regulator in india has
#
done this and at the cost of sounding immodest i've got to say that you know it is a whole lot
#
of work that basically has fed into this philosophy of how to build a regulator and the next regulator
#
that they build using ibbi as a cookie cutter hopefully will continue to have these features
#
that was the early work the next kind of work we did on the insolvency and bankruptcy code is
#
figuring out how bankruptcy cases insolvency cases go through the court process we all know
#
that courts are a problem so our puzzle was but what in the data tells us that this is a problem
#
where do we fix what is the bottleneck why are cases taking so long so we traced the life cycle
#
of each and every insolvency case that went through the tribunal in the first year and we
#
created an open access data set of how much time did it take in different stages and for me that
#
was i mean if there is one piece of work that i absolutely think if i could give its copyright
#
in my will to somebody i would actually give it give that piece of work copyright to my most
#
precious child you know because i feel like because that got us thinking on thinking about
#
cases court cases as life cycles not as courts as organizations that have a judicial vacancy
#
problem or you know an infrastructure problem or a finance problem no you've got to start from the
#
basic which is that if you claim that tribunals and courts are problems you are you able to give
#
us enough data about what in the life cycle of the case is the problem so that so you know it's
#
always one kind of work leads to another your research never ends that if i have to do something
#
or bankruptcy it will end in bankruptcy it there are actually it creates segues for the next area
#
of work and that took me to courts and thinking about course from a data perspective and things
#
like that so yeah bankruptcy work although i was involved in the last stages actually it gave me the
#
food you know the food for thought for all the future work that we ended up doing on courts
#
you are one of the giants on whom future generations will stand when they make their
#
when they design their future regulatory bodies we'll talk about courts after the break but a
#
larger question before that that earlier you spoke about how you'll have whatsapp uncles who will
#
ask you why should terrace gardens not be regulated and similarly those same whatsapp uncles will
#
tell you that you know actually we have good laws but we enforce them badly laws are fine
#
so my question to you is that how much of the enforcement actually comes from the drafting of
#
the laws itself the language that is used and the detail that is gone into how much of the
#
enforcement pressure can be taken on that itself so state capacity is not such a problem number
#
one and number two that is it important while drafting a law to keep in mind what likely
#
enforcement is going to be given state capacity and then draft it accordingly so you don't aim
#
for a best solution which will work in a utopian framework but you aim for an optimal solution for
#
that particular sort of situation okay so what you're really asking me is that to what extent
#
can we explain the quality of enforcement by the law yeah okay okay so there are two kinds of laws
#
in india you can easily classify laws into those which give excessive discretion to the state to
#
choose when to enforce versus not and then there is a second law which basically has no means of
#
enforcing itself okay so if you take something like the prevention of money laundering act or
#
the unlawful activities prevention act or even the svaltada and all those laws afspa for example
#
just because it is written that it is a crime to do xyz it doesn't mean the executive has the
#
obligation to enforce that the executive chooses which cases to take and which cases not to take
#
and therein lies the rub which is that if the law gives discretion to the executive to pick and
#
choose what it wants to enforce versus not i mean you are really setting yourself up for disaster
#
you're setting yourself up for the law being used exactly for the purposes which it is not
#
meant to be used okay on the other hand if you have a law which sets out the principles
#
on which it is very clear what is a crime what is not what considerations should weigh with
#
the executive when it chooses to enforce something versus not what considerations should weigh
#
with the executive on the quantum of fine that it enforces versus not i think that is
#
that would be an ideal law but the only way to kind of take account of state capacity is by
#
building in these principles into the law itself so that the executive doesn't have to
#
apply its mind and explain why it chose to enforce against some kinds of seditious
#
uh speech but not another kind of seditious speech and things like that so the classic example that
#
is normally given is the criminalizing check bouncing now if you think of a check a check
#
is really a contract and if a check i write to you bounces uh it means i've violated my contract
#
to you in no sane view of the world can this be a criminal offense it's a contractual obligation
#
that i have breached against you it has no public damage it causes no damage to the public
#
and therefore when you criminalize check bouncing the question is do you have the prosecution
#
capacity to take these cases through no you don't everybody knows that but the state is wise enough
#
to know that our process is so much of a punishment that the threat of uh of an fir for your check
#
for bounce check may actually help solve these disputes under the threat of the law right
#
so i would say this is a very realist view of things which is that people often negotiate
#
things under the threat of the law the law is not being used to solve the problem of bouncing of
#
checks it is being used to help negotiate and allow one party to actually just force a settlement
#
out of the other party and so i feel on your question of is there a relationship between
#
enforcement and the quality of the law i think definitely there is the more discretion and the
#
law gives the harsher the enforcement is actually it endangers the weakest capacity who is in
#
weakest parties who are in no position to defend themselves against the against the state and
#
against the stronger party that the law is going to be used against you almost invariably know that
#
which is why stand-up comedians crack jokes and remain in jail for a much longer time than you
#
know i don't know tv anchors who say much more offensive things and continue to hold you know
#
even if they are arrested they're released the next day so you know who the law is going to be
#
used against the way to think about this is increasingly we must move to a situation where
#
less and lesser things are criminalized that's the that's i think the easiest way to address
#
the question of state capacity versus what should be written in the law i mean the lesser and lesser
#
you criminalize things the lesser and lesser scope for its abuse and you figure out a way to
#
make people dissent incentivize people from doing the wrong things without really criminalizing it
#
you don't have the capacity to enforce it even even if you're doing it in good faith you know
#
that after you there will be somebody who will use it for precisely the things that you are not
#
that this law is not meant to address so we may not have state capacity but we have coffee capacity
#
and we'll take a quick break and perhaps have some more coffee
#
long before i was a podcaster i was a writer in fact chances are that many of you first heard
#
of me because of my blog india uncut which was active between 2003 and 2009 and became
#
somewhat popular at the time i love the freedom the form gave me and i feel i was shaped by it
#
in many ways i exercise my writing muscle every day and was forced to think about many different
#
things because i wrote about many different things well that phase in my life ended for various
#
reasons and now it is time to revive it only now i'm doing it through a newsletter i have started
#
the india uncut newsletter at india uncut dot substrack dot com where i will write regularly
#
about whatever catches my fancy i'll write about some of the themes i cover in this podcast
#
and about much else so please do head on over to india uncut dot substrack dot com and subscribe
#
it is free once you sign up each new installment that i write will land up in your email inbox you
#
don't need to go anywhere so subscribe now for free the india uncut newsletter at india uncut dot
#
substrack dot com thank you welcome back to the scene and the unseen i'm still here with bhargavi
#
you cannot regulate the duration of my podcast it will be as long as i feel like you know the scene
#
and the unseen and terrace gardens must forever go unregulated and by the way when whatsapp uncles
#
argue for terrace gardens being regulated what is your argument against it because i guess that
#
that could be a great general purpose argument against all nonsense regulation so the thing is
#
that you know to help to see why are they saying terrace gardens should be regulated because they
#
are they are really irritated by a certain kind of problem that they have been facing it's their
#
lived reality so to convince them that regulation is not the answer to terrace gardens is very hard
#
you have to start from the framework of why the state should regulate versus not and this is not
#
a market failure and that if enough people actually believe that the value of a badly kept terrace
#
garden is you know is just it's it's better to spend on a well-kept terrace garden that i can't
#
believe i'm doing this it's better to spend on a well-kept terrace gardens than a whole bunch
#
of buildings having badly kept terrace gardens which actually reduces the the aesthetic beauty
#
of your building then you'll have well-kept terrace gardens or that you allow more gardeners to come
#
into your societies and you know let them tend to the garden and you don't only have empaneled
#
gardeners and things like that i mean it's just you just you don't have an answer to this to a
#
person who believes that terrace garden should be regulated it's very hard for me to convince him
#
that the state that state regulation is not the best answer to every problem that you face from
#
8 a.m in the morning to 8 p.m in the evening it's it's just hard you don't have the argument
#
because you've got to start from scratch also it depends on the person a lot of the times people
#
are open to listening to a counter view many a times people are not and you i mean i just
#
played by the i see how fatigued i am i see how open the opposite person is to listening to what
#
you have to say i love the phrase empaneled gardener and i think you know terrace gardens
#
could easily fit into like a jg ballard dystopian novel he had a novel about a person stuck on a
#
traffic island with you know just traffic going all around and then there for days and they're
#
living there and dystopian apartment blocks featured in his work swelling jg ballard from
#
the show notes as well read fiction that is where all of the real world is kind of contained let's
#
talk about the law i mean i've sort of had episodes on it from different perspectives but way back in
#
the hoary past and like one at one level i like to say and i think you'd agree that it's true that
#
in india you don't really have a rule of law maybe some privileged elites like us can think of
#
something like the rule of law if something goes wrong with us but for 95 percent of the people if
#
not more there really is no reliable rule of law and you're just surviving by social conventions
#
and mores as far as they take you and maybe just inertia and that's a great tragedy and and and
#
part of the the the reason for the apathy most people feel towards the law is the terrible state
#
that it's in that you have legends of cases dragging i think in an earlier episode someone
#
had told me about a case that has dragged on since the year 1300 i don't know how that's possible but
#
there's something in the indian courts to that effect i think alok prasanna kumar perhaps in
#
an episode i did with him six years ago so give me a sense of what i kind of just articulated the
#
the folk version of the problem that there are tens of thousands of cases
#
lakhs of cases which are just piled up prisons are full of under trials who've been there for years
#
and etc etc and then you know the deeper look that you actually you know took at that once you
#
got into it right so you know on whether rule of law exists or not no rule of law can exist unless
#
there's an efficacious remedy to enforce it right it's pointless writing thousands of pages of laws
#
with you know great virtues etc if there's no court to enforce it that is that's really what i
#
meant yeah yeah for most people approaching the court is like a last resort or arguably
#
it should be because there should be better ways where people negotiate amongst themselves
#
and find cozian solutions towards their problems as opposed to using the state coercion and then
#
going to the court to enforce that state coercion i think where it becomes really important there
#
are two ways of thinking about it it's where you're involved in a dispute with the state
#
okay so the state is i mean it has unlimited resources to keep litigating and therefore
#
it's cheaper for the state to use the courts on the other hand when it's a commercial dispute
#
between two parties the reason the court shouldn't be the last resort is because invariably one party
#
will be in a stronger position compared to the other and what you want to try and ensure is that
#
both parties have a fair shot at getting an equitable solution okay now the problem with
#
courts is that most of the times we think of courts as some sort of sovereign bodies that are
#
supposed to do this divine duty of dispensing justice the courts are as much of service
#
providers as a social security administrator today if i if my adhar authentication fails i blame ui
#
dai for not making sure that authentication frameworks are working across its whole line
#
of service providers on the other hand when i go to a court think of the architectural setup of a
#
court there is a judge who's sitting at a pedestal everybody else is sitting below
#
only certain regulated intermediaries namely lawyers have unlimited access to the courts
#
a lot of what is being said is not cannot be heard through the courtroom there is no place
#
for everybody but that is just the architectural setup of an organization that actually tells you
#
a lot about the organization itself right just a few minutes ago we spoke about how just the sheer
#
idea of making things simple for the litigant by putting a camera in a court was so vehemently
#
objected to so that tells us something about what we perceive what the average person perceives as
#
the role of the court which is that they see the court as some sort of a sovereign body that is
#
supposed to dispense justice if our case takes really really long we normalize it to a point
#
where we think that it's only normal that the court should take so long whereas if there were
#
as many authentication failures for adhar we would probably be protesting on the streets right
#
but we don't do that for courts because we don't see courts as a service organization
#
and that is why all the discourse on the court reform focuses on things like judicial vacancy
#
judgment appointment procedures etc i think judgment appointment of judges is important
#
it is really important but it affects maybe it affects only the higher judiciary you're only
#
talking about the judges of the high courts and the supreme court you're really talking about maybe
#
one percent of the entire judicial workforce that is there in the country the discourse needs to
#
shift therefore from you know supply side reforms to demand side reforms which is that what does the
#
average litigant want from a court okay and unless you are able to figure that out we all will be
#
running in circles we want to increase court infrastructure maybe the average litigant
#
is perfectly comfortable with just you know video conferencing hearings and maybe we don't even need
#
to have so much physical infrastructure for the court maybe the average litigant is actually
#
more comfortable with written submissions being made and no oral arguments at all
#
as compared to you know this traditional notion of first you know i'll get a lawyer and then the
#
lawyer will argue maybe the average litigant is very comfortable talking to the judge as compared
#
to a lawyer who he often suspects of you know being bought over and cheating him and so on and
#
so forth so i think if we shift the vantage point of courts from you know the state from a state
#
supported body to what the litigant wants i think we can make much more progress in thinking about
#
court reforms and that brings me to the point of okay so what do litigants really want right so in
#
there are many countries in which there are regular surveys of litigants done on what do
#
they really want from courts in some countries in fact judges are elected not even appointed
#
i wouldn't really go that far as a reform because you're supposed to be a counter-majoritarian body
#
uh but in india we don't even have those data collection procedures to figure out what does
#
the average litigant want maybe the average litigant actually doesn't mind a slow system
#
because guess what he's using the system to actually negotiate a better outcome with his
#
counterparty uh we don't know these answers maybe the average litigant just wants predictability
#
over everything else you know okay fine i can have my case disposal after five years but tell me how
#
is the process going to be organized at what frequency will i have hearings will my hearing
#
take place on the day on which it is scheduled or will it be adjourned and because the matter will
#
just not reach on that day how many hearings on an average should a case of my type take we don't
#
have that basic information and i think starting from there is one way of looking at court reforms
#
and access to justice as opposed to starting from knowing believing that this is the problem
#
do you know believing that judicial vacancy is the problem have you even tried an experiment
#
where you increase the capacity of a court by appointing more judges and figuring out if it
#
actually increased the disposal rate i don't think we've done such experiments at all if you
#
haven't done those experiments how do you know judicial vacancy is the problem you you may say
#
that this is my lived reality this is the experience that i had you've got to be you've
#
got to meet higher evidentiary standards if you want public funds to be assigned for appointment
#
of more judges when actually the people are not even satisfied with the current state of the system
#
right so what i think we should be working on is getting much more information about case life
#
cycle data that if you have a dispute with your landlord today or with your employer today and
#
you file a case what are your expectations within how much time would you get your first hearing
#
is that expectation met within how much time will you get a disposal is that expectation met how do
#
you expect to be treated by the court staff how do you expect to be treated by the judge all of
#
these expectations actually will provide the feedback loops that i think currently courts
#
are not adequately getting simply because there's it's not like they don't want to hear it i just
#
think there's just no systematic way of collecting this information that exists today so from the
#
work that you've done you know what are the lessons that you've learned or the insights
#
that you've gained and what hypothesis would you arrive at from there in terms of the reforms
#
needed like you're right that you know traditionally people will say oh you know we need more judges and
#
etc etc but you know what have you found and what are the kind of reforms that you think
#
could be a move in the right direction right so what we've been doing in the last three
#
years at xkdr forum in bombay is we've been actually talking to we've said that look this
#
is the system as it exists okay within this system how do litigants reorient their expectations so
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what we did is we did a survey of litigants where we said that if you had a credit contract that is
#
defaulted on so some you know a lender has lent money and the borrower has defaulted on it
#
what are your expectations of the judiciary because you know that it will take a long time
#
to resolve this dispute and actually it shouldn't be so counter-intuitive most people said that
#
we know it will take a long time but we just want predictability i just want to be able to organize
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my life such that it doesn't get disrupted because of this case so for example what is the likelihood
#
of getting a first hearing within the first three months of me filing a case okay what is the
#
likelihood that the judge will substantively hear in the mat on merits as opposed to saying
#
oh now file the next batch of pleadings i'll give notice to the other side what is the likelihood
#
of getting a disposal within the first one year within the second year and you know all of this
#
is just so insightful today if you order a i don't know if you any service provider you think of
#
okay right from courier services to pizza delivery you can track minute by minute where
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the parcel is where the service which stage of delivery is a service in we are just simply not
#
able to do that for courts and we are not able to give that predictability to litigants i think just
#
committing to give that predictability in itself will reorient courts towards meeting those goals
#
so for example what we often find is that courts often schedule 100 matters in a day to be heard
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when you know that your average capacity to hear them to hear matters is maybe 40 a day
#
why would you schedule 100 matters set up expectations for the litigants and then you
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know hear only about 40 and 60 are told that actually your case was adjourned to another date
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does it even come up on that other date it is i mean we just need to as how do you say
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as oppressive as this sounds we just need to apply the whole management information
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framework that has been developed for the assembly line to a court process the assembly line it's
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very clear this is the process to be done at this stage it must take not more than one and a half
#
minutes then go to the next stage this person does exactly that so you've got to apply that
#
level of discipline that apply that information system to a court to a case that is going through
#
the you know the motions of a court if i'm hearing a schedule today how many hearings
#
so the question that i would ask for example to meet a litigants expectations is that if a
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hearing is scheduled today what is the probability that it will actually get heard today how many
#
times are you not meeting that probability and if you are not i would actually go on and diagnose
#
that problem like break it down into part by part and diagnose which part is not functioning
#
as per expectation that's the way to do it i mean supply side has been tried too often
#
and maybe we can keep trying it but i don't think it will move the needle too much
#
and i would imagine that the unpredictability makes you know imposes a massive economic cost
#
because you and i might choose not to transact in a particular way because if one of us defaults
#
then we simply don't know what's going to come out of it maybe you factor that cost in the
#
probability of a default into the arrangements that you made and that has like an an economic
#
cost which is unseen my question here is like i love your framing of what the courts do as
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essentially a service delivery you know they are delivering justice that's a service that you
#
kind of expect and when i think of swiggy and zomato yes you're right i can you know track them
#
minute by minute on my app and you know insta mart and zepto will you know fall over each other
#
and take helicopters to get it here in 12 minutes and they actually do but there the issue is that
#
the incentives are great i don't need to think about what is our organization designed or any
#
of that shit that's their problem their incentives are great it's a market incentive you know they
#
need to make a profit and that's driving them to give me the best possible service you want
#
justice is not something that you can really privatize in that manner so the question that
#
then comes up is that how do you fix the incentives you know that is really the
#
worry i'm sure the supply side capacity can take care of itself if you just get the incentives
#
right but you know like how do you fix that what's the solution there so you can privatize justice
#
in the way that arbitration for example private arbitrations are entirely privatizing justice
#
there is no court involved you and i agree ahead of time that if you and i have a dispute
#
x person will be appointed as an arbitrator and will resolve that dispute and we agree to be
#
comply with that and if either of us defaults in complying with that person's order the other
#
person can go to court and get that order enforced of the arbitrator okay but that hasn't worked
#
because guess what courts actually don't care so much about competition like you rightly said
#
the way to organize the incentive system for judges in my opinion is and there are a lot
#
of papers written on this on how judges actually care about peer feedback they they do care about
#
what the public thinks of them although they are not elected but they do care about things like
#
you know if a litigant using my courtroom has given me a bad review it will affect me okay
#
often it comes out in the form of contempt petitions etc which is you know in my opinion
#
it's it's trivial it's it it shouldn't be used but which is why when you think of court reform
#
from a demand side from the litigants perspective and you start setting up you start setting up
#
yourself for feedback loops and information systems at some point that feedback loop will
#
go back to the judge in question and it will start reorienting his incentives towards serving
#
the beneficiary of this institution right so today we even think of judge level performance
#
parameters being published is sacrilege okay it is no no if we judge level performance
#
parameters are published in the public domain currently their performance reports go as
#
our confidential matters which go up to the senior judge and the senior judge reviews the
#
performance of the junior judge but think of it as being published one argument against that is
#
that actually this is the this can be used to undermine the independence of the judiciary
#
okay but equally you could argue that actually it gives feedback to the judge on things like
#
whether he's meeting the expectations of litigants who use his courtroom and that
#
reorients his incentives to do the right thing so you're right that there is no way to
#
introduce competition to reorient incentives but you can set up feedback loops in other ways
#
to motivate judges to meet expectations of litigants currently I mean I can't I mean
#
maybe it's just a thing with hospitals and police stations and judiciary which is that
#
everybody comes our home upset because those those are the places where you go as
#
when you are in a spot even if you account for that bias of the kind of places that they are
#
I don't see any litigant being satisfied with their experience of the courtroom at all
#
so Danny Kahneman and his book noise and various cognitive psychologists speak of similar things
#
point to how we imagine a judicial system and he's of course speaking in the context of the
#
U.S. we imagine a judicial system as being something that works to you know the processes
#
are great and everything and it works so well and what he points out is that incredibly trivial
#
things can affect judgments of judges that you know whether you lost at golf or won on golf on
#
a sunday can affect the decision you gave on a monday to the effect of you could either give
#
two years or seven years if those are the men and the max you know if you like if you and I
#
meet at a cafe for the first time and I I'm more likely to feel warm towards you if I sip a hot
#
beverage as opposed to a cold one you know ridiculous things like that humans are flawed
#
in deep ways and it we don't understand our own biases and there are so many circumstantial factors
#
that come into play and I just wonder that number one if you rationalize the laws that exist like
#
what is criminal and what is not at one level and two if you like how much of it is automatable
#
that once ai gets into play not to make the final decisions obviously humans do that but once ai
#
gets into play and you're having parameters fed in and out and etc etc you know how efficient can a
#
legal system of the future therefore look if we use all of that because what appears to me to be
#
the case is that we have a legal system that is an artifact of the past it is perhaps no longer
#
relevant in this world there are better ways of doing things but we've normalized specific ways
#
of doing things that we need lawyers and the lawyer will go to court and in the court there
#
will be a judge on a pedestal so how could the system look in the future and a question I was
#
going to ask separately but it actually kind of I think makes sense to tie it in with this is a
#
question I've asked in another context to some of my guests which is that if you reboot civilization
#
what would the you know so you have humans but then you reboot civilization
#
how could the legal system look like today and and the purpose of my asking that question is
#
I imagine some things would be exactly the same and therefore we can conclude that those things
#
are things that are inevitable given human nature and the way societies evolve and other things
#
would be completely missing and we could assume that they are accidents of history maybe good ones
#
maybe bad ones probably bad ones and can be done away with and then we can have a better sense of
#
you know what is essential and what alternatives are because I fear that with the law as with
#
pretty much everything else around us we've just normalized an existing form of doing things we
#
don't even question it at all and maybe we could question it maybe there are other ways of doing
#
things so these kind of two sort of questions about the role that in a new age what greater
#
information processing and automation whether that could kind of help compensate for the human
#
fibers that you have and you know reduce a lot of the friction within the system like if you and I
#
have a contract there are certain terms and conditions and I default on a payment I'm supposed
#
to make to you you know you should be able to automate that kind of decision rather than waste
#
actual you know a human can still give the final judgment but you know so what is what is sort of
#
your sense maybe answering the second question first and just imagine a reboot of civilization
#
how could a legal system look like I mean the whole function of a legal system is to make sure
#
that we can live together without infringing each other's rights and without fighting that
#
you know lives are not nasty short and brutish so what is your yeah so if I do reboot civilization
#
then two things you know which is that you reduce the power of the state the discretion
#
in power is given to the state under the law and that in itself reduces the likelihood of a person
#
who's aggrieved due to excessive discretion being used and going to court and you know having to use
#
the judiciary for getting a fair outcome against the state so if you reboot civilization definitely
#
the first remedy that you suggested which is that you reduce the scope of what can be
#
taken to litigation by actually reducing state intervention that is totally possible when it
#
comes to commercial disputes I have a much more pragmatic view of things which is I believe I
#
am more pragmatic which is that commercial disputes are not about state power commercial
#
disputes are about power asymmetry between two parties one of them has the courage to say look
#
I'm going to default you do what you like okay and partly you can do it because the judicial
#
system is really expensive to go to so there I would say that the state has no role and really
#
it's about it's a bit of a cycle because if the judiciary is quick and efficient then nobody
#
would dare to default the reason you are able to default is because actually you know this will
#
take time and you will get a settlement under the threat of a slow judiciary outside against the
#
weaker party so I don't know how to solve for that except through reforming court processes and that
#
is where AI in law comes in right now having said that the judiciary is not only about efficiency
#
the reason we follow a judge's orders is because we trust the system we believe that the system
#
if we want to live in the society actually we should follow court orders otherwise
#
it's not a good thing for society I mean there is some trust in the law that makes us respect
#
courts despite everything okay so as much as we want to say that courts are slow and inefficient
#
the truth is that today I would rather trust the court to make the right decision than
#
say an individually appointed arbitrator and that is why most of the decisions even go to court now
#
in the legitimacy literature this is something known as cognitive legitimacy which is that
#
over the years we are just so used to having a court system that it's very hard for me
#
or you to displace the role of a judge in the dispute in judging a dispute between ourselves
#
and I don't know to what extent AI can inspire that confidence you're right we can we should be
#
separating judicial decisions in which you know just to keep maintaining that trust we probably
#
cannot be using AI but for every other thing we can probably use AI we can probably assist the
#
judge using AI AI tools can be used to summarize pleadings you know give a much more reasoned
#
help judges write their decisions so I would say that AI tools with a human judge can help
#
increase efficiency but you know all of this is great in the hypothetical world of where we are
#
rebooting civilization but the truth is we are not and we have to live in this system and think of
#
solutions within this system and we have enough inspiration to do that enough examples you know
#
so for example recent it is well known and I think Appanna Chandra's recent book documents it which
#
is that in Indian settings oral arguments have disproportionately affected judge time compared
#
to a lot of developed countries courts where oral arguments are actually not the norm they're the
#
exception so most judges so for example in the US we were dealing with one litigation where
#
to make a case you have to submit your written submissions to make a case for taking the judges
#
time to listen to you you have to submit another submission that why do you think you need an oral
#
hearing what is it that you can't already say in written form that you want my time for and I think
#
those tweaks etc can be made even within without rebooting civilization and there I would say that
#
the harder question is how do you motivate judges it's a question which you ask that how do you
#
motivate judges to make these changes these changes are known they have been discussed ad
#
nauseam to be honest and the hardest question is now not what changes are to be made but
#
how do we get the system to internalize those changes they've not internalized it
#
they don't want to do it there are just way too many entrenched interests who benefits from
#
written submissions alone right the lawyers lose out the judge maybe loses out because you know
#
maybe he's much more comfortable in a situation in the current scheme of things he's actually
#
risen in the current scheme of things so this works for him or her and very few individual judges
#
would actually have the courage to say that you know oral arguments have their place but guess
#
what in my courtroom I'm going to do things in my way and I'm going to only take written submissions
#
and oral submissions I will limit them to 10 minutes nothing more right so even those basic
#
tweaks can increase efficiency but the big problem is the question of how do we design incentives
#
and that is why I come from the litigants feedback loop you set up litigants expectations
#
you publish a court performance benchmark to litigant expectations and you hope that works
#
as the feedback loop so judges want a five-star rating so they are you know I think so I think
#
a judge cares about what his peers think about him but so within the system is still the same
#
thing why should the state resolve itself and you know it's against his best interests in a sense
#
which would apply to most public policy right I mean your typical drive when you're trying
#
to get the state to reform itself is number one you want it to reduce its own power right so
#
and its own discretion and then that becomes a chicken and egg problem yeah no so does the
#
state benefit from slow courts maybe it does I think even individual litigants benefit from
#
slow courts it's not just the state so therefore whatever this why does the state benefit from slow
#
courts the state also is a party to a lot of contracts the state also defaults and
#
therefore the states like likes being in the system often states litigate in revenue matters
#
where if it loses at the lower tribunal I mean you know out of risk aversion the state appeals
#
and basically it doesn't want the right outcome it just wants it to sit there so that you know
#
it's all noted on the file that the relevant person has actually advised filing an appeal and
#
you know so everybody benefits from slow courts okay so at any given point in time
#
one of the parties is going to lose and that party probably benefits from a slow court more
#
than the other and therefore where will this incentive for reform come from there is a lot
#
of work which suggests that far that speedier courts there is a correlation between speedier
#
courts and classic growth parameters such as investment rate of investment you know cost of
#
doing business cost of credit all of that but that also doesn't seem to be moving the needle
#
enough because the benefits are too dispersed right of fast courts where will this come from
#
I think this will come from litigants because litigant a litigant who actually wants a faster
#
court is the sufferer and unless we figure out a way of capturing their expectations and then
#
benchmarking court performance to their expectations this has got to come from civil society that
#
actually all researchers which do this because you're right in any given point in any given
#
litigation one party definitely prefers a slow court so nobody is incentivized enough definitely
#
not the state to do this judges are not incentivized lawyers are not incentivized it's
#
got to come from somebody who is not affected by any of this but is still driven enough
#
for a change and I think that this is where researchers civil society academia comes in they
#
step in and they basically say that we are going to do this job of mapping litigant expectations
#
and then benchmarking court performance to litigant expectations and putting it out in
#
the public domain you risk contempt maybe there's a way to do it in a more in a less controversial
#
way in a better way such that this is not used as a tool to undermine the independence of the judge
#
we've got to think this through but I think the drive will only come from
#
researchers civil society they have a role here I think they are wasting their time on trivial
#
questions like how do we increase judicial vacancy these are easy questions you know
#
don't spend your time on that figure this out instead is it the case that only great political
#
will can solve it at one shot and therefore what you want to tackle is not the supply end of the
#
political marketplace but the demand end of the political marketplace so again the litigants of
#
people and if there is enough outcry from there then you know supply response to demand and then
#
politicians have to kind of wake up and look at it as you know one win which is possible for them
#
out there is that the case or are you just looking at you know litigants expectations public ratings
#
changing the incentives for the judges themselves so the most well-experimented thing is when public
#
ratings improve performance right so we rate every service even government actually the
#
government has no incentive to improve accept elections but the government also provides
#
services these days and you can rate that service and it's all out there for everybody to see
#
there is a class of repeat litigants that will benefit from a speedier judiciary okay and that
#
is creditors creditors who lend out loans as part of their business are perpetually facing
#
defaults and are using the courts for some reason or the other and generally they don't
#
prefer a slow judiciary that so you could actually galvanize collective action amongst
#
repeat litigants who use the judiciary enough and actually benefit from a speedier judiciary
#
a one-time entrepreneur who goes to court just for some you know vendor dispute or something what's
#
he's the benefit is too dispersed for him to actually galvanize and be part of this action
#
but repeat litigants who use the judiciary often and benefit from a speedier judiciary
#
are well placed to actually organize this as some form of a collective action money lenders of the
#
world unite oh yeah that's my slogan that's a good one yeah you've in a sense been juggling a couple
#
of things as well in all these years one is that you have in a sense been a practitioner you've
#
been in the belly of the beach to the ministry of finance and you've been you know drafting policy
#
and working on policy after that as well at igi dr and now at xkdr at the same time you also
#
publish papers and do what could be called academic work academic research you've got
#
papers with aniruddh burman on the responsiveness of regulatory agencies etc etc so how do how do
#
you think about the balancing of these two like one is knowledge production in a sense
#
and the other is actually interfacing with you know arms of the state and
#
you know doing all the messy negotiations and the dialogues that those involve so how does it you
#
know how difficult are these two to kind of manage together do you require different mindsets from
#
them are you ever tempted to say that screw it here i'll just be a full-time researcher and i'll
#
do only this and etc etc so i in in many ways i don't understand this question because i feel
#
that you can't do one without the other so i feel when you're working on policy you've got
#
to have an academic framework for thinking about things right at any given point in time you may
#
be asked a question on should the government regulate this if you haven't had a framework
#
for thinking about when should the state intervene versus when not how are you going to answer that
#
question you're going to answer that question on the fly or you're just going to talk to a few
#
people who are in that field and i don't think it's going to be rigorous enough so for me it's
#
been a beautiful combination where i get the time to do academic work in isolation
#
and i also get the real world experience so that i don't end up being in the ivory tower so to speak
#
i mean at the cost of sounding immodest i do think that everybody who steps into the policy
#
space has to be involved in academic ideas there's no way if you're not used to reading
#
papers if you're not used to thinking about them organizing the information that you know
#
i don't know how how will you do your job at advising a policy maker or drafting a law
#
or implementing a law so i just don't see them as two separate i mean they're a venn diagram which
#
you can only do policy if you are enough in academia and if you understand enough of how
#
negotiations happen it necessarily goes hand in hand no i totally get that i mean academic work
#
is meaningless if you don't engage with the real world and you know you can't understand the real
#
world without the frameworks in place but alas there are too many people whose academic work is
#
completely removed from reality and equally there are too many practitioners who haven't are not
#
rigorous enough or haven't thought things through what is this ecosystem like what is this ecosystem
#
that you're part of like how small is it how big is it how hopeful is it you know is everybody
#
like you i can also have a selection bias and say oh i worked with bhargavi and ajay and i know
#
these people and they are great it's amazing or i can look at other examples and say key man
#
it's just like so messed up they just don't care about what they're doing give me a sense of this
#
ecosystem of ideas is it growing is there common purpose what is it like so i think when i got into
#
the policy space this is early this is mid-2000s right so 2014-15 actually lawyers were not in the
#
space at all it was mostly dominated by the economists a little political scientists and
#
economists have view academia as a full-time career option whereas lawyers don't the the gap
#
between academia pay and legal practitioner pay is way too much for it to make sense to any lawyer
#
so when i got into this space actually it was dominated by the economists but in the last
#
eight ten years or so a lot of people from all sorts of fields have gotten into the policy
#
making space many of them i would say do not value interdisciplinary work enough
#
and therefore can get stuck in silos but worse many of them don't value academia enough
#
so interdisciplinary the importance of interdisciplinary work is easy enough to
#
explain right and people i can see people coming around and saying that yeah it's just
#
i have to solve the coordination cost problem but if i solve that then yes there is value in
#
working across different fields and having a team that actually works across different fields
#
everything is everything i totally believe that there are just so many connections between history
#
and economics and science and law and political science it's it's amazing but the ecosystem has
#
all kinds of people and yeah they don't value academia enough and that is harder to convince
#
people about because the perception is that academics work on esoteric ideas which have
#
no application today it is also true that academics get you know pigeonholed into trivial
#
questions because let's face it maybe all the hard questions have been answered okay maybe
#
maybe all the low-hanging fruit is already plucked and now those ideas are already fructified and the
#
end of history has happened and you know there is settlement we all have consensus on capitalism
#
works better than communism on and elevating people out of poverty and maybe then what is left
#
is essentially these you know sort of pigeonhole kind of questions which take you down rabbit
#
holes but have no application wider application so my sense is that yeah that particular hard
#
question has been answered of capitalism versus communism but otherwise when i think about law
#
when i think about rebooting civilization and what it would look like i think most of the hard
#
questions here haven't been answered and it is easy to take comfort in answering you know trivial
#
questions and talk about you know more judicial appointments for example and blah blah blah and
#
it's easy to take i think too many people are tempted to take comfort in those kinds of trivial
#
questions rather than actually answer you know go to first principles and look at the harder
#
questions because like you pointed out much of what exists today the frameworks and whatever
#
have emerged as a reaction to something key oh inflation is bad for growth let's have independent
#
central banks and so on and so forth right but you know maybe it's time for scholars like yourself
#
to kind of take that step back and look at the harder questions or is that the point you were
#
coming to that the hard no so i'm not explaining why i choose to do academia i'm saying that
#
the reason why academics are often not considered seriously enough is because they choose to pursue
#
questions which in their opinion are optimal for their career yeah so whether it is publishing
#
incentives or it is incentives to sound the coolest in the academic peer group so for example
#
currently a very hotly debated question is what is the role of digital currency in the country
#
now to my mind it's not an important question at all but it is you know digital currency is
#
the hot topic right now and therefore you'll find legal academics by the hoards writing up
#
on digital currencies and sure a state-sponsored digital currency if that is what fuels your
#
curiosity go for it the truth is that their incentives are aligned to write about state
#
sponsored digital currency because guess what it will get them a publication and therefore
#
that way you end up going into rabbit holes which are not really applicable to the real world
#
and that in turn makes even bureaucrats and policymakers and decision makers not take
#
you know academics seriously unless just by chance they happen to sort of interact with
#
them and realize okay that they're working on a question that actually matters to them
#
so to answer your question on the ecosystem the ecosystem is actually very new in india
#
it is not uh it is not normal for so many people to be working on with the government on
#
not implementing their government programs but conceptualizing the government program
#
it's uh and therefore i would say it's been what two decades of this ecosystem actually existing
#
with all kinds of different people and uh we've got to see what model evolves as most sustainable
#
is it the university model where a center within the university is working with the government on
#
ideas and then they're conceptualizing the idea articulating it and then implementing it or is
#
it that independent think tanks which are outside of the university and therefore not bound by
#
university um constraints that will actually work with the government even if you're not working
#
with the government just putting out ideas out there uh that actually will matter in the long
#
run we have to see what model will work i've got to say that in the last six seven years maybe all
#
of this is a bit in limbo because only empaneled experts can actually work with the government so
#
you are anyway restricting the pool of people who will be part of an ecosystem that will be
#
relevant in policy making your knowledge of horticulture and botany don't matter if you're
#
not an empaneled gardener that's the lesson that's the lesson so you know we did an episode of
#
everything is everything called fixing the knowledge society and our thesis in that was
#
that exactly what you were saying except i think we expressed it in harsher terms where i would
#
just say that academics today is completely broken no connection with the real world especially in
#
the humanities some fields more than others no connection with the real world everybody
#
is in silos people are studying wheat production in the 1700s in eastern venezuela nothing to do
#
that you know moves a needle anywhere they follow fashions of the day which can often lead you down
#
wrong directions as has happened in development economics for example where the focus has moved
#
away from growth and uh and the question there was and like the phrase ajay and i used at the
#
title of that episode was knowledge society and i think about that that what does a knowledge
#
society look like like back in the day the place which was uh you know the the center of the
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production of knowledge the dissemination of knowledge the learn the acquiring of knowledge
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was a university and today it is largely broken and irrelevant and people outside the system
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recognize it for what it is and it's a tragedy in two ways and one way is that many fine minds
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once they get into it just follow those incentives and choose to live within that and they'll spend
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their whole lives within that and not move the needle in the real world at all and that's a
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tragic loss of talent but the other also is that there is a lag there is a lag between something
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fundamentally changing and then something coming up to take its place you know if those
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institutions are broken what takes this place what happens how does knowledge then get produced and
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disseminated and acquired and all of that you know it can't just happen in this random gardening kind
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of way that people are doing youtube courses and people are you know whatever what is that
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knowledge society who are those people who are the uh you know the knowledge producers who are
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moving the needle forward and the big questions that really matter so in a broad sense not
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accusing you of being part of any of this but in a broad sense what is what is your um uh you know
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sense of that so one part of me tells me that actually there needn't be one one kind of
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institution that actually prevails over everything okay people can actually organize themselves into
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a society or they can organize themselves as part of think tanks that do relevant work
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people can organize themselves within a commercial firm and do this kind of work as a lot of
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consultancies do and we have to see over the long run what wins out it is not obvious to me that
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only one type of institution will keep winning over time okay uh it depends which institution is
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capable of attracting the most talent that will remain relevant in policy making and that will
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actually win out so there was a time when economics as a profession won out when it came to
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influencing policy uh today i don't know okay even economists are realizing the importance of
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being in interdisciplinary teams precisely for the reasons that we mentioned and uh i mean of
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course right now you have a government-sponsored think tank that is winning out but it need not
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always be the case and i don't think it can be it should be centralized in one type of institution
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there will be many let a thousand type of institutions bloom and we'll see which one
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is most efficient will last out i think we'll have a diversified portfolio of different kinds
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of institutions doing this work some will be uh within universities some will be outside some
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will be within consultancy firms and maybe each one has its place i could argue that a consultancy
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firm is much better place to implement a government program whereas i mean and i include policy work
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to not just include the knowledge society i think implementation is a very very critical part of
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policy and i think consultancy firms are greatly placed to just roll out uh implementation at
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scale uh i don't think universities are great at that universities are much better at doing
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esoteric stuff which at some point you know some person makes a connection between that esoterism
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and reality and it just comes together think tanks are great that i would argue even
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popularizing the idea socializing ideas uh so i don't think there's going to be one type of
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institution it will be many types and they all will have their place and role and i'm not saying
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this as a diplomatic answer although i don't think anybody really minds what i say but
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the point is that we shouldn't try to uh sort of force fit uh our ideas of today
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what is happening today is a function of time it will not be the case throughout and
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maybe different kinds of people will survive in different organizational setups and still do the
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same kind of work who knows couldn't agree more i mean let freedom be the default a thousand
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institutions will bloom as you uh put it correctly so let's move away from this boring talk of state
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and economics and law and all and let's let's kind of move back to yourself what is you know
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what is self-actualization for you like outside of this law and economics and whatever
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you know uh who are you what do you do what are your interests what's going on in your inner life
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oh my god okay uh actually i'm you know i'm quite the nerd that way so i'm pretty much
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reading all day or doing some of the other work i mean i guess what happens when you train to be
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a lawyer is that you spend your early years either in a law firm or in a council practice
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and that's a very exacting profession in terms of time you don't end up developing a hobby of
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sorts at all uh so i honestly have nothing much outside of work i'm sorry that sounds like a
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boring answer but that's the truth it's it's basically i love the team at xkdr it's an
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interdisciplinary team where we work with cool data from courts uh on any given day for example
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yesterday i was thinking about sanjeev sanyal's comment on do court vacations actually increase
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pendency and i said that why can't we use our data to figure out the answer to this question
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for example for cases that are filed during in and around vacations can we compare their first
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hearing date to cases that are not filed in and around vacations right so if both types of cases
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actually get their first hearing within the three months that tells us something about the truth of
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this proposition right so on odd days i'm thinking of those things on even days i'm reading albert
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camus the plague or the stranger or something like that that will help me keep stay keep myself
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sane i've recently got into music and i'm learning to play the keyboard so i hope to be able to
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graduate to the piano by next year so let's see wow when did you start learning about two months
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ago not bad i mean economists learning stuff lawyers learning stuff your friend rajeshwari
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who is recording with me tomorrow in fact the dad episode will release first is learning the
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guitar i think so oh really yeah you could all form a band the xkdr band yeah we'll name it
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something else you come up with a cooler name you you have to come out uh with a cooler name
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so you know before we wind up the show i really have to ask you to share with my listeners what
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i believe is the most radical reform suggestion that i have ever heard and i sort of keep quoting
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you to uh uh people on this and it's quite delightful so tell me you want to get a really
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difficult reform done uh how do you do it how do you push it through okay so this takes me back
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to that dinner conversation and uh we were talking about uh how do we get this was before the
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disinvestment of air india and the question was that how do we get the government to move on
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something as hard a decision as disinvestment of air india which officer will be ready to sign such
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a file okay and uh it just seemed logical to me that an officer who's on a terminal illness will
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actually be more than happy to sign such a file because the consequences or to him of are actually
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pretty limited and i mean what better way to give your life end your life than actually by
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leaving the legacy of having signed the file of disinvestment from air india right so i just put
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it forth as a suggestion uh which is that you know we find a card of officers who are on a terminal
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illness and make them sign the files with all the difficult decisions because it seemed like a
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problem that everybody was discussing ad nauseam that who will sign which officer will sign under
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the threat of the three c's uh the the central vigilance commission and the cag and the cbi
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and there are so many such hard reforms that have to be done and which are stuck simply because we
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can't find officers who'll sign those files just get the guys with the terminal illness you know
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there's a novel in this because now it opens up further options you can get into nuances
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that one do you find the guys with terminal illness b do you induce terminal illness in
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someone so they'll do it and c do you make someone falsely believe that they have terminal
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illness when they don't so at the end of the day the three c's come after you and you're like oh
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my god i have another 30 years to live so but anything for the cause right anything for the
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cause so uh you know a delightful note to end on as it were but we won't end here let me ask
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you a question that i ask uh that i ask all my guests on the show that for me and my listeners
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recommend books films music that you love and which mean a lot to you okay all right so let's
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see i mostly recommend books that actually inspire people because i feel that one thing that we don't
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have enough around us is inspiration so one book that has really inspired me is a phil night's
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shoe dog i think it's a great book on how he built nike as an organization how he scaled it up how
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he failed so many times and despite that he kept at it and it was only his passion for the product
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for building a shoe that helps people run right i think it's a fantastic story i think to keep
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sane you should be reading books that help you develop a stoic attitude and there i find kamu
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pretty uh pretty good in you know helping you calm down and the world is as it is and it goes on and
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you are just one cog in a wheel and it you know so things like that uh what else what else uh
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films i'm not much of a film watcher i'm a great bollywood buff but i don't know if that really
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helps whatever you love okay i'm thinking of the last good movie that i watched yeah la pata ladies
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is great everybody should watch it everybody in india should watch it it's about uh i don't
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know if you've watched it actually actually i haven't but i've been meaning to i've been
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yeah i haven't been avoiding it it's uh it's i think it's about feminism without really virtue
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signaling or preaching and it's feminism in the classic sense which is a classic liberal sense
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which is that how does a woman realize liberty and how within her own constraints she navigates
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uh to you know to realize her own agency and uh and having agency has no one meaning i mean
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within your con you know within your circumstances whatever you can do to realize your free will i
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mean that's exercising agency and la pata ladies just conveys it in a beautiful humorous fashion
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you should watch it can't wait to see her i did an episode with mukulika banerjee where i think it
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was her i often get mixed up so forgive me if it's not her but i think it was her who mentioned
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how i think in the 40s or the 50s a mom and a female friend set off in a tonga and went from
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one town to the other on their own and i found that beautiful and when i when i chat with sort
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of guests of that vintage i think minal pandey also kind of brought it up you realize that a
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lot of women whose lives you would be judgmental of today saying oh they were oppressed and all
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of that actually you know there's a lift feminism in their in their actions right within those
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constraints they do what they can and you know that and that is exercising agency that's agency
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that's inspiring by itself so a friend of mine actually told me a beautiful example of because
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she does a lot of rural field research on and she met in the in some village of rajasthan when
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women and this very common actually in a lot of urban centers where a woman who's on her menstrual
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cycle is asked to stay in a separate room not allowed to enter the kitchen and things like that
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and we always think of it as it being oppressive and when she met these village women and she tried
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to explain to ask them that why do you think this is scientific they said they were very happy
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because that means they get a day of work of housework they get a day of having to you know
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go to the market and get a day of work having to go and fill water from the nearby you know
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municipal tap and things like that and they said it's great and that's when she was like i was so
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humbled that you know our definition of agency is not everybody's definition of agency and people
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actually excite their agencies in ways that they find absolutely possible like one episode where
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i got a lot of such counter-intuitive insights was with the great dalit scholar chandrabhan prasad
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and chandrabhan ji was just throwing these insights one after the other and i'll just share a couple
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of them and one is not gender specific in fact is probably male specific he said that whenever he
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sees an elder person in his extended family with a paunch he feels happy it's a sign of progress
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like if they have diabetes it's a cause for celebration because he could afford to get
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diabetes you know and i love that story and the other one which does have to do with gender which
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is why i thought of this is he points out that there are places like typically the our view is
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that goongads are bad it's a sign of patriarchy women are oppressed etc etc but he said that
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dalit women in the village that he comes from they celebrate that they can get married with
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a goongad because a generation ago it would not have been allowed to their caste so it is a sign
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of their empowerment that they can now get married with a goongad so it's it just tells you that the
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world is so complex and layered that you should never come to easy judgments but actually do the
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hard work of getting out there and you know feeling it for yourself which is why ask the litigants
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what does he want as opposed to asking the judge how many assistants do you want you are too too
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nerdy for me this is your widest smile i've seen so far when you're saying ask the litigants okay
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fine i will ask the litigants hence proved hence yeah thanks so much for coming on the show this
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was great most welcome and i had a great time thank you if you enjoyed listening to this
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conversation share it with anyone you think might be interested check out the show notes enter
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rabbit holes at will you can follow bhargavi on twitter at bhargavi zaveri that's one word
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linked from the show note also you can follow me on twitter at amit varma a m i t v a r m a
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you can browse past episodes of the scene and the unseen at scene unseen
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