#
The world is full of so much beauty and so much knowledge that it is both so exciting
#
It's exciting because we are surrounded by magic and illumination.
#
It's terrifying because well, there's so much of it.
#
When we are kids, we tend to be naturally curious, always asking why about everything.
#
If we are lucky, we get some answers and we get sources that satisfy these urges.
#
There are interesting people, interesting books around us.
#
Some of us retain that curiosity and sense of wonder as we grow older.
#
And when we go through school and college, we can indeed keep indulging these curiosities.
#
Again, if we are lucky, we have the time and space to enter rabbit holes at will, to take
#
deep dives into whatever we fancy.
#
But often, as we grow older, this ocean of knowledge and beauty can become a river and
#
then a stream and then a pond.
#
Academia makes us specialise.
#
Life coaxes us into comfortable grooves.
#
Where we were once seekers and thinkers, we end up as creatures of habit and autocomplete
#
I have felt these terrible tugs as well.
#
These are the default forces that guide human action.
#
Why waste more cognitive energy than we need to?
#
Pick a lane, stay in the lane.
#
Well, we need to fight this.
#
The thinkers I most admire are hard to categorise because they did not restrict themselves to
#
They were renaissance men and women.
#
The whole world was alive to them and that is why they were truly alive.
#
I aspire to travel widely, to drink from many streams, to have many ways of looking at this
#
I often say, the more dots you gather, the clearer your picture of the world will be.
#
It may be pixelated to others, but it can be HD or even 3D for you.
#
Keep reading, keep engaging and hold one truth close to your heart.
#
Everything is everything.
#
Welcome to The Scene and the Unseen, our weekly podcast on economics, politics and
#
Please welcome your host, Amit Verma.
#
Welcome to The Scene and the Unseen.
#
My guest today is a man who is both a great thinker and a good human being and luckily
#
for me, someone I can call a friend.
#
I have known Ajay Shah for over 15 years.
#
I first knew of him as a brilliant economist, but as time has gone by, I have seen more
#
and more layers to him.
#
I often say that most of us can have deep knowledge of just one or two things in our
#
Ajay has deep knowledge of many different domains.
#
He will speak about nine of them today, but those of you who have seen our YouTube show
#
Everything is Everything will have seen glimpses of many more.
#
He was born in the 1960s, gained a vision of the 20th century in the 1970s from his
#
equally brilliant father, went to IIT in the 1980s and then did a PhD abroad and then chose
#
to come back to India in the 1990s because he wanted to be part of this story, the one
#
that started unveiling here in 1991, of making India a freer and a better place.
#
Ajay played a pioneering role in reforming our financial sector, then he worked in the
#
Ministry of Finance for a few years in the 2000s, first internally and then from the
#
outside as part of an IPFP, he was closely informed in major reforms like the new pension
#
system, the FSLRC, the IBC and inflation targeting.
#
These might seem like acronyms and jargon to you, but as you listen to these episodes,
#
you will realize why they were so far reaching and seminal and made a difference to the world.
#
Ajay is also co-authored along with the legendary Vijay Kelkar, the one essential book on public
#
policy you must read, In Service of the Republic, The Art and Science of Economic Policy.
#
Ajay and his wife Susan Thomas run the XKDR forum today and quite apart from all the things
#
one puts on a CV, he is also being a fearlessly outspoken public intellectual and someone
#
who has made an effort to build an intellectual ecosystem in India.
#
Many people have referred to the episode I did with his friend KP Krishnan as a master
#
class from the Indian state.
#
If that is so, this episode is both a history lesson and a master class on the Indian economy,
#
Indian policy, the state and society and much much more.
#
Ajay is a true renaissance man, he cares about the world, he brings so many dots, he paints
#
This is one of my favorite conversations, there is so much wisdom in here.
#
And at this point, I should also point you to the YouTube show we do together, Everything
#
is Everything, so please check that out also and also check out our new course Life Lessons,
#
which I will talk about just now in the commercial you are going to hear.
#
Many of the things I have learnt in my life, I had to learn on my own.
#
I think you will agree with me that our education system doesn't teach us so many things that
#
we need to make the most of ourselves in this world.
#
I learnt my lessons when life happened to me and I happened to be paying attention.
#
For many years now, I have been thinking, what are the essential life lessons that everyone
#
should learn to be able to live a complete life.
#
I invited my friend Ajay Shah to join me on the intellectual challenge of figuring this
#
out and then we decided to put together a course where we would actually teach this
#
So we created Life Lessons, which you can check out at lifelessons.co.in.
#
In this 5 week course running across 5 Saturdays, we have put together 15 webinars that are
#
intended to help launch you down journeys of discovery.
#
We will speak about learning how to learn, learning how to think, mindsets, mental models,
#
clear writing, how to communicate better, quantitative intuition, probabilistic thinking,
#
the history of thought, the foundations of economics and even practical matters like
#
how to think about personal finance and how to think about personal health.
#
People who do the course also get to be part of a larger community that will have in-person
#
Basically, while we have always been sharing what we have learnt in a piecemeal way in
#
our show and our writings, here and there diffused, this is an effort to synthesize
#
So please head on over to check out Life Lessons at lifelessons.co.in.
#
Ajay, welcome to the Scene in the Unseen.
#
I am so happy to be here with you.
#
I think I have the vague impression that we have done some 13 episodes of the Scene in
#
So you are kind of behind Shruti Rajgopalan who is on 19 I think.
#
But this is the first time, let me tell you, that we are actually doing a Life in Times
#
episode where I get to have the kind of conversation I love to have with one of my favorite people.
#
So thank you for coming on the show.
#
And my first question is kind of like this, that you know when I look at my own life,
#
I look at my own life not in some structured way, I mean I can assign a structure and a
#
narrative to it, you know, in a post facto kind of way and you know after the fact tell
#
a story that this happened, that happened, this is why, blah blah blah and everything
#
can kind of make sense.
#
But while I was living it, it was amorphous.
#
I didn't have a clear idea of what I was doing and why, I went from one thing to the other
#
without really thinking too hard.
#
I don't think I had coherent narratives about myself, like an interesting question I often
#
ask people is what is a story you tell yourself about yourself or told yourself about yourself
#
So I want to ask you how it's been for you in the sense that do you think of yourself
#
on one linear journey all this while and you haven't really deviated much from it or do
#
you think that looking back fine you can put a structure to it but everything was unexpected,
#
there was you know a lot of serendipity etc etc.
#
How does one reconstruct one's life in a sense because in a manner of speaking it's an act
#
of dramatic reconstruction, storytelling almost.
#
As you say there are stories that we tell ourselves and I have often been struck by
#
how some people tell stories that are more dark than others.
#
I think that we somehow stumble on these narratives about ourselves and some people play up the
#
positives and some people get stuck on some of the bad things.
#
I think everybody has good things and everybody has bad things.
#
I don't think anybody has a monopoly on lady luck right.
#
The distributions are about similar.
#
So I consider myself lucky in that I'm generally a happy person and time heals and I look back
#
at the good parts and therefore I am a happy person because I believe I'm very privileged
#
because I have a selective memory for the good parts.
#
If you dwell on the bad parts then you think oh my god life sucks.
#
So I think that the distribution of shocks of the world is about random after you get
#
the biggest shock of all which is some genetic endowment and some family endowment.
#
Other than that all the things that happen are more or less you know 50-50.
#
About half the shocks are good and about half the shocks are bad.
#
So I'm lucky that I am a happy person and I remember the good parts.
#
So I'm sure the stories I tell myself and the stories that I tell you will be tinged
#
with a flavour of rose and there are other ways to look at the same life and reconstruct
#
things in a much more harsh way.
#
The second thing is I think it's interesting to make a distinction between some deeper
#
values and a sense of purpose versus the machinery of what we actually do in life.
#
The machinery of what we do in life is highly contingent.
#
It is some things happen, some events happen and many times today I'm going to say to
#
you that so and so came up to me and said X okay like so many key turning points happened
#
to me because somebody said X and then the wheel started turning.
#
Now of course there are preconditions and there was some foundation and there was some
#
reason why that happened but there was an external impulse and I'm that happy person
#
that when you give me the mad idea I will run with it.
#
I will not be scared, I will not be negardly, I will try things and so my life is a series
#
of accidents which each of them turned into something fun and something not so fun.
#
But I think that there was stability in terms of some sense of values and some sense of
#
So there are some very deep ways in which I basically was forged as a teenager and I
#
have more or less stayed similar ever since and I've often said to you that my father
#
was the most important influence on my life and he brought me that sense of who are we
#
and why are we here in this world.
#
He lived in the 20th century, I lived in a part of the 20th century and I understand
#
the agony and the glory of the 20th century and that gives me purpose of what we are doing
#
That part has been stable.
#
So I think some values and some sense of purpose are relatively stable, the rest is very contingent
#
and one should have a sense of fun and adventure and be ready to jump into the ponds one sees
#
And it strikes me that the stories we tell ourselves can also be self-fulfilling, like
#
if you look only at the positive parts, that becomes a spur to action and therefore good
#
things are more likely to happen to you.
#
We had an episode of everything is everything on the surface area of serendipity, kind of
#
Whereas if you are negative and you're always whining and you're blaming other people,
#
you stop working hard and etc etc and that creates a vicious cycle.
#
So it's really a virtuous cycle versus a vicious cycle.
#
Abhijit Banerjee has some very interesting work around the mind and the cognitive space
#
of poor people and he tells a story where poor people are weighed down by a whole bunch
#
of practical trouble in the world and I don't disagree with him and I feel that pain.
#
So for example, there are household survey questions in America that in an emergency
#
would you be able to produce $400?
#
And a lot of people say no, I don't know how on earth I would produce $400 when faced with
#
And I recognize that that is a difficult state and it is hard to write poetry when you are
#
But I also think that for people like us, many of us are drowning in the practical stuff
#
and we're not able to rise above the everyday life.
#
Then it's a part of how we organize ourselves, the stories we tell ourselves, the way we
#
prioritize the everyday life and the way we create mind and space for higher things.
#
And this is partly about character but it is also partly about a whole bunch of practical
#
So what priority do you give the practical things in life?
#
What priority do you give the everyday shallow social engagement?
#
For those kinds of things, I feel we get to choose who we are and that can create the
#
space for higher things.
#
So I think there is a package of a positive spirit and a prioritization through which
#
we can extract mind and space from a wide variety of budget constraints.
#
So most of the people hearing this show are not poor.
#
So I respect what Abhijit says about poor people and I feel that empathy and it would
#
be great if we could make their lives better and a lot of us dream about a better India
#
where we've made a significant dent through the forces of economic growth.
#
But turning to people like us, I feel we have more agency than we think and we choose about
#
how to be positive, how to make space for higher things, how to control the time allocation
#
for really the things in life that are not elevating and each of us get to choose what
#
I actually meant exactly people like us when I spoke about the vicious and virtuous cycles.
#
Many people don't have the good fortune to be positive because so much shit is happening
#
But at the same time, I see the most privileged and fortunate people also sitting around whining
#
I'll take a digressive question before we kind of get to biography.
#
It is correctly said that when you are young, the scarcity you are most likely to face is
#
of money, but as you get older, especially for the wealthy, you know, it's a scarcity
#
Time is what is valuable.
#
And I am wondering about a certain balance and how you make that balance.
#
Like you spoke about valuing your own time.
#
I have noticed that, you know, you calendarize everything months in advance when Ajay has
#
a gathering at his house, gentle listeners, you know, it'll be a calendar invite and
#
it'll be like six thirty to nine.
#
And eventually you learn not to show up late because you have to leave at nine when the
#
calendar entry ends and you always sleep early and et cetera, et cetera.
#
So everything is calendarized months in advance.
#
And I'm thinking of it in I'm thinking of two aspects of this.
#
One aspect of it, which I envy and I wish I could kind of implement it myself, perhaps
#
you can help me, is that once you start calendarizing, the calendar becomes a commitment device and
#
you end up doing things.
#
And before you know it, a lot of things get done.
#
And I think that's fantastic.
#
And, you know, other guests of mine on the show like Chuck Gopal have, you know, also
#
spoken about this at length.
#
But on the other hand, it almost seems that then everything that you do is almost instrumental
#
and is planned so much in advance that a certain space for spontaneity kind of goes out of
#
the window that if the most valuable resource is time, then why are you giving it away so
#
And how do you think about that sort of allocation?
#
So I think this is a great debate that everybody should have.
#
I don't pretend that I have the right answers.
#
But here is the thought process.
#
And as I said, this is something we should all think about more.
#
The danger is that we are all in the hurly burly of life.
#
And by default, my next one or two months calendar is full.
#
It just that is that is the way life is.
#
Now the trade offs we make are do you fill up your next one or two months of calendaring
#
with more mundane practical things, or do you make space for the things in life that
#
really matter, the things that are really important to you?
#
So I felt that the way to protect the good and important things is to put in calendar
#
blocks deep in the future.
#
So you remember, Namsitha and you and I made a plan to go to hike at Kotligard and we were
#
not able to find approximate time.
#
And also, you know, it was summer and you don't want to hike in the summer.
#
And because you guys are new, I did not want to take you in the monsoon.
#
So you know, I forecasted that 26 September would be the first available time when it
#
is relatively dry bracket.
#
It turned out to be a monsoon hike and we blocked the calendar entry.
#
Now what is the point of that?
#
The point of that is to respect and value that which is important, that which is elevating
#
the idea that the four of us would go for a hike and then to take it seriously that
#
no, this is the calendar entry.
#
Now I'm going to be true to the calendar entry.
#
Months ahead of time, I put in the calendar entry.
#
Now I'll not be casual about it.
#
So it's a way to make safe, make space for the things that we value because otherwise
#
in the next one, two months, we are always busy.
#
So by that reasoning, each of us will tend to be filled up with the practical constraints
#
So by default, you know, I have meetings, we write papers, we do project meetings, I
#
have to meet a variety of people and normally that fills up the calendar.
#
So by default, anyway, my headspace is going to be taken up by the practical things of
#
So how will I ever make space for the good things in life that matter?
#
And the answer is calendar them, do them well ahead of time.
#
So when my calendar is empty, I'm putting in the good things in life.
#
As you go closer to the date, the remainder of the month will get filled up with practical
#
So this is a trick I'm using.
#
So as an example, just last week, Ayush and I agreed that winter, Sahyadri's trek for
#
this year will be 11 days, 10 to 20 January.
#
And it's blocked in our calendar.
#
So like 10 to 20 January is gone.
#
Don't ask me to do anything 10 to 20 January, I have almost never cancelled a trek.
#
But then that is the way to do things that you have to do it months ahead of time.
#
If you ask near horizons, where will I ever get an 11 day block doesn't happen.
#
So these are the tricks that I use that make many plans far ahead of time.
#
So you sort of fill out your year with big chunks of important cool things that you value.
#
And then the rest will be practical life.
#
Somebody will say, I want to discuss a project with you.
#
I look at the calendar.
#
So those are practical things.
#
So this is my trick for how I make space for the big things of life.
#
Just to give context to our listeners, Namsitha and Vaishnava, the brilliant young crew we
#
have and everything is everything.
#
And a few months back, Namsitha told Ajay, I really want to go on a trek with you because
#
we did a great episode on hiking.
#
It was around that time that Namsitha said this months ago.
#
And Ajay said, yeah, let's do let's calendarize it.
#
And Namsitha and Vaishnav duly burst out laughing that months in advance this man wants to
#
But Ajay did calendarize it.
#
And my plan was that, okay, if Namsitha and Ajay are going away for a trek, I will go
#
with Vaishnav and we will ride somewhere.
#
But I imagine it will be a trek lasting a few days.
#
And I was told, no silly, it's a one day trek.
#
And then I thought, okay, I'll also come along.
#
But then it happened to be on a Saturday, which is when I conduct the webinars of my
#
It was a cohort on so I didn't go.
#
But anyway, so that is sort of the context.
#
I've tried calendarizing things.
#
My issue is that if you're calendarizing something like a meeting or a Zoom call or the everything
#
is everything shoots like we do, it's easy for me.
#
I just have to show up and the thing unwinds and it happens.
#
What I find incredibly difficult, say, is if I calendarize something like a block of
#
hours for writing, right?
#
And then you reach that block of hours.
#
And then it becomes like mind-blowingly hard, which is really, I think, the big tragedy
#
Like somewhere behind you, we're recording this in my home studio, somewhere behind you
#
in that bookshelf, there is this artifact I got from Chandigarh.
#
After my dad passed away, we went, we cleared away his entire library, gave away a few thousand
#
I kept only things which were meaningful to me or interesting books which were completely
#
And one of the things I kept from there, somehow it was still in that house, was a diary of
#
So he was a government servant and he would get diaries, free diaries every year.
#
And he would give them to me and he would say that I want you to write a book in this.
#
So in 1986, he gave me a diary to write my book in and it is blank.
#
And I think of it as being in a sense a representation, you know, of my life that I never got down
#
So this is a life question for me and I think many people who are asking that you're someone
#
who's been very productive, you're not only showing up, but you're getting the job done
#
So how has this evolved with you?
#
Like was it, I know we did an episode on Declutter where both of us spoke about this a little
#
So all these episodes we mentioned will be linked from the show notes are meant as supplementary.
#
But essentially, how did you sort of arrive at work ethic and discipline and taming the
#
First I just have one opinion to offer and it's not something I do, but it's something
#
I've been saying to many people.
#
This is about making time for thinking and deep thinking and reading.
#
And my suggestion is, for example, imagine you put a calendar block for every Saturday
#
morning from morning to lunch, saying this will be my alone time of reading.
#
So I wonder whether this would be useful to many people, because it's a way to systematize
#
It's a problem for me because I read all the time.
#
So my life I feel is in decent shape.
#
I feel I'm good at reading long form and I'm good at reading papers.
#
I'm not yet good at reading books.
#
I am trying to reshape my life in a way to come back to books much more.
#
I was very good in reading books till many years ago.
#
But today I am failing on reading books adequately, but I'm doing very well on reading long form,
#
I've just got that down.
#
Day after day, I am reading thousands of words and pages all the time.
#
But for many other people, I have often found resonance around this trick that by default
#
we fill up our life with social calendar and with work.
#
So can we prioritize reading and deep intellectual space of isolation and reflection?
#
And so could it be that you block a Saturday morning for that?
#
Could it be that you block an entire Saturday for that?
#
And consider this that some of the readers might find this to be a useful trick.
#
Because the way all of us are working or most of us are working in this world is we obey
#
So if a calendar is free, then you'll say, yeah, sure, I'll come have chai with you.
#
And then suddenly your Saturday morning is gone.
#
Whereas if there's a calendar block saying this is my deep thinking time, then that's
#
a way to protect it from the social calendar or from some work meetings and so on.
#
My experience, so let me put it into two categories.
#
One category is my life experience with the business standard.
#
So in the mid 1990s, Ashok Desai was kind to me and he took me on as a fortnightly columnist
#
at the business standard.
#
So I've been writing this for the longest time.
#
And it has just become a complete drill for me where there is a recipe that every alternate
#
week, you've seen me on some of these weeks, that by Saturday evening, I try to have an
#
idea for what I'm going to write on Sunday morning.
#
I will often text a few people saying, do you have an idea for something that is worth
#
I will glance at the financial times and I will wonder what's happening in the world.
#
And I will think about what is worth writing about.
#
And generally by night, I try to have an idea.
#
And then I try to read a few things about it.
#
And that brings me to another great trick that I believe should help almost anybody.
#
That is my understanding of how the human mind works, which is it's a very good idea
#
to fill your mind with a field with a problem and go to sleep.
#
And the next morning when you wake up, your mind is at a superior level.
#
There's just something that happens deep inside the human mind that sleeping over a problem
#
And I don't mean procrastination.
#
I don't mean postponing a problem.
#
Like you have to concentrate.
#
You have to be deep inside that and then go to sleep.
#
So as an example for our recording today, I thought about what we should do today in
#
the deep night yesterday and then I fell asleep.
#
So that stuff was buzzing in my head and then you fall asleep and then I feel we wake up
#
with a better insight into what we're going to do.
#
And then in the morning I wake up and in about two hours I write the business standard column
#
So that's become a drill.
#
And I just fortnight after fortnight, I do that.
#
And similarly, you and I do everything is everything.
#
We meet on average once every six weeks and we scratch our heads with each other and we
#
make up six show ideas at a time.
#
And that's again become a drill.
#
And you know, I feel only recently you and I have started becoming comfortable with the
#
idea that we can keep doing this for a long, long time.
#
You know that I have butterflies about our ability to sustain this.
#
You have been the optimist saying, no, no, this is going to work for a long, long time.
#
That has become another drill.
#
Everything else that I write, what is happening to me is that I get swept away by the idea
#
that something happens and I just fall in love and I'm deeply in it.
#
And then I'm all mad and I'm fully focused and I'm only doing that.
#
And that's how I write.
#
And by the way, I also have a great privilege that when I really go into those things, I
#
basically blow away a lot of other work and deadlines and including violating work calendar
#
So I will literally skip meetings.
#
I will cancel meetings.
#
I will just say, sorry, I'm not available.
#
I have not attended board meetings and so on.
#
When I'm in that zone where I'm fully absorbed and I'm lost in an idea and I'm writing, because
#
when I'm in that space, I have grown to recognize that it's a good space and you know, I ain't
#
much babe, but I'm all I got that you got to be there and do your best.
#
That worship is something special and you must treasure that and you must nurture that.
#
So I can't predict when those things happen, but when they happen, I respect them.
#
I value them and I try to seize that moment of concentration of insight, of the joy and
#
translate it into writing.
#
So my writing is unpredictable and bursty other than these rituals around business standard
#
and everything is everything, which outputs that are happening on a clock.
#
Everything else is not happening on a clock.
#
Everything else is unstructured and you can't predict what idea comes when.
#
So as you know, there are many formats we write in.
#
You have also emphasized that each of us, we need to learn a format.
#
You learned how to do seen and the unseen.
#
You and I are learning how to do everything is everything.
#
I have learned how to write an opinion piece.
#
I've learned how to write a blog article.
#
I have learned how to write a research paper.
#
I've learned how to write an academic book.
#
I have learned how to write a trade book.
#
Each of these is a skill, but then those capabilities, those highways, so to speak, are there.
#
Now comes the creative moment that you wait for the Lord to give you the spark.
#
And then when the spark comes, there is a well optimized machinery on how to turn it
#
into a blog article, how to turn it into a research paper, how to turn it into a book.
#
That stuff is already there.
#
There are deep machines inside the mind that know how to do that.
#
So then I live in the zone of the idea and I try to write.
#
So this is my recipe for writing that when you are entranced with the idea and when you're
#
full of the idea, don't do anything else, just like be in it with all heart and soul.
#
So writing code, writing prose, these are magical things to be done at the highest level
#
of lucidity and priority.
#
And then at that time, just don't take any interruptions.
#
At that point, I don't want anything else.
#
So as I said, I will literally blow away a whole bunch of normal work calendar entries
#
because I'm in that zone and I will flake out on a whole bunch of promises and deadlines
#
and deliverables because I'm in that zone.
#
Here is a completely upside down way to come at some of the similar things that we, all
#
of us, we have thousands of things to do and that's human nature.
#
So none of us are short of things to do and we have many, many ideas.
#
It's good to organize them in sort of some ABC classification that C is a long list of
#
many things that are sort of there and they're simmering and they're there in the mind.
#
And in a way, we have a low level CPU allocation processing them at all times or somebody writes
#
something, somebody says something, it connects that, yeah, I was also thinking about this.
#
And then some of them get upgraded to a B where you're putting greater effort on that.
#
And then you're upgrading a few to A where you're really at top level effort and intensity.
#
This is called an innovation funnel.
#
And so we are triaging all the time and we're picking a few things.
#
And so I say to myself that I respect my triaging.
#
I say to all the readers, I say to all the gentle readers listening to this podcast that
#
believe in yourself and believe you're triaging, trust your triaging, trust your instincts,
#
trust you when you think that X is beautiful and X is wonderful and X is important.
#
Don't be plagued by doubt.
#
And don't worry about all the other things that are going on.
#
So when you get into that zone, then you just give it your 100% that believe in you.
#
Don't do anything else.
#
At that time, just blow away everything else.
#
Be rude, cut off everything else, flick out on deadlines and violate calendar promises
#
Then don't let all the other 150 unfinished papers on your computer intrude on your consciousness.
#
When you're there, just be there.
#
I heard a great story from Mrinal Pandeyji.
#
She did this lovely episode with me.
#
I've also recorded episodes with her sister, Ira Pandey and her cousin, Pushpesh Pandey.
#
And Mrinalji and Iraji are, of course, the daughters of the great Hindi novelist, Shivani.
#
And what she told me about her mom was that it wasn't that her mom was able to make blocks
#
of time to sit alone in a room and write.
#
What her mom would do is she would find time during the day and once she sat down, people
#
knew not to disturb her.
#
So they could be having, say, lunch.
#
And suddenly, you know, as lunch is widening down, she'll just take paper and pen and start
#
writing on the dining table with the hubbub around her, with people around her, at which
#
point they knew that mommy is not to be disturbed.
#
But at which point, also, she would cut herself off effectively.
#
She would never whine, oh, I have so much work, I have so many people around me.
#
You know, she would just find a way to get the job done.
#
And this is why I am more and more skeptical of writer's block, the phrase that people
#
You know, I think that, and which I also have used, but I just think that that is terrible.
#
If you really, really, really want to do it, you'll sit down and do it.
#
Having said that, it is, of course, much more difficult for women to do this, to be able
#
to tell the world to get lost and leave me alone and et cetera, et cetera.
#
Unfortunately, in the world that we are in, you know, many more men have that sort of
#
privilege than women do.
#
It is almost expected that a woman will have to change the diapers and make food for the
#
kids and the husband and all of that.
#
And it is just the way that it is, the way it is.
#
But then what one needs to think about is that within the limitations that you have,
#
if you really want to get it done, you know, how can you get it done?
#
So I have some opinions on this.
#
All of us grow up as children with fantasies about some castle in Italy where the Rockefeller
#
Foundation will invite you for a writing fellowship and you will get that concentration
#
OK, and I think that's just not an effective way to think about the world.
#
And if that happens to you, great, more power to you.
#
But it is neither necessary nor sufficient.
#
So the powers that we need, in my opinion, are at three levels.
#
The first is precisely what you said, that the hubbub should not matter.
#
So let me say a few things and everybody will recognize them and then you will just get
#
Can you work in a coffee shop?
#
You know, most of us can.
#
And there's quite a bit of distraction.
#
And there'll even be some bad music playing.
#
Hell no, there'll be some nice music playing, OK?
#
I think most of us are well adjusted, we are able to handle that.
#
Are you able to work at an airport?
#
Are you able to work in a plane?
#
And I think for most of us today, the answer is yes.
#
So let's like get out of the idea that you need to be surrounded by nature and birds
#
chirping and silence and the Milky Way above is the only way to write.
#
So when we look back at our heroes, George Orwell and Hemingway wrote under very dire
#
Their lives were tough and in the worst of times, they made space for themselves to write.
#
So I feel we should just get this out of us, that regardless of the hubbub, regardless
#
of the noise, you're sitting on a plastic airport chair and we should be able to write.
#
We should be able to think, you know, write code, write prose and do high quality stuff,
#
The hardest thing, in my opinion, is to be able to be antisocial.
#
So most of us are programmed that if you're surrounded by other people, then we will engage
#
with them or we will make eye contact with them or we will overhear their conversations.
#
So what is truly hard is to let go of your people and be true to your cause.
#
And I think that's a skill.
#
And then because women are inherently better socially, this becomes a bigger block for
#
And this is something each of us has to battle with in ourselves at two levels.
#
One is that if you're a woman, you need to, you know, man up and be a little more antisocial.
#
And if you're a man, you need to respect women more.
#
And you know, each of us need to try harder in these things.
#
The last thing I say is that the easiest margin where I feel most of us can make progress
#
is to just be sensitive to and chip away at the time allocation that we make for cricket,
#
for Bollywood, for casual conversations on politics and on shallow social engagement.
#
These four are really the time sink, which are eating up most people.
#
I feel that's a first stage that everybody needs to think about.
#
So we should think about the time that is being expended on shallow social engagement
#
on Bollywood, on politics, on cricket, and really chip away at that.
#
And I'm pleased to say to you that for me, the time on Bollywood, the time on cricket,
#
the time on casual conversations about Indian politics is zero.
#
And the time in shallow social engagement is low.
#
So that creates whole blocks of time.
#
This idea I am stealing from Nandan Nilekani, who was once speaking with me.
#
And I said to him, like, wow, you're CEO of Infosys.
#
How the hell do you make time to be a thinker and to write books?
#
And he said to me, basically, my superpower is I take no interest in cricket and in Bollywood
#
and in casual conversations on politics.
#
And he says, if you think about it, that's like three hours a day for the average Indian
#
And suddenly you've got a gigantic resource, you know, three hours a day multiplied by
#
300 days is a thousand hours a year.
#
Suddenly you're talking.
#
So I feel that these are things that all of us can become more conscious about and chip
#
And then you create space for intensity, for depth.
#
I mean, when I think aloud about this, one, I completely agree with you, two, you know,
#
I think the message that you're giving here is not that all your time should be parceled
#
out into productive blocks and etc, etc.
#
But the way that I think about it is, look, we have 24 hours in the day.
#
I should sleep for eight hours, more or less.
#
I can work for eight hours.
#
In fact, if I work for four or five hours in a day, it's phenomenally productive because
#
all the work really happens in four or five hours.
#
And the remaining eight hours, I can do what I want.
#
So it is not that there is no time to unwind or chill, but also what is important is what
#
is the texture of that unwinding.
#
I am being far more useful if I unwind by reading a nice book, even if it is for enjoyment
#
alone, but reading a nice book so my mind is in that rhythm and that space, rather than,
#
you know, just scrolling mindlessly or swiping mindlessly somewhere.
#
I am much better off if I watch a good film and, you know, I remember in the 1980s, I
#
My dad was a director of the Film Institute in Pune for five years.
#
I got to see the best of world cinema.
#
But you know, for most people, it was impossible.
#
It was an impossible dream to see Fellini and Kurosawa and so on and so forth.
#
And today we can see any damn thing we want.
#
So even at leisure time, I think there is a certain way of kind of, you know, designing
#
So I would put principles here like deep engagement is a phrase that you have always used.
#
I would put words like intensity, like things that go deep into your mind and fit into the
#
life journey of building knowledge and understanding the world and being a good part of the world,
#
as opposed to just things that are not memorable.
#
And a week later, you can scarcely remember what you were saying and thinking.
#
A couple of things I want to down click on from what you said earlier, and let's move
#
on to one of them, which is about form.
#
Like we've been talking about this a lot.
#
I've been talking about this a lot, as you know, I have an old essay on how, you know,
#
in my view, the form really matters because the form of what you do shapes the content
#
and that shapes character.
#
The example I used in that essay was, of course, a podcast that if you're doing a 10 minute
#
podcast, you know, the way you approach it is completely different.
#
You are asking boilerplate questions, getting things over with, interrupting your guest
#
if he goes on for too long.
#
If you're doing an eight hour podcast, you have to learn the art of really listening.
#
Your engagement has to be deep.
#
You have to do tons of research.
#
You have to read all their books and other books around the subject, etc, etc.
#
And by shaping the content, it shapes character also subtly because you are ultimately an
#
accumulation of all the things that you do.
#
And that deep engagement kind of helps you in ways that, you know, might actually be
#
unseen to you. And I want to take you back to the forms that you worked in because and
#
perhaps in hindsight, looking back, you can tell what impact they made because number
#
one, you're doing a fortnightly column for business standard at one point in time.
#
This essentially means that through the two weeks, your mind is kind of worrying in the
#
background, your subconscious is worrying, looking for ideas.
#
And then once ideas come in and you zero in on one idea, then you synthesize it and you
#
make sense of it and perhaps you sleep over it, which is excellent advice.
#
I completely endorse that.
#
And then you come up with a column and you're working in those two weeks bursts of 800
#
words each time or whatever the word limit was.
#
And similarly, when we do a show, it is kind of like since we are doing a show, like every
#
time I go to a bookstore, I am not just looking at books as a part of my brain, which is
#
looking at potential seen unseen guests that this person sounds interesting and etc, etc.
#
And similarly, when random bits of news will strike me or I'll be I'll be like, hey, you
#
know, this could be an everything is everything episode.
#
And you shifted forms many times.
#
You've done blog articles like if Ashok Desai at that time had come to you and said, I
#
don't want a fortnightly column.
#
We're starting a blog, though, of course, there were no blogs then, but we're starting a
#
blog. I want five posts from you every day on it.
#
The nature of the things that you think about would have been very different.
#
And now you've also done blogging, though not at five posts a day frequency, though I
#
have. And you have also written a book which requires a completely different kind of
#
immersion. And I am guessing would have given you insight, greater insight into both your
#
subject, which you already knew really well, but also into yourself.
#
We'll come back to all of those and discuss those pieces separately later.
#
But on this larger question, is it easy for you to look back and disentangle the effects
#
of the forms that you choose to work in?
#
And is there a larger learning there that if you are a young person listening to this,
#
choose some forms over others because they will do more for your mind?
#
So first is I would say to everybody that you have to master one form at a time, that
#
it's not wise to produce in many different forms at the same time because each of them
#
is a craft. So, you know, I learned the craft of writing a thousand word business standard
#
article, and it is now lost in the mists of time.
#
But for me now, it is a muscle memory.
#
I know how to think for a thousand word article.
#
And I also know how to recognize what is a cool topic for that.
#
Each form has its own magic and you have to figure out that magic.
#
So that's one part that you have to master one form at a time.
#
And there are some people who have played only one form all their lives.
#
OK, so George Orwell wrote essays, wrote books, he never started a podcast.
#
OK, and he's just one of the greatest men of the 20th century and more power to him.
#
So I'm not fetishizing the range of a larger number of forms, but we do need to think about
#
a form and then get the muscle memory of the machinery of how that's done.
#
So it's done. And now you put it out of the way.
#
Now we are left to the pure creative phase.
#
So we should be so fluent in the form that we stop noticing.
#
We just know how to reel that off.
#
Now you are waiting for the Lord to give you the spark, where you have an insight,
#
where you have a moment of something new, something original coming up in your mind.
#
And then after that, you are enslaved by that idea and you're building it and executing
#
it in a form of your choice.
#
Now, turning to the business standard, I describe my script to you.
#
So I really have a weird thing to say to you.
#
For the two weeks, I am only living my life and I'm not thinking business standard at all.
#
But on Saturday evening, I'm mining my life.
#
On Saturday evening, I'm thinking of what happened to me in the last two weeks.
#
What were the fun conversations I had?
#
What were the events in the world?
#
What stories do I want to tell?
#
So in an opinion column in the newspaper, the rules of the game are A, it's got to be topical
#
that you have to be something connected to the world.
#
You can't tell the stories that you want to tell.
#
It has to be about the world today.
#
So sometimes I have nursed some thinking and insights into the world forever.
#
But that doesn't mean you get a chance to write about it.
#
Then the world gives you that moment where you get to write about it.
#
So, you know, for example, I was a student of infectious disease all my life.
#
Since my days as a PhD student, I have been reading and studying infectious disease, but
#
I never wrote about it.
#
And then, you know, the world gave us COVID.
#
And suddenly, you know, I kind of knew a bit about these things.
#
So I was ready to write about it.
#
So the world has to give you that moment.
#
And then you have to say something cool and insightful that will help others figure what
#
is happening in the world.
#
The phrase you use is sense making that our value add is that we are able to interpret
#
the world and give some unique knowledge and insight to others.
#
So this is one form at a time.
#
So my thoughts for others would be that learn the craft to the point where it just becomes
#
invisible. And then after that, you're waiting for the insight.
#
So imagine like when you and I talk about everything is everything, sometimes like we
#
will just exchange three sentences and suddenly we'll say, blam, yes, that's an episode.
#
Because by now, we know the rhythm and the machinery of the idea that will kind of work
#
as an everything is everything.
#
And by now, we've played this many times and we know how to do it.
#
So my thought would be that the form should be so mastered that it becomes invisible.
#
Then, you know, you're playing chess, you're not even noticing the elementary calculations
#
that are going on. Then you're thinking strategically, you're playing on the board at a
#
deeper level. You're thinking about the position at a deeper level and not calculation.
#
Yeah, and that also syncs well with that advice that people give about habits, that if
#
you're trying to inculcate habits, do one at a time, because it takes about three months
#
of doing something constantly before it becomes that muscle memory habit kind of thing.
#
And then you can move on to a new habit.
#
But if on Jan 1, you make resolutions and you say, I will do these three things this
#
year, and you try to do them all together, you won't be able to cope.
#
So, you know, just kind of do.
#
But I'm also after something more basic that at first, cycling is a 100% CPU job.
#
Your entire brain is absorbed in trying to stay aloft.
#
Then you can't see the scenery and you're not thinking about other things.
#
Then the day comes where the motor coordination of the body is perfect and we are cycling.
#
And I'm just remembering that you have confessed a shameful fact about your life to me once
#
that you don't know how to ride a bike.
#
And then you can start looking at the trees and the stars and everything else.
#
So then you're playing at a different level.
#
Yeah, I mean, extremely privileged childhood, so I didn't have to cycle to school, as it
#
were. I feel a bit ashamed of it, but it is what it is.
#
And we've actually done an episode on cycling for everything is everything, because cycling
#
is one of my great passions, I mean, as a sport.
#
So please do watch that episode where I've tried to synthesize everything that I love
#
about the sport. As it happens, we are recording this on a Thursday, two days before the Jiro
#
de Lombardia, which is the last of the cycling monuments.
#
But the episode will come out on Monday when we'll already know the result.
#
But, you know, I'll go out on a limb and say it's probably going to be Pogacha.
#
So moving on to sort of another aspect that I want to double click on before we get to
#
biography, which is earlier you mentioned that it is important to give that time to
#
yourself for isolation and reflection.
#
Right. And I am wondering about how you structure that.
#
Like, there are times where I'll say that for the next one hour, I'm just going to
#
chill. I'm not going to look at my laptop.
#
I'm just going to and I'm surrounded by books.
#
Maybe I'll read something, maybe I'll think.
#
But then the time just passes and not much happens.
#
So when you speak about reflection, like, what is it to you?
#
Because a lot of my productive reflection just happens in those times where I am not
#
trying to reflect. It is not intentional.
#
You know, my mind is wandering and me too.
#
Exactly that. It's not systematized.
#
It's endlessly happening.
#
There's no clear way to put that up as a formal activity.
#
It happens invisibly all the time while we think we're doing other things.
#
Yeah, because I was just thinking if you calendarize things like reflection time,
#
mostly date night, and then the pressure just gets there and like, you know, what the
#
fuck do you do? Let's now sort of go back to the very beginning, as it were, to your
#
childhood. I want to know when you were born, where you were born.
#
Tell me about your early childhood.
#
You can even give me prehistory to your family if you have some guest room.
#
Yeah, my life story is very much located in the prehistory of my family.
#
My father was born in 1926 in Hyderabad, Sindh, which at that time was just, you know, a
#
It was an incredibly backward world.
#
The stories I've heard from his childhood are just like unbelievable, the kind of
#
things that happened in that world.
#
And he was a highly privileged person because his father knew English and his father
#
was a stenographer for the British Army, which was like, you know, a top one percent
#
I just meant that there was a certain modicum of human capital in his family.
#
He had an amazing story about how he got out of that background and turned himself
#
There was no school beyond class six in Hyderabad, Sindh, at the time.
#
And he was sent off to boarding school in Karachi.
#
And that boarding school happened to be right close to a British cantonment.
#
And the British cantonment had a bookshop and that was the turning point of his life.
#
That was the key breakthrough of his life, that there was a bookseller who was kind
#
enough to make an arrangement that my father could come to the bookshop and take a book out
#
in the evening and read it at night and come back in the morning and put it back.
#
And that was the incredible event that completely changed his life.
#
And just like you said, it was so difficult to find a Kurosawa in those days when you were
#
young in similar fashion.
#
This story comes from an age where mere access to books was something big.
#
So, you know, he got access to the great books of the world, the Edgy Wells and the
#
Communist Manifesto and so on, all those things.
#
And because it is so scarce, you value it more.
#
Yeah, you value it more.
#
And he had he somehow got started on that madness where every day into the night he'd
#
be reading deep into the night and then go back in the early morning, give the book and
#
then be back in boarding school.
#
When he was in 11th and Gandhiji started the Quit India movement, he had the level of
#
knowledge and alertness and connection to the world to run away from boarding school,
#
get on a train ticketless and come to Bombay.
#
And he knew absolutely nobody or nothing in Bombay.
#
So I asked him, what did you do when the train reached Bombay?
#
He said, I slept at the railway station because there was nowhere else to go.
#
So he was just like a kid at the railway station in 1942.
#
And there were no phones, there were no cell phones, there was no money.
#
So just imagine that level of imagination and risk taking and courage.
#
When I think of these stories, I think our lives are so tidy and ordered that, you know,
#
we need to let a little more madness into our lives and it would do us a lot of good.
#
So he had that kind of sense of the world and the risk taking that went with it.
#
Then in Bombay, he had to struggle his way up because there was no money and he had no
#
credentials, he had no education, he had no degrees.
#
He was just an 11th standard kid all alone in Bombay.
#
And gradually he found his way in that world and he moved out.
#
His prime attention was politics, his prime attention was the freedom movement.
#
And by 1946, he had drifted full on into the Communist Party.
#
And like many other people of that age, he was absorbed in that thinking, in that world.
#
And immediately after independence, Nehru banned the Communist Party.
#
So he went from a world of British opposition to the freedom movement, to post-colonial
#
India's opposition to the Communist Party.
#
And in parallel, he was doing odd jobs to make a living and attending some amount of
#
night school and working his way up through his education.
#
So everything was very slow in terms of building his formal credentials.
#
He was very clear that he always wanted to be an intellectual.
#
He wanted a job as an intellectual.
#
But while he had the Mozart instincts, he did not have the salaried credentials.
#
And so he was just struggling at the edges of life, doing odd jobs and doing mundane
#
things. So that's the kind of life that he built.
#
And he met my mother in 1955 and they had to elope three times.
#
So the first two times they got caught and he got beaten up.
#
And my mother's parents moved from Bombay to interior Maharashtra to a place called
#
So for the third time, my father, bracket zero money, found his way to Parli Vajanath
#
and figured out a third elopement.
#
And by this time, there were dire threats that if you dare come back and trouble our
#
daughter, then, you know, terrible things are going to happen to you.
#
So in the third elopement, they ran and they ran and they never stopped running till
#
they reached Banaras and they just hid out for a year.
#
And then they came back to Bombay.
#
So this is the kind of drama of my father's life.
#
And it gives you a flavor of the person that he was a happy, large hearted, risk taking
#
person with the courage of his convictions, who would do things that he believed in.
#
He cared deeply about the world and he rolled the dice with his own life over and over
#
in doing the things that he thought were really important.
#
And so through time, he worked his way up into a PhD at the Bombay University, always
#
working night school, taking exams slowly.
#
So he was very, very late.
#
I seem to think he got his PhD in his late 30s because he just never got the time and
#
focus to get it done like a privileged young person is able to.
#
And he built his career as an economist.
#
In 1976, he took the plunge and he did entrepreneurship.
#
He started an organization that is the Center for Monitoring Indian Economy, CMIE.
#
And for me personally and my sisters, we grew up with him and we got that life of books
#
and a sense of the world.
#
We lived in a house surrounded with thousands of books.
#
And also in the modern age of the Internet, we don't adequately realize how there was
#
a scarcity of access to a sense of the world.
#
So we were very privileged in that.
#
We had four newspapers in the morning, the Economic Times, the Financial Express, the
#
Times of India and the Indian Express.
#
We had two newspapers in the evening.
#
We had the Financial Times and the International Herald Tribune as physicals.
#
OK, we had the Newsweek and we had the Foreign Affairs and we had the Scientific
#
American. OK, so this was our media diet.
#
These things came to our house regularly.
#
And that's just amazing.
#
Like I grew up reading Scientific American and Foreign Affairs.
#
So I just have ancient memories of all these things and, of course, lots of books.
#
So you've seen a lot of the things that I know how to say in Everything is Everything.
#
And I think like the bulk of what I do in Everything is Everything was all the childhood
#
stuff. So The Fat Frogs of Tatsin's Kaya Airfield is a childhood story to me.
#
It's my father told me the story.
#
So these are things that are memorable and you'll never forget.
#
So I was reading all this stuff as a child and I just picked up these things.
#
So I remember there was an ancient Scientific American where there is the first design
#
work of the GPS. So at the time, the GPS was just a space system for defense
#
applications, no civilian applications.
#
But here I was reading the article, understanding a bit about what is this thing
#
and how it works and the role that general relativity plays in making GPS work.
#
I just got all these things as a child.
#
So my father would speak to us.
#
Dinner time was sacred.
#
My sisters and I would be at the dinner table and he would tell us stories about the
#
world. And we got a great deal of conversations about how the world works and what is
#
going on. His interest was always the world.
#
It was not practical little detail.
#
It was the grand things.
#
So things like the Russian invasion of Afghanistan was like, you know, top attention
#
of what is going on. Why is it going on?
#
Things like that. And in 1976, he started CMIE and I got an incredible exposure in
#
that period like a first person shooter because I was talking with him through all
#
that as a child bracket.
#
So please don't overestimate my cognitive capacity.
#
I was 10 years old, but I was with him till 1983.
#
So I left home in 1983.
#
So I was with him from 1976 to 1983 for seven years.
#
But for seven years, I talked with him every day about everything that was going on in
#
that startup, which was CMIE, which was a mixture of principles and practicality that
#
it is a for profit business.
#
It had to make ends meet.
#
There was no support of philanthropy or grants or anything.
#
It had to stand on its own feet.
#
So there was a business side to it about how you build and sustain an organization.
#
But there was a dream inside it.
#
CMIE is not a normal startup.
#
It was never a valuation story.
#
It was never about what will you sell it for.
#
It was something you do because we want to build better information about this country.
#
My father was an economist who was sick of bad measurement in India, and he understood
#
that the choke point in India is just information that you need to measure India better.
#
We should come back and talk about measurement as a theme later.
#
But that was the dream.
#
It was being done in a spirit of service and it was being done for a deeper reason,
#
And I got that. I got that whole experience of being with him in building a for profit
#
organization that had to exist and be there and meet payroll every month, and at the
#
same time, pursue a dream and have a sense of purpose about what we are doing in this
#
world and why we are here.
#
So this was my early story with him.
#
And, you know, in many ways, he established the foundations of what I've done for the
#
rest of my life. So everything that I do is because of him.
#
I know it sounds childish that, you know, I'm an old person today, but really it started
#
there. I left home when I was 17.
#
So, you know, I probably was sentient when I was 10.
#
So basically, I got seven years with him or at most eight years.
#
But everything happened there.
#
I got the dreams of the 20th century.
#
He was deeply connected into the great story of the 20th century.
#
And I understood something about this whole passion, this whole drama of what it is to
#
build a great civilization in the 20th century.
#
I was there to some extent myself, because, you know, in my life, many events evolved,
#
including 1989, the fall of the Berlin Wall.
#
But because of him, I actually felt that sweep of history.
#
I felt that we are here for a bigger purpose.
#
I'm just thinking aloud and thinking aloud about what it means to aspire and to travel.
#
Like when you speak of his journey when he was so young to join the Quit India movement and all
#
of that, I am also sort of reminded of V.P.
#
Menon. I did an episode with Narayani Basu and V.P.
#
Menon, and we've spoken about his story on everything is everything as well, where, you
#
know, when he's 11 or 12, he burns his school down because they treat him badly.
#
So he literally burns his school down.
#
He runs away. He goes to the mines at Kolar and he works in the mines at Kolar and works his way
#
up. And then he makes his way to Delhi.
#
And then the career just unfolds.
#
And at one level, there is a selection bias because these are the kind of stories we will
#
remember. Extraordinary stories at another level.
#
I'm thinking that if you want to escape your circumstances back in those days, you had to do
#
something extraordinary. Like today, a young person who is in a city in India who aspires, even
#
if you're poor, there are things that don't require such outrageous journeys that don't require
#
you to burn your school. You know, your dad became an entrepreneur when he was 50, more or
#
less. Right. Whereas if he was a 15 year old today, I think he would become an entrepreneur
#
when he was 15, perhaps, because that spirit is taken care of.
#
Whereas in those days, there was there was no outlet.
#
There was no way out. There was no escape.
#
You had to kind of get up and go.
#
And and therefore, I'm wondering if that there is fortune there also.
#
Fortune not in the human capital.
#
One might be lucky to have that your grandfather taught English and that he got access to books.
#
And those are, of course, good fortune.
#
But there is also, I think, a certain good fortune in having a certain trait of character,
#
which makes you like that, which makes you open, which makes you a positive person, which to
#
some extent, I think is inherent and to some extent can be an act of intention, but largely
#
inherent. And and I think that also helps that, like when you describe him, it seems a lot
#
in a sense like you're describing yourself, that that optimism, that openness, that willingness
#
to trudge out and, you know, so and I'm kind of thinking aloud here, but what is your sort
#
of sense of that? Because in that sense, you and your father, you shared some of the 20th
#
century, but you lived in entirely different worlds.
#
Yeah, I want to say this in a couple of different ways.
#
I feel unhappy about the normalization of modern life and modern activities.
#
I would like to say to each of us, pick yourself up and kick yourself in the butt and dare
#
to dream and do crazy things, because actually all this is there in front of us.
#
OK, so this sounds like self-help books, but it's true that, you know, if people from that
#
world, some people from that world with so much hardship and so much adversity and like
#
literally no safety net, there was no ladder that was visible and you had to make your
#
own ladder. And the cost of failure was tremendous.
#
When my father eloped with my mother, he was physically beaten up by goons.
#
OK, that was the price of seeking true love.
#
And I would say to everybody that, you know, dare to dream, seize the moment, try mad
#
things, because actually we have so much more of a safety net today.
#
When my father ran away to Bombay, he had to come ticketless in a train because he had
#
no money for a train ticket.
#
And when he landed in Bombay, there were no phones, leave alone cell phones.
#
There was nobody to call you're all alone.
#
Today, there's so much support.
#
There is a safety net. You're able to make a call to somebody asking for help.
#
So I'd just like to say to everybody that roll the dice.
#
Try more. Try crazy things like take a break from the safety, the security and roll the
#
dice and try more difficult, more audacious things.
#
And the venture capitalist's worldview, which is for every 10 darts, one will work.
#
That's a reasonable description that let's find the energy and the hunger to throw 10
#
darts. So instead of like sitting and scrolling on other people's feeds, go out and do
#
something. So I feel I take a very positive message out of all that, that let's roll
#
the dice. Let's try many things.
#
And Lady Luck distributes her favor equally.
#
So one in 10 out of your mad ideas will work.
#
It will not be nine in 10. It will be one in 10.
#
So you have to be ready for nine failures.
#
If you don't try many, many things, none will work.
#
And you have to keep rolling the dice and stay positive and keep trying life.
#
So I feel that the access to resourcing and the access to safety nets that all of us
#
have in my normative world should be a call for more risk taking, not less.
#
And there's something odd about the modern culture and the modern media world where we
#
have turned ourselves to so much more of couch potatoes.
#
Now, I won't whitewash the extent to which my father was an outlier.
#
It's not true that everybody in 1926 was like that.
#
Most people lead lives of quiet desperation.
#
And that's all there is.
#
They carry their song to their grave.
#
But I just feel the basic issues are the same in all generations that you can lead a normal
#
life or you can go roll the dice and do something amazing.
#
And those choices lie in front of all of us.
#
And it would be good if we will try a little more on entrepreneurship at 50 versus 15.
#
I think that there is evidence in the United States.
#
So watch one number carefully.
#
The probability of a successful firm conditioning on the age of the founder.
#
And that peaks at age 50.
#
So it's actually precisely at age 50 that we talk more about the 20 year olds who make
#
We know how that worked out versus we talk less about the startups by a 50 year old.
#
By age 50, my father knew this shit.
#
And that is why the odds of winning were higher.
#
So I'm not a great fan of very young people going and starting something.
#
It's really turned into a pathway for acquisitions of technology by larger companies while
#
imposing very high burdens on younger people.
#
But that's a separate story.
#
I think that it is wise to do things later.
#
And late in my life, Susan and I became entrepreneurs and we started XKDR forum.
#
And that was actually quite late.
#
I was all of 56 when we started.
#
So I have thought about this that in a way I had all the privilege and I could have it
#
would have been relatively easier to start something younger.
#
I have my own reasons at every step.
#
There was always the decision of stepping out and starting something new.
#
And there were many, many options and choices at several points.
#
I was offered things through which one would have started something new.
#
I had reasons for staying in the groove and you will see when we talk about the story.
#
I feel like each step there was a great reason to do what I was doing.
#
And then came the moment and I happened to think that it was a good moment, a sensible
#
moment, but I started relatively late.
#
Susan and I were both 54, 56, 54 when we started XKDR forum.
#
And I think that is merit in that level of wisdom and calm and knowledge.
#
And we know how to do it.
#
And you have the human relationships to be able to pull it off.
#
So I'm not a great fan of what happens in the modern startup world.
#
And you have to admit then that I have chosen just the right age to start life lessons.
#
And even everything is everything for that matter, though they are not ventures.
#
But I often say they are there's no question.
#
So you are putting in your own equity, you're putting your time, you're putting your
#
passion. Money is not the thing.
#
You know, money is easy.
#
The really, really hard thing is the energy, the passion, the risk taking, the fear of
#
falling, of putting yourself out there and saying, no, hell with you.
#
Here I am. This is my product and the lifetime of learning.
#
You know, so before I double click on your dad, which I want to do much more, I want
#
to talk about your mom.
#
Tell me about your mom, because one thing that, you know, more and more when I think
#
of, you know, women of that time, they are even more constrained.
#
They're completely constrained.
#
In a sense, they are imprisoned in a setup where, you know, they can do some things,
#
but not as many things as your dad.
#
Your mom could not have run away at 11 and joined the freedom movement.
#
Your mom could not have, you know, had the audacity to land up in Bombay and sleep on
#
the platform without knowing anyone.
#
And throughout her life, her options in terms of career must have been incredibly
#
limited. And I think what happens too often is that many of us for almost all our lives,
#
even for some people, look at our parents as parents, like we have an image of them
#
when we are a kid that they are a parent, mother.
#
It is a role. It is a particular thing.
#
And we never revise that.
#
And hopefully, as we get into adulthood, we begin to look at them as actual flesh and
#
blood people with desires of their own, with frustrations of their own, with narrative
#
arcs of their own, not, you know, that little box into which you had placed them.
#
So from that perspective, sort of tell me about your mom, because in one respect, what
#
she did in eloping with your dad three times is as audacious as your dad running away to
#
join the freedom movement.
#
I mean, it is her freedom movement also, in a sense.
#
So tell me a bit, tell me about her.
#
They were mad people, you know, you have to respect the things they did.
#
My father once told me that their story was optioned for a Hindi movie and the movie
#
never got made, but it got to the point of being optioned.
#
She was very young when she met him.
#
Let me remember, she was 19 when she met him.
#
There were a very high age gap.
#
And then she went through this whole drama with him.
#
And after marriage, she had us, we were four children.
#
So that was quite a handful.
#
Once again, four children, very low resources.
#
So everything was difficult.
#
And it was also in India that was difficult.
#
So you had things like milk shortages.
#
So the everyday elementary stuff of life was very hard.
#
She worked her way up to education with undergrad and master's degrees
#
while she was bringing us up.
#
And she never really got back to a full blown professional career.
#
She helped out in CMIE in small ways once it got started.
#
But she was not an important part of its creation.
#
So in some sense, her life energy was consumed by us, that she built us,
#
she made us, she made my father and she made the four of us.
#
And that was the way it worked.
#
I was not ready to speak with her in a new way for a very long time,
#
because exactly as you say, she was occupying a JD, which is called mother.
#
And you don't talk to the JD called mother.
#
And much later, she had terminal cancer.
#
And we knew that there was no way out.
#
And she was only on the painkillers that would be palliatives in the end game.
#
And that was one of my considerations for exiting at the Ministry of Finance.
#
And I thought I'll be back in Bombay a little more
#
and I'd be able to be with her in the end game.
#
And it was unpredictable.
#
We did not know when the end would come.
#
And it was just a funny day of my life.
#
It was my last day at the Ministry of Finance.
#
I was taking my boxes, loading them into my car.
#
And when I reached my house in Delhi, I got the call that she died that day.
#
So I never really got the time to be with her properly at the end.
#
I wanted to ask her many questions and write down many stories.
#
I never got that opportunity.
#
What questions would you have asked her?
#
I wanted to, with my more adult mind, I wanted to hear her story from age zero.
#
And I just never got that opportunity.
#
Let's go back to talking about your dad.
#
What I also find fascinating about him is that when people go on adventures
#
or when people go on journeys, it lasts for a while,
#
but then they can anchor themselves to something.
#
Let us say a young boy goes out to make money, something works, he makes money,
#
but then he is anchored to that and he is in that group forever.
#
From an outside, it seems to me that that was not the case with your dad,
#
that your dad goes to join the freedom movement with all the fervor of it,
#
guided by that one core principle of freedom
#
and that one core anger at the subversion of the British,
#
but then joins the Communist Party.
#
And I would imagine that it's convenient then for him to be the rest of his life
#
within that tribe that he has now found for himself.
#
But he moves on from there as well.
#
You know, he is a one who presumably brings Friedman and Hayek to you much later in life.
#
Give me a sense of his evolution through his journey,
#
both in terms of the intellectual evolution itself,
#
but I guess that intellectual evolution would be tied in to what is happening in his life
#
and to the story he is telling himself about himself.
#
Like, what is that story? What's going on there?
#
So a couple of different things.
#
He was in modern jargon. He was a humanist.
#
He cared deeply about people. He cared deeply about the world.
#
My sister Shobhna tells the story where he would wake up in the morning
#
and he would read a newspaper story about inflation and he would be disturbed all day.
#
He was connected to the world deeply.
#
He just had this deep empathy for what was happening in the world.
#
It was not just a game. It was real. It was real people.
#
And then he was deeply connected into the misery of the 20th century,
#
into all the mass murder, into the communist and the Nazi experiments
#
and all the misery that they brought with them.
#
When you have lived in the 20th century, as I have doubtless said to you a couple of times,
#
you know that political and social catastrophe is always possible
#
and it is something you keep in your mind all the time.
#
I think it was Tony Judt who says that
#
if you are not comfortable using the word evil in a sentence,
#
you have not understood the 20th century.
#
So, my father was deeply plugged into what was happening in the world
#
and he understood the passion and the horror of building a society, of building a state,
#
of coming together as a decent society and that is not a given.
#
That is something that is going to come out of purposive individual action.
#
Each of us have to think and make the world.
#
The world is made out of all of us and it is not about our pay grade.
#
It is not made by Gandhiji and Nehru.
#
It is made by you and me every day.
#
The life that we lead makes the society and the country that we live in.
#
So, that was very much a sense of responsibility that how you live matters
#
and everything that you do and you say matters and then we are not cold spectators.
#
So, my father was a short person.
#
He was 5'6", malnutrition in childhood and all that.
#
I remember we would be walking on a street and several times I have seen this myself.
#
There would be two people brawling on the street.
#
Maybe one of them is drunk or for whatever reason one guy is angry
#
and there is a screaming match or there is physical violence.
#
My father would always walk up to them and interpose himself between them and say,
#
you should stop fighting.
#
It was just that kind of character.
#
He would, it was his job.
#
There would be 100 spectators where people are beating each other up.
#
My father would be the one person who would walk up from the pavement
#
and go in the middle of them and a couple of punches would land on him
#
and he would separate the two.
#
That was his sense that it is my responsibility.
#
You know, I have to do it, that I have to be good in this world
#
in a thousand small ways and it all adds up.
#
So, you have to be thinking of the grand and you have to be thinking of your everyday.
#
And so, all these practical decisions that we make every day in living,
#
they matter and the world casts a light upon our everyday.
#
And he found energy from that.
#
And you know, I think for you also, for me also,
#
it gives us energy about why are we here?
#
Otherwise, you know, why would you wake up every day and run hard at life
#
if you don't have something bigger to live for?
#
So, I think this goes back to Aristotle that
#
the reason to live is you got to be part of something bigger than yourself.
#
And he found his purpose from the world and its place in it.
#
I also want to know about the role that intentionality plays in this.
#
Like you and I can talk about purpose
#
and you and I might feel at different times that we are full of purpose.
#
But most of the time we slip into a default groove
#
where we are just going with whatever we are doing during the day.
#
So, we are not burning with that purpose throughout.
#
A lot of things we do in kind of automatic mode that way.
#
And I sort of wonder then about
#
how much you can shape yourself by an act of intentionality
#
where how much you can, you know, make an effort to keep that purpose upfront
#
and say that, okay, everything I do is informed by this.
#
What were the things that he was intentional about?
#
Because I imagine that going through life
#
for someone who's come from where he has
#
and does not take anything for granted,
#
not just a lesson of the 20th century, but his own life lesson in a sense.
#
For a person like that, there would be intentionality
#
in the things that he did, in the kind of husband he was,
#
in the kind of father he was,
#
in the way he treated his co-workers at his startup, all of those things.
#
So, give me, I mean, I feel like this will give me
#
a better sense of both his values and his practices.
#
So, I think it's shades of grey.
#
All of us have to balance the mundane and the ethereal.
#
So, we all brush our teeth and, you know, there's no running away from that.
#
And there is no higher purpose in brushing your teeth
#
other than like having nice teeth.
#
So, that's good and appropriate and noble.
#
We make choices at bigger things and then we make trade-offs to keep it going.
#
So, for example, entrepreneurship, okay?
#
So, you had to meet payroll every month
#
and that imposes a certain discipline, a certain rhythm.
#
And there are things that have to be done to maintain the organization.
#
So, there is a dream of what is CMIE,
#
that CMIE is the dream of a private high-quality statistical system
#
that will do measurement of India that is better than what
#
the low-state capability government organizations do.
#
Okay, it is a high bar, it is a crazy dream.
#
But then to live that dream, you have to do very many practical things every day.
#
So, I think all of us, we juggle these things.
#
Because my father came from this kind of underprivileged background
#
and he never got that formal track of like a proper university education.
#
So, see, I was born with a silver spoon.
#
I attended IIT Bombay, I got a PhD in economics.
#
So, like that, by late 20s, I was finished with all formal education
#
and I had a good-looking resume to show people.
#
And the world contains credentialism.
#
So, I think credentialism is dumb, but the world contains credentialism.
#
So, my path got eased to that extent.
#
His path was not eased.
#
He was an uneducated person with no fancy credentials
#
and working his way up in the world.
#
And I am struck by the way I feel that he did not feel bitter
#
and it did not spoil him as a person.
#
So, I know there are others who carry that sense of insecurity
#
and irritation about having been mistreated, as I know they are.
#
So, I have no shred of optimistic views about the world.
#
The world is mean, the world is cruel and there is credentialism in the world
#
and the people lacking in formal credentials will be repeatedly mistreated.
#
So, over the years, it goes away.
#
But for a long time, people are mistreated.
#
And I felt that my father had a sense of purpose about his place in this world
#
and what he's trying to do and he believed in himself
#
that he never got either bitter or low on optimism
#
because other famous people treated him as a lightweight.
#
I think it is Eleanor Roosevelt who said
#
that nobody can make you feel inferior without your own permission.
#
It was like hell with you. Here I am.
#
I'm showing up every day and I'm going to try this.
#
And so, he was a happy, laughing person doing life with all energy.
#
There were so many people with more fancy credentials
#
who did not start CMI and he did like that.
#
So, he had that happiness and the strength of character
#
and the self-belief to be able to do it.
#
So that even though he was doubtless snubbed and treated badly,
#
innumerable times by the more credentialed establishment,
#
it never turned into insecurity or bitterness or irritation by him.
#
He would go at life with full energy and full passion.
#
And I feel that's something that I take away from him.
#
And actually credentials don't matter at all.
#
It's the biggest bullshit in the world.
#
So finally, it is we who have to show up every day
#
and find the energy and the enthusiasm to do things.
#
So, I would like to just say to everybody
#
that it doesn't matter what lines are there on your resume.
#
It only matters what energy and what passion you bring at life.
#
I used to think that this is the way you reassure me
#
because you of course are IIT, PhD, I am nothing at all.
#
But was it an advantage for him that he was an outsider?
#
And therefore, he has a broader view of the world.
#
He is not constrained by conventional thinking.
#
He can dream dreams that they may not have the courage to dream
#
or even the ability to imagine.
#
I feel that at one level it's a lemon that I am an outsider
#
in every field that I have kind of touched.
#
I am not really a part of, I am not an insider anywhere.
#
But being an outsider allows me to look at it differently
#
to bring other frames to bear, etc.
#
So, certainly one thing that he did not become an academic
#
in a university job, which would have its own consequences
#
in terms of the skills that one acquires.
#
If he had gone into that life, it would have been harder
#
for him to make the leap into entrepreneurship.
#
And because he was out in the world owing to the lack of credentials,
#
he picked up more knowledge and the capability and the insight
#
which led to the creation of CMIE.
#
So that's one direct line in the fashion that you described.
#
That he got to the ability and the confidence to build CMIE
#
partly by virtue of being the outsider,
#
of being the less credentialed one.
#
The second part that I don't know, but I'm just going to guess and think
#
that it may well have been that there was a main establishment
#
that was thinking in more conventional ways
#
and there were debates and there was a high table
#
from which he was more excluded.
#
And then he chanced upon his unique subversive insight
#
that, you know what, the measurement's the thing.
#
For most people, you're supposed to just be a supplicant
#
and accept government data and wait for a hundred years
#
for the Indian state to develop a state capability
#
in economic measurement.
#
Whereas it was his subversive idea that measurement
#
is actually the heart of it.
#
There is a line from Alan Greenspan many, many, many years later.
#
And when I read it, I burst out laughing
#
because I basically just reminded me of my father
#
where Greenspan says something like a little better economic measurement
#
would do a lot more for economics than a boatload of more theory.
#
So Greenspan also felt the thing that I know my father felt
#
that the choke point is the measurement,
#
that we just need to do more on measurement.
#
We are fighting over basic facts.
#
It's not the choke point of theory.
#
It is the choke point of facts and that our job is to build facts.
#
He was well plugged into the history of science
#
and an understanding of the scientific methods.
#
And the story he used to tell me was based on Kepler and Tycho Brahe and Newton.
#
Tycho Brahe was this mad Danish count who lived on an island called Uraniborg
#
where he spent his entire life assembling a data set.
#
And all he did was he did measurement
#
and he built the world's first high quality data set
#
about the movement of the planets that improved
#
on the data that was known at the time of Aristotle.
#
And he gave that data set to Kepler
#
who was the statistician that found empirical regularities in that data.
#
And then those empirical regularities were used by Newton to do theory.
#
And this story was very clear in my father's mind
#
that this is the journey of progress.
#
This is how you make progress.
#
First, you do measurement.
#
First, you just need to know facts about the world
#
because when we don't know the facts,
#
each of us will make do by imprinting our vision of the world
#
and our values and our likes and dislikes
#
and a whole bunch of impressionistic information is lined up,
#
is marshaled to support our priors about the world
#
and make us feel good about ourselves
#
and make us believe that we have understood the world.
#
Whereas good data is magic.
#
It forces us to wake up and say,
#
no, on this we are wrong.
#
This is not how the world works.
#
And it also creates a shared vocabulary.
#
Otherwise, your facts and my facts are widely divergent.
#
How can we argue with each other?
#
The modern predicament of alternative facts
#
and the polarization of the political discourse
#
is exactly the state of physics a la Aristotle
#
where you have incredibly noisy data.
#
So you can believe that the earth is the center of the universe
#
and there are epicycles and the planets rotate around us.
#
You can believe like Copernicus
#
that the earth rotates around the sun with epicycles
#
and the data is so bad that you know what?
#
All these sound reasonably good.
#
It is only data that changes the debate
#
and Taiko Brahe gets us to Kepler where we think,
#
And then once you figure out they're ellipses,
#
no, there is absolutely no question.
#
It is the earth that goes around the sun
#
and not the other way around.
#
So this was the sort of dream that he nurtured
#
I don't know this because I did not have this level of conversation.
#
It could well be that this came easier to him
#
because as an uncredentialed person,
#
he was likely excluded from the high table.
#
I'm just guessing that that's inevitable.
#
That's how the world works.
#
Let's talk about his intellectual evolution.
#
What did he learn about the 20th century that he taught you?
#
His journey in the 20th century was to start out
#
at the Indian freedom movement
#
and then to get swept away into the idea of communism.
#
And he was deeply well-read in all those things.
#
And he's my source for a sentence I've often said to you,
#
which makes you wince every time,
#
but I always say that Karl Marx was one of the great thinkers of the world.
#
And you have to recognize that in that time, in that place,
#
his insights into capitalism and globalization were remarkable.
#
Almost everything he thought about the world
#
on how to change things was wrong.
#
There is no telling the amount of nonsense
#
that was there in his prescriptive claims about the world.
#
This whole noise about the inequality,
#
the pickety that is found in Marx,
#
the idea that capitalism is inherently unstable
#
and will go from one crisis to another,
#
the idea that the government has to do this,
#
the government has to do that,
#
the idea of government ownership,
#
that stuff is all wrong.
#
But there are deep insights there.
#
And when you place it in the journey of ideas
#
from Adam Smith to Ricardo to Marx,
#
there is incredible knowledge there.
#
And he knew that stuff and he respected it.
#
And he gave me those things.
#
Like the other great thinkers of the 20th century,
#
he moved away from the Marxist idea
#
when he started understanding the horror of the USSR.
#
These things happened with a lag.
#
So you will remember there is a book,
#
Socialism, the God that Failed,
#
with a whole bunch of people like George Orwell
#
and Arthur Koestler who wrote in that book.
#
And these things came to him.
#
And the 1953 Khrushchev speech was a very big thing.
#
By the way, these things came with a lag.
#
because many people dismissed
#
the western reporting around the Khrushchev speech at first
#
So it took time to digest what was said.
#
And then the publication of Solzhenitsyn.
#
These were all very big events.
#
One day came out and my father read it.
#
One day in the life of Ivan Denisovich.
#
One day in the life of Ivan Denisovich
#
by Alexander Solzhenitsyn.
#
And then it was his foundational humanism that
#
no, that's not what we did this for.
#
So we're not in this journey to create this horror.
#
In parallel, he exited the Communist Party full time in 1955.
#
And through the 60s, he had the wit
#
to look at the emergence of the socialism of the Indian state
#
and start understanding that this isn't working.
#
That this license permit Raj
#
is the destruction of private sector dynamism.
#
He lived in Bombay all through.
#
He was never a part of the Delhi establishment.
#
He never held a seat of power.
#
He never became an official.
#
He never became an advisor to government.
#
That helped because he understood that the greatness
#
and the energy of a country lies in the private sector,
#
And you have to nurture that dynamism.
#
And I remember by the time 1976 when Free to Choose came out,
#
he was 100% there on that thinking.
#
And Free to Choose for him was a book that I could understand.
#
So I vividly remember that he knew these things
#
and he knew them deeply.
#
And when the book came out,
#
it wasn't that the book shifted his point of view,
#
but he said, this is a book that you will enjoy and understand.
#
And so as a 10-year-old, I got Free to Choose
#
and we got to talk extensively about it.
#
So I know that that was the journey.
#
1955 was the exit from the Communist Party
#
and 1976 was Free to Choose.
#
So over these 20 years,
#
he fully walked out on the state domination view completely.
#
That is not the idea of communism,
#
not the idea of a developmental state,
#
the idea of development economics,
#
the idea of Indian socialism,
#
the idea of central planning and license permit Raj.
#
And there is a Bank of India designing a financial system.
#
It was fully out of that by 1976.
#
So that was his 19 years of journey.
#
And again, when I look back, I just say,
#
wow, all his friends were in the Communist Party.
#
He lost his human network.
#
He lost his friends because they said, what happened to you?
#
So some things lost and some things gained in living every day.
#
And he lived that life.
#
And again, it was a life of deprivation.
#
It was not a life where he had the resourcing, the jobs,
#
the human networks, the ability to attend conferences.
#
He was never invited to conferences, things like that.
#
And he just had that commitment, the humanism.
#
Similarly, I so vividly remember 1976 and the emergency.
#
At first, we were in Bombay and so we were a little distant.
#
We actually did not know facts about what was going on.
#
And it was milder and it was okay.
#
The first time he visited Delhi after the emergency,
#
he came back home and he said,
#
people are scared to talk to each other in restaurants
#
and people absolutely shut up on telephones.
#
And his position was simple.
#
We did not do the freedom movement for this.
#
It was just simple, black and white.
#
That in an environment where there is an environment of fear,
#
where people don't talk openly in restaurants,
#
where people are afraid of criticizing the government,
#
an environment where people are careful about what they say on phone,
#
That is not why we did the freedom movement.
#
And in a flash, he knew that the emergency was wrong
#
and we had to get out of this as quickly as possible.
#
That foundational humanism and the dream
#
of what are we trying to do?
#
We're trying to build a decent society.
#
And the drama of the political ideas of the 20th century
#
was about finding a means to that end,
#
And so a 1953 speech is sufficient
#
to repudiate the idea of the USSR.
#
You just quoted from both sides now.
#
Did he introduce you to Joni Mitchell?
#
What was his cultural artistic life like?
#
We were poor, but he had this idea
#
that you never cut corners on the cultural materials.
#
So we had a record player at home in those days.
#
It was mono, it was not stereo.
#
And we had a record player at home and we would buy LPs
#
and we would buy books.
#
And for most of his life, not by the time I came along,
#
but for most of his life,
#
he had a running line of credit with the bookseller.
#
So there was a Badri Kaka who was a bookseller,
#
who was basically the drug dealer who would sell my father books
#
and maintain a line of credit.
#
And my father would pay for the accumulated balance
#
of books that had been purchased
#
and not yet paid for every month.
#
So that was his credit relationship with his bookseller
#
because that was the only way he could buy books.
#
By the time I came along,
#
we could afford to pay for books on spot
#
and we could afford to pay for music on spot.
#
And so basically the philosophy was
#
we will be frugal in everything else,
#
but we will never cut corners on buying records
#
And so I grew up in a house with a record player
#
and just lots of great music.
#
His world was Indian classical music
#
and Western classical music and Hindi movies of that age.
#
And so I just grew up around these things
#
and he never knew modern Western music.
#
So I never got that from him.
#
But my good friend Suresh Vyas will say that
#
I learned something deeper about music through that upbringing.
#
I learned something about the grammar of music.
#
And so then I was ready for all the other journeys
#
that I went through in music later in life by myself.
#
You know, I think what we're trying to do
#
with our course life lessons is something akin to,
#
in a sense, what your dad did for you.
#
Like what we're trying to do is we are saying
#
that there are things that we learned
#
on a 30 plus year journey through life
#
or a 40 plus year journey through life.
#
And we are now trying to synthesize them
#
and make it easy for you to kind of pick up some of those.
#
And I think in a much deeper and fundamental way,
#
that he lived through those years of the 20th century.
#
He gets all his lessons by doing.
#
He understands the power of economic freedom
#
and why firms are important,
#
not through a book or not through somebody telling him,
#
but by actual lived experiences,
#
by seeing how the way the world works
#
and being open enough and intellectually honest enough.
#
And then that accumulation of experiences
#
within a few years of father-son interaction
#
in very innocuous ways, you know, informs,
#
you know, your thinking about the world
#
and shapes your foundations.
#
So give me a sense of that because
#
at the time, obviously, you're just a kid.
#
Cool books, cool things.
#
Your father's telling you cool stories.
#
Later on, when you look back in hindsight,
#
That's the foundation of the world
#
that this is what the 20th century is like.
#
This is what science is like.
#
This is what Tico Brahe did, you know,
#
and what Tico Brahe did when you're a kid
#
Today, it is fucking the center of everything, right?
#
So give me a sense of that sort of learning.
#
You know, give me a sense of that.
#
So first, it happened through time.
#
So for parents, the message is you have to put time,
#
that dinner time was sacred.
#
We would all have dinner together on a dining table
#
and we would talk about the world.
#
So that was just the way he was.
#
He was not interested in practical things.
#
He was interested in the world.
#
So the excitement every day is to talk about
#
what happened in terms of something in Bombay and Delhi
#
and in Washington, D.C. and so on.
#
And I already described our media diet.
#
So we were just getting access to the whole world.
#
And also, there was a spirit of conversation
#
and it was always about arguments.
#
And I remember vividly when in 1979,
#
so that would be when I was 13.
#
In 1979, the Soviet Union invaded Afghanistan
#
and we just exploded in arguments and ideas around that.
#
And I had a whole set of claims around military theory
#
that I claimed that this was going to work.
#
And my view was that they were going to win
#
and it was going to work.
#
And his view was, no, it's not going to work.
#
And we argued with each other and he said, write a paper.
#
So he said, sit with your typewriter and write a paper.
#
You were 13 years old and he asked you to write a paper.
#
It was the first time I wrote down an argument
#
from first principles about why I think
#
the Soviet invasion of Afghanistan is going to work.
#
And I was wrong, but that's okay.
#
The point was that I got the experiences
#
of facing the world, facing an imponderable complex reality
#
and having that sense of participation
#
in the affairs of the world,
#
of thinking about them in real time.
#
And it was not that this is beyond our pay grade.
#
What are we doing talking about big things like Afghanistan?
#
No, it was treated as dead serious that we are here.
#
We are in this world and what we think matters
#
and it is our job to understand the world
#
and it is our job to have views and opinions
#
and always this mixture of a positive and a normative
#
with a prediction that is it going to work
#
and a normative view that what do you think
#
about the foreign policy of how the Americans
#
should be handling this, things like that.
#
So there was always this sense that we may be
#
some irrelevant father and son sitting in faraway Bombay
#
with no connection or involvement in anything
#
that is going on in the world,
#
but it is our bloody business to take interest in it
#
and devote effort and read everything about it,
#
read the news, read the current articles
#
in the foreign affairs that are coming out
#
about the invasion of Afghanistan
#
and develop a point of view and write.
#
And so at age 13, I wrote an article
#
which was never published, which never went anywhere
#
It might have been a blog article by a teenager,
#
pimply teenager sitting in a bedroom
#
and making claims about why the Soviet Union
#
is going to succeed in Afghanistan.
#
But the point is that's how I grew up
#
and I grew up around this stuff.
#
And again, what I love about the article is that
#
it's actually a damn good thing that you were wrong.
#
What is important is that you were thinking
#
about something and putting it down on paper.
#
And what I realized is that when it comes to writing,
#
we often pick up our sense of structure.
#
We always pick up our sense of structure
#
through osmosis from all the reading that we do.
#
And I would imagine that your sense
#
of how to structure an argument,
#
how to structure something that you're writing
#
would again be something osmotic,
#
both from the books and the magazines around you,
#
but also from the way your dad
#
would kind of present them.
#
I mean, we did an episode of everything is everything
#
on how to write a paper, which you gave.
#
And that's a structure arrived at for years
#
of working in the professional realm, writing many papers.
#
But give me a sense of the role that writing played on you,
#
the interplay between all of these,
#
because it seems that for the proper shaping of the self,
#
it is not enough to also read
#
and it is not enough to only talk,
#
but read, write and talk.
#
All of them form a triangle
#
where they're influencing each other,
#
Writing makes you a better thinker
#
because you are finding out things about yourself,
#
about the world, finding the holes in your argument,
#
the gaps in your knowledge.
#
Were you writing a lot?
#
Were you reading a lot?
#
I was not writing a lot.
#
So this Afghanistan article was an exception,
#
Mostly I was not writing.
#
What I was doing was the following.
#
So one is that we had an endless stream
#
of visitors and conversations.
#
And I was a curious bacha
#
and various people would come to the house
#
and my father would be talking with them.
#
And I would always sit in and listen.
#
And sometimes I would pipe up.
#
But it was a sense that the conversations of adults
#
are not to be held aloof and away from the kids.
#
It was not like kids will sit on their Nintendo
#
while adults are talking adult stuff.
#
It was a world where kids were sitting in the room
#
and hearing complex adult conversations.
#
we have understood that that is deeply important
#
to be in the sparring conversations is a great thing.
#
And then, of course, a lot of oral conversation.
#
So I think I got my oral articulation
#
out of debate with my father,
#
that from childhood I was arguing with him.
#
So I got the ability to think about an idea
#
and put it out in an oral argument
#
because of being with him.
#
The second funny thing that happened to me was
#
my father's English was not great.
#
So because he came out of this background,
#
he had a fair supply of grammatical errors.
#
writing was based on a stenographer and a typewriter
#
and there would be many errors.
#
And because of my growing up, my English was perfect.
#
So he dragged me into a role,
#
which I look back at with great happiness,
#
which is that he would dictate something
#
and it would get typed up
#
and it would first come to me.
#
So the first pass fixing of all his writing
#
And it was all done very seriously,
#
that you have to fix the damn errors
#
I am not giving it to you as an exercise.
#
You are a worker in the world of adults.
#
So this is unfashionable
#
and you can get cancelled for saying these things today.
#
But I think this is really very important
#
that you want that sense of participation
#
and involvement in the things that are being done.
#
And this is not just a puzzle
#
that is being given to you for your entertainment
#
or like a school assignment or something.
#
And so I read everything he was writing
#
with my complete concentration
#
and I would contribute improvements.
#
So it would always come to me, go back with my corrections.
#
It would go back to the stenographer
#
who would make the version two
#
that would go back to my father.
#
For the next stage fixing up.
#
So I got an incredible exposure
#
to all his important writing
#
and I got to talk about these things with him
#
and I got to read them.
#
And you can imagine the level of focus
#
because you've been told the serious work
#
of finding grammatical and typographical errors
#
that are spelling mistakes.
#
You know, these are very serious things
#
But it was these kinds of things
#
that I think got me going
#
and really got me to have unreal levels
#
of knowledge and insight.
#
I have a funny story on this.
#
Many, many years later,
#
I was in a room with Chitra Ramakrishna
#
and something came up about trading of government bonds
#
and somebody was asking about the legal framework
#
and I said something like
#
government bonds are deemed listed.
#
And everybody looked at me and said, what?
#
And I did not know why I was saying
#
I had unearthed something from my head
#
which I may have heard 10 years ago, 20 years ago
#
something happened somewhere
#
and I just remembered the sentence
#
that government bonds are deemed listed
#
and it actually turned out to be correct
#
you don't need to make a listing of government bonds
#
they are listed automatically
#
on every exchange in the country.
#
So I picked up endless fragments
#
of little facts and knowledge
#
and now my memory is not as good as it used to be.
#
You have seen me struggle to recollect things
#
but when I was small, I had the memory of an elephant
#
so I just basically drank everything
#
and I remembered everything.
#
So I constructed a database
#
and I had a reasonable inference engine.
#
So Kelkar always says that the essence of life
#
is building a large database
#
and then having some wit to manipulate it
#
and pull up the right things at the right time
#
so that kind of thing happened to me.
#
But I also want to go off into other things.
#
So as an example, because of my father
#
I got the Jim Corbett books
#
and I just took off and I went mad about nature.
#
So as a child, I was reading everything.
#
I was reading books from Africa.
#
I was reading books from India.
#
I was reading biology books.
#
I was reading natural history.
#
I was a full-blown naturalist.
#
I was interested in the frogs and the bees
#
and the algae and everything.
#
So for example, I never got to visit Corbett National Park.
#
I never got to visit Jim Corbett's house as a child
#
but we got the books and it fired my mind.
#
It drove me crazy with the dreaming and the imagination
#
and I believe that is what set the stage
#
for me to start venturing into the mountains
#
because I was just full of that craziness
#
of being out in the forest and in the mountains
#
and everybody should read Jim Corbett's books
#
because it's unput downable
#
and it's a dream about what it means to be human
#
and to be connected to the world in that fashion.
#
So I think I've told you my story
#
about how I actually started hiking.
#
I was 13 or something and I was at a book fair
#
and at the book fair, I stumbled on a book
#
Trek the Sayadris by Harish Kapadia
#
and that book contained a half page about each hike.
#
So just a little bit of a high-level description
#
about each hike and a bunch of people
#
from Patrakar Society in Bandra East.
#
We got our heads together and tried to go out
#
and climb one of those mountains
#
and we failed miserably and we mostly got lost
#
but that's how it started
#
and when I just look back at all the pieces
#
so partly it was like Jim Corbett
#
that made me ready to trek the Sayadris
#
then the book and then something about the risk taking
#
and being venturesome and saying
#
you don't know diddly squat
#
and there's nobody who's ever hiked in the Sayadris before
#
and a bunch of boys and I was all of 13.
#
We went out into the Sayadris
#
and tried to climb something and got lost
#
and I think that's good.
#
Amazing you know you just spoke about
#
how your memory is fading.
#
I should tell general readers
#
that if they go to the latest episode
#
of Everything is Everything episode 68
#
there's a beautiful bit that I didn't want edited
#
to be made clean but you know just to stay as it is
#
where you forgot a name
#
and then I asked you do you want to look it up
#
do you want to search the database
#
and then you like kind of pointed at your head
#
and said I'm looking it up
#
and then after a couple of seconds
#
and the database search was complete
#
and luckily your CPU was working properly at that time.
#
I want to double click on hiking a bit.
#
I mean we have a lovely episode on hiking
#
for Everything is Everything.
#
I love that one of my favorites
#
but I want to double click on one aspect of it
#
which is that in a sense what you do when you go hiking
#
serves as a metaphor for what I think is a good way
#
to be in the world also sometimes
#
because hiking is really like unless you're
#
unless you're one of those really dull people
#
who is ticking off a box and you say okay by 7 pm
#
we must reach Kotligard or whatever it is
#
unless you're one of those people
#
but most hikers are not.
#
Hiking puts you in a state of mind
#
where you're just being in nature
#
there is no goal there is nothing instrumental
#
you're soaking everything in
#
it is just a pleasure of being present in that moment
#
with all the beauty around you
#
and in terms of mindset it seems to me
#
to be so different from the default urban mindset
#
where everything that kids do today
#
often seems to be either goal directed
#
or you know dopamine inducing in the short term
#
that you're not doing something goal directed
#
but it is not just that freedom of being around nature
#
or around anything at all
#
that particular you know mind space of that
#
so can you talk a bit about that
#
because you know one quote that I learned from you
#
is a zen you find in the mountains
#
is a zen you take with you
#
you know where did that zen come from
#
was it something that had to be cultivated
#
was it something that was present less
#
in the younger Ajay Shah and is more there today
#
give me a sense of that
#
so first on what happens in hiking
#
we talked about it already is
#
it's not competitive and it's not performative
#
okay you're not doing it to put up a post on Facebook
#
that I climbed this mountain
#
that's silliness of the highest order
#
it's something we do for itself
#
so I was doing some amount of things by myself
#
before I started at IIT
#
I did a rock climbing course by myself
#
and then I landed up at IIT
#
and I was very lucky that
#
there was an active mountaineering community there
#
and I just took off into that
#
and I got better at it as we go along
#
initially a little bit of technical rock climbing
#
then rapidly retreated from technical rock climbing
#
to a simple non-technical hiking and trekking view of the world
#
and then I more or less stayed in that forever
#
so hiked in the Sayadris, hiked in the Himalayas
#
hiked in California, hiked in the UK
#
always tried to be out in the mountains
#
and there is a sense of being disconnected
#
and having time for meditation in the mountains
#
there's a physicality about it
#
there is a meditative physicality about it
#
where the human body is being challenged into unbelievable things
#
and it is a puzzle about how you handle yourself
#
and you are able to make it through these things
#
there is a slice of adventure
#
more so in the kind of things I do in the Sayadris than in the Himalayas
#
the easy Himalayan treks that I do are a little more
#
well packaged and managed
#
and there's very little that can go wrong
#
it's great being in the mountains
#
but there is not much of a sense of adventure
#
in the kind of things I do in the Himalayas
#
I don't want to imply that you can't make things infinitely difficult in the Himalayas
#
at my level of elementary
#
the things we do in the Himalayas are not risky
#
that's just it's very predictable
#
whereas in the Sayadris things go wrong
#
so hiking in the Sayadris is more difficult than hiking in the Himalayas
#
because of the physicality
#
because of the problems of route finding
#
so it's actually far more adventurous
#
you open your mind every day with a sense of
#
like okay what's going to happen today
#
it's cool to expose yourself to nature that is infinitely powerful
#
and we are all puny and we are nothing
#
and we have to make our way
#
and it's humbling and it's interesting to be part of that
#
and it also connects into my love of nature
#
I love to observe the insects
#
I love to observe the bees
#
when Namsita and Vaishnav and I were in Kothligarh
#
we had a small bee attack
#
it's just one of the great life experiences
#
and I'm pleased to say to you
#
that through the entire bee attack
#
I did not lose my love of the bees one inch
#
I was happy and calm and kind to them
#
I felt goodwill towards the bees
#
Were you strung by them?
#
My face is now fixed up
#
but if you had met me a week ago
#
my face had quite a few puffed up things
#
because of being strung by bees
#
but we go through these things and it's just great
#
so it brings out something better in all of us
#
Another of your great passions
#
and in a sense something that permeates the universe
#
as much as nature itself is math
#
and I remember this delightful story you once told me
#
which I'd like you to recount again
#
about how your dad wanted you to learn math
#
and what he did to kind of enable this
#
So my father knew math self-taught till about calculus
#
so you know he was able to sit with me
#
and solve problems all the way till early calculus
#
but beyond that his knowledge ran out
#
this is just one of the great things of the world
#
and you know it is worthy of passion
#
and commitment and effort
#
and he really knew that it is something he failed to do
#
and he wanted me to have a crack at doing well
#
and there was a tutor I had called Chandrasekhar
#
and if somebody is able to connect me to him today
#
I would be truly grateful
#
he was a PhD student of maths at TIFR
#
and he used to come to teach me
#
and the approach was that
#
to learn to think like a mathematician
#
to learn to see the beauty in mathematics
#
not to do a fixed curriculum
#
so it was not about exams
#
it was not about solving problems
#
it was about seeing something deeper
#
and seeing beauty in mathematics
#
and I thought it was great for me
#
and I really enjoyed doing it
#
so I have a gripe about the world
#
which I would like to pass on to all gentle readers
#
I am the normal Indian child
#
I studied for the IIT JEE
#
I did four courses in maths at IIT
#
and I am really pissed that
#
I never got an exposure to higher maths
#
I never really graduated to doing serious mathematics
#
I never got to real analysis and topology
#
and thinking like a mathematician
#
and constructing proofs
#
so I got too much into an engineering way of thinking
#
of being able to solve things
#
rather than being able to dream
#
and I would just like to put up this alert to everybody
#
that I got more maths than my father
#
but I wish I had got access to real mathematics
#
which is real analysis and topology
#
and thinking like a mathematician at a deeper level
#
and it's just one of my little sadness
#
I know probability theory
#
but I don't know measure theory
#
and I've tried and fumbled
#
and I realized that I missed out on
#
certain aspects of the childhood mathematical experience
#
it needs to go way beyond solving problems
#
to actually doing higher mathematics
#
One of the modules in our forthcoming life lessons course
#
is in fact called quantitative intuition
#
and it's one of my regrets as well
#
that I never learned math in a formal way
#
like in a sense I had to learn a certain subset of it
#
which is in my five years as a professional poker player
#
I had to kind of understand probabilities
#
and I had to understand some amount of game theory
#
which at a theoretical level I knew
#
and in fact making you know I made my living
#
because I had to know that shit
#
so it kind of worked for me
#
nothing with a framework
#
so while I always try to apply what I understand of numbers
#
and apply what I understand of probabilistic thinking
#
and apply what I understand of economic thinking
#
I just feel that it is not enough
#
and maybe it's a good thing
#
that in the formal education system
#
no old arcane framework was drilled into me
#
because that might have taken some of the joy out of it
#
I want to talk about sort of another aspect
#
of privilege that you and I have spoken of often
#
you have often referred to Jim Heckman's studies
#
and again we've spoken on this
#
in our everything is everything episode on education
#
but just to summarize it for the gentle readers
#
Jim Heckman did a bunch of studies
#
on early childhood learning
#
and for me what is one of his take away findings
#
many take away findings
#
I'm just picking one aspect
#
but one of his take away findings is that
#
kids who are surrounded by conversation around them
#
that consists of 10 letter words
#
grow up with an extra layer of intelligence
#
that other kids don't have
#
and you cannot compensate for this later in life
#
if you get it between ages 0 to 5
#
you don't have to be a participant
#
they have to be happening around you
#
so you could for example be from a rich family
#
but if your family is only talking cricket and bollywood
#
and there are no books in the house
#
you've actually been deprived
#
of that essential component of growing up
#
and in your case of course you had
#
all the adult conversations around you
#
but I'm thinking aloud and saying
#
that I always thought that both of us shared this
#
that we were extremely lucky
#
to have childhoods with those conversations
#
but what you also had is a math
#
what you also had is numbers
#
in more of the scientific way
#
whereas I had more of the humanities
#
saying thousands of books etc etc
#
how you feel this set you apart
#
and as you go on later in life
#
how do you fight the trap that one can fall into
#
when you realize that you know much more than your peers
#
or you're thinking about it in ways that they can't
#
because for me one of the traps that I fell into for a while
#
was a certain intellectual arrogance
#
that oh I've read so many books
#
and plus I am you know so much faster in everything
#
I need to study one hour for an exam
#
they need to do 10 days etc etc
#
and that's actually a terrible barrier to growth
#
and I would say held me back
#
for a long time till I managed to kind of
#
be reflective enough to figure out what was going wrong
#
so give me a sense of that journey
#
that on the one hand you're so incredibly fortunate
#
that you have all these different sort of influences on you
#
which are making you so much more knowledgeable
#
and smarter than other kids would have been
#
but then how does that also shape one
#
because it's not always in positive ways
#
so I want to say two three things
#
one is that CP Snow has this book The Two Cultures
#
which was there at home
#
and my father was very plugged into that kind of thinking
#
and a part of that came to me
#
which is that we are here to be in the world
#
we are uncompromisingly here to understand the world
#
so we should not narrowly fall into either of the two cultures
#
we should be full humanities human beings
#
and we should be full science human beings
#
and that has always been an aspiration of mine
#
and I've tried to be in both
#
and I know that you are better connected
#
into the worlds of literature and cinema than I am
#
and I am imperfect and incomplete in these ways
#
because I've just missed out on those experiences
#
and we each of us is different
#
and we each complement each other in different ways
#
on the maths I also want to emphasize
#
the lifetime journey of learning
#
you should never close your mind to the learning
#
so as an example I landed up
#
as an economics PhD student at USC in Los Angeles
#
but I made it my business
#
to essentially take one maths course every semester
#
so all through my PhD years
#
wherever I had the funding mechanism
#
to do one more course paid for by the scholarship
#
and it would be counted towards the credits required for PhD
#
then I would do one maths course
#
so just semester after semester
#
I would find something or the other in the maths department
#
and there again it's important to not be vain
#
so I did plenty of undergrad courses
#
so don't be arrogant that because I'm a PhD student
#
I should disrespect undergraduate materials
#
the principle was just bloody every semester
#
I will do one maths course
#
and I've just kept on trying to learn
#
I remember much later in life
#
I first got to financial derivatives
#
with more garden variety mathematics
#
and then the great Rajeeva Karandekar got me excited
#
into going after this from first principles
#
and looking at it from a full knowledge
#
of stochastic calculus and ethos lemma and all that
#
and I'm trying to remember
#
this would be I think in 2001
#
when I was in the ministry of finance
#
so I was an employee at the ministry of finance
#
and by that time I had understood that
#
that I need to undo stochastic differential equations
#
and I need to understand Gaussian Brownian motion
#
and so on geometric Brownian motion and so on
#
so I basically sat with books in my Barsati at Delhi
#
and I taught myself some stochastic calculus
#
so I won't pretend to great mastery
#
but I do have low levels of capability
#
that I can grind through ethos lemma
#
derive the Black-Scholes equation
#
and I have on one occasion in a research context
#
thought of one cool application
#
where something could be written in continuous time
#
and you grind through it using ethos lemma
#
and you get some lovely results based on it
#
and this was like late life learning
#
learning as a ministry of finance employee
#
so like that I feel the most important dharma of life
#
should be that we keep challenging ourselves
#
we should never become complacent
#
we should never feel finished
#
in terms of interoperating with other people
#
so first I was young and I was stupid like everybody else
#
and we are vain and we are arrogant
#
and we are thirsty for approval
#
we are thirsty for praise
#
we are thirsty for respect
#
and I satisfied all these stupid characteristics
#
so I was the idiotic IIT guy that you love to hate
#
I have no redeeming features to offer compared to that
#
but then you know growing up happens to all of us
#
and my father used to also tell me that
#
everybody has something to teach you
#
and it is your job to find it
#
so it's a good approach that when you meet anybody
#
they know some slice of reality
#
and again if you take it as the grand 20th century view
#
and being in this world
#
and thinking about the world
#
as opposed to a specialist view
#
if I become a specialist
#
I'm looking at x-rays for a living
#
and I'm not interested in everything else
#
and I'm lost in my magic
#
about how well I know how to read x-rays
#
and for the rest I don't give a damn about everything else
#
for the rest you know it's an amusement time
#
whereas if you think that our purpose is to learn the world
#
and think about the world
#
then everybody is interesting
#
in everybody's life story
#
in everybody's emotional drama
#
there are insights into human beings
#
and there is nothing in this world more complex than human beings
#
and it's our job to take interest
#
and find empathy and get involved
#
so I think like everybody else
#
I also went through a learning process
#
and you know gradually started growing up
#
and rather so you know when we are stupid
#
I think yesterday I was coming up with a
#
four part four level classification scheme
#
and we speak to impress other people
#
which is dumb which is a waste of life
#
we speak to engage in political speech
#
because I want something out of it
#
and that's also you know not nice meaning
#
I should not be saying things
#
because I want to get something out of you
#
and like some basic Kantian philosophy
#
it's not correct it's instrumental
#
then we speak in order to persuade
#
okay that's starting to make sense
#
that I'm persuading the other people and so person
#
so I want to get into their minds
#
and understand their frame of life
#
and I want to then add value
#
and persuade them about a different way
#
to see the world or to think about it
#
and then we participate in conversations
#
because we are here to learn
#
and change our mind about something
#
so the best deal in the world
#
is where we do Bayesian updation
#
I think I said to you long ago
#
that I went through a journey of
#
childish hope about the world
#
and then complete pessimism
#
and then mature optimism about the world
#
which runs in three steps
#
that at first I thought
#
that you have to put down an argument clearly
#
and then of course the other person is rational
#
and they will understand it
#
and that's wildly wrong
#
because most people are trapped in their own points of view
#
and their own ego and their own beliefs
#
and they're going to take nothing
#
they're going to take diddly squat out of what you say
#
so I went from stage one of optimism
#
to stage two of complete pessimism
#
that people are never going to listen to anything
#
and that people are wrapped up in their own world
#
and in their own belief
#
and our ability to actually communicate an idea
#
and persuade anybody is exactly zero
#
but then I've shifted positions
#
that if you go into it with good faith
#
and you bring good human values
#
and you bring genuine friendship
#
and goodwill to the table
#
then we will talk to each other
#
I will never admit that I learned something from you
#
because I am a stupid person
#
I will ruminate over it
#
and I will update to some extent
#
moving in your direction
#
and that is my takeaway
#
that is it is in my selfish self-interest to do that
#
and once you come at the world in this fashion
#
then suddenly there is a bounty of learning and growth
#
there's lots more still to talk about your childhood
#
so don't imagine we have finished with it
#
but let's take a quick commercial break
#
and get some lunch first
#
and this sounds like a commercial
#
it's a plea from me to check out my latest labor of love
#
a youtube show I am co-hosting with my good friend
#
the brilliant Ajay Shah
#
everything is everything
#
every week we'll speak for about an hour
#
on things we care about
#
from the profound to the profane
#
from the exalted to the everyday
#
we range widely across subjects
#
and we bring multiple frames
#
with which we try to understand the world
#
please join us on our journey
#
by subscribing to our youtube channel
#
slash amit varma a m i t v a r m a
#
the show is called everything is everything
#
welcome back to the scene and the unseen
#
I'm still with Ajay Shah over here
#
and by the way would some
#
would any of the general readers like to calculate
#
how many hours we have spent talking to each other
#
you know all the scene and the unseen episodes
#
and everything is everything
#
that would be fascinating
#
I'm sure some AI will do that at some point in time
#
so Ajay I'll come back to your childhood
#
and let's talk about you know at home
#
before we go on to talking about your school
#
tell me about the reading habit
#
like what kind of books were around you
#
what kind of books were you reading
#
and is there anything specific
#
that you remember as a light bulb moment
#
or something that sort of made you transition
#
from one kind of reading to another
#
the books were eclectic and all over the place
#
so as I said my father was an old style intellectual
#
the purpose was to study the world
#
and not to become a narrow subject expert
#
so there was economics there was history
#
there was politics there was philosophy
#
there was science there was fiction
#
so I got a full exposure to the world
#
there was Rabindranath Tagore in English
#
there was Rabindranath Tagore in Bengali
#
okay like that there was a great deal of material
#
we also had that peculiar old style thing
#
so we had an encyclopedia Britannica
#
and the McRoyal encyclopedia of science and engineering
#
and I have endless afternoons
#
randomly picking up something from
#
the McRoyal encyclopedia or the encyclopedia Britannica
#
and just deep diving in one rabbit hole after another
#
so I remember at one point
#
I decided nuclear submarines are cool
#
and then just like studied and studied
#
small nuclear reactors inside a nuclear submarine
#
so I just got this full range of books
#
and I imbibed all of them
#
I think most of all I got the history
#
so I got a lot of easy science books
#
because my father did not know advanced science material
#
today my knowledge of science is much more advanced than that
#
that stuff got me interested and got me going
#
but today my level of knowledge is vastly greater
#
but history like it's irreplaceable to read books there
#
because you know the fundamental foundations were laid there
#
and it's not as if the history books have changed that much
#
between that period and this period
#
so you know probably even today
#
Jadunath Sarkar's biography of Shivaji
#
is considered a great biography of Shivaji
#
so I feel that a lot of the history that I got there
#
has been directly and tangibly my knowledge set today
#
but on the other hand all influences are precious
#
and so for example the science books I got there got me started
#
and I was eclectic in reading everything
#
I don't think there was a single field there
#
that I did disservice to
#
I read all the fields that were in the house
#
and that also seems so delightful in the sense
#
of building that mindset of everything is everything
#
right otherwise people will often a read
#
only for instrumental purposes exam pass kanna etc etc
#
or they'll focus on one kind of reading
#
and kid will read some book by xyz
#
and then the father will get more books by that author
#
but they won't just be lying around that lucky serendipity won't happen
#
so one last funny story about the book experience
#
so I said as we got richer
#
there was no line of credit with the bookstore
#
and we were buying books from the bookstore on spot
#
the bookstore was Strand Bookstore
#
okay so Bombay people will remember
#
it used to be a glorious institution
#
Mr. Shanbagh ran Strand Bookstore
#
he did some current books
#
and then he did what are called remaindered books
#
which were books that were sold abroad by the KG
#
after their main print run had been sold
#
and it was no longer getting shelf space in bookshops
#
that the rate of sale was such a trickle
#
that the cost of inventory and storage was greater
#
than the trickle of sales
#
at that point publishers would pack them into boxes
#
and sell them by the kilo
#
and Shanbagh was skilled in the ways of traveling abroad
#
and accessing these markets and buying these books
#
and so Strand Bookstore had this two-tier thing
#
that there were full price books
#
and there were books at ridiculous levels of discount
#
and the discount to the point where it made almost no sense
#
to locate the price of the book near the list price
#
because it had actually been purchased by the kilo
#
so there was no meaning to the MRP of the book
#
and my father was good friends with Shanbagh
#
so we used to spend a lot of time at Strand Bookstore
#
I would periodically be deposited into Strand Bookstore
#
so my father would have work to do elsewhere in the city
#
and I would be dumped into Strand Bookstore
#
and they would be told he's going to be here for three hours
#
and they would say sure
#
and they were happy and they took me in
#
so I wandered the bookshop
#
I eclectically looked at all kinds of books
#
and then I would make a pile of what books were buying today
#
and then the deal was some of the trade books are at MRP
#
the other books basically Shanbagh would just give me
#
at ridiculously low prices because we were friends
#
so he would just make up numbers
#
and so that was my regular ritual of going to Strand Bookstore
#
and while I'm on this subject
#
I got another great experience in that period
#
that oftentimes I would be dumped into Strand Bookstore
#
and then in the evening
#
my father would come to Strand Bookstore
#
and then he was a great lover of Bombay
#
he just absolutely felt something for the city
#
it was of mythic importance and meaning to him
#
so whatever time and energy we could manage
#
he would basically build up a walk each time
#
so there would be a long complicated walk through Bombay
#
which would always end at some railway station
#
or some point to get a cab
#
and so we would walk a couple of kilometers
#
and he would tell me stories along the way
#
so that is how I learned Bombay
#
I also got to feel the meaning of being
#
with an ancient culture
#
so I got these long walks in Bombay
#
it's one of the happy memories of my childhood
#
and I'm just thinking aloud
#
and thinking that you know
#
people are often surprised that when I travel
#
two of the places I like to hang out at is
#
one I will always go to the bookshop in the city
#
and two I really enjoy working in markets
#
or whether they are just random markets out there
#
I think one of my friends once came up with this great line
#
he replaced Nepal with commerce
#
I love the smell of commerce in the morning
#
and markets are in a sense so beautiful
#
because it is full of people
#
fulfilling each other's needs to mutual benefit
#
and it's just a microcosm of the way society works
#
and cities in that sense are so amazing
#
were there any in your serendipitous jaunts
#
through the lanes of this great bookshop
#
which I remember fondly
#
do you remember any interesting discoveries
#
or someone that you would not otherwise have come across
#
but you're like wow this is
#
I no longer have the sense of you know
#
some books came because of like a review in foreign affairs
#
and some books came serendipitiously
#
I think Lawrence Darrell came from Strand Bookstore
#
but I'm not able to split these apart anymore
#
and another digressive question that you mentioned how
#
you know one of course there is a delightful serendipity
#
of having all these books around
#
you dip into any of them
#
but if you are to actually think that
#
okay if you're to give advice to someone who has a kid
#
you know and they say that
#
look I'm not that much of a great reader
#
but I want you know buy a bookshelf
#
I have space for one bookshelf
#
where I will put the optimal books
#
so that my kid if she picks up any of them
#
can develop a sense of wonder for the world
#
what are the kind of books you would recommend in there
#
like you said that the science books
#
that you had at home were pretty basic
#
and the history was great
#
and how would you think about designing a bookshelf like that
#
it's a complicated question
#
and my thoughts may not be necessarily correct
#
there is a whole new world of young adult writing
#
that I know nothing about
#
but I am a prisoner of my experiences
#
I think that children's books are not a very useful thing
#
it's better to be in adult books
#
and children do as you do not as you say
#
so it's actually the books that you will take interest in
#
so I would say to everybody
#
that leave a child aside
#
you are the site of action
#
and I feel it's a nice thing for us to have a bookshelf
#
and I always encourage people
#
so I say to people that pick your 10 friends
#
and ask each of them to pick two books that change them
#
that's a great way to start
#
so you know your 10 people
#
you trust your 10 people
#
tell me the books that really matter to you
#
and that's how we get going
#
that's how we start a journey of books
#
and this is completely away from
#
school and college textbooks
#
or any instrumental goals
#
and then you know one can keep going in that world
#
you know I love this friend
#
our mutual friend Suyash Rai told me in my episode with him
#
and I think he got his first salary
#
and he was in Baroda and he went to a bookshop
#
and he just laid down 7000 rupees or 8000 rupees
#
gave it to the owner of the shop
#
and said listen I want to read good books
#
I don't know what to read
#
rather than me pick randomly
#
why don't you pick for me
#
and that guy spent four or five hours
#
picking together exactly
#
you know the perfect set of books for Suyash
#
and I think it speaks a lot to the book
#
it speaks a lot of Suyash
#
that genuine desire for learning
#
which is why he's such a great thinker today
#
but it also I think speaks for the bookseller
#
and you mentioned Shanbagh
#
and I wonder whether there is space
#
for that kind of person in our cultural life
#
like Shanbagh must have shaped so many people
#
who would you know have gone there
#
not just you because you were being babysat
#
or your dad because he was there
#
but so many people you know think of Strand
#
in a way that no one is going to think of a crossword today
#
and I wonder if you know books
#
knowledge kind of so much of it going online
#
and so many of the bookstores that you see
#
selling just the mainstream pap
#
whether that affects anything
#
but again thinking aloud
#
I think the counterpoint to what I just said is Bangalore
#
which has remarkable bookstores
#
you know Blossoms Bookworm
#
it's just such a treasure
#
I have mixed feelings on this
#
I don't know that the world of physical bookshops
#
is scalable and replicable into the future
#
there are many people who are really fighting
#
for that tradition of a community store
#
where there is it's a mom and pop
#
and there's a coffee shop
#
and it's as much a gathering place
#
as a place to sell books and sell coffee
#
and I totally respect those things
#
God knows we need more of those
#
but we now have a whole array of channels
#
through which books are written and talked about
#
so a good thumb rule is to keep away from
#
like the mainstream stuff
#
what is sold in airports
#
anything that sells too many copies
#
you should treat with a little bit of suspicion
#
but for the rest you know
#
through friends we read book reviews
#
so all in all we are influenced
#
by what the world is doing
#
and what the world is talking about
#
and people are still talking about a book
#
there's a good chance that
#
you should be thinking more about that book
#
many of our gentle listeners
#
will have probably noticed
#
that Seeing Like a State by James C. Scott
#
is something we just keep coming back to again and again
#
and I consider it a difficult book to read
#
it's a book that you have to devote yourself to
#
and think deeply about it
#
and you know it will be great
#
Susan is very passionate about
#
the concept of a book club
#
of communal book readings
#
so right now she's running a book reading system
#
she and Bhargavi are running a book reading system
#
Tyranny of the Experts by Billy Sturley
#
and a bunch of people commit themselves
#
that we will read 100 pages at a time
#
and I think this is the best way
#
that all of us can foster
#
that a bunch of people commit to each other
#
that I won't come as a spectator
#
that each of us should read 100 pages at a time
#
bring one book at a time into our world
#
and into our consciousness
#
and we are world builders
#
we are endlessly adding all this into our head
#
again in the concept of
#
what does it mean to read books
#
and what does it mean to own books
#
I always say to people that
#
you will not remember the words of what a book said
#
but the book will change your mind forever
#
in ways that you cannot even fathom
#
books do something deeper to the word mind
#
not in a retrieval sense like a computer
#
but there's something going on
#
and we should treasure that
#
if listeners of this episode
#
want a virtual version of this
#
where we can run a book club
#
maybe that's something worth thinking about
#
but just let us know by Twitter or however
#
and that's an interesting idea
#
before we get to your school again
#
you know we are going in concentric circles
#
you know out of the home
#
and now I want to talk about your neighborhood
#
you know this neighborhood in Bandra East
#
which is known as a place of culture
#
not only are there many economists
#
who've grown up on the same lane as you
#
but there are all kinds of writers musicians
#
you mentioned Suresh Vyas earlier
#
so give me a little sense of what it was like
#
to grow up in that environment
#
because that is also in a sense a great privilege
#
it's a place of culture and learning
#
and all of you are of course elites
#
but not necessarily English speaking
#
because there are writers and playwrights and poets
#
who aren't speaking Marathi right in Hindi etc etc
#
all of that is happening
#
so tell me about those childhood experiences
#
mingling with those people etc
#
it was a piece of central planning
#
it was old style urban planning
#
that the government decided
#
that there will be a Kalanagar
#
which is a colony of artists
#
including one famous artist
#
a cartoonist called Bal Thackeray
#
then there was a JJ school of arts student hostel
#
then there was Sahitya Savas
#
which is mostly Marathi literature
#
then there was Patrakar
#
which is a bunch of journalists
#
which included my father
#
and then there was Artek Apartments
#
which was a bunch of architects
#
so this is a 700 meter stretch of one side of a road
#
which was this central planning thing
#
that will try to bring these people together
#
and you know in hindsight
#
like wow that was pretty cool
#
I just want to scream at all these people
#
could you not have please done one more thing
#
could you not have shattered
#
the walls that separated all of us
#
so just think what sense does it make
#
and they have a wall in between them
#
like basic knowledge of urban thinking
#
is that you want to reduce the frictions
#
you want to reduce the transactions costs
#
so there should be no walls
#
and people should walk freely
#
every little transactions cost matter
#
well so I grew up in this world
#
and I think we had friends
#
who came from these interesting backgrounds
#
I attended a local school
#
that was called New English School
#
it had a mixture of Marathi medium
#
there were two sections of English medium
#
and my friend from that period
#
whose father K.J. Purohit
#
living in Sahitya Savas
#
so this was the kind of little world
#
I walked to school every morning
#
and there was no bus to take
#
because it was like a 30-minute walk
#
and that was the kind of happy life I led
#
and I grew up also around a bunch of guys
#
who really made a difference to me
#
Faizal Azmi, Kalpak Dighe
#
were my community at school
#
and on the journey up to the JEE
#
Faizal in particular took me in
#
when I was really struggling
#
and he helped me to explore
#
and it was just absolutely perfect
#
that just at the right time
#
he made all the difference
#
to my learning trajectory
#
and it also makes you think about
#
you meet the right person
#
and they help you in the right ways
#
it just makes so much of a difference
#
and I'm eternally grateful
#
and I also wish for these kinds of good people
#
In what way did he help you?
#
So I was stuck on certain things
#
like you had to graduate
#
from elementary, trivial
#
high school physics and maths
#
to a more complex maths and physics
#
and lots of kids make the transition
#
and for whatever reason I was stuck
#
I was not making the transition
#
and Faizal was just kind
#
and there were a couple of critical days
#
when he made me cross certain boundaries
#
suddenly I was seeing the world
#
and then after that he and I
#
we did everything together
#
Kalpak, Srikant, Faizal
#
and I did everything together
#
and I was a first class participant
#
I was just completely stuck
#
and just Faizal took it upon himself
#
to be kind to me and help me
#
and take me through certain places
#
where I had just not made the grade
#
on seriously complicated
#
maths and physics that you rise to
#
Resnick and Halliday and the Calculus
#
Many aspects of our nature
#
and our character are contingent
#
everything is everything episode on this
#
but some are perhaps essential
#
like I can look back on some people
#
and they're exactly the same
#
as they used to be 30 years ago
#
and I can look back on some people
#
and they're completely different
#
right though there is a core somewhere
#
but otherwise they change a lot
#
on that young Ajay Shah
#
let's say you look back
#
on an 18 year old Ajay Shah 40
#
you know what is he like
#
and what does he not have
#
and the dreams are the same
#
there is an I think the old person
#
was arrogant and impetuous
#
with fiery eyes and dreams no one can see
#
but over the years I think
#
I'm not so much in a hurry
#
the way the world works
#
that we come, we do, we go
#
and our job is to add a little bit
#
of beauty and truth to the world
#
and I'm happy to be part of that journey
#
Sthita prajna is such a great word
#
let's talk about IIT now
#
so you know this is your childhood
#
you're growing up in this great colony
#
you've got cool friends
#
you're reading all these great books
#
both through osmosis and directly
#
at this point what is the story
#
you're telling yourself
#
because you can be anything
#
because luckily unlike many people
#
you have all these books
#
and you can be anything
#
open different worlds to you
#
so what are you thinking
#
in terms of doing in your life
#
how do you end up in IIT
#
what is that experience like
#
so I was very much into the dream of
#
thinking about the 20th century
#
and being a part of those kinds of things
#
so for example if you said
#
science and engineering and physics
#
I was already deeply imprinted
#
with stories like the Manhattan Project
#
okay you've heard me talk about
#
and that would be the way
#
it was always the idea that
#
you have to find your Manhattan Project
#
I do think that I got some 3%
#
of my Manhattan Project later in life
#
but that was always a quest
#
that was always the idea
#
and so I was deeply plugged into
#
the idea of the 20th century
#
and so it was never about a narrow
#
but it was being a part of that
#
being a first class citizen
#
let's stop for a moment
#
it means to care about the world
#
to think about the world
#
to participate in the grand questions
#
and in a sense to be a renaissance man
#
to be everything is everything
#
that you have to think of everything
#
you have to be part of everything
#
it's not a narrow specialization
#
it's not finding a trade
#
it's not finding a career
#
it's much much more than that
#
that was always very clear to me
#
and that was a sense of purpose
#
by it was there was a personal accident
#
that there was a wonderful woman
#
she was an economics professor
#
so she moved to work at IIT Bombay
#
well I think in the 70s
#
and she was a friend of my parents
#
the IIT Bombay campus at Powai
#
and that's how my folks learned about
#
okay it was an age when
#
there was very little hype
#
but it was the idea was
#
that it's a good college
#
and you'll get firm grounding
#
in quantitative thinking
#
and being able to work with models
#
once you try to take this entrance
#
we used to have this thing
#
the National Talent Search
#
which was like 250 people a year
#
and I got through that in the 10th
#
so I was reasonably optimistic
#
that the JEE was going to work
#
we arrived at this idea
#
and the backup plan was to study maths
#
so that was the two things
#
which is either you try to go to IIT
#
or you do an undergrad in maths
#
and I mentioned four people
#
who were with me in school
#
and sadly Shrikant and I joined IIT
#
and she did not even take the exam
#
and Faisal got through one year later
#
that's what happened to all of us
#
and it was a remarkable thing
#
when you pause to think about it
#
that there was an obscure
#
called New English School
#
where there was one section E
#
in which there were two little boys
#
sitting next to each other
#
Shrikant Rangnekar and me
#
and we were two out of the 250
#
and we both got through the IIT entrance
#
and I conclude from that
#
that these influences really matter
#
that we all impinged on each other
#
and we created some remarkable bubble
#
of excitement and enthusiasm
#
these are not random accidents
#
it's too unlikely to happen by accident
#
it is endogenous to the social construct
#
of each of us impinging on each other
#
so I think all of us kept each other going
#
both at the level of moral
#
and emotions and makeup
#
as also practical things
#
like I described to you
#
that at a critical moment in my life
#
No and that's very resonant for me
#
because I don't think we realize
#
the extent to which we are shaped
#
like if you were not a kid in Bandra
#
if you were a kid in Ghatkopar
#
Shrikant or Kalpak or Manisha or Faisal
#
your whole life could have been different
#
I'm sure you would have been successful
#
but the whole life could have been different
#
so tell me about that IIT sort of experience
#
because it almost seems that
#
you know it's just one of those things
#
that almost happened to you
#
that you happened to go to that place
#
and your parents knew a professor there
#
and you do the entrance exam
#
what happens once you're there
#
like what are you studying there
#
and is there a sense of
#
you know you could at one level
#
be thinking of what are the things
#
thinking of what are the things
#
you know I am actually good at
#
might largely even be the same circle
#
and you could be thinking at
#
what should I do as a career
#
so what was your thinking
#
how was it evolving during this time
#
once you were actually over there
#
but mostly I was young and clueless
#
so there was not much strategic thinking
#
shortly after I joined IIT
#
so I really had no adult supervision
#
from that point onwards
#
about what was going on
#
more regimented machinery of courses
#
but a whole bunch of things happened to me
#
that were absolutely wonderful
#
and I consider those years
#
and it really worked well for me
#
I got taken in by two professors
#
Gopal Shevrey and K. Sudhakar
#
they were in the aeronautical engineering department
#
they were running a computational fluid mechanics lab
#
and they just they were kind
#
and for no particular reason
#
I cannot imagine why me
#
I do not know why they chose me
#
but I'm just so grateful that they did
#
so I joined an engineering lab
#
okay so in engineering universities
#
all the work is organized around a lab
#
a lab is like a small firm
#
there's a bunch of people
#
professors, PhD students
#
funded projects, equipment
#
and that's like the immediate unit of collaboration
#
that's absolutely the right way
#
that there should be a series of labs
#
where there is a continuity
#
in the kind of work that is done
#
and there are people who work deeply
#
typically the lab will have a name
#
so Shevrey and Sudhakar took me in
#
and she was technically a student
#
but they took her in also
#
so they were looking for mad people
#
and so maybe we fit the bill
#
that lab was a tinder of its time
#
well the sequencing is a little off
#
but so that was absolutely great for us
#
and they demanded mad levels
#
of knowledge and capability out of us
#
and we had that kind of fire
#
and capability that we would do things
#
and I don't know how on earth
#
they thought that they could ask
#
because now when I look back
#
I was just a silly teenager
#
but I don't know how I found
#
the level of energy and enthusiasm
#
and knowledge to actually do these things
#
so Rajappa here, Susan and I
#
with Shevrey and Sudhakar
#
and that worked very well for me
#
that really worked well
#
it was experience in being like an org
#
there is a sustained chipping away
#
computational fluid mechanics
#
they were part of the early research
#
on the design of what is now called
#
what at the time was called
#
the light combat aircraft
#
so they were doing pieces of contract research
#
for the aeronautical development agency
#
that was going to lead to
#
the light combat aircraft
#
but the way this works is that
#
what happens by way of public funding
#
for innovation turns into HRD
#
that there's learning by doing
#
that by asking people to do things
#
you develop their capabilities
#
does not directly feed to the aircraft
#
it becomes the knowledge
#
that are developed inside the country
#
that worked very well for me
#
the second piece that worked very well for me
#
when there were no computers
#
it was a Russian ripoff
#
was made out of transistors
#
meaning there was not even an IC
#
that were used to make a computer
#
and there was one of these
#
which was a favor done by the Russians
#
it was a Russian ripoff
#
the Russians did not have the ability
#
to make this computer themselves
#
they stole the design of the IBM 360
#
and they industrialized
#
the manufacture of that computer
#
and one of those came to IIT Bombay
#
so there was this ancient
#
that was sitting in IIT Bombay
#
it had horrible bad quality
#
photocopied American IBM manuals
#
because Russian manuals were useless
#
and that was the kind of equipment
#
okay and we were very lucky
#
we could get our paws on it
#
and we started learning
#
I know how to think algorithmically
#
there are four great languages
#
of human language like English
#
where I think I do reasonably well
#
there is the language of thinking
#
but I think I do equally well
#
I feel like I have an instinctive ability
#
to think algorithmically
#
live in the world of computer code
#
then there is a third language
#
where I think I am B grade
#
and there is the language of the genes
#
so there are these different
#
and it's interesting to think
#
What is the language of the genes?
#
Just the deep understanding of how
#
so it's a language that
#
your code is specified in
#
some language of four letters
#
and I have no knowledge
#
so I was very lucky that
#
and somehow I just took to this
#
there were severe constraints
#
in getting access to computers
#
there was something called a BBC Micro
#
it was a small computer
#
being pushed along with
#
BBC instructional material in the UK
#
processor with 64K of RAM
#
and there was a bunch of these BBC Micros
#
which had come as a gift
#
and they were sitting in some room
#
and they were supposed to be inaccessible
#
so you had to jump some walls
#
and illegally get access
#
to those computers at night
#
and so I was merrily doing that
#
so I would be alone in that room
#
where I am not supposed to be entering
#
you mean literally jump some walls
#
Literally jump some walls, yeah
#
You just broke into it basically
#
and I started writing code
#
one of the first things I was doing
#
was there is this equation
#
del squared phi equal to zero
#
for the flow of a fluid
#
around a circular shape
#
and it was some primitive computer
#
but I was up and running
#
solving for these shapes
#
it would paint this screen
#
so this was like miraculous stuff
#
we had never seen graphic screens before
#
and I was painting the solution
#
and I was fully up and running
#
to del squared phi equal to zero
#
and this was in the computer science department
#
where I was illegally going at night
#
and I had this whole thing up and running
#
so then one day I told Chevre
#
that you know I've done this
#
Chevre was in the aeronautical engineering department
#
I'm solving del squared phi equal to zero
#
and I have a graphical representation
#
and he said oh that's nice
#
then I became really embarrassed
#
because I said you know
#
I'm not supposed to go there
#
I've been illegally going into that room
#
so I was like very nervous
#
into the computer science department
#
where I was illegally going
#
show me what you've done
#
and he said this is good
#
so these are the sorts of things
#
that you know I just kept going
#
and learning these things
#
we used to keep talking with each other
#
and there was no reason to do these things
#
we were just like the old hackers
#
figuring out subtleties
#
just challenging each other
#
doing the next more crazy thing
#
that was considered impossible
#
and the only reason to do it
#
was because it was impossible
#
and I broke my right arm once
#
these scars on my right arm
#
there used to be a PC game called Digger
#
and various people in IIT used to compete
#
and it would keep the high score
#
so there was no easy way
#
other than actually playing
#
but when your right arm is broken
#
you know you really need
#
to do something different
#
because you can't play with your left hand
#
at the assembly code of Digger
#
and then I suddenly understood
#
the layout of the levels
#
were stored inside the binary
#
so then I wrote a editor program
#
through which I could design my own levels
#
and then I designed my own screens
#
through which you basically got scores for nothing
#
after my right arm had healed
#
with the world's highest
#
imaginable score for Digger
#
so that was the kind of life that I led
#
This is such an incredibly cool story
#
where are these people now?
#
Where are Srikant and Kalpak
#
and Manisha and Faizul?
#
Manisha had a health crisis
#
and her life has crashed
#
Faizul lives in Bandra East
#
and we have all the same warmth
#
Faizul has multiplexed his life
#
on one hand he does some amount of teaching
#
he is pursuing the great love of his life
#
which is to learn gravity
#
he endlessly pushes himself
#
to learn general relativity
#
and think about gravity
#
that is the passion of his life
#
Kalpak at last count was in the United States
#
he was doing nuclear non-proliferation work
#
for the United States government
#
and Srikant lives in the US
#
and I've lost sight of what he does
#
Do you feel that you took to computers
#
because your mind was just naturally
#
attuned to that kind of systematic thinking
#
it helped you become a better thinker
#
like just in the same case that
#
if you weren't in Bandra
#
if you were a kid in Ghatkopar
#
you wouldn't have been the same person
#
had you been to been in IIT
#
say three years earlier
#
when they might not have been a computer
#
you would have been a different person as well
#
how much of a role does algorithmic thinking
#
actually play in the person
#
that you've gone on to become?
#
I think there are four kinds of thinking
#
where you need to learn to think about
#
and I don't know how to do that
#
and my mind is dead to the possibility
#
and I'm unable to see things
#
then I'm weak in mathematics
#
meaning I don't do advanced mathematics
#
I'm a good user of mathematics
#
but I'm not able to dream
#
I've had some dreams of imagining new theorems
#
but I recognize that failing
#
it's like a part of your mind starts singing
#
whereas otherwise it can be dead
#
and that's the way in which I think of
#
thinking algorithmically
#
it's just something beautiful that happened to me
#
and I feel I get it cold
#
I just get it completely
#
my intuition knows how to think algorithmically
#
Can you give me a concrete illustration of this?
#
Well so all through life I've done many pieces
#
we'll discuss some of them later
#
but across all the fields that I have done
#
it has been an effortless thing
#
to think of the various complex systems
#
and people and processes
#
like there will be this algorithm
#
this is what we will do
#
So Ajay you know I've done episodes
#
with people who went to college in Delhi
#
and one thing I realized while speaking to them
#
is that actually all the famous people in India today
#
came from a very small circle of people
#
who were in the same college
#
and this not only says something good
#
about that school or that college
#
it also says something very sad about the country
#
that there were only a small number of people
#
who had that kind of access and whatever
#
JEE was you know an interesting sorting system
#
to get really bright people into IIT
#
so a couple of questions
#
and one is that was it sort of either thrilling
#
or scary for you to now be among people
#
who were as smart as you
#
which I presume many of these people must have been
#
while earlier in your particular manner
#
you would have been the smartest kid on the block
#
and two who were some of the interesting people
#
fellow students who had an influence on you
#
I really started talking only there
#
meaning other than talking with my father
#
and talking with my you know
#
then the people I described
#
like Manisha and Faisal and Kalpak and Srikant
#
I wasn't really talking to a lot of people
#
I became more verbose once I landed up
#
now JEE is a sorting system
#
I have an opinion about the world
#
just like I was saying that New English School
#
why were there two kids sitting next to each other
#
who were two out of the 250 NTS
#
these things are not accidental
#
similarly I think that at IIT also
#
there are random accidents
#
that turn into feedback loops
#
so the early universe becomes lumpy
#
and not smoothly distributed
#
so it is believed that the batches of the girls at IIT
#
okay so they used to be 13
#
there was no quota system in those days
#
now there's a quota system
#
and I have my own views on it
#
but let's keep that separate
#
in those days a batch of the girls would be about 13
#
which is a very small number
#
statistically it's a very small number
#
and then there would be batch characteristics
#
so there would be a random accident
#
by which one batch would have a couple of
#
people who would catch fire
#
and that entire batch would achieve a different character
#
so I think that's an important kind of causality
#
that even though it is one common sorting mechanism
#
there are local accidents that happen
#
this is my theory of the world
#
so I was very lucky I landed up in a great wing
#
at IIT hostels in those days
#
there would be a concept of a wing which is 13 people
#
and it is assortative matching in that
#
the wing chooses the freshies
#
and so that it's non-random sorting
#
it was not some bureaucratically allocated randomness
#
but once you land in a hostel
#
which is bureaucratically allocated
#
then starts the assortative process
#
and I just landed up in a wing that was a little interesting
#
I remember that on that EC1030 computer
#
the Russians only had the stolen Fortran 4 compiler
#
and Fortran had evolved after that
#
so folks at IIT Bombay had built a Fortran 77 compiler
#
so sitting in IIT Bombay
#
they built a full Fortran 77 compiler
#
they wrote a compiler in India in the late 70s
#
and there was no documentation for it
#
because it was homemade
#
there were no books for it
#
all the standard western books on Fortran 77
#
were all a little idiosyncratic
#
because you know this is the IIT Fortran 77
#
which is a little incompatible
#
and in the full spirit of dog fooding
#
again I admire these people
#
in the spirit of dog fooding
#
the first year mandatory course in programming
#
first semester mandatory course in programming
#
for everybody was done in this IIT fort
#
in a local non-standard Fortran 77
#
which was a source of endless irritation for everybody
#
because the books don't work
#
and there was a certain amount of black art
#
and how you would do it
#
the older fellows invented a project
#
let's write a book on Fortran 77
#
and I got drafted into it
#
and I got drafted into it
#
but there was a bunch of people in the wing
#
and in my wing they invented the project
#
that we will write a book on Fortran 77
#
and now I feel that you know
#
like there were so many wings
#
there were so many hostels
#
why did nobody else do it
#
why did these guys do it
#
there was something interesting
#
and exceptional going on
#
and again I'm so grateful
#
that Mahesh Krishnamurthy
#
who's now in Omidyar Network
#
who is now an adjunct faculty member
#
at Carnegie Mellon University
#
they chose me as a bakra
#
saying you will write chapter one
#
where it will have A, B, C, D
#
okay so I had to go read
#
and write that chapter one
#
and they would be my seniors
#
who were both computer science seniors
#
and I had to figure out all the things
#
and they would read my draft
#
so it just put a great pressure
#
that we were writing a book
#
in case you had any doubts in that age
#
how was a book produced in those days
#
it was called Cyclostyling
#
so the pages of the book
#
were cyclostyled and bound
#
and kids from all over the campus
#
and using it to supplement
#
their first year education
#
how many authors were there?
#
oh so you actually had your names
#
yeah so I had my name on a
#
double quotes published book
#
amazing when you were 18 years old
#
and who were the other authors
#
do you remember any of them?
#
good friend from that period
#
now again think of the accidents
#
this is the same Sanjay Jain
#
as I think product architect
#
digital public infrastructure
#
at the Gates Foundation
#
similarly again about that wing
#
so I used to like to row
#
we had boats in the Powai Lake
#
and I had the upper body strength
#
would go rowing with me
#
and on the boat in Powai Lake
#
he would teach me maths
#
and this is only maths for fun
#
meaning with no functional purpose
#
this is only entertainment
#
he was doing discrete maths
#
and that was the kind of culture
#
it was a world of knowledge
#
where is Mini Ganesh now?
#
Mini Ganesh is in America
#
an adjunct at the CMU in America
#
so here's one little event
#
that happened very recently
#
which again got me thinking about
#
some accidents and locations
#
there is an organization
#
in Delhi a research organization
#
they recently did a search process
#
for members of their board
#
so four people were shortlisted
#
and I was a little surprised
#
that three out of the four
#
were from my hostel from my time
#
so note this is an India organization
#
they looked at the entire India
#
and looked for a long list of four
#
for a short list of four people
#
who would become their board of directors
#
and three out of the four
#
were from my hostel from my time
#
what is the probability of that?
#
So at this point you start thinking
#
no there's something more going on
#
and by the way out of the four
#
the two who finally joined
#
are both from my hostel my time
#
so I think there was some randomness
#
that worked out and then
#
the people fed on each other
#
and the process of competition
#
one of the common anxieties
#
that all of us have to encounter
#
I think it happens along two dimensions
#
and that is the anxiety
#
of wanting to fit into the world
#
or wanting to be respected by your peers
#
I am imagining that your hobbies
#
and interests would have
#
because you would immediately
#
have found like-minded people
#
especially in places like IIT
#
and fitting in with the boys
#
would not be so much of a problem
#
but as you have often told me
#
in India the biggest problem
#
one of the biggest problems in India
#
is that boys don't know
#
Casanova already at 17 or 18
#
and indeed staying with her
#
like when I first met you
#
and almost on the spectrum
#
in the sense that it's like
#
okay he doesn't really know how
#
be in social situations
#
in his nerdy little brain
#
so how did that aspect work out
#
like I'm a few years younger than you
#
you know just talking to girls
#
it was like no one had an idea
#
and especially if your ideas
#
came from popular culture
#
which you have to remember
#
there's no internet in those days
#
there's fucking Bollywood
#
which basically teaches men
#
so did it help that you had
#
three elder sisters at home
#
one is that I was brought up
#
and I'm sure that helped
#
I think it also helped that
#
IIT was a peculiar bubble
#
it was not a modern style
#
like today there are all kinds of walls
#
and all kinds of difficulties
#
one just got the opportunity
#
to be simple and be human
#
without having too much other complexity
#
the entire burden of the machinery
#
or prying eyes of other people
#
and dealing with social forces
#
all these things probably helped
#
that it was a simple innocent life
#
and that just made it easier to segue
#
and you got together with
#
a person who in some ways
#
in the sense also a geek
#
incredibly bright etc etc
#
in nerdiness in some ways
#
that was a lucky accident
#
that she turned out to be like that
#
the heart wants for the heart wants
#
who you're going to fall in love with
#
so how did that play out
#
and how did that kind of
#
what happened from then
#
through your early adult life
#
does it give a sense of stability
#
look at things differently
#
you know that relationship
#
has been a big part of your life
#
I would like to know more about it
#
it's been a huge influence
#
everything would have been different
#
if Susan and I had not got started
#
in those days like we did
#
and we were just lucky that
#
and share some of these ideas
#
at a very fundamental level
#
and what are the kind of things
#
so I think we both managed to
#
encourage each other in the madness
#
and that has worked out
#
take me to the next part of your journey
#
so you've done your IIT
#
you are now you know job ready
#
and you can either become an engineer
#
straight away I'm guessing
#
or you can go for higher education
#
but the assumption is that
#
you're going to be an engineer
#
getting a PhD in economics and so on
#
even though one of your first love
#
I think you told me once was physics
#
and you're really a physicist
#
to an economist who wanted to be
#
I think is a phrase you used
#
so tell me a bit more about
#
that evolution of yourself
#
and that evolution of the way
#
in which you saw yourself
#
I've already told you the story
#
where I grew up with my father
#
and the glory of the 20th century
#
and he was an economist
#
it is a different kind of economics
#
compared to what most modern
#
technical economics people do
#
but that is the kind of economics
#
that I thought was a great life
#
made the joint decision
#
that why not try to do that
#
so we sort of figure out
#
that even though we had
#
undergrad degrees in engineering
#
you had to get good GRE scores
#
and you could apply directly
#
so even though we'd never
#
done any serious economics
#
before we managed to start doing
#
economics PhD in America
#
and also it is testimony
#
education system in the US
#
that they don't get stuck
#
that there is flexibility
#
and they're not going to say that
#
because you did not study economics
#
I remember many years later
#
there was an absolutely wonderful
#
young person with a law degree
#
Indira Gandhi Institute
#
to do a PhD in economics
#
if you have a law degree
#
to start a PhD in economics
#
the kind of foolishness
#
but luckily that was not
#
and when I started there
#
they did a very sensible thing
#
which is they run a screening exam
#
where they test for disabilities
#
and they have this very nice
#
that whatever be the disabilities
#
and I think that's the right way
#
rather than having some lofty
#
that a student has to come prepared
#
with all these capabilities
#
and you must have all or nothing
#
instead they were wise and sensible
#
they said we'll run a screening test on you
#
I did an absolutely terrible job
#
on probability and statistics
#
I had got zero probability
#
you have to overcome that
#
and so I was put through
#
the correct sequence of steps
#
and it worked great for me
#
for the things that happened
#
but I think this is the right
#
sensible way to approach it
#
rather than saying that
#
there is some black and white thing
#
I find it a interesting experience
#
that there are periods in my mind
#
where I have just gone absolutely mad
#
about one subject at a time
#
and those are the periods
#
where I have really lost myself
#
and developed deep insights
#
and I think the first of those
#
was physics with Faisal
#
so when I was doing physics with Faisal
#
we were in a different world
#
we lived in an unreal way
#
and we were truly happy
#
and we just did physics
#
and it was a great turning point
#
then I think the second
#
and computer engineering at IIT
#
and Rajappa and Susan and me
#
and I went deep into those things
#
and I got really good at it
#
a third was the mountaineering
#
I think we've discussed
#
in the everything is everything episode
#
that were out of this world
#
the level and the quality
#
the mind-blowing achievements
#
and the disasters that happened
#
it was just a very very
#
big dramatic experience
#
and I think that's what we are made of
#
three such deep experiences
#
and the second in microeconomics
#
and the third in macroeconomics
#
in the first one and a half years
#
I never got that kind of great experience
#
after the first one and a half years
#
so I think the early part
#
I'm so happy about those deep dives
#
that there were weeks and weeks
#
and I was in some books
#
and I was understanding everything
#
and I was deeply immersed
#
and I'm so happy for those things
#
it was not a great experience
#
I'm not thrilled about the rest of the PhD
#
but there were three episodes
#
all of them in the first one and a half years
#
where I went deep deep deep
#
and got lost in a world of
#
has stood with me till today
#
I'm rock clear on some of these basics
#
and each of these things
#
so far I've described several things
#
that I know some things
#
they may be relatively basic
#
I know them absolutely rock clear
#
and then I do first principles
#
reasoning based on that
#
and I'll figure out anything from scratch
#
so I never have to take anything on authority
#
I don't do a superficial understanding
#
of something state of the art
#
I'd rather start from the bottom
#
and build a whole edifice by myself
#
and that's a safe and confident way to be
#
and also then you don't have to be so surrounded
#
by a network of collaborators
#
a lot of modern science
#
is done by collaborators
#
where one knows one thing
#
another knows another thing
#
and nobody actually understands each other
#
and build some products
#
that has its own merits
#
that I know a few things
#
and then I'll build first principles
#
and I often index my life
#
that where did I get those few weeks
#
of just going flat out mad
#
where I am 24 hours a day
#
you achieve extremes of intuition and depth
#
it may not be advanced material
#
the point is whatever you know
#
and you've seen it from every direction
#
and it is deeply integrated into the mind
#
that I got three of those episodes
#
at the PhD years at USC in Los Angeles
#
I'm going to do a lot of double clicking on this
#
but first a broader question
#
when you learn something deeply
#
it changes the way you look at the world
#
it becomes another sort of skin
#
it becomes another layer to your gaze
#
like just probabilistic thinking
#
obviously I wouldn't know it
#
as well as you are as systematically as you
#
but having applied it for all the years
#
I feel that I can look at the world
#
around me probabilistically
#
and therefore be just alarmed
#
at the judgments people seem to be coming to
#
and equally the little that I love about economics
#
you know the reason I think of it
#
as a study of human behavior
#
how people respond to incentives
#
what are scarcities like
#
and once you realize how our brains are wired
#
and all the fallacies and biases
#
how they can get in the way of clear thinking
#
I think they just add so much clarity
#
to a lot of things that you see
#
so I'm guessing you went through
#
you know a similar process
#
with each of the subjects you learned
#
even mountaineering would have given you
#
on a different way of living
#
tell me a little bit about that
#
because all of those then become critical
#
and how you see the world
#
so when I experienced probability and statistics
#
I remember it felt as great
#
as a child when you learn calculus
#
you think there can be never
#
there can never be anything as beautiful
#
but lo and behold there was
#
it is such a huge step forward
#
as a toolkit for understanding the world
#
that you know you're ready to
#
write models about things
#
that are not deterministic
#
and so that was one huge step forward
#
in the micro and the macro
#
I had come with my inheritance
#
of my father's economics
#
which is relatively basic
#
so mid 20th century economics
#
would be sort of his thing
#
and there had been a great evolution
#
of a more technical kind of economics
#
with some really important things
#
and both in microeconomics
#
and it was a completely new level
#
where I became comfortable
#
with the toolkit of modern
#
quantitative microeconomics
#
is completely a theoretical subject
#
there is a more complex interaction
#
and because I was not just
#
a narrow technical economics person
#
I actually had a more humanities view
#
of this and many other economics students
#
because I was steeped in the history
#
that you know for example
#
I knew a lot about the great depression
#
which is a central pillar
#
of how this story has evolved
#
I was very lucky that I came into this
#
at the time of some grand theoretical discussions
#
where the world was coming out of
#
the Keynesian visions of an economy
#
into the more Milton Friedman
#
who solve maximizations
#
and there was a whole so-called Lucas program
#
that was right at that time
#
being built and rolled out
#
so I was just very lucky
#
I was there in those years
#
when those debates were hot
#
and there were people in the department
#
that felt strongly in either way
#
we would have many seminar speakers
#
of diverse kinds coming in
#
and I got to see that as a debate
#
and not as a finished product
#
not as a tidy finished product
#
so today when you see like a standard issue
#
new Keynesian DSG model
#
it seems all polished and finished
#
when you see modern textbooks
#
they are told in an ahistorical way
#
that we only learn in a historical way
#
and the sequence in which they emerged
#
and the debates that drove people
#
to go from one stage to the next
#
I feel that gives us a better understanding
#
and then we know it from the bottom up
#
we are able to tear it apart
#
and rebuild it for ourselves
#
so modern physics is ahistorical
#
you just take into the textbook
#
and you are told here is Schrodinger's equation
#
and now we are going to figure out
#
how to explain things using Schrodinger's equation
#
I feel that's particularly limited
#
when it comes to a field like economics
#
which is actually a humanities subject
#
which is wearing a great deal of technical garb
#
so particularly in economics
#
I feel it's very useful
#
to take a history of economic thought perspective
#
where we start understanding
#
five years and ten years at a time
#
what were the empirical problems
#
that was presented to the main paradigm
#
and then what were the innovations
#
by which some things got fixed
#
which great fads erupted
#
and later on proved to be relatively pointless
#
versus which contributions were more lasting
#
and over the years have been accepted more
#
I think this gives us a much better grounding
#
and intellectualization
#
so I was lucky to be in the years where
#
the work of Friedman and Lucas
#
was the subject of active debate
#
and it was not a finished product
#
today it's a finished product
#
we just treat all this as the truth
#
and we don't think deeply about where it came from
#
but I was there at the time
#
when it was still the subject of violent disagreement
#
and so I benefited by taking this historical view
#
and it fit well within my instincts
#
of locating this in the great journey
#
so I was able to connect this up
#
into history and politics better than many
#
and that was my PhD experience
#
then other things happened
#
like I had to pick work to do
#
and a PhD thesis and all that
#
I was charmed by the Rand Corporation
#
Rand Corporation is a United States Air Force think tank
#
that was built to house Johnny von Neumann
#
who were coming out of the Manhattan Project
#
then over the years they built a social science program
#
and there was a wonderful professor named Lee Lillard
#
who was working at Rand Corporation
#
and an adjunct with us at the USC in Los Angeles
#
he gave me a job at the Rand Corporation
#
he became my PhD advisor
#
and my other PhD advisor was Andy Weiss
#
in the economics department
#
and we picked an idea for a thesis
#
which was putting together tools
#
and methodological ideas
#
that they were then developing
#
and the implementation for me was going to be
#
around the fertility of women in Malaysia
#
and most people sort of blink
#
and wonder what the hell I was doing
#
and I was pushing at the frontiers of the application
#
of certain theoretical and econometrics tools
#
that they were building
#
and so I was the person told to go there
#
and develop this as an application
#
so that was a kind of PhD thesis that I did
#
don't remember it with the happiness
#
that I remember about the three deep dives
#
I also liked being in the Rand Corporation a lot
#
I went into Rand with the full level of reverence
#
that is due an organization
#
that in a way was built to house Johnny von Neumann
#
it was one of the great centers of thinking in the world
#
Richard Bellman was there
#
dynamic programming was developed there
#
game theory was developed there
#
they've played an incredible contribution
#
Tom Schelling was there
#
US strategic doctrine was developed there
#
so I treated the organization with great respect
#
and I learned a bit about what it meant
#
to be this kind of organization
#
I was thinking organizationally
#
I was thinking about the sociology of knowledge
#
about how we bring people together
#
how we create the internal culture of knowledge
#
and discovery and curiosity and greatness
#
so for me Rand was a journey in learning
#
what it means to build great research organizations
#
I was open to this dream and I was curious about it
#
and I feel I took that away
#
for the rest it was okay
#
I mean I'm not thrilled about my PhD thesis
#
The first time I heard about a PhD thesis
#
and this is a story for the listeners again
#
Ajay and I did an episode of everything is everything
#
and I had written columns in the past
#
ranting about how the traditional notion
#
that overpopulation is a problem is just bad
#
people are brains not stomachs
#
and I wanted this episode to sort of unveil my ideas
#
so Ajay said yeah yeah you go ahead
#
I'll just add something if I feel like it
#
so I think the first two three chapters
#
is me just making the full argument
#
giving all the facts and the data I want to
#
and I think there was this magical 10-15 minutes spell
#
where you spoke about fertility
#
and how fertility tends to decline
#
and countries which lose hope
#
and your worries about India's declining fertility rate
#
and I thought it was magical
#
and I was wondering like what the fuck
#
I had no idea that this guy
#
no you know has thought about this stuff
#
I've never seen you write about it
#
like where did all this come from
#
and then you told me that
#
hey your PhD was on the fertility of women in Malaysia
#
I want to double click on a bunch of things
#
and for one of them I'll take a digression
#
I had once done an episode with Rebecca Goldstein
#
after she wrote a book about Plato
#
and in that we were chatting about how philosophy
#
in a sense was like a proto-science
#
that what happens is you ask all the big questions
#
and then in some of those areas
#
like biology and astronomy and all that
#
science comes in and science takes over
#
and it's no longer philosophy
#
but in some areas like ethics for example
#
that they actually remain philosophy
#
and progress through the centuries seems glacial
#
to the point that if you study philosophy
#
you absolutely have to start with Plato-Aristotle
#
there's no you know it's not like physics
#
where you take a modern textbook
#
and look at what's the state of the knowledge now
#
that historical evolution is super important
#
to just getting a grasp of what the questions are
#
in a you know in a much more compressed sense
#
if we kind of look at economics right
#
you've spoken about historical context
#
and I completely sort of get the evolution
#
you have your Smith and your Ricardo
#
and your Marx with his insights
#
you know good description bad prescription
#
you know you have the great depression
#
and you understand okay
#
the Keynesian ideas are naturally going to come up here
#
you know and and later on through time
#
you know Friedman and Hayek may make a comeback
#
so I get the historical context of all of these
#
but my question really is
#
is it to arrive at something
#
that you can call the truth in economics
#
right because in physics
#
you can arrive at the truth
#
and it is you know shit is falsifiable
#
in say ethics or aesthetics
#
or the classic philosophy
#
you know those classic philosophical fields
#
it's an argument that will be ongoing for a while
#
in economics I would assume
#
that there is so much data
#
that you can just look at the passing of time
#
and you can now say that
#
okay some things are just the truth
#
we had an episode on how to do development
#
episode 57 of everything is everything
#
I've had an episode with land pritchett also
#
and you would look at some of his work
#
and think that some questions are truly settled
#
that the importance of economic growth
#
to human progress is settled
#
there's really nothing else
#
but it appears not to be the case
#
you know open to fashions
#
and different schools of thought
#
as if you know there's no reality out there
#
which you can kind of look at
#
so what is your sense of it
#
that I would imagine that as a young person
#
you would go into this field
#
as you're falling in love with this field
#
you see the evolution so far
#
but you assume that there is an arc of progress
#
and it will get closer to the truth
#
is that really the case
#
because economics is also interacting
#
with so much else in the real world
#
it's interacting with politics
#
it's interacting with different ideologies
#
which have their own dogmatic positions
#
which are almost religions by themselves
#
so what's your sense of the field
#
and the pursuit of truth
#
and how fast it progresses
#
some parts of economics have succeeded wildly
#
there are things that happen
#
that you can't believe on how well they work
#
okay so there are parts of finance
#
that give you predictions
#
that are just eerily good
#
and it can be used for engineering
#
so the word financial engineering
#
it is literally like the evolution
#
from Newton's laws to mechanics
#
to building bridges and doing engineering
#
so it is literally something up at that level
#
that there are parts of economics which do that
#
similarly consider passing the market test
#
Amazon is the biggest recruiter
#
of PhD economics in the whole world
#
and I don't have a great judgment
#
about what they do inside
#
but I assume that this is working
#
in a dollars and cents way
#
so there are parts of economics
#
which have really graduated
#
in terms of working with numbers
#
and gaining pretty effective grip of the world
#
within limitations of what you mean by effective
#
so you know you should not ask
#
to forecast a stock price
#
it is the insight of economists
#
that in a well-functioning market
#
the stock price will not be forecastable
#
because any forecast ability
#
would have been used up by competitive agents
#
is one in which no forecast is possible
#
so you need to get out of simple concepts
#
like you can't forecast the weather
#
you can't forecast the stock price
#
those kinds of debates need to be put aside
#
that there are some parts of economics
#
that are remarkably successful
#
in terms of hard numbers
#
and interesting value-added contributions
#
to real people in the world making decisions
#
that said my heart remains
#
in the old 19th century and 20th century agenda
#
where it was more like a philosopher
#
you had to be a thinker about the world
#
you had to have good feelings about the world
#
in the sense that you cared about the world
#
it was not a technical disciplinary thing
#
that you get five pups and get tenure
#
that you thought about the world
#
and you cared about the world
#
and you tried to put everything together
#
to form insights into the world
#
and think about human beings
#
and how all of us can do a little bit better
#
in our time on this wretched earth
#
so I think that that dream remains important
#
and it flies in the face
#
of the normal organization
#
of universities and career tracks
#
so almost nobody is playing that role anymore
#
but I continue to think
#
that that's an important role
#
that needs to be played
#
that we need the people who will think and worry
#
on the sweep of history
#
and on the sweep of the human experience
#
where economics plays a great role
#
so as a card-carrying economist
#
that economics is the queen of the social sciences
#
and that economics is at the center of everything
#
that people respond to incentives
#
people solve optimizations within constraints
#
and that is the heart and soul of what people are
#
and yes people go crazy
#
they get swayed by ideology
#
all those things are there
#
but at heart the most useful set of insights
#
and the core of understanding the human condition
#
and I feel we should try to do that
#
now the disciplinary approaches
#
of modern universities and specialization
#
and the research journals
#
and publication and tenure
#
all these rules interfere with this journey
#
so I feel the world is currently a bit underserved
#
by the kind of thinkers that are required
#
and you know I am not an enthusiast
#
about the normal trajectory of academic economics
#
meaning I do write papers
#
because I love to write papers
#
but I do not consider it as
#
the either necessary or sufficient
#
that there is much more to living a full life
#
than writing those papers
#
you know you mentioned mobs and I am thinking
#
the key to understanding mobs
#
is really at the intersection of exactly two subjects
#
which are biology and economics
#
you know one explains the way that we are hardwired
#
and how those knobs can be turned
#
and the other the nurture component is really economics
#
you know we are optimizing within constraints
#
or we are responding to incentives and etc etc
#
there is very little work
#
but it is starting to happen
#
where people are bringing evolutionary theory
#
and I think that is just pitch perfect
#
that you know the great idea of biology is evolution
#
the idea that you know you and I
#
have hardware in our brains and bodies
#
that was designed to operate 50,000 years ago
#
under hunter-gatherer conditions
#
that is like one piece of truth
#
and then how that hardware plays out
#
in a modern homo-economical setting
#
where we do voluntary exchange
#
I feel that would be a very very fruitful line of inquiry
#
I think it is just about beginning
#
but it would be a great way
#
to push on understanding the world in a deeper way
#
and you know there is the same central insight
#
at the heart of both of them
#
which is spontaneous order
#
you know both natural selection
#
and the way markets work
#
and the way society works is
#
all in a bottom of spontaneous order kind of way
#
before we continue with your personal journey
#
another question double clicking
#
on you know the point you mentioned
#
about those three delightful deep dives
#
which you know gave you so much joy
#
and that is about learning how to learn
#
like you mentioned that
#
you know that you had a particular way of learning
#
that you would get to the root of everything
#
or to the first principles or whatever
#
and you know it is one of the skills
#
that I realized that I have
#
in many of the disparate fields
#
or the skills that I have got
#
like initially I will just immerse myself
#
and get to the first principles myself
#
even if they are not written down anywhere
#
and kind of figure it out
#
that gives me the clarity
#
and then I can map the rest of the landscape pretty well
#
I want to know about your processes
#
and I am sure a lot of that learning
#
must just have happened surely from joy and happiness
#
you are not really thinking about
#
what is the framework for learning
#
you are just diving into it and you are learning
#
but now when you look back in hindsight
#
what are the common elements to them
#
how should we think about learning in fact
#
so not just as a descriptive thing about yourself
#
but we all have more or less the same brain
#
you know even as a prescriptive way
#
that if there is someone listening to this
#
who wants to learn a new subject
#
if I want to learn the guitar
#
do I just learn some chords
#
and learn how to play popular songs
#
so I can sing along at parties
#
or do I go to music theory
#
and try to first figure out
#
you know those kind of first principles
#
does it depend on what kind of temperament I have
#
so for me I think there are three tracks
#
one is always the historical journey
#
that how did this field evolve
#
what were the questions being asked
#
and again and again I find
#
that is a tremendous source of insight
#
as opposed to an ahistorical view
#
where we take today's state of the art
#
so I want to give you a trivial example
#
when you think about health
#
when you think about it in a historical sequence
#
what you see is that in the first world
#
first came the public health
#
there was very little by way of health care
#
that doctors could do to cure anybody
#
or make a meaningful contribution
#
to the health of a person
#
we clearly distinguish from our listeners
#
you've spoken about this many times before
#
a treatment is applied to one person
#
public health are the initiatives
#
that are taken to make a difference
#
to the health of an entire population
#
for example clean water and clean air
#
the clean water and the clean air came first
#
control of mosquitoes came first
#
so the first wave of improvement of health
#
in the first world countries
#
and today public health in the west
#
is considered a completely solved problem
#
meaning that there are no meaningful problems
#
in the field of public health in the west
#
and their focus is primarily on health care
#
but once you see this in historical order
#
you will immediately think that
#
no in India we haven't even begun
#
we haven't done public health
#
so if you take a snapshot of contemporary
#
western thinking on health
#
it is health care centric
#
because that is the problem
#
they're grappling with today
#
but once you think about it
#
you will realize that to do health in India
#
is not to do health care
#
we've got to wage war on public health
#
okay so that's a simple trivial example
#
we're just taking a historical perspective
#
rather than learning today's snapshot
#
and do a PhD in health in the west
#
you will find a health care emphasis
#
but if you take a historical sequence
#
you will see that oh first
#
you have to get the filled out of the Ganga
#
and that's a third day a project
#
and you know those are the most material things
#
you can do by way of making
#
the health of the people of India better
#
rather than focusing on health care first
#
I mean the excellent illustration you gave me
#
which explains this to me is
#
just mosquitoes and malaria
#
that public health is you do defogging
#
so there are no mosquitoes in the first place
#
and you don't get malaria
#
health care which comes next
#
is you're treating a malaria
#
but if you do the public health properly
#
the health care component is vastly simplified
#
which is always view things
#
in historical perspective
#
my trick since childhood is
#
everything that I know is tagged with a date
#
and things are stored in my head
#
and also that permits odd interconnections
#
that ah while Oppenheimer was doing this
#
while Oppenheimer was doing this
#
at the same time Godel was doing that
#
like that you're able to link up
#
what was happening in the world
#
because the storage and retrieval system
#
is organized around dates
#
the second trick is first to think
#
at a more English intuitive level
#
and get a rough sense of what's going on
#
and it may be imprecise
#
but get a high level picture
#
of what's going on at an intuitive level
#
and then stage three is
#
then you have to do the deep dive
#
and get the technical details
#
let get the correct models
#
go deep into the technical detail
#
and get mastery of the field
#
and these three interact with each other
#
so constantly what you push on the second track
#
will help improve your third track
#
what you push on the third track
#
will feed back into your first track
#
this is how I learn all fields
#
and I'm just thinking aloud
#
and applying it to how someone may learn chess
#
like first you know the moves right
#
but the wrong way to teach someone chess
#
would be to make them memorize openings
#
like d4 d5 c4 s queens gambit etc etc
#
the right way would probably be
#
to the historical perspective
#
where you will see games
#
immortal game evergreen game
#
but then you see a game
#
which is much more boring
#
there is a certain elegance in it
#
you come to the first principles
#
which to me are everything
#
which is not what the moves are
#
but why games are playing out
#
which is when you learn
#
basically two things for me
#
which is space is important
#
and therefore you occupy the center
#
or you take the hyper modern approach
#
of attacking it from the flanks
#
that initiative is important
#
therefore you are developing the pieces
#
and then when you look at
#
morphy and anderson spectacular
#
which frankly are pretty basic right now
#
anybody who is on tactics trainer
#
or not allow them to happen to him
#
but then immediately makes sense
#
because everything comes down to
#
and i feel that once you get there
#
you can learn the rest yourself
#
because everything flows out of these
#
after these when you're getting into
#
and you start using computers
#
for the pedagogy and all of that
#
and we have a great episode on chess
#
so for everything is everything
#
which the gentle reader
#
but after that everything falls into place
#
so does that make sense
#
replicating your sort of
#
that you learn much more
#
when you see these in historical order
#
otherwise i just tell you
#
control of the center matters
#
you say fine control of the center matters
#
but you haven't got it deeply
#
let's talk about now your
#
but before your journey back to india
#
couple of things i want to double click on
#
and one of them is this
#
that how has your gaze on india evolved
#
the way you look at the country
#
a lot of what you would have gotten
#
about india would have been
#
from your father's sense of hope
#
like all his actions indicate
#
that's why he was a man of action
#
that you're growing up in
#
largely forward-thinking
#
secular tolerant liberal
#
all of those beautiful things
#
and that would have been
#
kind of the lived experience
#
and you would have imagined
#
the entire country is like this
#
would have been disturbed
#
at all the things that are going wrong
#
that even though you're in a bubble
#
you know you're in that bubble
#
and you can see all the shit
#
that's going wrong around you
#
but you know in those same years
#
i was much younger than you
#
my default view of the world
#
was almost a received wisdom
#
that the state is a solution
#
you know if planning is failing
#
that means planning wasn't good enough
#
do better planning baba
#
that's the kind of default view
#
you know markets are looked upon
#
across those fundamental questions
#
evolve and how did that affect
#
the way that you looked at india
#
so my father had the delight
#
of how the developmental state
#
and developmental state
#
and he had that passion
#
of talking about all this
#
and explaining it to me
#
that this stuff is broken
#
and i used to think this
#
you know those kinds of things
#
so i was like fully cognizant
#
and remember i said to you
#
i was precautious in 1976
#
when milton friedman produced
#
i was a 10 year old reading that
#
so i never went through
#
in the world of public policy
#
my views have shifted and evolved
#
earlier i was more in a bubble
#
and shifting their ideology
#
and they have the wrong approach
#
i have grown to understand
#
it is a game of control
#
these things a little differently
#
than i used to in the early years
#
i was really quite an innocent one
#
in emphasizing the ideas
#
surely you will not continue
#
you've got to be far more careful
#
on the questions of self-interest
#
and public choice theory
#
in the way we think today
#
i think that after independence
#
there was an entire period
#
of a very different kind
#
of person in government
#
i'm sure you remember your father
#
and the people around him
#
who are just making a career
#
and some of them would be
#
the visionaries and the dreamers
#
but the kind of hard-headed
#
and power that we see today
#
in the first two generations
#
of the indian state has changed
#
and i have also learned slowly
#
and that shapes our thinking
#
on how we might think about policy
#
why you came back to india
#
i also want to ask about academia
#
we've of course had a great episode
#
on this fixing the knowledge society
#
i think it's episode 23
#
of everything is everything
#
if i know my numbers correctly
#
but you know give me a sense of that
#
because there was a time
#
where if you were an idealist
#
who wanted to change the world
#
the academy would actually appear
#
to be the ideal place to do so
#
for the production of knowledge
#
the discovery of knowledge
#
the dissemination of knowledge
#
the whole game happened there
#
whereas now when i look at it
#
and my view may well be harsher
#
it's a joke that you know
#
especially in the humanities
#
it is just a big circle
#
academics talking to academics
#
nothing they say is of consequence
#
people getting deeper and deeper
#
into more and more specialized silos
#
in it's between 1634 and 1638
#
and it seems to me that
#
i know you'll agree with
#
that a lot of really fine minds
#
waste their lives in academia
#
when they could instead
#
be trying to make a difference
#
what you felt about academia
#
then has academia changed
#
have your feelings towards it changed
#
and what was it that made you
#
was there a push factor
#
as much as a pull factor
#
my phd experience of writing papers
#
and getting a phd thesis
#
meaning i did all these things
#
and i was left unsatisfied
#
the happiness that comes
#
i learned to write papers
#
only after coming back to india
#
and after i fully woke up
#
are developing a technical toolkit
#
and i will apply it into malaysia
#
of what these kind of tools can do
#
that left me a little cold
#
i need to take interest
#
and we should always be alive
#
to what it is we're doing
#
and i felt i did not enjoy that
#
the incredible publication pressure
#
a word publication orientation
#
for you're supposed to shut up
#
and stop taking interest
#
you're supposed to focus
#
and each paper is a multi-year journey
#
and it involves a dulling
#
there has been a problem
#
of high-powered incentives
#
that people are offered
#
in return for playing this game
#
and i think that just brings out
#
so there was a different world
#
where the american universities
#
worked in a more sensible way
#
of high-powered incentives
#
curious people got thrown out
#
who ran the race harder
#
and then they made the next wave
#
of the tenure decisions
#
and they made the next wave
#
of the journal acceptances
#
a certain kind of process
#
in the world of academics
#
much more clearly today
#
than i did at that time
#
i was just accepting that
#
okay fine this is the way
#
of everything is everything
#
around the knowledge society
#
and that is this kind of material
#
okay and now on the question
#
the manmohan singh speech
#
and i had access to him
#
and he was telling me stories
#
about what was going on in india
#
i want to be part of this
#
moment that i knew enough history
#
to know that these moments
#
are not things that happen often
#
with the benefit of hindsight
#
was one of the greatest moments
#
those people did the work
#
that laid the foundations
#
of the greatest growth episode
#
and we're able to say that today
#
but standing there in 1991-92
#
i had the intuition that
#
this is the way in which
#
we should think about these things
#
so i was keen to be back
#
from the usual difficulties
#
and delays of late phd completion
#
so i remember in early 1993
#
susan and i were looking
#
and looking at my misery
#
okay fine this is enough now
#
so we purchased a ticket
#
to fly to india in august 1993
#
saying this shall be the end
#
so it was a commitment device
#
to buy the plane ticket
#
had to be put into place
#
before my flying back to india
#
we also had to check out
#
of the rented house there
#
national park before that
#
were then back calculated
#
that this is the exit date
#
for the hiking in yellowstone
#
therefore this is the region
#
where you want a phd defense
#
and so i went to my advisors
#
and then i pushed myself
#
in the intervening months
#
to finish my phd thesis
#
so see this is long range
#
i recommend it to everybody
#
everything worked out as planned
#
other than one minor thing
#
that we missed the flight to india
#
after packing up out of the house
#
and getting to the airport
#
and we missed the flight to india
#
however you took the next
#
yeah so all the planning work
#
yellowstone worked on time
#
returning the rented car
#
some relatively minor fees
#
and give you a next day's flight
#
where we went and stayed
#
because we had no house
#
wow so what a remarkable story
#
and it's not in a sense
#
that you're just coming back to india
#
by now you have also arrived
#
which is the first big field
#
in which you immersed yourself
#
kind of brought new ground
#
so tell me a bit about that
#
like when did you start
#
falling in love with finance
#
or recognize the primacy of it
#
like we of course episode 21
#
of everything is everything
#
which is a beautiful episode
#
the beauty of everything
#
when did you start to fall
#
and when did you realize
#
that if i am coming back to india
#
this is the thing to do
#
so in fertility and demographics
#
and demographic transitions
#
so i'd never done a course in finance
#
susan started a phd thesis in finance
#
and she did courses in finance
#
and that is how i started
#
so my picking up finance
#
is entirely because of susan
#
and i just got fascinated
#
it came from two points of view
#
one was just the dream of science
#
that the level of quality
#
and precision of finance
#
was just something qualitatively ahead
#
of anything else we see in economics
#
so the state of the art
#
in quantitative work in economics
#
labor was the best that we got
#
and labor economics is a mess
#
and then i discovered finance
#
and finance was just magical
#
how well we understood some things
#
and it had dreams of science
#
compared to everything else in economics
#
like in derivatives pricing
#
this stuff is not just a theory
#
you get predictions of option prices
#
how well these models work
#
and they drive engineering
#
that are used in the real world
#
and it is a great edifice
#
that was a group of reasons
#
that it is an unusually clean place
#
where one can have the pleasure
#
okay it's a guilty pleasure
#
come on you can just do this
#
the physics and maths nerds
#
yeah so it is this sheer happiness
#
that you can actually be precise
#
and understand some things
#
whereas in a lot of other economics
#
doing economics is truly hard
#
i mentioned one of my three deep dives
#
it is the hardest of all fields
#
today i count myself as
#
but it has really taken decades
#
it is the hardest of all fields
#
i've just done a phd in macroeconomics
#
they're the least possible
#
understanding of their own field
#
so i always say to young people
#
on simple technical things
#
and then when you grow up
#
by the way this is what
#
when i was a young person
#
you should do other things
#
and then you will come back
#
that it took me 10-20 years
#
to come back to monetary economics
#
it takes time to do macro
#
like you have to have a rich
#
understanding of the world
#
you have to be a thinker
#
if you hide inside some models
#
you're not understanding macro
#
about why to do finance
#
part two was just a simple
#
common sense about socialism
#
that if india is going to emerge
#
to be played by finance
#
so finance is the brain
#
a normal capitalism work
#
the capitalism was stifled
#
and there was a central
#
the government told you
#
what products and processes
#
where it would be a ferment
#
there would be a great deal
#
i also had simple common sense
#
while agriculture at the time
#
it was going to keep declining
#
in terms of dollar a day poverty
#
it was going to keep declining
#
and it was going to be gone
#
so there's plenty of installed
#
who know how to do agriculture
#
who know how to do poverty
#
i don't need to do those fields
#
the importance of these fields
#
and there is established expertise
#
writing papers on agriculture
#
that it was over served
#
of shrinking importance
#
dramatically increased importance
#
and i like late in my phd
#
i did my next deep dive
#
where i just went mad on finance
#
i was just reading papers
#
and really really understanding
#
again entirely self-taught
#
susan who was doing some stuff
#
and i was talking to her
#
to discuss finance with them
#
that's okay i have no problems
#
i don't need too many people
#
so by the time i came to india
#
and i announced to others
#
amazing let's take a quick
#
so have you always wanted
#
but never quite gotten down to it
#
well i'd love to help you
#
27 cohorts of my online course
#
the art of clear writing
#
and an online community
#
before my past students
#
to showcase the work of students
#
and vibrant community interaction
#
spread over four weekends
#
and practice of clear writing
#
there are many exercises
#
the course costs rupees 10,000 plus gst
#
head on over to register
#
that's india uncut dot com
#
doesn't require god-given talent
#
just a willingness to work hard
#
welcome back to the scene
#
i'm still with ajay shah
#
who is now back in india
#
i mean we are recording this
#
in india in my home studio
#
in the larger narrative
#
that you've gone abroad
#
and then you've sort of come back
#
was there a sense within you
#
that that this is where
#
this is an exciting moment
#
or was it a decision that
#
spend the rest of my life in india
#
that is my karambhoomi as it were
#
partly out of the sense
#
of connection with the journey
#
of indian national development
#
and partly also a sense
#
that so many things in the west
#
you know the standard fable
#
that the people aren't wearing shoes
#
there's no demand for shoes
#
that there's incredible demand for shoes
#
because nobody has shoes
#
so it's a bit like that
#
there's so much to be done here
#
like very basic application
#
of first principles will go far
#
in terms of making a contribution
#
and making a difference
#
so this is this country
#
is a paradise for people
#
who are willing to dig in
#
and lead a difficult life
#
but it can be very rewarding
#
because there's so much
#
for a young person in your position
#
there are so many temptations
#
for example you could just do an MBA
#
and get into consulting
#
or you could take up high-flying jobs
#
and you know with your skills
#
just make a really great life
#
to sell yourself the rationalization
#
that let me first make myself
#
and make a great life for myself
#
and then i will have the resources
#
to do what i want to for my country
#
one can go down those road roads endlessly
#
than people typically do
#
when they are in their 20s
#
they're sort of making decisions like this
#
so what were the kind of conversations
#
you and Susan had about this
#
what was your sense of purpose then
#
like we've spoken about
#
and i have a broad sense of it now
#
but what was your sense of purpose then
#
was it already solidified
#
into just play the long game
#
i do it was basically this
#
i've already described the context to you
#
that i grew up with my father
#
with a sense of the world
#
and there was a great journey
#
and you know we were all part of that
#
and we had to try to do some good things
#
so that was very much the strategy
#
one of the standard parts by the way
#
was to go work at the World Bank
#
so i remember Surendra Dave said
#
you should first go work in the World Bank
#
but the problem was July 1991 had happened
#
so you know spending more years
#
the important years in India
#
that i understood those things correctly
#
because it is in fact true that
#
i'm going to describe the story to you
#
where i just happened to be the right person
#
in a bunch of historic things that happened
#
and just a few years later
#
these events and activities
#
so i was just very lucky
#
but you know all in all 1993
#
worked out reasonably well
#
in all this one should always remember
#
that hindsight always looks 2020
#
so a different set of accidents
#
a different set of shocks
#
and i'm sure a different fun life
#
i don't want to overstate
#
the particularity of what happened to me
#
but i personally feel very lucky
#
and i think i understood it
#
strategically and conceptually correctly
#
so remember before that
#
the fall of the berlin wall 1989
#
was a great euphoric moment
#
for you know a whole bunch of people
#
i'm sure i know you would have felt that
#
i just felt like a great load
#
being lifted off my back
#
we were out of that nightmare
#
of communism and the cold war
#
and you know the freedom of eastern europe
#
all these things looked so wonderful
#
july 1991 felt like a very important beginning
#
with the benefit of hindsight
#
with the benefit of hindsight
#
about the reforms of 1991
#
to have this boundless belief
#
that oh now we are fixed
#
like we'll get out of this socialism
#
and there is an endless journey
#
to freedom and prosperity
#
and truth and beauty and love
#
and all the good things
#
so you come back to india
#
what's what's lined up for you here
#
you know take me on that journey
#
so my father died in 1984
#
after that cmi was being run
#
the great indian economist
#
and then by mahesh vias
#
okay so i first showed up at cmi
#
and then shortly later i moved to ij idr
#
but primarily what i was doing
#
was something different
#
and so after i landed in india
#
i reached out through human networks
#
and i met with the great man cb bhave
#
who was at the time executive director
#
i think he was senior executive director
#
at sebi and shortly after that
#
i met rh patil and ravinarayan
#
and these meetings happened
#
essentially within 10 days of each other
#
and each of these three people
#
is just one of the great people of the world
#
i respect them enormously
#
they are just the best people
#
and it seems like a mind-blowing level
#
of good fortune to have landed up in india
#
and within the first three weeks
#
within a span of 10 days
#
and then i met rh patil and ravinarayan
#
and i basically spoke with them
#
like a clueless open-ended newbie
#
i knew nothing at the time
#
and i talked to them about what their life was
#
and what they were thinking
#
and what they were doing
#
and i was fully entranced
#
at what they were doing
#
and i felt and even today i feel
#
that they had a great insight
#
and they had a great point of view
#
and they were doing really important stuff
#
cb bhave was the number two person at sebi
#
so he was part of the team building
#
of the project of building
#
and ravinarayan and rh patil
#
they were building an exchange
#
and just for a little bit of background
#
and context sebi was set up
#
as a empty organization
#
without legal powers in 1988
#
surendra dhave was the chairman
#
and his team was ravinarayan
#
and nagesh jivinagesh kumar nagesh
#
okay that was his team all drawn from idbi
#
and they had no powers at the time
#
and dhave moved out to run uti
#
at the time of the scandal
#
and after that sebi got the law passed
#
so sebi got some powers
#
after the harshad mehta scandal
#
and so i'm discussing 1993
#
where that sebi now had some legal teeth
#
and there was a team there
#
and cb bhave was just one of the wonderful people
#
he was a former ias officer
#
who had exited the ias and come into sebi
#
and ravinarayan and rh patil also ex-idbi
#
so this was the landscape
#
and the two great things going on
#
in the country in finance
#
were the construction of sebi
#
and the construction of nse
#
and so i met these people
#
they told me some sense of their values
#
and what they thought they were doing
#
and i requested to volunteer
#
so i'm going to take two digressions here
#
before we go further into the story
#
one i'd request you to speak
#
about each of these people in turn
#
because these are not people i imagine
#
who would have been spoken about
#
much in the public domain
#
they're just names to people
#
i've heard their names before
#
i don't know anything about them
#
and in the rest of the conversation
#
any other important people
#
that we forget all of this
#
and i'd like there to be a way to remember
#
so wherever you feel it is appropriate
#
somebody had a big impact on you
#
or taught you something
#
or played an important part
#
these are all unsung heroes
#
so you know tell me a bit
#
about each of these guys
#
that illustrate aspects of their character
#
CB Bhave is IAS Maharashtra carder
#
he worked with YB Chauhan
#
so he you know he had access
#
to the old great congress style
#
chief ministers of india
#
he grew up through that world
#
and he was in the ministry of petroleum
#
and when sebi was being built
#
he got chosen to come into this
#
and he learned this field
#
his views on the importance of finance
#
to the kind of things i've described
#
that in building the new india
#
these are the commanding heights
#
and exactly in the sense
#
of Nehru's use of the word commanding heights
#
are the commanding heights of india
#
and bhave had that kind of
#
principles and philosophy
#
and it was a wild west at the time
#
which did not work too well
#
and there was very little knowledge
#
so a lot of the stories
#
but there was a lot of figuring out
#
and lest anybody have confused notions
#
about what figuring this out means
#
it is never about our mass adoption
#
of a package of knowledge from abroad
#
meaning we have to know
#
how the rest of the world works
#
we have to know the detail
#
of the institutional machinery
#
but it can never transplant here
#
it has to be figured out here
#
and as land pritchett emphasizes
#
a practitioner in the first world
#
is like a new york taxi cab driver
#
he knows how to get rides
#
he doesn't have a subtle understanding
#
and how the pieces come together
#
we have to have the full first principles
#
understanding of who does what
#
what are the incentives
#
and of course nothing can be transplanted
#
you have to work incrementally
#
and you have to start building
#
so it is a tremendous creative act
#
of bringing understanding
#
a sense of political economy
#
sequencing capacity building
#
this is the kind of work
#
of the true policy thinkers
#
and the policy makers of india
#
it's never a stroke of the pen
#
you know big bold decision
#
it is a thousand small sophisticated decisions
#
that fall within a larger strategy
#
it is the ability to hold one idea
#
in your head for a long long time
#
okay and that is what all these people were doing
#
big dramatic announcements
#
that they had a deep insight
#
in the indian financial system
#
and the nature of the work
#
and they built towards that
#
over many many years slowly
#
fighting very very difficult odds
#
paying an enormous personal price
#
that no good deed goes unpunished
#
so these are the real heroes of india
#
came in as senior executive director of sebi
#
he developed this whole insight
#
and philosophy of what we are doing
#
and I just admire him so much
#
that what he figured out
#
was really hard to figure out
#
and at the time I was young
#
and I learned enormously from him
#
so a lot of the knowledge
#
see I get to make more noise
#
because I write in public
#
a lot of the cool stuff that I wrote
#
was coming from people like this
#
that it is they who created the world view
#
and I adopted a lot of that knowledge
#
are the cool things that I have said
#
are actually coming from them
#
and so a lot of the knowledge was
#
figured out by these three people
#
then I come to R.H Patil
#
R.H Patil grew up in IDBI
#
of Surendra Dave and of my father
#
and back to how India works
#
in 1984 there was a G.S Patil committee
#
on the reforms of the capital market
#
so these committee reports
#
state-of-the-art knowledge
#
sift through the debates
#
and legitimize certain views
#
so there's a whole body of knowledge
#
in the G.S Patil committee report of 1984
#
which was shaping the reforms
#
of the Dave period in SEBI
#
and the early years of the 1990s
#
so these things are not created
#
they come from a context
#
of the G.S Patil committee report
#
the G.S Patil committee thanks
#
economist deputed by IDBI
#
to serve as the technical team
#
for the G.S Patil committee
#
so this is the way knowledge gets built
#
that R.H Patil was in IDBI
#
was studying this field
#
was learning this field
#
G.S Patil committee report
#
the intellectual connections
#
between what was written
#
in the G.S Patil committee report
#
what these guys set out to build
#
then again think of the period
#
so it was frankly a study group
#
okay so it was Surendra Dave
#
it was frankly a study group
#
but this is very important
#
because if you don't have study
#
then it makes no sense to have action
#
so these are very healthy things
#
that people poopoo that period
#
and they excoriate that period
#
they say oh it was pointless
#
this is a toothless SEBI
#
yeah it's a toothless SEBI
#
but you need that marination time
#
you need the incubation time
#
the problems of the system
#
they developed the insight
#
is an electronic exchange
#
so BSE used to do floor trading
#
they used to shout at each other
#
and they used to rip off
#
and they used to periodically
#
because they could not efficiently
#
process money and shares
#
and NSE built electronic trading
#
which created full transparency
#
went to people all over the country
#
so it was no longer just Bombay
#
and it was CB Bhave's idea
#
and he literally bugged everybody
#
to build a new institution
#
which is called the clearing corporation
#
Williamson type institution building
#
that the clearing corporation
#
by putting up an institution
#
so you trade against me
#
you might not give me the shares
#
you might give me shares
#
I might not give you the money
#
so a middleman comes up between us
#
which is the clearing corporation
#
this is a new institution
#
that facilitates transactions
#
that you and I do a trade
#
and one millisecond later
#
the legal fiction that is created
#
is that the clearing corporation
#
and the clearing corporation
#
has a trade against you
#
the clearing corporation will chase you
#
the clearing corporation will hound me
#
are doing business with each other
#
was prevalent all over the world
#
but other people understood
#
so Bhave and R.H. Patil
#
and Ravi Narayan understood
#
that this holds the key
#
that we have low levels of trust
#
where people barely know each other
#
how will we ever make this work correctly
#
without crashing and burning
#
from time to time in a crisis
#
because somebody does not pay up on time
#
of their institution building
#
that they were building electronic trading
#
they were building this clearing corporation
#
they were building the depository
#
and became the founding leader
#
of the depository project
#
this project was incubated inside NSC
#
it was led by Chitra Ramakrishna
#
to build the depository
#
as the CEO of this depository
#
took a well incubated project
#
that had been nurtured by Chitra
#
and significant amount of
#
and that built the depository
#
and so we started getting
#
and electronic exchange
#
and suddenly equity market trading
#
in India was working well
#
and I want to show you the contrast
#
I moved back to India in 1993
#
in 1993 the first surge
#
and it had instantly collapsed
#
on the problems of physical paper
#
all this kind of mess was coming
#
and it was not possible
#
large scale foreign investment
#
with this kind of market capability
#
so people don't adequately
#
of the Indian software industry
#
and the enabling framework
#
through the ages of SEBI
#
so these are all the pieces
#
had the luxury of becoming part
#
we were mostly volunteers
#
I never got paid in all this
#
and we got to be a part
#
and it was the best deal
#
in the world I could ask for
#
that I got to contribute
#
into one of the great achievements
#
of Indian institution building
#
and the Indian economic reforms
#
kind of double clicking
#
and going further on this
#
a continuation of the last question
#
and then a further meta question
#
of the last question would
#
again be not just about
#
an episode on the reformers
#
and everything is everything
#
about a different kind of reformers
#
there were a whole bunch of people
#
the self-aggrandizement
#
of being able to publish
#
and get their ideas out there
#
they were not public intellectuals
#
prevailing conventional thought
#
to themselves and their careers
#
but they went against it
#
and they silently fought
#
that battle at the back end
#
till the time was right
#
and they were able to do
#
what they went on to do
#
and that time may never have come
#
and their lives may have seemed futile
#
if things didn't change
#
and what I often wonder about it is
#
going back to public choice theory
#
public choice theory tells us
#
people are responding to incentives
#
that bureaucrats will just want
#
to increase their budgets
#
and the size of their departments
#
that if people look after
#
a certain narrow definition
#
then you go with the prevailing win
#
that there's a status quo bias
#
while people respond to incentives
#
they respond to different kinds
#
and there are subtler incentives
#
so I therefore am always very curious
#
about trying to get a sense
#
of what is driving these people
#
where is their purpose coming from
#
you are sitting in America
#
and it's a brave exciting time
#
but it's already happened
#
you're just joining the party
#
when these people are there
#
to take the metaphor too far
#
so you are absolutely right
#
what I am describing as
#
these three people are of course
#
created by that larger community
#
who were all with each other
#
and I think that they created
#
and the yearning for respect
#
in the eyes of each other
#
that is the most important incentive
#
that drove these people
#
so there was a sufficient community of them
#
and they talked to each other
#
they thrived on each other
#
they protected each other
#
keep the ship moving forward
#
through the great years
#
when India was making progress
#
through which it happened
#
to think of this story without
#
at the Ministry of Finance
#
to Manmohan Singh being a Prime Minister
#
to Manmohan Singh being a Finance Minister
#
to Narasimha Rao being a Prime Minister
#
all this is a political superstructure
#
which created the conditions
#
where these appointments took place
#
otherwise there would be no Bhave
#
and R.H. Patil and Ravi Narayan
#
in these critical positions
#
and the story goes further back to the 1960s
#
when Manmohan is meeting Montek
#
and saying boss come back to India
#
so all these people are the network
#
which led to this external manifestation
#
and SEBI and NSDL and all that
#
it ultimately comes from one coherent community
#
that lie at the Ministry of Finance
#
and for example we know that many years later
#
those same tools were used in very different ways
#
the New Delhi started bringing
#
a very different breed of people
#
and New Delhi hurled agencies
#
against these organizations
#
the idea of New Delhi hiring strange characters
#
or the idea of New Delhi hurling agencies
#
against these kinds of people were unheard of
#
now I realize that that is the privilege
#
at that time we just took it for granted
#
that's what Delhi will do
#
New Delhi is the ultimate custodian
#
of the economic reforms
#
that if they ever want India to make progress
#
you need a financial system
#
and so they've done these kinds
#
of appointment decisions
#
and we've had a procession
#
of great people in this field
#
and only you don't know
#
what you've got till it's gone
#
and it's only later on you understand
#
that New Delhi is capable
#
of being perfectly perverse
#
and actually put an end
#
to the one generation journey
#
of building the Indian financial system
#
so you know I really admire
#
all the people that came together
#
and that is the machinery out of which
#
these great growth episodes happen
#
they don't happen out of thin air
#
it is made out of people
#
it is made out of intellectual frameworks
#
it is made out of communities
#
I'll link a bunch of episodes
#
which if you're a new listener
#
you should be listening to which is
#
you know we did a great episode
#
I've got episodes with Monte Carlo
#
that touch on all of these
#
and of course episode 28
#
of everything is everything
#
a meta question I want to ask now
#
is about finance itself
#
that I think there is a danger here
#
and the reforms and all that
#
to commit the curse of knowledge
#
many listeners of the show
#
and to a large extent even me
#
don't really and whatever I've learned
#
in fact about the Indian financial system
#
I've learned only through you
#
as if I'm in kindergarten
#
what do you mean when you say
#
the commanding heights right
#
in the scene and the unseen
#
on exactly this a few years ago
#
and that was your first episode with me
#
and everything is everything
#
in this very cool episode
#
but describe it to me that
#
a you know what is the importance
#
of finance in an economy
#
to bring India into the modern age
#
as far as for finance was concerned
#
let's focus on the non-financial sector
#
the bulk of every economy
#
the financial sector can be like
#
90% of GDP is non-financial
#
so the resource allocation problem
#
is how will you allocate capital
#
between different industries
#
the central planner did that
#
so a planning commission would decide
#
that we shall have steel factories
#
or a planning commission would decide
#
that so and so technology is a good one
#
or some industry ministry
#
would allocate a license
#
to such and such person
#
so picking winners is the essence
#
as a part of central planning
#
I think Jagdish Bhagwati's book
#
India in Transition 1993
#
the planners decided that
#
it is immoral to use aluminum
#
for the purpose of making
#
that aluminum is a rare thing
#
but it cannot be used to make
#
the hull of a soft drink can
#
so this is the world of central planning
#
at the collapse of the Soviet Union
#
that the central planning stuff
#
sadly we're standing in 2024
#
most people in the Indian state
#
have not yet got the memo
#
and we're standing in 1991
#
where more people have got the memo
#
that central planning does not work
#
and we're trying to imagine
#
a world without a central planner
#
okay so we want to think of
#
what is that world without you
#
it's a world of finance
#
so let's think about that
#
a person is a private business person
#
thinking of building a business
#
in the non-financial sector
#
what is that person going to do?
#
the answer is that person
#
the person is going to build a business
#
is going to build a factory
#
putting in 100 rupees of capital
#
will generate more wealth
#
that happens by looking at the valuation
#
so imagine if the price to book ratio
#
of a cement company is five
#
is that I'm going to put in 100 rupees
#
to make a cement company
#
and the market is going to reward me
#
with a market cap of 500
#
and people look at that and say
#
telling main street what to do
#
that price to book ratio
#
saying guys do entry here
#
that you may have thought
#
that you are a edible oils company
#
but the high price to book ratios
#
are in the software industry
#
so Wipro needs to go out
#
of vegetable oils into software
#
so chase the high price to books
#
this is how people think
#
you want to be a startup person
#
what is a startup person looking to do?
#
they're looking to build a company
#
run it for five years and sell it
#
sell it for what kind of valuation?
#
so you look at the valuation
#
of the companies available today
#
you know this kind of company
#
these kinds of healthcare companies
#
have a very good valuation
#
to manufacture such a healthcare company
#
within the short period of five years
#
so that is the nature of the startup
#
and then we come away from the industry
#
and defaulting on every project
#
person X2 carries a good reputation
#
the financial system screens these people
#
when they come asking for money
#
the financial system judges
#
so wall street holds the keys
#
that you want to build a business
#
you want to put your own money
#
but you want to really grow your business
#
you want to raise equity capital
#
you want to raise debt capital
#
the financial system holds the keys
#
the financial system asks
#
20 tough questions for everybody
#
who wants to raise equity capital
#
who wants to raise debt capital
#
it is not a trivial matter to raise money
#
but you will be asked 20 questions
#
and that is a very good thing
#
and that these are the ways
#
in which finance is the brain of the economy
#
that the organized financial markets vote
#
on the valuation of alternative firms
#
every day this free information
#
comes out in the newspaper
#
so the price to book of firms and industries
#
that is made by the financial system
#
so the entire huffing and puffing
#
and the frenzy of the speculative drama
#
of the financial system
#
results in one public good
#
is a daily valuation measure
#
the price to book ratio
#
comes out into the newspaper
#
and then every business guy
#
looks at this and wonders
#
so look at the great rush
#
of every Tom, Dick and Harry
#
coming up with a software company in India
#
the Infosys IPO happened
#
lots of high price to book ratios
#
became visible in the software industry
#
and then 1000 people thought that
#
oh software even I can do that
#
so you may have had a business
#
in an unrelated area in the past
#
but you looked hard at the situation
#
and you thought okay I can put this up
#
let's put in 100 rupees
#
and try to build a software company
#
the market will reward us handsomely
#
and if it fails it fails
#
but that is the machine of capitalism
#
in which with the decline
#
of the central planning system
#
you need its supplantation
#
by the system of financial markets
#
that finance is the brain of the economy
#
Wall Street tells Main Street what to do
#
but finance is not a sterile black box
#
finance is institutions
#
is the pressures of corruption
#
is all the wrong people
#
wanting to get their hands
#
and indeed as happened later
#
all that pressure of too much money
#
actually led to extremely high damage
#
in the Indian financial system
#
there is a popular notion
#
that the world of finance
#
seems disconnected from the real world
#
where people are gambling
#
where money is making money
#
and what's the relation to the real world
#
a classic sort of illustration of this
#
that in the popular imagination
#
look our economy is doing badly
#
look at the price of tomatoes and onions
#
and yet the stock market is going up
#
and now you and me can of course
#
come up with that explanation
#
quantitative easing in the US
#
created easy money coming in
#
and that flooded our stock markets
#
and yeah there is no link between
#
there's no direct necessary link
#
between stock markets and real markets
#
this is an impression people have
#
that is intuitive and easy to believe
#
and I also believe not exactly true
#
there is an element to this
#
of speculation and all of that
#
but all of it is also working
#
towards a greater purpose
#
and we absolutely need finance
#
it is a lifeblood of everything
#
so much of human progress
#
again our episode 21 of everything
#
is everything is just about that
#
but you know what would your response be
#
if that query was thrown at you
#
the speculators are doing God's own work
#
they are putting their money
#
so you and I talk to each other
#
fine we'll talk about it
#
the speculator is going and putting a bet
#
NVIDIA is the purest play on AI today
#
so if you believe AI is going to do great
#
if you got excited by one physics Nobel Prize
#
and one chemistry Nobel Prize
#
then you will buy shares of NVIDIA
#
this AI hype is too much
#
AI is actually not going to be in this world
#
then you will sell the shares of NVIDIA
#
and it is people looking at the world
#
with idle chai conversations
#
but putting their money
#
so there is a dead intent there
#
another way to think about this
#
is that the large profits and losses
#
from financial speculation
#
in the hands of professional investors
#
gives them the incentives
#
to spend money on gathering information
#
to think about the finance commission
#
the thinkers of the planning commission
#
and the industry ministry
#
with a distributed self-organizing system
#
where people are putting resources
#
forming views about the world
#
forming forecasts about the world
#
and not just as idle speculation
#
but putting their money
#
to think about the future
#
officials in a ministry of industry
#
are fundamentally not incentivized
#
you know when anybody says
#
some official in the ministry of industry
#
that electric vehicles good
#
but how will they achieve that information
#
how will they achieve that analysis
#
what skin do they have in this game
#
the industrial policy approach
#
there is a lack of information
#
there is a lack of expertise
#
and there is a lack of skin
#
speculation in financial markets
#
that the people who are playing
#
are looking at green energy
#
they are looking at EVs
#
they're constantly asking themselves
#
what shares should I buy
#
what shares should I sell
#
if you were a genius five years ago
#
and you understood the AI revolution deeply
#
you would not write a blog article about it
#
you would buy shares of NVIDIA
#
and you would come out right
#
you'd be making vast amounts of money
#
so that's the role of finance
#
and I think it is great
#
you know the great tragedy of my life
#
and you're completely aware of this
#
I would have said NVIDIA is going awesome
#
because I've always been an AI optimist
#
and if I was investing five years ago
#
I would have put a lot of money on NVIDIA
#
because I'm just a Bengali lazy guy
#
and I made no investments
#
and I'm looking forward to you helping me
#
kind of plan my finances now
#
whatever little there is of it
#
people should get a sophisticated sense
#
but we will save that up
#
we will save that up for later
#
I also love the way that you describe this
#
as competing ideas fighting like
#
you know when people think of finance
#
which will come up for it
#
if you look at stock images
#
on Getty images or whatever
#
you'll probably find this green colored screen
#
with numbers going up and down
#
all over the place if it's a GIF
#
and I find it deeply exciting
#
because what is happening is
#
it's not numbers going up and down
#
it is a marketplace of ideas
#
these are real people talking to each other
#
I think EVs will do this
#
I think this EV company is good
#
I think that one is a fraud
#
and it is through these conversations
#
that we arrive at the most sophisticated
#
version possible of the truth
#
which no bureaucrats sitting
#
in some industrial policy ministry
#
in this I want to say one more thing
#
that all of us should repeat to ourselves
#
the future is unknowable
#
nobody should put up the benchmark
#
of predicting the future precisely
#
that's a dumb thing to do
#
tomorrow's world will be different from today
#
in ways that are profoundly unpredictable today
#
the financial markets predict the future
#
the bar is that financial markets
#
do a good job of consuming all available information
#
processed through the frailty of the human mind
#
meaning you don't have some demigods
#
processing the information
#
you have all the human frailty
#
and so I don't share the sense
#
that a financial market system
#
or if it is vulnerable to human frailty
#
because we only have humans around here
#
we haven't found any demigods
#
so what are you gonna do?
#
okay you want some officials to do this stuff?
#
what the Indian financial system looked like
#
like you've already painted the image
#
trucks full of shared certificates
#
and paper going from place to place
#
so what did the system look like
#
in which it interfaced with the state
#
in our most recent episode of
#
everything is everything
#
you know you've spoken about
#
how when you think about it
#
the state has a monopoly on violence
#
aspects of this monopoly
#
is you create contracts
#
which control the principal agent problem
#
which you know make those agencies
#
accountable for the limited amount of coercion
#
that is parceled out to them
#
so there are really two pieces of the puzzle
#
one is what does the financial system look like
#
and b what is the state's approach towards it
#
where is it getting in the way
#
what is the correct way of regulating
#
i mean i know it's a deeply complicated question
#
and it could take up 10 hours of your time
#
just answering this one question
#
but give me a broad sense of
#
and in what direction the changes are going
#
finance is the queen of the economy
#
the exchange is the queen of finance
#
the exchange is the great junction box
#
is for the exchange to work properly
#
what does working properly constitute
#
fair access to everybody in the country
#
it should not be that it is a building in bombay
#
and the blocks in calcutta are disadvantaged
#
fair means that you don't lie to the customer
#
what used to happen in the olden days
#
is that amit bhai would call
#
his friendly neighborhood stockbroker
#
and say buy me shares of reliance
#
the shares would be purchased
#
actually on the trading floor for 200
#
but the guy would lie to you
#
and say i bought it for 220
#
so that was just a little bit of theft from consumers
#
that was going on every day all the time
#
you would pay a high price when buying
#
you would get a low price when selling
#
because the trading floor was opaque
#
and there was no way for you to see it
#
the third attribute was about market manipulation
#
the exchange is a frontline of supervision
#
where it has to enforce against market power
#
so market power is a market power
#
market power is a market failure
#
you don't want any people bringing vast sums of money
#
or forming a cartel and making a false price
#
and that detection and enforcement against people
#
should be done by the exchange
#
because they are close to the action
#
and governments are far away
#
so the exchange has to be the frontline
#
of enforcement against market manipulation
#
finally the fourth characteristic is that
#
the exchange has to be systemically robust
#
in terms of its payment and settlement functions
#
money should come in smoothly
#
shares should be paid correctly
#
there should be no screw-ups
#
there should not be a collapse
#
what we had was a crisis at the Bombay Stock Exchange
#
where there was a payment failure
#
and the exchange closed down
#
for some three weeks or something
#
it was the Harshad Mehta scandal
#
where the prices were manipulated
#
there was the malpractice on treating consumers
#
and it was only for people in South Bombay
#
customers everywhere else in India were not accepted
#
so I've described four attributes
#
of what a good exchange should be
#
and all the four attributes were violated
#
by the Bombay Stock Exchange
#
now I want to go away from the easy story of the NSE
#
and say something different
#
that in fact I've never said in public before
#
but I think about it a lot now that I'm all grown up
#
the first best option in that situation
#
was for the Bombay Stock Exchange to reform itself
#
look it's a private organization
#
they should have the right incentives
#
they should know that fixing these problems
#
because if you are able to pool in the activity
#
of customers all over India
#
and if you give the customers a more fair deal
#
and if you enforce against market manipulation
#
and if you make sure that the exchange does not collapse
#
the business of the exchange
#
will go up a million fold
#
as it did in the following years
#
and I did not think about these things clearly
#
but the really interesting question
#
is why were the members of the BSE
#
not able to arrive at a caution bargain
#
through which they would remedy themselves
#
as a purely private organization
#
this is something I feel we need to think more about
#
and it's a mystery to me
#
and it's also a tragedy to me
#
because it would be so great
#
if private action would have gone after these problems
#
and Ashok Desai was the chief economic advisor
#
and the ministry of finance supported
#
the ideas of the people in Bombay
#
which was the folks like the IDBI people
#
we can build a new exchange
#
and their theory of change was that
#
while the players should be private
#
because we do want a private sector economy
#
maybe an exchange is such a critical piece of infrastructure
#
that maybe having a little bit of a public ownership
#
and a public effort in promoting a new exchange
#
so they put down 49% of public shareholding
#
by public sector organizations
#
51% shareholding by private financial firms
#
and this is a good ownership structure
#
because these owners were all the users of the exchange
#
so I think it's a very good alignment
#
insight that has unfortunately been lost over the years
#
but there's a very good alignment that
#
think of it like a community facility
#
that the users of the exchange
#
are the large financial firms
#
and they are the owners of the exchange
#
and they have every incentive on the board
#
in terms of putting pressure on the exchange to work well
#
and so the NSE solved all these problems
#
Ashish Chauhan is a junior of mine from IIT
#
he was the engineer in this project
#
he played a great role in bringing
#
the satellite communication technology
#
through which NSE was able to put up satellite dishes
#
and suddenly all the traders from all over the country
#
were first-class participants in the same market
#
you were no longer a second-rate participant
#
trying to talk to a BSE broker on the phone
#
so that is our problem one got solved
#
then they created an electronic trading system
#
where you could see all the prices on a screen
#
that put an end to problem number two
#
because the customer could see exactly what price
#
so that entire abuse of customers was eliminated
#
then comes problem number three
#
about enforcement against market manipulation
#
NSE created the governance concept
#
that the management team will have no skin in the trading game
#
and the trading members will have no ownership of the exchange
#
the exchange is owned by end users of the exchange
#
so this ownership and governance architecture
#
of the NSE of that period
#
was an absolutely brilliant idea
#
saying that under these conditions
#
you get the correct incentives
#
to enforce against market manipulation
#
the brokers who are part of the bad activities on the exchange
#
were the owners and the managers of the exchange
#
and that created bad incentives
#
so the dreamers of NSE suggested and delivered
#
that this is the way to get the market manipulation under control
#
finally they built the clearing corporation
#
that I already described
#
and that put an end to the periodic payment crisis
#
they also built the depository
#
that put an end to the problems of the physical paper
#
and truckloads of paper
#
so this was the revolution
#
it's one of the great reforms of India
#
it got done in the early 90s
#
it created a vast escalation of the human participation
#
therefore the brain power
#
the people from the whole country and the world
#
and participated in that conversation
#
the information in that conversation improved
#
and that is how India got better
#
so it is one of the great elements of nation building
#
and these are the heroes of the story
#
what's just remarkable about opening up access like that
#
to people all across the country and all across the world
#
is that when you have so many more dots to paint a picture
#
the picture you paint will be so much better
#
and so much closer to the truth
#
it's just enormously pathbreaking
#
and what's your personal journey during this time?
#
what were you and Susan up to?
#
what were the precise things that you were working on
#
and that really excited you?
#
so partly we were socially well integrated into the early NSE
#
and we got to meet people regularly
#
so Ravi Narayan, R.H. Patil, Chitra Ramakrishna
#
Ashish Chauhan, Raghavan Putran
#
these are all great people
#
and we got to meet them
#
we were self-appointed busybodies
#
we would keep getting ideas
#
and we would go up and speak to them
#
or send them email and just volunteer
#
whenever they needed propeller heads
#
they would ask us questions
#
so we tried to contribute
#
can you give me examples of what kind of ideas
#
what kind of questions?
#
so many many practical ideas
#
but I want to focus on two big ones
#
one was the construction of a stock market index
#
so at the time the mainline index of India was the BSE Sensex
#
and I was at a conference organized by SEBI
#
and the World Bank in Goa in 1995
#
with a whole bunch of people
#
and R.H. Patil was with me at the conference
#
and we all knew crystal clear
#
that the next phase of market development in India
#
was going to be the launch of derivatives trading
#
and the most important derivatives are index derivatives
#
so you have a futures or an options on the index
#
and that will need an index
#
and so R.H. Patil said that
#
do you do something like the BSE Sensex
#
do you have knowledge and insight
#
using which something can be done better?
#
and he said I clearly have one problem
#
that the companies lobby with the exchange
#
to get their own stock included into the index
#
and he says we can't have that
#
I don't want any accusations about some corporation
#
jockeying and lobbying to get into the index
#
to get thrown out of the index
#
so how large should an index be?
#
what should be the rules of index maintenance
#
and can we create dispassionate mechanisms
#
which are grounded in economic logic
#
that will create an exchange
#
and Susan and I started on that work
#
and this work led to the design of the Nifty index
#
in Nifty we came up with ideas and algorithms
#
which exploited the new level of transparency
#
which was now happening at NSE in an electronic system
#
so there was the kinds of information being revealed
#
in the electronic system
#
that was previously unattainable
#
so we played a role in imagining
#
what kind of information capture should be done at NSE
#
which then created new kinds of data sets
#
and we were the pioneering users of that data
#
doing research with that data
#
and that new kind of data became used
#
by the algorithms inside the Nifty
#
why should there be 50 companies in NSE
#
we first went back to NSE
#
saying that you know this should be dynamic
#
like it should be 61 shares today
#
based on some algorithm
#
and then we should recompute the algorithm every year
#
and tomorrow it will say 73 companies and so on
#
and R.H. Patil said shut up it will be 50
#
and it's got to stay 50
#
he says you have to think about the world
#
the world is not ready for an index
#
that has a varying number of stocks
#
even though when you pause to think
#
like if the algorithm will spit out some things
#
who am I to judge the number
#
what is the sanctity of the number
#
like that so we worked closely with Ashish Chauhan
#
and others in NSE on this
#
and in those days the computers were incredibly primitive
#
we had one tiny Toshiba laptop
#
because you couldn't afford two laptops at the time
#
and we wrote all the code there
#
and the typical recipe would be
#
that I would start an algorithmic idea
#
and I would peter out halfway
#
and Susan would complete it
#
Bishop Heber says about the Mughals
#
he says the Mughals began like titans
#
and finished like jewelers
#
well so I was the little titan
#
and Susan was the little jeweler
#
that she finished all these things
#
and so we wrote a bunch of codes
#
and the bunch of codes did everything
#
that they would analyze the world
#
they would analyze the data
#
what is the list of the firms
#
that should be in the index
#
they would work out rules for
#
they would apply the rules for index inclusion
#
so we basically built the Nifty
#
and it went head on head to compete against the BSE Sensex
#
and that worked out pretty well
#
because I think the world accepted
#
that this was a better index
#
of course it took lots of persuasion
#
and these things are not easy
#
like the Dow Jones is a pretty foolish index
#
but it looms large in the public imagination even today
#
but the professionals moved out to the S&P 500
#
and it is that kind of story
#
the professionals moved out to the Nifty
#
and that was pretty cool
#
so with the benefit of hindsight
#
this was just a lot of fun
#
that we enjoyed doing these things above all
#
and it was the application of brain power
#
and thinking creatively
#
we didn't read the methodology of the S&P 500
#
they did not have the kind of information that we had
#
we were an electronic exchange
#
and the Americans were not
#
so we thought from scratch
#
how would you exploit the opportunities
#
of this new information set
#
so that is the delight of life
#
to think from scratch and figure out stuff
#
it was the most advanced index in the world
#
and even today I feel there are some clever things
#
now a lot of the index work
#
has gone stupid over the years
#
some days I feel like starting all over again
#
and you know Susan and I
#
should just sit and think from scratch in today's world
#
how would you make indexes
#
and I feel there's a lot that can be done
#
I'm not pleased at how this field has gone
#
but yeah at the time it was a cool bunch of ideas
#
we've had discussions around this stuff
#
with many global academics
#
and generally people are into
#
that yeah this was pretty neat and clever
#
and what I also find interesting is that
#
typically when the designers of an index
#
can keep a percentage of royalties for themselves
#
which can make them very very rich
#
and you and Susan just said
#
so we just handed over the IP to NSE saying
#
we are only here to do it
#
for the pleasure of doing it
#
what's the second one the first is nifty
#
but first I want the name nifty
#
okay so it was first NSE 50
#
which is like the most boring bureaucratic name in the world
#
then Susan was repeatedly writing latex files
#
do you know latex it's a type setting system
#
I've heard about it from you
#
I think you mentioned it during our UNIX episode
#
it's the world's most beautiful type setting
#
and we use it to type set articles
#
and to type set books and so on
#
so you can create macros in latex
#
so you don't have to write NSE 50
#
and so you know NSE is a small
#
so it has to be typeset as a small caps dash 50
#
so there's a big caps and a small caps
#
so this is happening repeatedly
#
so Susan wrote a macro for that
#
and the macro she wrote was nfty
#
so backslash nfty to mean that small caps NSE dash 50
#
because that was just in the type setting of the latex file
#
and nfty suddenly suggested nifty
#
so she jumped and said this is nifty
#
yeah so that's how it's called nifty
#
nifty is a nifty name if I may say so
#
yeah the second fun story I want to tell is about risk management
#
when you do a derivatives trading system
#
there is a risk that some bloke will take a 16 trillion rupee position on the exchange
#
and make a loss and go bankrupt
#
and there will be a bloody mess
#
and this has been known since the 19th century
#
when futures trading first began
#
so I described the institution of the clearing corporation
#
but that begs the next question
#
how is the clearing corporation going to be safe?
#
Is the clearing corporation rapidly run out of capital and go bankrupt
#
and then suddenly you have a big mess
#
so this brings the question of the risk management system of the clearing corporation
#
that how is the clearing corporation going to monitor the exchange environment
#
and create incentives for people to do safe things
#
and this turns out to be a problem of calculating risk positions
#
calculating the risk associated with positions
#
and asking people to hold capital
#
so if you're going to take a position you should have to put up capital
#
so that if you default that capital will be forfeited
#
and that creates incentives most of the time for people to not default
#
occasionally they will default
#
and we have some fallback ways of dealing with those occasional and rare defaults
#
then comes the question so how much is that capital
#
all over the world there are systems inside exchanges
#
which do these calculations and enforce these requirements
#
but there are certain differences in the institutional architecture in the west
#
in the west they have big well-capitalized firms who are playing on these exchanges
#
so you rest a lot on the depth of the financial strength of these members
#
but that's not where we are in India
#
in India we had dinky small firms participating in the exchange activity
#
and so it was particularly critical to be able to do these calculations on a real-time basis
#
this had not been done before
#
so you wanted to be able to calculate the risk of every participant
#
on the derivatives exchange in real time
#
and that was new there was not a problem that had been solved before
#
and I think I briefly told this story in one of the episodes of everything is everything
#
that Ashish Chauhan and Susan went to Chicago looked at these systems
#
and came back to India and said those guys are on 70s technology
#
and they can never do real time
#
and we're just better off building something from scratch here
#
and Ravi Narayan green-lighted the idea that we should build a proof of concept inside IJIDR
#
so we worked with a bunch of old PCs and students and did some cool computer engineering
#
and built a risk management system which is called PRISM and this was done in 1999
#
and I'm pleased to say that while the guts of the system have been rewritten
#
over and over reflecting many generations of technology
#
in its essence that system is alive and well today
#
meaning even today this system is alive and well inside NSE
#
and I think it is even today called PRISM and it does the risk management
#
so this is another example where we got to bring the full blend of all the knowledge
#
of statistics knowledge on how to think about risk of computer science knowledge
#
of how to think about high performance computation of finance knowledge
#
of how this fits into the working of the clearing corporation
#
I was on the board of the clearing corporation when it was created in 96 like that
#
so this was a nice mixture of knowledge and participation
#
in the institution building of the world these are the kind of things that we got to do
#
it almost seems like you know like almost like a dream come true
#
that you know you're right that if you were working in the western world
#
you would be working within a completely existing system
#
doing incremental little things and etc etc
#
basically driving a taxi instead of building a transportation system
#
or designing a city which is almost you know like what this is
#
so give me a sense of the headiness of the time
#
was there like what were the new challenges that you were kind of falling in love with
#
and you know all these years you are in that in these early years after coming back to India
#
you're in that whole financial world where there is SEBI and NSE
#
and you're building NIFTY you're building PRISM
#
you're doing all of this you're engrossed in that
#
but this is not only why you came back you know there's also a larger picture
#
give me a sense of that larger picture what do you see of the Indian state there
#
what is the Indian state's approach towards the financial system
#
because even if you are building a state-of-the-art NIFTY and a state-of-the-art PRISM
#
the system is still incredibly primitive in many ways
#
especially with regard to its interface with the state
#
so let's look at the dates as I said I started in this subject in August 1993
#
in November 1994 equity trading started at NSE
#
and in less than a year NSE became the biggest exchange in India
#
and by international standards this is unheard of
#
it never happens that a second exchange is able to dislodge the leader
#
so that was quite remarkable
#
and then just a sequence of wins and wins and wins
#
in March 1996 NIFTY was launched
#
in November 1996 the depository was launched
#
in the middle of 1996 the clearing corporation was launched
#
and all these pieces started falling into place
#
now there were of course political economy interests
#
there were many people who did not like to live in this new world
#
there were people who had a deeply optimized business that worked in the old world
#
so there was always going to be a galvanization of their interests
#
around the desire to protect the available ways in which they were working
#
and see this involves problems of the old India
#
in the old India there were suitcases of cash coming into trading
#
there was market manipulation
#
there was a tacit give and take with the exchange staff
#
on how you will get selective enforcement against market manipulation by some people
#
so there was a messy world
#
and there were people and firms who had skills who optimized for that world
#
and so there was always going to be a backlash
#
and there were people who were very unhappy about all these developments that were happening
#
so there was a lot of conflict and rivalry around these kinds of things
#
when NSC succeeded then a lot of people got really unhappy
#
about the next stage which was derivatives trading
#
I think in their hearts everybody knew from the western data
#
that basically the big game was derivatives trading
#
that derivatives trading was going to dwarf the working of the equity market
#
and so that unfortunately turned into a big flashpoint
#
but for years and years it just got stuck
#
so in March 1996 the Nifty was launched
#
and in 1996 the Clearing Corporation was launched
#
so in my opinion in 1997 you were ready to go
#
like there was really no reason to delay
#
I mean I know Prism was not ready
#
but fundamentally you were ready to go with derivatives trading in 1997
#
but a whole bunch of people were very unhappy
#
and there was political economy
#
there was all kinds of oppositions
#
the left is always mobilized to be anti-finance
#
so there was a peculiar partnership between the old rear guard
#
of the Bombay Stock Exchange and an old kind of exchange culture plus the left
#
so the socialists and the communists who are always ever present
#
in the Indian intellectual landscape
#
also jumped in reading blogs in the west
#
and attacking derivatives trading in India
#
so there was that kind of partnership of hostility
#
to the way these things work
#
in I think in August 1997 we finished an 18-month process
#
which is called the LC Gupta committee
#
so there was a wise old man LC Gupta
#
and government created a committee led by him
#
in order to figure out policy issues around derivatives trading
#
and you know unfortunately it took 18 months
#
when it could have been done in much less
#
but there was a lot of conflict there
#
by the way you may have heard me mention the name Parsi Mistry
#
Parsi Mistry is a remarkable Indian guy
#
he grew up in the IFC and the World Bank
#
at the age of 33 he was the chief of staff of the World Bank
#
and he was socially connected to the Indian leadership
#
to people like Montek and Rakesh Mohan and so on
#
so Parsi was one of the members of the LC Gupta committee
#
there was a bunch of people who were members
#
and as I said it unfortunately took 18 months
#
but that report got done
#
and it essentially established the machinery of derivatives trading
#
but still after that the years went by
#
and finally in 2000 there was a big mess
#
on the equity market once again
#
with the collapse of the Calcutta Stock Exchange
#
with some allegations around the Bombay Stock Exchange
#
and the entire Ketan Parekh accusations
#
and at that time finally came the impetus
#
to move forward with the derivatives trading
#
and I seem to remember Nifty Futures Trading
#
started on the 12th of June 2000
#
so potentially what could have been done in 1997
#
now that I'm all wise and grown up
#
I think wow that is pretty good
#
but at the time I was very cantankerous
#
why are we spending years and years just not moving
#
and I was extremely unhappy about all those events
#
now that I'm older I think that's fine
#
what is derivatives trading and why is it important?
#
you are a speculator you believe NVIDIA is good
#
now if you go to the spot market and buy NVIDIA
#
your voting power is related to the amount of capital that you put up
#
now the distribution of brain power in the world
#
may not be the same as the distribution of money power
#
so when you have a view on NVIDIA
#
is there a way in which your voting power can be increased
#
compared to your wealth
#
and the answer is leverage
#
so you want to be able to get a bigger position
#
than the money you have in your pocket
#
that is called derivatives trading
#
so derivatives trading is a way to do leveraged speculation
#
to take bets on the price of NVIDIA
#
in a way that reduces the tyranny of pre-existing wealth
#
if you don't have derivatives markets
#
the voting power is in proportion to pre-existing wealth
#
and so the places with intellectual power
#
are automatically devalued in the speculative process
#
derivatives trading helps put more power
#
with the people who have more brains and less money
#
so what were the debates around it
#
I can actually understand all the intuitive objections
#
around it from the old schoolers
#
but what were the sort of objections around it
#
how would you answer them at the time
#
and how did it eventually happen
#
and what did that landscape look like then
#
the objections are basically the left
#
likes to think that making money is a bad thing
#
rich people is a bad thing
#
vast amounts of money flow through derivatives trading
#
the firms that play in derivatives
#
become successful and rich
#
there is a little bit of a continental European
#
hostility towards finance
#
where there are these almost Nazi ideas of blood and earth
#
that things you can touch are good
#
and things that you can't are bad
#
so people want reality of the real economy
#
and are hostile to ephemeral things
#
this is a very old gulf in philosophy
#
and that leads to this hatred
#
that how can be this shell game of some gambling
#
that actually controls the world
#
so there is hostility towards
#
which controls vast amounts of money
#
which can create and destroy great amounts of wealth
#
which controls the world
#
this gets under the skin of some people
#
and irritates the people
#
but we know that this stuff works better
#
that when you have derivatives trading
#
the prices become more informative
#
there's no question that the way I explained it to you
#
that the distribution of brain power in the world
#
is not the same as the distribution of the wealth
#
that could be a nice socialist point
#
I could be pretty Marxist in this
#
the Marxist case for derivatives trading
#
I think we should ask Chad GPT to write an essay on this
#
I would prefer it if you wrote it Ajay
#
we don't want Chad GPT to write anything of the sort
#
see Chad GPT has ample access to Marxist literature
#
I just have to give him the seed of the idea
#
yeah but you know the thing is
#
progress happens through a small minority of people
#
going against convention
#
Chad GPT depends on an LLM
#
which follows Sturgeon's law
#
where 95% of everything is crap
#
so somehow the twain don't meet for me
#
so I think that it is a fact about the world
#
that the distribution of wealth
#
is not the same as the distribution of brains
#
and what derivatives trading does
#
is it gives a bigger bang for the buck
#
to the guy with the brains
#
and who's willing to put their money on the line
#
you have the conviction
#
it's a combination of brain power and conviction
#
and if you get a stupid man with conviction
#
fine he's giving his money away
#
fine mistakes are a part of life
#
there's nothing wrong with making mistakes
#
okay again to live is to make mistakes
#
I mean maybe there will be an earthquake
#
and you and me will be thinking
#
why were we so stupid to sit here and be recording
#
so mistakes are a part of life
#
the future is unknowable
#
there will be all kinds of things
#
where some people win and some people lose
#
but this is the best information system known to man
#
we don't know a better information system
#
because you need to philosophically accept
#
that the future is unknowable
#
and no one brain can know the future
#
it is only this distributed intelligence
#
that can discern the future
#
this is the best that we can do
#
and its churning burns up many people
#
if you don't want to run the risk of being burned up
#
it's a voluntary decision
#
freedom includes the freedom to make mistakes
#
and once we build this edifice
#
it is the world's best information processing system
#
there is no better system known to man
#
to grind through all the information
#
and make bets about the future
#
and thus discover the future
#
and embed it in the stock prices
#
which creates the price to book ratio
#
of each company and each industry
#
which is then seen by Main Street
#
which guides how the venture capitalist
#
and the businessman decides to build new companies
#
prices information incentives
#
we shall also link to our everything is everything episode on prices
#
and on four papers we love
#
which includes high x-rate paper
#
the use of knowledge in society
#
and these two are important prices
#
so Ajay at this point I want to ask you about IGIDR
#
which is of course Indira Gandhi University
#
which is in Bombay Goregaon
#
where you were based during this period
#
like what was your arrangement with them
#
what kind of working atmosphere was it as an institution
#
what was it like for you
#
IGIDR was built by Kirit Parikh
#
it is funded by the Reserve Bank
#
and Kirit Parikh had this happy approach
#
that it is the job of each academic faculty member
#
to simultaneously write papers and engage with the world
#
so he was delighted about all this kind of
#
real world work and real world engagement
#
and we were also starting to get pubs
#
so he was happy in all respects
#
and it was a remarkable environment
#
IGIDR also placed a low demand in terms of teaching time
#
and this is a core issue
#
in terms of the funding model of academic organizations
#
so most academic organizations to make ends meet
#
they have to ask for very high levels of teaching
#
load on faculty members
#
and this is true everywhere in the world
#
but we had the luxury in that period
#
the way the institution was structured
#
that we had low teaching burden
#
Susan and I would do a little bit of teaching
#
and we were starting to add on PhD students
#
and that was working well
#
I felt that we were getting high quality PhD students
#
we were getting some really cool people
#
coming together as PhD students
#
and it was coming together as a bit of a research group
#
there were modest amounts of external funding going into it
#
because the wages of the PhD students
#
were paid for by the campus
#
so in a way they were not labor that the lab had to fund
#
so earlier I mentioned the engineering lab
#
as a unit of organization
#
so we started building an engineering lab
#
inside IGIDR based purely on PhD students
#
with a little bit of external staff
#
with a little bit of external funding
#
like the PRISM project got done there
#
and I thought this was a really good thing
#
now in hindsight I did not
#
in hindsight I know that this was the magic of Kirit Parikh
#
that leadership like Kirit Parikh
#
had all these characteristics
#
of encouraging and supporting the establishment of labs
#
of encouraging and supporting engagement into the real world
#
and creating a supporting environment
#
and over the years I have understood
#
that these are not things to take for granted
#
so there is a far more messy environment
#
in the government research organizations today
#
where many of those happy things are no longer feasible
#
but that's for a later story
#
maybe at the end we should come back and reflect a bit
#
on how the intellectual community works in India
#
but for right now I just want to say that
#
through this period we were in the early stages
#
of setting up a small lab
#
and we were at IGIDR and it was working well
#
and everybody was chill with what is going on
#
that some research was happening
#
some pubs were happening
#
we were running some events
#
we were doing real world
#
we were scoring value and impact in the real world
#
we were turning into public intellectuals in India
#
and this was happy and comfortable and supported
#
by the management and the board of the organization
#
You had mentioned earlier that one of the things
#
that may have worked in your dad's favor
#
or maybe underscored his iconoclasm
#
was that he wasn't in Delhi
#
and I would imagine that in Delhi
#
things might have worked differently
#
you would have been in different circles
#
you might have had a different incentives
#
you would have had a different crowd to impress etc etc
#
and you have of course spent a lot of your time in Delhi
#
which we'll talk about later
#
the Ministry of Finance here
#
but give me a sense of how much of a difference
#
that locational change makes
#
that you are in Bombay in a sense
#
you have that physical distance
#
so you can be a little more dispassionate
#
a little more removed from the pressures
#
that would come in a capital city like Delhi
#
and I would imagine that culturally it's very different
#
like Bombay in a sense can be transactional
#
but it leaves you alone
#
whereas Delhi is a city obsessed with status and power and so on
#
Well, in the event very shortly after this period
#
I parachuted into Delhi
#
and I had a perfectly great four years
#
in the Ministry of Finance
#
so it's not that at the time there was a problem
#
in the institutional culture of Delhi
#
the decline of Delhi happened after that
#
in these years I felt that Delhi was a high quality bunch
#
you know I think I've said to you before
#
if you sit and make a dream team
#
dream team out of the people
#
who were in the Ministry of Finance in my time
#
it would be the number one economics department of India
#
like the brain power inside the ministry was unmatched
#
compared to any academic department in India
#
which was not true for most of the years
#
but in that period when I was there
#
it was just outrageously strong
#
that the pubs and the citations of the people
#
in the Ministry of Finance were amazing
#
so in that period this is not an issue
#
what is an issue is finance
#
finance is like if you're going to do financial markets
#
then Bombay is the place
#
Delhi barely understands what is the futures
#
so most people in Delhi have no idea what is the derivatives
#
you just have leftist people shouting the derivatives bad
#
you'll have some people shouting
#
people make losses doing derivatives trading
#
there's no genuine understanding of derivatives trading in Delhi
#
so that's a deeper problem
#
so if you want to do finance
#
if you want to do financial markets particularly
#
you should be in Bombay
#
I think there's a line from a movie
#
the ghost in the darkness
#
where she says you build bridges John
#
you got to go where the rivers are
#
if you're going to do financial markets
#
you have to be in Bombay
#
there's no meaningful way for anybody in other places in India
#
to do financial markets
#
the beating heart of financial markets is in Bombay
#
there was no understanding of derivatives trading
#
you had a few voices shouting random things
#
again straight out of ideology and dogma
#
but no real understanding of how it works
#
and a little before that you also spoke about
#
how you guys were getting established as public intellectuals
#
was there a point in time
#
where your focus began to include
#
not just that we shall enable change
#
or assist in change at a policy level
#
or an institution building level
#
but also at this larger level
#
of changing the discourse
#
of introducing these ideas
#
because something that I have believed very strongly is that
#
if you want to really make a long-lasting impact
#
then the wrong place to aim
#
is the supply end of the political marketplace
#
which is the politicians and bureaucrats
#
because supply will respond to demand and supply
#
and they'll respond to incentives
#
if you convince a demand end you basically won
#
because the demand end is what rules it
#
politicians will immediately give the demand
#
and I feel that this is one area
#
where all of us have kind of failed
#
some of us have tried more than others
#
and we gamely keep trying
#
and I give myself credit for that
#
but by and large we have failed
#
and this is almost the most important thing
#
like you know just to go back
#
to what I said about the supply end
#
you pointed out that came here after 91
#
it seemed that okay that that supporting environment
#
for reform will always be there
#
you assume that okay now we've gone upon the path
#
and boom look where we are today
#
equally you know when it comes to IGIDR
#
we assume that this is how things are going to be
#
and Kirit Parekh goes and boom
#
you know and from what I hear from others at IGIDR
#
it's not looking too great there either right now
#
so you can't take this shit for granted
#
that maybe and this is a question I posed to Krishnan
#
and he you know didn't agree with my thesis
#
but my thesis is all these great reformers
#
we celebrate are outliers
#
in a sense they went against the tide
#
but what we really need to progress
#
is institutional change
#
and more importantly a change in the way people think
#
and a way people think will come from
#
you know for want of a better term
#
from public intellectual
#
so what is your sense of the importance of that role
#
like today of course you're a youtube superstar
#
so we've established that but
#
one day we should make an episode on derivatives
#
yeah we actually should yeah our next schedule
#
so here's a list of thoughts on this problem
#
so there was a policy community to persuade
#
we wrote a bunch of papers
#
we were there in the conferences
#
I feel we were given deference by the community
#
people understood that you know
#
we were reasonably smart and we knew this stuff
#
and the kind of arguments we were making
#
I felt did carry the day
#
because all in all in the thinking
#
and debating part of the policy community
#
where it got stuck for all those years
#
was more a real world brass tax political economy
#
and that's also a legitimate part of every country
#
I do not at all want to suggest
#
that such criticism opposition and conflict
#
is in any way inappropriate
#
it's a healthy part of every country
#
okay then there was actually a huge problem
#
which is that to make derivatives trading
#
you need a large number of derivatives traders
#
and on day one there are none
#
and then this is a chicken and egg
#
if you have very few derivatives traders
#
then there'll be few people playing on the market
#
and then the market will be illiquid
#
and then that's a kiss of death
#
because nobody wants to go to an illiquid market
#
so this was a very significant and important concern
#
and so a bunch of us initiated many activities
#
that would try to create a first generation
#
of derivatives traders in the country
#
so these were people who needed to be taught
#
and persuaded that this is a good thing
#
this is an important thing
#
this is better than your present ways
#
basically you have to tell the brainy people
#
that we're giving you more bang for the buck
#
okay so we are equalizing your gap in wealth
#
against the rich people
#
so you have brains but not the brawn
#
here we are amplifying your brawn
#
but this needed to be done all over the country
#
so NSC built a large number of
#
these kinds of little teaching arrangements
#
and Ashish Chauhan and Susan and I
#
have done ridiculous amounts of travel
#
just going around doing talks
#
answering questions, helping people
#
then after that Damini Kumari was at CNBC
#
and she had this idea that she would do
#
she's a young woman from IIT
#
a couple of years my junior
#
that she will record a bunch of videos with me
#
where there would be episodes
#
over which derivatives trading would be taught
#
and these episodes were basically played
#
once or twice or thrice a day
#
do they exist anywhere?
#
I don't know where they are
#
we got to do everything is everything episodes
#
mega episode on derivatives trading coming up
#
so this just turned it into a very mass thing
#
where lots of people got exposure
#
what's the future, what's an option
#
so one did a fair amount of this kind of teaching
#
which was the broader capacity building
#
of how to grow the trading community
#
then there was also this idea that
#
you should have a certification exam
#
so lots of people got worried
#
that people are not to be trusted
#
with their own decisions
#
so you have to put the employee
#
of the brokerage firm through an exam
#
before they can be certified
#
to trade on the derivatives market
#
now I would roll my eyes and say
#
come on everybody's incentives are aligned
#
the individual's incentives are aligned
#
the customer's incentives are aligned
#
the firm's incentives are aligned
#
these were all just the kind of arguments
#
that one had to deal with
#
we were part of building
#
what was then a very novel thing
#
which was an electronic testing system
#
where on weekends at NSE offices all over India
#
there was a computerized testing system
#
you and I have discussed
#
in the competitive examinations
#
episode of everything is everything
#
it's out two weeks from now
#
but still we'll have people
#
there is an episode coming
#
yeah everything is everything
#
and in that I think I mentioned this a bit
#
so Shrava Mishra built the implementation
#
and we participated in the concepts
#
and the design and the curriculum
#
Shama Fernandez was part of this work
#
so that's how there was this push
#
on a little exam with a curriculum
#
where you test people on their capabilities
#
I'm not a great fan of these things
#
but all these things had to be done
#
so I feel that we did well on persuading
#
a broader trading community to come into this
#
because all in all it worked
#
and you know once you get that first critical mass
#
then you're done it's gold
#
because then it's a network effect
#
that once trading works
#
then more people want to come in
#
what did not happen was capability building
#
in the intellectual space
#
and so there was a 25 year period
#
of financial reform thinking in India
#
and that entire team got ejected
#
and there is no replacement in sight
#
so that's where the Indian intellectual community
#
was not able to replenish itself
#
and keep a core community going
#
even after bad things happened to the first wave
#
and then that takes you back
#
to the problems of the knowledge society
#
that in an environment of the incentives
#
that you can't persuade the philanthropic people
#
public policy thinking is an important agenda
#
they'll say no I want to feed the children
#
so there is no funding for financial research
#
then you're down to the journal pubs
#
that there are people in academics
#
who will publish in the foreign journals
#
but they will not take interest in India
#
and there was a tremendous entrepreneurial effort
#
by NSC and some of the people at the periphery
#
where you know for years and years
#
this was just a labor of love
#
of building this whole thing
#
and you know that's gone
#
and I don't know how to replace it
#
you know speaking of disappearing communities
#
I think this is therefore a good time
#
we have a long episode on pensions
#
in the scene and the unseen
#
which came out I think a year and a half ago
#
and we also had a recent episode
#
on everything is everything on pensions
#
because you know the government
#
just came up with the UPS
#
and we chatted about that
#
you of course were one of the designers
#
of the new pension scheme the NPS
#
and we won't go into it in much depth
#
I'll ask listeners to just
#
either listen to the scene unseen episode
#
watch the everything is everything episode
#
which is about an hour long
#
I think it's really comprehensive
#
and we've kind of covered everything
#
in the piteous way possible
#
but regardless I still do want to go over
#
some of that journey again
#
in terms of like how did that come to you
#
like you were working in Bombay
#
in the financial markets
#
you were working with the NSC and all
#
you were building Prism
#
all of this was happening
#
how did you know getting involved
#
in pensions policy come about
#
so this was my field number two
#
there was a conference in Goa
#
organized jointly between the World Bank
#
and the Ministry of Finance
#
so Jim Hansen of the World Bank
#
organized a conference at Goa
#
and there were a bunch of people there
#
who was then chief economic advisor
#
had suggested to Jim Hansen
#
a person named Anand Bordiya
#
who was then the joint secretary
#
at the Ministry of Social Justice
#
and Anand Bordiya asked Shankar Acharya
#
that I want to build work
#
on pension reforms for India
#
how should I go about it
#
and Shankar said talk to Ajay
#
I got connected to Anand Bordiya
#
Anand Bordiya said to me
#
that we need to work in this field
#
I said sure I'm happy to work on this field
#
but you need to think a little more
#
it's not a one person thing
#
many many people are required
#
look at equity market work
#
2030 super brilliant people
#
across many many organizations
#
this four-way partnership
#
that you need people at NSE
#
you need people at SEBI
#
you need people in the Ministry of Finance
#
you need people in academics
#
be intellectually capable
#
principles, values, philosophy
#
write newspaper articles
#
and that's how you get progress
#
a more of a community project
#
worked with Gautam Bharadwaj
#
to pull together a project
#
was at the leadership of this
#
history and capability of UTI and SEBI
#
he was the right person
#
to think about pension funds
#
he has that perfect combination
#
and this was called Project Oasis
#
it was also a government committee
#
called the Oasis Committee
#
and I was a member of it
#
and in this basically Dawe
#
invented the problem statement
#
is a frictionless low cost
#
where we get the glories
#
of investment in equities
#
and the long-term performance
#
of equities without bringing in
#
and the fees and expenses
#
of conventional fund management
#
in the design of that new system
#
which is called the new pension system
#
and so that is something
#
or rather the Oasis Committee was
#
report was completed in 1999
#
I think that conference in Goa was 1998
#
the work on pension reforms began
#
and we'll come back to this
#
but also I think we've fully talked
#
how the dispersing a community
#
because then you are left
#
Tell me also about the problems
#
let's briefly go over the problems
#
also with the old pension scheme
#
like why was the old pension system
#
why was it felt that we need
#
a new pension system as it were
#
was for only civil servants
#
which are probably 2% or 3%
#
of the overall workforce
#
and I am jumping around on time
#
meaning we did not know this
#
at the time numerically
#
we knew it instinctively
#
that the implicit pension debt
#
commensurate with the burden
#
of the old pension system
#
so for 3% of the workers
#
we had run up a set of promises
#
that were worth 70% of GDP
#
therefore this was wrong
#
and this was unsustainable
#
and this could not scale to the population
#
so not only did we need to fix
#
the pension promises for civil servants
#
we also needed a completely new foundation
#
on which you could build something
#
that would work for the people
#
which had some bad programs
#
so that was the idea of Project Oasis
#
and the design of the new pension system
#
an intellectually sound pension system
#
which can work for the great
#
which can become an engine
#
for the reforms of the EPFO
#
which can become a replacement
#
for the civil service pension
#
now in the event it got used
#
but that was the principle
#
that use modern knowledge
#
and develop a working pension system
#
that can then become a raw material
#
for many many applications in India
#
that was the idea of the NPS
#
so I'll quickly kind of
#
urge listeners to watch our
#
everything is everything episode
#
and listen to our seen unseen episode
#
but to quickly kind of wrap it up
#
that when pensions first began
#
a voluntary way of younger people
#
to thank the older guys
#
you know given life expectancy
#
and it was a lot of people
#
contributing a little bit of money
#
who wouldn't be around for too long
#
then Bismarck came along
#
made it something mandated
#
and it was still manageable
#
because you still had a lot of people
#
having to give a little bit of money
#
to support a few people
#
again wasn't so great back then
#
you know that pyramid structure
#
became more of a cylinder
#
fewer and fewer younger people
#
supporting more and more older people
#
that seemed entirely reasonable
#
one is that you link the pension
#
that people are getting to inflation
#
you know the cost of living
#
and two that you link it
#
of somebody who is in that position
#
which the person retired on
#
and all of it sounds reasonable
#
it is a massive fiscal burden
#
the implicit pension debt
#
would have you know led to
#
something had to be done
#
and the genius of the NPS
#
you know Paul to pay for Peter
#
for his own future pension
#
but it is his own money
#
in such a way that he has a
#
choice of ways to invest it
#
which has much better returns
#
and we've discussed it in
#
go more into it over there
#
it's become a kind of a
#
you know what were you doing
#
apart from the economics
#
apart from the economics
#
you were deeply into music
#
and said we have an episode
#
that showcases your passion
#
outside of this wonkery?
#
a cat adopted my mother
#
and my mother had diabetes
#
and she changed our lives
#
so that was just an amazing experience
#
that she was a small cat
#
the rest of her entire life
#
and that was a great thing
#
there were young people
#
the person who went into UID AI
#
who is now in the Gemini project at Google
#
were in the house all the time
#
and that was my human community
#
in the later part of that
#
and so that's my human world there
#
we had the PhD students
#
and a bunch of young adults
#
who were both PhD students
#
and Renuka, Viral, Vikram and Suja
#
and it was a simple happy life
#
it was actually extremely
#
hardworking this period
#
so we had very little by way of staff
#
and I told you in the early years
#
Susan and I had only one computer
#
because we couldn't afford
#
and we worked very very very hard
#
we wrote all the code ourselves
#
we just wrote ridiculous amounts of code
#
and we just built it ourselves
#
when the platforms also
#
so writing code was hard
#
my first versions of the code
#
for Nifty were written in Perl
#
and I don't recommend that to anybody
#
it is not fun writing a lot of Perl
#
but at the time I was fluent in Perl
#
so it was a extremely hardworking period
#
I was not doing a whole lot
#
Shrava Mishra built fabulous loudspeakers
#
so I had a great collection of CDs
#
and loudspeakers in the house
#
but really it was just this work
#
this work was absorbing
#
it was a level of intensity
#
I have similar levels of intensity
#
actually going in for many years
#
life really changed later
#
and we'll talk about it
#
there's a friend of mine
#
and he told me recently
#
and he almost reared up
#
he got very sentimental about it
#
that when he was in his 20s
#
he worked with he named
#
who were much much older than him
#
they should have treated him
#
but they took him seriously
#
into a lot of discussions
#
his career went really fast
#
and my friend was sort of
#
as something outstanding
#
that these older people
#
are treating me as an equal
#
and treating me so well
#
and today if there is one failing
#
it is that I don't spend
#
so much time with young people
#
paying it back as it were
#
not just during this episode
#
and one of those elements is
#
who took you under their wing
#
who were extremely kind to you
#
people like just so many
#
all of these older people
#
they could have been sanctimonious
#
they could have been patronizing
#
you know they could have
#
do the same with others
#
a kind of extreme introvert
#
who goes with Satra's statement
#
hell is other people right
#
at an intellectual level
#
that it is super important
#
who are much older than you
#
and much younger than you
#
or you have many more than me
#
was it always like this
#
in the sense was your dad
#
that you had to actually think about
#
because it is really not natural
#
and be completely natural with them
#
you have so many friends
#
so many friends who are much older
#
so much kindness shown towards you
#
something internalized within you
#
that I must also be kind to people
#
or does it take an act of intentionality
#
what is a good way to live in the world
#
that this is one good way
#
I never thought about it formally
#
meaning now in hindsight
#
and call it a philosophy
#
and Renuka Sane showed up
#
it was never a question
#
with all their heart and passion
#
so that's basically all I ask
#
that young people should be
#
I'm a cool bored person
#
boring thing in the world for me
#
and then I'm not interested
#
I have had lots of students
#
that what the student is after
#
because that's not interesting
#
then I just feel attracted
#
and obliged to participate
#
and it always works well
#
because it is so interesting
#
and look I carry the stories
#
so I often say to young people today
#
now that I'm really old
#
I say I'm your time traveler
#
had just barely happened
#
and the second world war
#
had not yet been rebuilt
#
and that's something unique
#
are something wonderful
#
and important and precious
#
and I think we got some
#
knowledge from that period
#
and it's good to be able to pass it on
#
You bring them the lessons
#
they teach you the cool ways
#
of the 21st century as it were
#
I periodically get instruction
#
on how a Gen Z would say this
#
I've always really like dogs
#
Cats are fucking sociopaths
#
and then having so many of them
#
You've had so many cats
#
that what's the deal there
#
because she chose my mother
#
and we were only helping
#
My mother's feet were not good
#
so we took her from Bandra
#
thinking that we are helping
#
and we had no interest in the cat
#
she was like in our hearts
#
and there is a fundamental feature
#
of cats that you can't stop at one
#
So once you learn to love one cat
#
and you will feel morally obliged
#
that you have to help them
#
there were more and more cats
#
So there was a friend cat
#
come up the stairs at IJDR
#
and give birth to a litter
#
and then go off and die
#
what are you going to do
#
you have to take in that litter
#
that you have to take in
#
so just cats kept happening
#
and they're absolutely great
#
No I don't agree with you
#
cats are not sociopaths
#
cats are training wheels
#
to be a full human being
#
okay to be a full human being
#
to love unconditionally
#
and cats are the right vehicle
#
because they don't care
#
and they are not transactional
#
so they don't care about contracts
#
they don't care about repeated games
#
they're not transactional
#
they will present themselves to you
#
and give you an opportunity
#
and if you're not interested
#
So cats are the best education
#
on being a full human being
#
how to do unconditional love
#
Another thing I learned from cats
#
I watched the entire lifespan
#
in a compact number of years
#
you know so in about 12-14 years
#
a cat goes from a baby to old age
#
and I found that deeply
#
about the human lifespan
#
the human lifespan is so long
#
we don't observe it enough
#
but we barely perceive it in us
#
because it's all happening
#
and we don't understand it
#
whereas for me observing cats
#
was a journey of going from
#
in a finite number of years
#
and I got to observe all those things
#
to think about what it means to
#
that's a beautiful sentiment
#
on that note until tomorrow
#
I have learned in my life
#
I had to learn on my own
#
I think you'll agree with me
#
that our education system
#
doesn't teach us so many things
#
the most of ourselves in this world
#
when life happened to me
#
and I happened to be paying attention
#
what are the essential life lessons
#
that everyone should learn
#
to be able to live a complete life
#
I invited my friend Ajay Shah
#
on the intellectual challenge
#
to put together a course
#
where we would actually teach this stuff
#
so we created life lessons
#
which you can check out
#
in this five-week course
#
running across five Saturdays
#
we have put together 15 webinars
#
to help launch you down
#
how to communicate better
#
the foundations of economics
#
and even practical matters
#
like how to think about personal finance
#
and how to think about personal health
#
people who do the course
#
that will have in-person meetups
#
basically while we've always been sharing
#
in our show and our writings
#
here and there diffused
#
to synthesize our knowledge for you
#
to check out life lessons
#
welcome back to the scene
#
Ajay and I took an overnight break
#
the second half of the show
#
and we've just about reached
#
this millennium so to say
#
so tell me about this next phase
#
in your life that you know
#
you you grow up in Bandra East
#
you then move on to IIT
#
you get your credentials as it were
#
working in finance over here
#
doing incredibly exciting things
#
like you know NSC, Nifty, Prism
#
what takes you to Delhi
#
that there was a collapse
#
of the Calcutta Stock Exchange
#
there was a funding crisis
#
and there were some bad things
#
that happened at the Bombay Stock Exchange
#
and it had all added up to a mess
#
and so in the context of
#
folks at the Ministry of Finance
#
felt that they wanted to amp up
#
their finance capabilities
#
at the time the team was
#
CM Vasudev was the Secretary DEA
#
Rakesh Mohan was the Chief Economic Advisor
#
Yashwant Sinha was the Finance Minister
#
Jaimini Bhagwati was the Joint Secretary
#
so these were conversations
#
I got a call on Thursday
#
from Rakesh Mohan saying that
#
at the Ministry of Finance
#
I said yeah potentially
#
he said come here tomorrow
#
so on Friday I flew to Delhi
#
and on Monday I had the appointment letter
#
so that's how I landed up
#
at the Ministry of Finance
#
this was just a big new change for me
#
that I hadn't thought about this
#
I hadn't anticipated this
#
you know I thought I would be doing
#
the gritty institution building type work
#
so you know what I described to you
#
the nation building of the equity market
#
building financial markets is a good thing
#
it is important to make finance work
#
finance is the brain of the economy
#
and I'm very comfortable
#
doing that for a long long time
#
meaning I don't need to
#
but suddenly this came along
#
and also there was a context of
#
so in some sense to some extent
#
they wanted a pair of hands
#
to work on all the things
#
that were going on there
#
which were the difficulties
#
of the Calcutta Stock Exchange
#
the Bombay Stock Exchange
#
and also like to come and be part
#
of the Ministry of Finance
#
it was an age where there was much more
#
of lateral entry by economists
#
into the Ministry of Finance
#
okay so that has kind of died down
#
but I was one out of a long tradition
#
we have seen these are all the storied names
#
of Indian public policy
#
and Indian economic reform
#
so they were used to this idea
#
and there were many other cool people
#
so it was a nice environment to go into
#
so that's how I showed up
#
at the Ministry of Finance
#
and it was all new to me
#
at the time so to convey
#
my level of cluelessness to you
#
I did not know what is a government file
#
so for all ye gentle readers
#
who have never contemplated
#
that is before the Right to Information Act
#
a government file was a deep complex
#
brainstorming and debate done in writing
#
okay so imagine we convene again and again
#
and we do many complex arguments face to face
#
but imagine now I'm telling you
#
that we are never allowed to meet
#
so now imagine a series of arguments
#
conducted in handwriting
#
and then each stage of that argument
#
it goes closer to a decision
#
and then finally at the appropriate level
#
of authority a recommendation is made
#
and at an appropriate level of authority
#
and all this is in the file
#
and I did not know any of this
#
and I learned how to open files and read them
#
and the old files of the Ministry of Finance
#
they are beautiful wonderful people
#
I learned to love the people
#
and you know having the luxury
#
the opportunity of reading
#
the handwritten file notings of people
#
like Montek Aluwalia and Shankar Acharya
#
I've got to read the file debates
#
between Rangarajan and Shankar Acharya
#
advocating more decontrol
#
and the MOF folks were saying
#
no no no we have to be very careful
#
so all these are written down
#
there are arguments done in writing
#
so imagine the absence of physical meetings
#
because these are institutions
#
derived from British India
#
the winter capital is in Shimla
#
and there is a debate going on
#
with the collector of Allahabad
#
is that the file goes up and down
#
and a person writes a few paras
#
then the file goes back
#
so through years there is a debate
#
and it is stored for posterity
#
because you can always open it up
#
and wonder who did what and why
#
with the declining writing skills
#
of the Indian bureaucracy
#
coupled with the Right to Information Act
#
today people don't want to write on file
#
because you know you'll get into trouble
#
you don't want people to know
#
what you felt and what you said
#
so these days conversations take place orally
#
and some undersecretary writes
#
a conclusion of the conversation on the file
#
the debates have been lost
#
anyway I learned how to read files
#
monumental cluelessness
#
I did not know what is law
#
so Kelkar and Shah is the book
#
that I recommend for every aspiring
#
to get your basics right
#
in what ways is the law the code
#
that authorizes state coercion
#
and that contains the rules
#
through which you overcome
#
public choice theory problems
#
if somebody had told me a para or two
#
of this kind of language
#
I would have got it in a flash
#
and it took me a very long time
#
because I came from a pure economics background
#
and I hadn't thought about the laws
#
meaning in the work on derivatives
#
we knew that there were constraints
#
on wagering in the Contracts Act
#
that interfered with the working
#
of the derivatives market
#
and I was part of the drafting
#
of a section that overcame that
#
but it was like a peephole
#
involvement into one section of law
#
rather than a conceptual
#
first principles understanding
#
what is the constitution
#
that is not ultra virus
#
how do laws interact with each other
#
all these things I did not know
#
when I showed up at MOF
#
what I knew was what I knew
#
set of human relationships in Bombay
#
which was a great asset
#
because the folks in Delhi
#
it is something remarkable
#
how distant the two worlds are
#
it's not just a matter of a two-hour flight
#
it is also a matter of the paradox of power
#
this is something that I have learned over the years
#
I did not know it then of course
#
the paradox of power is the idea
#
which is also used in Kelkar and Shah
#
which is that the more power you accumulate
#
the more you lose your cognitive ability
#
because everybody starts lying to you
#
you are a famous important journalist
#
and your columns or your
#
articles in the newspaper
#
are going to be read by millions
#
now suddenly lots of people
#
and try to influence your worldview
#
to make you write things
#
so they will butter you up
#
100x worse is to be a finance minister
#
the world's hardest job
#
is to be a finance minister
#
because the smartest people of India
#
show up for a 30 minute meeting
#
for 29 minutes they are buttering you up
#
establishing a conceptual framework
#
that is completely wrong
#
in order to ask you for something
#
that would be good for their self-interest
#
and the better finance ministers know this
#
one aspect in which they respond
#
is a generalized cynicism
#
which is also equally harmful
#
if you will not listen to people
#
so I understood it is so difficult
#
to be in ministry of finance
#
and have a sense of the world
#
to be in a government organization
#
all these things are a curse
#
everybody is lying to you
#
and this was all new to me
#
I had not understood it
#
is this your formulation
#
of the paradox of power
#
I think it is from other people
#
but so here's the beautiful sentence
#
that I got from somebody else
#
the further away you are from power
#
the more clearly you see
#
I think it's a beautiful pithy formulation
#
that I stole from somebody
#
Takshashila's collections of columns
#
is called distance from Delhi
#
which I think says a lot
#
there is a different problem
#
of the culture of Delhi
#
which is all about proximity to power
#
but here I'm after something
#
that at the ministry of finance
#
when the smartest people
#
are organizing themselves
#
to make sure you do not see
#
very strong human networks in Bombay
#
where at least in that little zone
#
I had access to good knowledge
#
so people would talk to me
#
there were the human relationships
#
whereby through the MOF years
#
people would speak to me
#
what is actually going on
#
and that was one of the contributions
#
that I brought to the ministry of finance
#
where I was able to always
#
cut through the bullshit
#
and ministry of finance in Delhi
#
but it is elementary to understand
#
that they have their own self-interest
#
in the Indian financial system
#
from the institutional views
#
of regulatory bureaucracies
#
and again I was able to cut through that
#
that my knowledge of Indian finance
#
was not intermediated by RBI or SEBI
#
it was based on direct connections
#
that was one of the pieces of value
#
that I brought into the ministry
#
and I stayed for four years totally
#
there was no partisanship
#
what was the party in power
#
there was an understanding in that age
#
that the ministry of finance
#
and economic policy is special
#
and you need people in white frocks
#
to do economics properly
#
otherwise you will endanger
#
the fate of the country
#
and it was a great environment
#
ideological litmus test questions
#
so I was hired by Yashwant Sinha
#
and I worked closely with him
#
and I admire him immensely
#
I cannot tell you how much I respect
#
I used to think that I know a lot
#
and I have memorized a lot
#
and I realized that this guy is 20x of me
#
that his lifetime of experience was rich
#
and he had that same kind of memory
#
that he basically remembered everything
#
he knew in this year this happened
#
in this file that is this story
#
it is incredible the level of knowledge
#
then also the level of hard work
#
I watched him work essentially 11 hours a day
#
when you're a finance minister
#
is not like six one-hour meetings
#
it is like 20 half-hour meetings
#
and each of those meetings
#
the fate of the world is on the line
#
so imagine the cognitive challenge
#
for mind-blowing important half-hour meetings
#
where you have to make decisions
#
and then okay it's done
#
and now we're going into a next deep dive
#
into something completely different
#
of being a finance minister
#
so I really learned to understand
#
the richness and the complexity
#
of the job and he had a great team
#
the ministry of finance was a great team
#
I really feel bad for a finance minister
#
that may not have such a good team
#
because then all this burden
#
falls on him or her shoulders
#
even without capable teams
#
to think through the basics
#
and it is terrifyingly hard
#
given bad institutions in India
#
there is a disproportionate burden
#
on the finance minister
#
by the way I learned that
#
in the entire ministry of finance
#
all the departments put together
#
there are basically about 20 people
#
it is not a deep capable institution
#
it does not have depth of bench
#
it does not have depth of talent
#
they don't have people thinking
#
and working at many many levels
#
there's a disproportionate role
#
for basically 20 people
#
and that also is a failure
#
then I stayed when Jaswant Singh
#
became finance minister
#
Kelkar came into the ministry
#
at minister of state rank
#
and S. Narayan was finance secretary
#
and that was another golden period
#
I did not work with Jaswant Singh directly
#
and it was absolutely great
#
amazing human capabilities
#
just an absolutely charmed life
#
for the ministry of finance
#
Jaimini Bhagwati moved on
#
and you know it was all great
#
and then S. Narayan moved
#
as secretary to the prime minister
#
external affairs minister
#
that I would regularly run
#
between the PM's office
#
where S. Narayan had his office
#
and the ministry of finance
#
where Kelkar had his office
#
of the thinking process
#
kicked off two very important projects
#
he got the point rapidly
#
that the ministry of finance
#
as an institution is broken
#
and again I admire him so much
#
this was known to everybody
#
but he said we got to fix this
#
he had a strategic view
#
that he was always pushing
#
we have to think for 25 years
#
it was his amazing ability
#
and we had finished some
#
we were sort of at the closing stages
#
of the entire UTI crisis
#
and the Calcutta stock exchange crisis
#
and he sort of asked us
#
so what are you thinking of next?
#
okay we finished all this
#
now what are you guys thinking of next?
#
and we kind of looked at each other
#
because we had actually not gone
#
India is doing well in IT
#
IT is about brain power
#
then India can do finance
#
because finance is about brain power
#
India can compete with the UK
#
Bombay can compete with London
#
what would we need to do
#
to set course for that?
#
that level of brain power
#
that we were not the ones
#
coming up with the idea
#
it was his strategic vision
#
that look what can we do
#
so that Bombay can compete with London
#
and yes it will require
#
a hundred difficult things
#
but let's figure it out
#
and who could have predicted
#
that India would be an IT superpower
#
a stupid third world country
#
why should we begin at pessimism?
#
let us begin at a big dream
#
and that led to the creation
#
Bombay as an international financial center
#
where these kinds of things
#
because it just put a different slice
#
of knowledge and capability
#
so the FRBM act had been passed
#
and then Jaswant Singh said
#
but show me how is it going to work
#
just because you pass a law
#
you get fiscal responsibility
#
like how are you going to implement it
#
that the deficit shall go down
#
so Kelkar and Dhiren Swaroop
#
FRBM implementation task force
#
were staff for that committee
#
that came out of that group
#
the GST had previously been proposed
#
by Govind Rao and others
#
in previous work in India
#
of trying to think it through
#
its revenue implications
#
in overcoming the fiscal mess
#
it creates better tax foundations
#
and you can see in all this
#
things that I started doing
#
of a nifty futures market
#
the Ministry of Finance did to me
#
so Kelkar always told me
#
when you are Minister of Finance
#
you have to do everything
#
you have to think about
#
you have to broaden your vision
#
there was just an accident
#
the Ministry of Finance
#
who was then the RBI governor
#
and you know he knew me from before
#
and I said I've started here
#
one thing crystal clear
#
that you work for the joint secretaries
#
that you work for the secretary
#
or you work for the minister
#
you should be crystal clear
#
you work for the joint secretaries
#
then everything will be good
#
like don't have ego problems
#
it is their signatures on file
#
that make the decisions
#
your job is to support them
#
watch your human dynamics
#
with the joint secretaries
#
I was doing that merrily
#
and that's precisely how
#
Ministry of Finance worked
#
that we had a series of great
#
in the Ministry of Finance
#
and I just was able to become
#
their thinker and philosopher
#
the open-ended brainstorming with me
#
rather than being narrow
#
around a practical office matter
#
meaning we do that also
#
but the real value is that
#
Ministry of Finance needs
#
intellectuals they need
#
they need the full picture
#
and that is what people like us
#
You know the great CLR James
#
who wrote the classic cricket book
#
what do they of cricket know
#
what do they of finance know
#
because everything indeed
#
I have a couple of small observations
#
one, two, three, four big questions
#
if I blend two of them as it were
#
My first sort of reflection is that
#
about Rakesh Mohan calling you up
#
and saying hey come to Delhi
#
and it's almost an overnight thing
#
seems also similar to other stories
#
we've discussed in the past
#
tells Monte come back to India
#
or how Manmohan Teh tells Kelkar
#
that come and work with me
#
and these are heartening stories
#
they're heartening stories
#
of a certain kind of openness
#
that you know you could easily
#
you know what mediocre people do
#
that increases their chances
#
of being influential and successful
#
greater than themselves
#
so together you can build
#
a strong intellectual community
#
and in many ways I think
#
in the things that you do as well
#
My second observation is
#
I was just coming to that
#
the Joint Secretary of Capital Markets
#
with the benefit of hindsight
#
at the time I didn't understand
#
he was ruling the roost
#
he was a PhD in finance
#
okay he knew finance very well
#
he worked in World Bank Treasury
#
he was a local demigod of finance
#
it could have easily been
#
that he became pretty clear about me
#
instead he opened his arms wide
#
unstintingly took me in
#
he was scrupulously friendly
#
opened all information to me
#
I kind of took it for granted
#
it was the largeness of his heart
#
that he had no hang ups
#
he was a completely secure
#
he had no awkwardness with me
#
all kinds of insecurities
#
at the Ministry of Finance
#
they were just amazing human beings
#
yeah and that also seems like an outlier
#
I mean we've discussed this before
#
big-hearted politicians
#
bureaucrats of this manner
#
caliber of people anymore
#
it kind of ended a while ago
#
my second observation is about
#
how we understand history
#
like part of what we need to do
#
I think is understand everything
#
you know the first step of
#
right so when you describe
#
there is so much joy in it
#
that a historian can go back to say 2001
#
and they can look at a file
#
and they can see a conversation
#
between various different people
#
and it can be so illuminating
#
and this is actually perhaps
#
because what has happened
#
in this electronic age is that
#
when he was writing letters
#
or people writing down their thoughts
#
writing long letters to each other
#
and there are two consequences
#
that that doesn't happen
#
that we are communicating more
#
by WhatsApp and SMS if at all
#
and one consequence is that
#
one consequence of course
#
is that it becomes harder
#
for historians to figure out
#
exactly what happened and why
#
you know the gate to speculation
#
but the other aspect of it also
#
it affects a clarity of thought
#
of the people concerned
#
that when you are forcing yourself
#
and argue with people in writing
#
and you are considering
#
I think the quality of thought
#
than if there are four people
#
trying to discuss something
#
where the power dynamics
#
may affect what someone says
#
an observation I have to make
#
which is a lament really
#
there's nothing one can do
#
historians are the unacknowledged
#
conscience keepers of the world
#
indeed and this is completely unrelated
#
but since you said that
#
it also strikes me that
#
just as people talk of journalism
#
as the first draft of history
#
there is implicit in that
#
something that says that
#
which contains the truth
#
and what I have realized over time
#
is there is never a final draft
#
we can never understand the world
#
we can never understand the past
#
and we have the small matter
#
that we don't yet have time machines
#
but even if we had time machines
#
even if I can somehow go
#
where you and Yashwant Sinha
#
are talking to each other
#
I would still miss so much
#
you know the world is deeply complex
#
unnecessarily an important
#
as detailed as possible
#
and this stuff gets in the way
#
the first of my larger questions
#
is about seeing like a state
#
but what it taught you about the state
#
and you read the book much later
#
I know you know Land gave it to you
#
and you read it much later
#
but I want to understand
#
that from your experiential perspective
#
how does a ministry see
#
and if I can dig a level deeper
#
how does a secretary see
#
how does a joint secretary see
#
what really is going on there
#
because from a distance
#
and I can throw all kinds of criticisms
#
or make all kinds of observations
#
but what's actually going on
#
and I'll come back to working
#
in my next question perhaps
#
but I'm just interested in how it sees
#
modern managerialism wants to view
#
as a middle manager of a bank
#
your operating processes
#
and I feel that this misses the essence
#
the monopoly of coercive violence
#
is a deeply theoretical project
#
you need to understand the reality
#
and you need to form a theory
#
where is the market failure
#
what is the lowest cost
#
to society intervention
#
and then we need to be on
#
that constant feedback loop
#
and how I need to change course
#
have deep knowledge about the world
#
and that is the more scientific project
#
of data and theory and models
#
yes of course that is good
#
but the world is much larger
#
there are things in the world
#
that are not dreamed of
#
so a policymaker also needs
#
and also to get the political economy
#
policymaker cannot be blind
#
to the political economy
#
it's not just the analytical
#
it is the map of interests
#
and the coalition formation
#
through which a variety of people
#
are pursuing their own self-interest
#
in everything that I have described
#
the task in a place like India
#
leads to a greater accent
#
and an ethnographic type
#
which requires conversations
#
with large numbers of people
#
the knowledge is nuggets
#
and the policymaker is obliged
#
to wander the landscape
#
and create moments of trust
#
and discover that knowledge
#
what happens in a place
#
like the ministry of finance
#
is that when private persons
#
show up at the ministry of finance
#
and to gaslight the policymaker
#
and ask for policy actions
#
that work for their own self-interest
#
into a ministry of finance
#
that is supplied by government agencies
#
it is public choice theory
#
those agencies have no interest
#
in Indian national development
#
they only have interest
#
and their own peace of mind
#
and them not being asked
#
the ministry of finance collapses
#
into a state of lack of knowledge
#
are more self-aware about this
#
then we think a lot more
#
about how to overcome these barriers
#
but this is my rough conceptual sketch
#
to be a policymaker in India
#
you know the paradox of power
#
as you so eloquently put it
#
the life of Yashwant Sinha
#
he had some brilliant ways
#
of working which helped
#
so I'll give you one example
#
build a group of 10 people
#
one afternoon with them every month
#
recognizing that these people
#
would shade the reality
#
it's better to meet them
#
and we ran regular meetings
#
and did no agenda conversations
#
because it is important
#
for a minister of finance
#
in the Bombay financial system
#
and that was pretty cool
#
I was the owner and manager
#
I remember funny stories
#
Rakesh Mohan said to me
#
here's one thing you have to do
#
you have to write down everything
#
just store all logs of everything
#
that you do on this project
#
minister of finance group
#
you know I was an email type person
#
lots of things would happen
#
so write down everything
#
are going to come on this
#
so several parliament questions
#
came and then I had to pull out
#
these were the meetings
#
your life is an open book
#
so that was an interesting
#
here's the second thing
#
that Yashwant Sinha did
#
that was really brilliant
#
what he would do is that
#
he would read 10 newspapers
#
before coming to office
#
okay I was a young person
#
and he would out hard work me
#
my level of energy and strength
#
he worked very very hard
#
he would read 10 papers
#
opinion pieces in the day
#
he would pick 3, 4, 5 of them
#
some of which would be critical
#
some of which would not be critical
#
he would run that beauty parade
#
3, 4, 5 of the good ones
#
then he would reach the office
#
okay no URLs and all that
#
they would cut the opinion piece
#
on a piece of white paper
#
to the appropriate joint secretary
#
with his signature saying
#
just think of the pressure
#
it put on the joint secretary
#
that you have the best minds
#
attacking the government
#
very often criticizing the government
#
and they have no connection
#
see it solves these problems
#
coming through government agencies
#
with public choice theory
#
here these are independent people
#
writing into the free press
#
in those days the press was free
#
are thrown into the face
#
of the joint secretary saying
#
so the poor joint secretary now
#
has to have the level of intellectualism
#
saying this is what he's saying
#
and why is he saying it
#
and what should we do different
#
what a simple management idea
#
that a leader should use
#
that reach out to your critics
#
find the people who don't agree
#
around the bad information systems
#
that surround the ministry of finance
#
don't just listen to your friends
#
but listen to the people
#
who are criticizing you
#
op-eds were really tough
#
it was a different world
#
it was a free level of freedom
#
so these are the kind of things
#
that I saw and I learned
#
beyond my narrow foundations
#
I now want to talk about process
#
how the state does things
#
and I feel that there is
#
an interesting trade-off here
#
and this sort of involves
#
I think we have finally come to
#
of on everything is everything
#
we have finally come to
#
that for the individual
#
to have a bias for action
#
where we haven't agreed
#
what should the case be
#
you should both have it
#
but having it is actually
#
where things move so fast
#
but leaving companies aside
#
talking about the state
#
I mean we've seen unseen
#
everything is everything
#
it's all biased for action
#
you got to go out there
#
do things learn from them
#
throw things at the wall
#
you simply have too much power
#
many of them unintended
#
and you cannot act in haste
#
so there has to be a process
#
and the process also acts
#
on arbitrary power being
#
that we love to satirize
#
influenced sort of thinking
#
even in our public choice
#
that oh committees will sit
#
and they will order samosas
#
one committee will appoint
#
and they will talk forever
#
because files used to be bound up
#
the terrible caricature
#
no decision takes place
#
there's a status quo bias
#
there are all kinds of interplays
#
and I think to some extent
#
that is true and inevitable
#
and not just government
#
but any big organization
#
because it is the biggest
#
and few checks and balances
#
often becomes like that
#
that you have often made
#
process is super important
#
in terms of checks and balances
#
in terms of getting a diversity
#
the vacuum of knowledge
#
the further you are away
#
the further you are from power
#
near the epicenter of power
#
take me through that trade-off
#
that what are these processes
#
every side of both of these
#
where a process is awesome
#
and you arrive at the truth
#
and make useful reforms through it
#
where a bias for action
#
and where a bias for action
#
like to just give examples
#
both going right and wrong
#
a lot of the things that happened
#
were you know done really quickly
#
as we've discussed very often
#
of policy work behind it
#
so the reforms didn't happen overnight
#
but when the time for action came
#
these guys got the job done
#
they didn't take half measures
#
on a certain set of reforms
#
we wish they would have done much more
#
so in there a bias for action helped
#
and many of them weren't even
#
placed before parliament
#
where it goes completely wrong
#
is nonsense like demonetization
#
but that's exactly the metaphors
#
so consider for example
#
the work of the equity market
#
I described a long stuck
#
that there was a political economy
#
NSC was fully ready by 1997
#
to launch the nifty futures
#
that would have been great
#
and there was a political economy
#
but as the years went by
#
papers committee reports
#
there was a community of experts
#
there were questions of detail
#
that the community knew
#
can you build a real-time
#
within Indian style budgets
#
using parallel computation
#
or questions at level of high philosophy
#
in your vision of India
#
having complex strategic conversations
#
amongst the economics people
#
that was also happening
#
the community of experts
#
that was building a point of view
#
and was developing capabilities
#
and then all this came to a head
#
when there was the UTI crisis
#
the Bombay stock exchange crisis
#
and the Calcutta stock exchange crisis
#
all these happened together
#
Yashwant Sinha announced that
#
that the old trading ways
#
the derivatives trading
#
Gemini was his joint secretary
#
they were able to stand
#
and the community building
#
and the implementation confidence
#
that there is R.H. Patel
#
and a whole bunch of people
#
who will be able to pull this off
#
and that's exactly the story
#
another of my great experiences
#
of the Ministry of Finance
#
which is around pensions
#
we've told this story elsewhere
#
but I just want to link it here
#
there was a pension reforms journey
#
out in the public domain
#
a community was being built
#
Surendra Dawe, Gautam Bharadwaj
#
a whole bunch of papers
#
many many people started writing
#
there was an increasing consensus
#
that the NPS is a good idea
#
in the Ministry of Finance
#
there were some debates at the time
#
when Yashwant Sinha was there
#
there was a great selfless moment
#
who was the Minister for Social Justice
#
went up to Yashwant Sinha and said
#
Ministry of Social Justice
#
the pension reforms of the country
#
so I would like to transfer
#
this whole work project to you
#
and it came into the Ministry of Finance
#
and then came Yashwant Singh
#
and convinced himself that
#
okay I agree with you guys
#
this is the right way forward
#
then S. Narayan strategized everything
#
worked with Yashwant Singh
#
Yashwant Singh got the idea
#
and Yashwant Singh and Aduvani
#
and Vajpayee all came on the same page
#
and then they strategized
#
Vajpayee personally came into
#
what kind of contribution rate
#
what commensurate wage hike
#
what probabilities of beating
#
the 50% nominal pension
#
all these things were figured out
#
again there were implementation teams
#
there were people who could
#
make these calculations
#
so you know I feel the sadness
#
of the people trying to do UPS
#
because what calculations
#
so they're basically just doing guesswork
#
there is no committee report
#
there are no research programs
#
at research organizations
#
this kind of complex thinking for them
#
in the pension reforms journey
#
okay there were a series of experts
#
in the country who were thinking
#
when the government had questions
#
needed to discuss trade-offs
#
and that's how we got to the NPS
#
okay so it's exactly that template
#
that we have to grow knowledge
#
and incubate it for long years
#
and then yes you also need
#
the people inside government
#
who are able to make those decisions
#
is a binding constraint
#
neither one makes the other
#
I feel that the theories that
#
we have pulled together
#
for example in the everything is if
#
on the long road to change
#
comes out of all these experiences
#
out of watching the 91 reforms
#
out of watching my years
#
in the ministry of finance
#
is how I put together all this construct
#
but you know one could argue
#
you've cherry-picked examples
#
of when the process has worked
#
for the process not to work
#
or for ossification to happen
#
that is why India is a third world country
#
because mostly these kinds of things
#
and my plea and my exhortation
#
to all the gentle readers
#
on the theory of change
#
because if you have a theory of change
#
purposefully acting upon it
#
otherwise if our theory of change
#
we need to do more philanthropy
#
that will feed children
#
then you know it's never going to make
#
India a successful country
#
or if the theory of change
#
is that joint secretaries are great
#
and we just need to give them
#
and get Bain Consulting to work for them
#
then you know we'll do the wrong things
#
so we do need to think and debate
#
what's the theory of change
#
Is part of an ideal process
#
also the fact that there should be
#
for example you pointed out
#
that when the pensions work started in 1998
#
it was public from the start
#
there was a community building around it
#
if as much of the process as possible
#
and there's public consultation happening
#
and other people weighing in
#
then that exercises a kind of accountability
#
also on the people within the system
#
because they have to be seen to be acting
#
and also because if there are
#
which have been universally criticized
#
then you know it is that much harder
#
again Yashwant Sinha was my mentor
#
and teacher in all these things
#
he used to say very clearly to me
#
look I'm a finance minister
#
so you know you have that understanding
#
that I follow the intellectual consensus
#
that there has to be an intellectual consensus
#
you guys you're the economics baradari
#
you guys have to thrash things out
#
and be ready that you have an agreement
#
that these are the 15 things that make sense
#
then I am the politician
#
I will work on figuring out how to do things
#
where you guys have not thrashed it out
#
The third of my big questions
#
is about a phrase you use for Yashwant Singh
#
where you said that he had a strategic vision
#
and I think about all the people
#
that you worked with and described
#
and it would strike me that
#
people like Yashwant Singh
#
like Manmohan had strategic vision
#
perhaps there were others like Narsimha Rao
#
who may not have had the same vision
#
but could see the wisdom in it
#
and keep their ego out of it
#
and keep conventional thinking out of it
#
I imagine Vajpayee would have been a mix of both
#
I imagine Chidambaram would have been a mix
#
that strikes me as something really unusual
#
because the immediate incentives of a politician
#
as we know from public choice area
#
are always to do whatever is most likely
#
to get them elected in the next elections
#
which could be at most five years away
#
but actually much less than that
#
because local elections, regional elections
#
are happening all the time
#
so it actually doesn't it take
#
someone extraordinary to rise above that
#
okay this is my strategic vision
#
if Mumbai was to become a London
#
so to say in terms of the financial system
#
no one would be sitting
#
and giving Jaswant Singh credit for that
#
people have forgotten he exists
#
and yet sitting there back in the day
#
he is kind of doing this
#
so a is it an anomaly or b
#
is it something you can expect
#
because by the time a politician has reached those heights
#
what else is there to excite him
#
than the thought of a great legacy
#
this is beyond my pay grade
#
I've endlessly thought about it
#
okay so let's look back in history
#
look at the grand Indian collapse
#
from Nehru's death to the emergency
#
okay so Nehru died in 64
#
and we had the most terrible years imaginable
#
leading all the way to 1976
#
that's a full 14 years of darkness
#
and how did that happen
#
and then once you were there
#
what was the probability
#
that we were going to come out of that
#
and start putting together a good country
#
okay so how were we to know
#
that hiding inside Indira Gandhi the populist
#
there was actually the decency
#
of having elections in 1977
#
how does a country come out of all that madness
#
and come back to the Rajiv Gandhi years
#
and then the Narasimha Rao years
#
and then to the 20 years
#
of good performance of 1991 to 2011
#
I do not have the understanding and the judgment
#
of how the United States gets into Trump
#
or how the United States got into its great years
#
okay so this is something that deep social phenomena
#
I am an observer of these things
#
I have not a theoretical understanding
#
about how and why these things happen
#
speaking for me for myself
#
how do you protect your heart
#
I feel that it is our job to do our things
#
it is our job to contribute
#
and ask for nothing in return
#
so each of us have to have a self-appointed place
#
and we have to chip away being good
#
and you cannot tell when the world is ready
#
and some of those creations
#
and if we do not do all that hard work
#
then the right people and the right documents
#
are not available inside the body politic
#
for the right time when it comes
#
is there a certainty that there will be a right time
#
after the fall of the USSR
#
in fact they never got good times
#
Putin's regime today is arguably the closest
#
we are to the reversion to the old communism of the USSR
#
Xi Jinping in China today is the closest
#
that they are to the old communist world of Mao Zedong
#
so there are no certainties in these things
#
political and social catastrophe is always possible
#
what's the point of being despondent
#
and saying then you might as well just give up
#
in Unix language kill zero
#
but rather let's take upon ourselves
#
the constructive agenda that we are here
#
it is our job to create
#
it is our job to be with people
#
it is our job to be good to people
#
it's our job to grow community
#
it is our job to argue about the world
#
and that's a constructive project
#
and we can keep doing that in our own quiet ways
#
so my next big question
#
kind of concerns the state again
#
like we discussed process earlier
#
but I'm also interested in
#
once this lumbering beast decides to do something
#
and if I may mix metaphors here
#
how does a machine begin to actually work
#
like for example you pointed out
#
that when it came to the FRBM
#
Jaswanta actually asked you
#
that how is it actually going to work
#
and that is a question that I think about
#
because I think the process of change only begins
#
when you actually get a policy through
#
how is it to be implemented
#
how is it going to make its way
#
through the veins of the state
#
till it's completely internalized
#
and till it actually works
#
the bankruptcy code is such a great piece of legislation
#
but people talk about implementation issues
#
and things that have gone wrong
#
I also think about you know
#
the debates about the farm reforms for example
#
and we had a great episode on that as well
#
which I'll link from the show notes
#
and the thing there is that
#
and this could be true in any context
#
you could have equilibrium A
#
which is a way the world should work
#
and which will be good for everyone
#
and it'll be good for the poor
#
but the state is stuck in equilibrium B
#
which is completely different
#
which is suboptimal if not damaging
#
but where there are many players
#
who are benefiting from that
#
and don't want the system to change
#
and that's a whole political economy problem
#
and not just is there an issue
#
of getting a change through
#
that you know takes us from B to A
#
but it's also how do you get it through the state
#
you have to fight the politics
#
and you have to fight the bureaucratic beast
#
and also I would imagine
#
that there are huge transaction costs
#
involved in just that switch right
#
like in your experience
#
because my imagination is you go there
#
as an enthusiastic young Turk saying
#
at some point you realize
#
or perhaps you had already realized
#
before you joined the state
#
and that's frustration one
#
but frustration two could also be
#
that after it is actually implemented
#
you realize that it's never going to be implemented
#
and that's in fact exactly what happened to
#
so give me a sense of that
#
the working of the state
#
and you know how we should think about it
#
there are two different parts
#
one is to get to the written policy outcomes
#
there is a lot of political economy
#
that goes into that period
#
at the time the ministry of finance
#
and the SEBI worked well
#
compared to other organizations in India
#
and there is in fact a natural analogy
#
where futures trading on commodities
#
for example futures trading on gold
#
is a close analog to futures trading
#
on Nifty or on the currency
#
so it made sense to get economies of scale
#
by bringing all this together
#
and it was also thought that
#
ministry of finance and SEBI
#
is a more modern and a higher capability
#
as compared to what was then going on
#
with the commodities regulator
#
which was called the forward markets commission
#
which used to come under
#
the ministry of consumer affairs
#
so ministry of consumer affairs
#
at thinking about financial regulation
#
of commodity futures markets
#
and there was a separate agency
#
called forward markets commission
#
now there were some people
#
who benefited from regulatory capture
#
of the forward markets commission
#
and they did not like the project
#
of merging forward markets commission
#
so there was a lot of conflict around it
#
and I remember there was one meeting
#
between Chidambaram and Sharad Pawar
#
no we are not going to do this
#
so that's normal and legitimate democratic politics
#
and at the time the decision was
#
no this should not be done
#
then there was one big crisis
#
and scandal that erupted
#
and then that merger got done
#
so in a way the idea was correct
#
it got postponed for a couple of years
#
and then there was a big crisis
#
and we got to say I told you so
#
and then the merger got done
#
and yet with the benefit of hindsight
#
that merger was fundamentally useless
#
because actually we had a big decline
#
in the ministry of finance and SEBI
#
commodity futures capability in India today
#
so in a way the theory of change
#
involved the idea that there would always be
#
a ministry of finance and a SEBI
#
which was like the world of a CB BHAVE
#
and in fact we lost that
#
so you know the twists and turns
#
of the reality will surprise us
#
the second and distinct idea
#
is about implementation
#
and let me tell you about one success story
#
imagine you say we're going to do the NPS
#
okay so Chidambaram was finance minister
#
we're going to do the NPS
#
what's the footprint of the NPS
#
answer any corner of government
#
where there is a 50% defined benefit pension promise
#
which is a very expansive footprint
#
it includes autonomous organizations
#
does it include the Bombay Port Trust
#
because if there is a guarantee
#
of a 50% defined benefit nominal pension
#
it will come into the NPS
#
of all the organizations of government
#
where there is a pay and accounts officer
#
where the pension contributions
#
for the NPS must be scooped up
#
and sent into the NPS system
#
that's actually a Herculean job
#
it took years and years
#
to even accumulate that list
#
and you know late in the game
#
there have been horrible stories
#
about one piece of government
#
or the other popping up somewhere
#
there is this one organization
#
and they are not yet doing their contributions
#
things like that have happened again and again
#
that's an implementation nightmare
#
in the context of earlier discussions
#
that there is no HR database
#
in the government of India
#
if you ask the government of India
#
how many employees you have
#
they'll say I don't know
#
you ask them how many pensioners you have
#
they'll say I don't know
#
so basic information is not there
#
the footprint of their empire
#
and that makes implementation very difficult
#
so that's the second kind of implementation problem
#
the third kind of implementation problem
#
and there was some process
#
and you know Susan led a team
#
that drafted the insolvency
#
there needed to be organization building
#
in the bankruptcy regulator
#
the IBBI in the judicial system
#
should be seen as a first draft
#
and then you have to kick off
#
where you're watching this thing working
#
and you discover what works
#
and you create feedback loops
#
the way things worked out
#
there were no researchers
#
in the picture it was just practitioners
#
you know informal feedback
#
oftentimes backed in political economy
#
and the teams were weak
#
so the kind of learning process
#
there was a big holdout
#
the Reserve Bank of India
#
the IBC to work correctly
#
of having fragile banks
#
and there the concept of
#
there is one more category
#
of building state capability
#
and every time you pass a law
#
which has coercive power of the state
#
then you're going to need
#
to build a government organization
#
that will wield that power
#
and if you don't exercise
#
these government formations
#
so this is all a variety of
#
and this is all the richness
#
of knowledge of actually
#
doing public policy in India
#
absolutely did not have
#
and you know my thoughts
#
my advice for everybody else
#
you need the Kelkar and Shah
#
type package of knowledge
#
in addition to all the economics
#
so there is a body of knowledge
#
preferably more and more
#
for modern development economics
#
the Kelkar and Shah package
#
the public choice theory
#
the problems of building
#
and organizations in government
#
and you're talking sense
#
about how to actually build government
#
so a person in Bain Consulting
#
does not know how to build government
#
because they've never faced
#
a person in development economics
#
does not know how to build government
#
because they've actually just done
#
humanitarian things before
#
poverty and redistribution
#
and how to feed the children
#
the machinery of government
#
is a completely distinct thing
#
from many established disciplines
#
and I feel it's possible
#
and wrongly take for granted
#
institutional memory will survive
#
of knowledge will pile up
#
so a future generation will learn
#
and mistakes of the past
#
and that doesn't really happen
#
for institutional memory
#
to be lost for all of it
#
and then it stopped happening
#
an entire generation of capability
#
you and Vijay write a book
#
like in service of the republic
#
that's one aspect of public policy
#
but just the beast is so vast
#
that there needs to be so much
#
more done for that also
#
I worry that it all gets washed away
#
the ministry of finance
#
and through these experiences
#
I also want to understand
#
what is the engine room
#
what is it like to work in a ministry
#
and there are files on tables
#
did you have an office in the MOF
#
who were you reporting to
#
just describe all that to me
#
So I had an office in North Block
#
I think technically I was reporting
#
to the chief economic advisor
#
realistically I was reporting
#
and to minister of state
#
Kelkar when he was there
#
and in my day-to-day life
#
I was working with joint secretaries
#
I was collaborating with Arvind Modi
#
so that was my little world
#
of the people that I got to talk to
#
which is situational awareness
#
it is the job at ministry of finance
#
to have a sense of the world
#
to understand what is going on
#
what should we be doing next
#
and that's a very difficult thing to do
#
it is very easy to just be drowned by files
#
just put your head down
#
then actually you have a full day
#
you know rise above that
#
and actually have a sense of the world
#
and what are our priorities
#
we have very limited state capability
#
and there are only 20 thinking people
#
at the ministry of finance
#
what should we be doing
#
when Rakesh Mohan was there
#
used to run very nice meetings
#
where we would put the files aside
#
the practical firefighting aside
#
what should we be doing
#
what should we be thinking
#
what are the big problems
#
what are the big opportunities
#
one of my happiest periods
#
was when Kelkar was there
#
and Kelkar's machinery was like this
#
that he would show up to work
#
I refuse to come in the morning
#
so he would wake up late
#
he would read the papers at home
#
and after reading all the papers
#
he would come to work at 11
#
it was always he and Arbin Modi and I
#
every day that was the calendar
#
that he and Arbin Modi and I
#
would sit and talk about the world
#
and again the same thing
#
develop our situational awareness
#
what are our priorities
#
and what should we be doing
#
can we talk to so and so
#
can we persuade so and so on this
#
and then you know my little happy life
#
then Kelkar would go home
#
and because I was a starving orphan
#
that 11 o'clock show up at his office
#
do the brainstorming with Arbin and him
#
and then go home with him for lunch
#
and then do the rest of my day
#
so we would have made up a work plan
#
disproportionately important thing
#
that often gets forgotten
#
in the ministry of finance
#
then you're responding to other people
#
whereas you got to wake up and say
#
what are our priorities
#
do I have some time and mind
#
that Ila has this keen sense
#
and energetic about my agenda
#
when am I being a help desk
#
a variety of people come to me
#
they're all good people
#
they're all decent people
#
there's good things going on
#
and I'm solving all their problems
#
I'm not actually pushing my own agenda
#
and I haven't thought about the world
#
and I don't have something positive
#
so that's a nice distinction to make
#
that happened in the ministry of finance
#
used to be different than
#
the budget process used to
#
and I just want to describe it
#
I was not part of the core
#
there's something called
#
which are the secretaries
#
of the ministry of finance
#
and the chief economic advisor
#
and this was called the budget team
#
and they would meet every day
#
leading up to the budget
#
and they would argue about
#
the budget was much more
#
it was actually a commitment device
#
for the entire union government
#
was that every sentence
#
went into a spreadsheet
#
operated at the prime minister's office
#
who are held accountable
#
for delivering on that sentence
#
so it was not just things you say
#
it was followed through
#
somewhere in some ministry
#
is responsible for this one line
#
and that's how it was a planning mechanism
#
for the activities of the full year
#
by the ministry of finance
#
where money was exchanged for reforms
#
so I'll give you an example
#
I was brought by S. Narayan
#
with the ministry of civil aviation
#
so he told me to be the bad guy
#
and argue about airport privatization
#
there was a secretary of civil aviation
#
and there was S. Narayan
#
and I had been programmed
#
talk about the importance of
#
privatization for the Bombay airport
#
and what Narayan was doing was
#
that I'll give you money
#
but in return you have to let go
#
of Bombay and Delhi airports
#
and that was the trade that was made
#
so if any of us enjoy the glory
#
of the modern Bombay airport
#
this is S. Narayan using the budget process
#
that the ministry of finance
#
the DEA has the power to make the budget
#
and therefore this places the burden
#
to have a sense of the economy
#
to have a point of view
#
on the activities of all the departments
#
and then to be able to run
#
and exchange money for progress
#
the ministry of finance
#
used to be disproportionately important
#
because I was not in the budget team
#
meaning I was an employee
#
at the ministry of finance
#
but there is a great deal of secrecy
#
that surrounds the budget process
#
make a long list of mad ideas
#
and sell them to anybody
#
so all my interlocutors in government
#
you are JS infrastructure
#
I think we should do ABCD
#
you are JS capital markets
#
I think we should do ABCD
#
I would meet the secretary
#
I would peddle all kinds of ideas
#
I would write 20 notes about everything
#
and I had a very happy approach
#
this is the most I can do
#
most of it will not work out
#
most of it will be shot down
#
it is my job to do all this
#
so I would peddle all kinds of ideas to everybody
#
and I did not have a seat on the table
#
which would actually choose
#
what goes in the budget
#
so I developed this practice
#
the budget day would come
#
I could never bear to hear
#
I would just wait and wait
#
of the part A of the budget speech
#
and part B of the budget speech
#
and I would sit and read that
#
and I would go with a highlighter
#
and mark out the fun things that happened
#
either mine or other people's
#
so out of each budget speech
#
I would make a short list
#
of what I thought were the good areas
#
and knock on door saying
#
because now this is already agreed
#
and I know some joint secretary
#
is going to be tormented by the PMO
#
that hey what have you done
#
about implementing this
#
of implementation capacity
#
so you have to go to the joint secretary
#
I'm so happy we're doing this
#
this is a really important milestone
#
this is going to change
#
and can I help you to do it
#
and so a random subset of it
#
in terms of the work plan
#
of the rest of the year
#
so this was the way these things work
#
of some such fun ideas?
#
The greatest example is something
#
that will build a bankruptcy code
#
now because it was small and medium
#
basically my eyes had stopped reading
#
okay this is many years later
#
Jayatlee's budget speech
#
the budget speech that carefully
#
and I completely missed it
#
and in any case I would have thought
#
small and medium enterprises
#
some specialized bankruptcy code
#
and his the antennae saw that
#
oh there's something interesting here
#
and he went to Jayatlee
#
and he said yeah we can do that
#
we can do something better
#
we should build an entire bankruptcy code
#
and that's how IBC happened
#
so that's how you have to read
#
the budget speech with great interest
#
and now what can we do with it?
#
So a complete bankruptcy code
#
is a superset of a bankruptcy code
#
for small and medium enterprises
#
that the budget speech requires
#
So you know I love the process
#
how you're giving fun idea
#
to different joint secretaries
#
now a small subset of those fun ideas
#
actually make it into the budget
#
and once they make it into the budget
#
you know the iron is hot
#
you strike and you kind of go
#
and you take up the implementation as well
#
and you know they kind of get through that way
#
just be enthusiastic and ask
#
okay 90% of what I would ask for
#
and that's perfectly okay
#
because the 10% was fun and exciting
#
and my tiny IBM X10 laptop
#
in the ministry of finance
#
IGIDR type capability in those years
#
the small subset of those go through
#
and make it to the budget
#
you go and ask to work on them
#
if something comes through
#
which fits my conceptions
#
you know what is the journey
#
for the Republic of India
#
I would go volunteer saying
#
I hadn't thought about it
#
but here's my bigger question
#
right you are one person
#
I think you're an outlier
#
no matter what anyone says
#
the rest of the department
#
would not work like that
#
certainly in modern times
#
right and even back then
#
you were an outlier there
#
that how does the budget
#
how do the line items get fixed
#
Jonathan Rauch has a great book
#
called government's end
#
and he wrote the book in 96
#
and it's very prescient
#
how almost everything is developed by
#
is taken over by special interests
#
and they rule the roost
#
I don't think the problem
#
because the special interests
#
aren't really organized
#
in the kind of manner they are
#
with hundreds of lobbying firms
#
of an administrative state
#
the private sector has no voice
#
vote banks will have some voice
#
like for example small retailers
#
will be against FDI in retail
#
how the rest of it gets decided
#
we see that this has so much money
#
that you know drive that
#
is it officials doing stuff
#
because they have to do stuff
#
special interests come into play
#
is it political pressure
#
that oh this vote bank is important
#
and that is my constituency
#
we must build a railway line there
#
how does all of that kind of play out
#
we should do an everything is everything
#
the Indian process is not good
#
okay it's a bloody mess
#
so a budget is supposed to be
#
that it's got to add up to 100
#
and then you're allocating
#
there's only 70 available there
#
70 has to go down to 65
#
like that it is this jostling
#
it's a mixture of multiple things
#
so somebody will invent a scheme
#
well loved by powerful people
#
so imagine Vajpayee and co started
#
the golden quadrilateral program
#
this is coming from very powerful people
#
has to be allocated to it
#
the ministry of finance
#
used to have a good instinct
#
for all government programs
#
it was a stingy approach
#
that we mistrust government
#
we will spend less by default
#
Chidambaram had a great line
#
so there was a generalized mistrust
#
that spending ministries
#
had to produce positive evidence
#
that their stuff is working
#
that was perceived to be working
#
not in ways that you and I may like
#
the better running of a subsidy program
#
would be considered running
#
meaning you and I may think
#
that that subsidy program
#
should not have existed
#
the institutional culture
#
of the Ministry of Finance
#
was just primarily about
#
outrages, corruption and waste
#
and just government organizations
#
and making buildings for themselves
#
and not actually doing anything useful
#
looked at the rest of the Indian state
#
that spending generally works badly
#
our job is to be stingy
#
and to cut back on everybody's money
#
that your spending programs
#
otherwise we will stagnate it
#
or we will cut it in nominal terms
#
so there would be a spending squeeze
#
it was not a great budget process
#
now these things would of course
#
how much money will be put into highways
#
so like that piece by piece
#
there would be a multi-party negotiation
#
that would come together
#
so it is not a great budget process
#
but that's how it used to work
#
how your intellectual landscape
#
is shifting during this time
#
before you moved to Delhi
#
you were completely focused on finance
#
you're thinking about macroeconomics
#
you're thinking about public finance
#
to what you call your field three
#
your third big field of work
#
after finance and pensions
#
so explain to me all of this
#
are very separate things
#
like after spending years
#
specialist in finance only
#
and a generalist in other things
#
or were you always kind of
#
I was always curious about everything
#
but here I got one deep dive
#
so my first life deep dive
#
my second deep dive was pensions
#
here the ministry of finance
#
explain fiscal for my listeners
#
is the game of taxation
#
expenditure deficits debt
#
a government has to tax
#
the entire economic theory
#
if you want to do tax policy
#
you really need high economics
#
tremendous breakthroughs
#
in deeply understanding taxes
#
that this is a good tax
#
the economists have done great things
#
then you come to tax administration
#
that how will you build organizations
#
government organizations
#
that will obtain tax money
#
while abiding by rule of law
#
tax income to the government
#
tax revenues to the government
#
that is the field of tax administration
#
it's a very very difficult black art
#
and you know in some ways
#
I feel like only about 10 years ago
#
I developed a fully articulated
#
on how to do tax administration
#
how to do tax administration
#
I appreciated the problem
#
but you know I was just
#
partly mostly deferential
#
that Arbin Modi had to figure that out
#
it was not my job to figure it out
#
what should you spend on
#
of public finance theory
#
then you come to deficits
#
how big should deficits be
#
how should deficits vary through time
#
what is an optimal strategy
#
should you have a simple crude FRBM
#
under the constitution of India
#
and some others got a paper out
#
that under the constitution of India
#
that you needed to know
#
you needed to tell the economists
#
the constitution of India
#
because it makes no sense
#
a meaningfully enforced FRBM act
#
living under the umbrella
#
of the constitution of India
#
and finally you get to debt management
#
when a government wants to borrow
#
a government has a stock of debt
#
how does it maintain that debt aloft
#
all these pieces together
#
and a bunch of collaborators
#
we have a new paper out
#
who lends to the Indian state
#
is a nice pioneering project
#
on starting to think deeply
#
and ask first principles
#
around strategic choices
#
of how the Indian state borrows
#
go grab money from the banks
#
and so how do you want to think
#
for borrowing of the Indian state
#
this is a flavor of public finance
#
there is a union government
#
there is a state government
#
there is a city government
#
what is the spending in
#
what is government spending
#
what should urban public finance be
#
all this is the field of
#
and I had the luxury of
#
by being in the ministry of finance
#
by being in the ministry of finance
#
every day you learn public finance
#
and you know I was a good bacha
#
I went back and read papers
#
every day there would be
#
so I was able to combine
#
a more theoretical view
#
so Ajay my next question
#
you are in the ministry of finance
#
this really large organization
#
and what can sometimes happen
#
in these large organizations
#
how enthusiastic you are
#
is that you can get lost
#
and just get into the groove
#
and clearly you loved your work
#
which is also important
#
but I would imagine that
#
and the broader questions
#
and make sure the state
#
but also a larger question
#
on what's good for India
#
what's good for the economy
#
of the state be etc etc
#
so you know tell me about
#
you know reconcile those things
#
it is indeed very difficult
#
I would try to look for things
#
many times other people's ideas
#
and I would try to participate
#
so I always try to have
#
we're building the republic
#
what are the priorities
#
and there was one experience
#
which was a bit of an eye-opener
#
late in my years at MOF
#
gold exchange traded fund
#
now let me introduce this
#
in an exchange traded fund
#
the gold would sit in a warehouse
#
which correspond to that gold
#
an exchange traded instrument
#
but actually we are trading
#
gold on the spot market
#
probably kept in Switzerland
#
this is a simple clean idea
#
it is only a step forward
#
for anybody who has gold
#
you know you correspondingly
#
facing the risk of a burglary
#
of moving physical pieces of paper
#
when you want to either buy or sell
#
whereas isn't it beautiful
#
to have a gold ETF unit
#
sitting in your depository account
#
it looks like a security
#
it walks like a security
#
it trades like a security
#
it is traded on the exchange
#
it's a simple beautiful concept
#
with rules by the Reserve Bank of India
#
rules by the Forward Markets Commission
#
rules by some government ministries
#
and so if you were the innovator
#
there was a new mutual fund
#
which was the innovator
#
they wanted to launch this
#
just got the run around
#
that each of these agencies said
#
no but I have this requirement
#
or no we have to consider
#
or we also have a rule and regulation
#
that prevents you from doing this
#
and there is a simple economic freedom lens
#
that it is for the people
#
that you know there's gold
#
I'll keep it in a vault
#
whether they feel like having this or not
#
and the financial regulatory function
#
that the gold is actually there
#
okay it shouldn't be that
#
when a journalist goes to the warehouse
#
they find the goods are actually missing
#
a financial regulatory function
#
that you do want the state
#
in overcoming asymmetric information
#
which is a market failure
#
households will discover
#
there's actually no gold there
#
but there's only one concern
#
for the Indian state apparatus
#
to figure out and resolve
#
that regulatory function
#
just took interest in this
#
in how you do financial innovation
#
trivial financial innovation
#
and just chased it through
#
there is a little chronology of this
#
the Percy Mistry committee report
#
Mumbai as an international financial centre
#
as a demo of how broken this is
#
you're supposed to innovate
#
you're supposed to come up
#
but if it's a multi-year journey
#
where everything is banned
#
unless you get approvals
#
and years and years go in approvals
#
then there is going to be
#
the gold ETFs came about
#
highly successful product class
#
but it also got all of us thinking
#
would sit with each other and say
#
world-class financial system
#
there are probably 5000 moves
#
of the scale and complexity
#
like senior expensive resources
#
had to put so much time and trouble
#
for frankly a tiny step
#
then like we're going to take
#
a capable financial system
#
so I think that experience
#
this was late in my life
#
and I was also starting
#
and it got me to start thinking
#
had happened in my life
#
by third and fourth year
#
in the Ministry of Finance
#
I had started understanding laws
#
who is thinking of these things
#
that I started employing
#
which is as bedtime reading
#
you should for half an hour
#
you should read bare acts
#
just read the pure bare acts
#
in fields that you know
#
and then start thinking that
#
how do these words of code
#
induce legal effects upon the world
#
you do need to know the world
#
I feel that being a degree in law
#
because you don't know the world
#
you have to start from the world
#
you have to deeply know
#
that there is a gold ETF
#
and it trades in this fashion
#
ah this line generates that effect
#
the mutual fund in that fashion
#
so then you start understanding laws
#
and it was dawning on me
#
that all the Indian financial laws
#
the written manifestation
#
of the Indian central planning system
#
and UK Sinha was skilled in law
#
and he started helping me
#
and so it started dawning on me
#
that this is not about economists thinking
#
that you need to liberalize this
#
or this needs to happen
#
but the doing is all in the law
#
it is just an obstacle course
#
that every doing is a Herculean effort
#
you need huge inputs of energy
#
at the time my argument
#
UK Sinha and I were only saying to each other
#
to make India an advanced economy
#
today I would add another thing
#
there are no guarantees
#
those teams don't happen lightly
#
in fighting with this obstacle course
#
a good set of experiences
#
but then it opened my mind
#
that you've got to go after
#
the nature of coercive power of the state
#
and how the government organizations
#
the emergence of a capable India
#
and those are the really important questions
#
let's talk a bit more about the law itself
#
because you refer to laws as code
#
and in a sense it's like code
#
in the sense that it drives behavior
#
laws create the constraints
#
to which people respond
#
but equally when you write
#
a piece of software code
#
the code if elegant and well written
#
will give you the desired outcome
#
and laws don't really do that
#
because society is deeply complicated
#
and things can get messed up
#
and laws can be wrong minded
#
what you learned about them
#
because at the basic definitional level
#
yeah sure everybody knows what laws is
#
it took you years and years
#
of working within the system
#
so what is that really getting it
#
what is it that Ajay Shah of today knows
#
who was maybe 34 years old
#
and how fundamental they are
#
what laws ought to be is two parts
#
first by the constitution of India
#
all coercion of private persons
#
must be authorized by law
#
by the philosophy of constitutionalism
#
and coercion is the exception
#
you and I would totally sign on to
#
most people have forgotten
#
but our constitution doesn't encode that
#
and ethos of constitutionalism
#
and all good constitutional scholars know it
#
that freedom is the norm
#
is authorized to coerce people
#
it is not that being a prisoner
#
and occasionally getting a walk out
#
that is authorized by the law
#
now sadly that's not how this works
#
many laws are badly done
#
so I think we discussed the other day
#
the law that creates capital controls
#
and current account restrictions in India
#
all cross-border transactions are banned
#
and then it opens up a few chinks
#
because you're a nice guy
#
I'll give you these permissions
#
and I consider this aberrant
#
I consider this violative
#
of the principles of liberal democracy
#
if the first section says
#
that everything is banned
#
and this gets you to fundamental philosophy
#
and principles of constitutionalism
#
what the law and political science people know
#
that the economists don't know
#
okay so it was civil servants at RBI
#
and what they did not know
#
is that there is a concept called freedom
#
they did not get the memo
#
that this is supposed to be a liberal democracy
#
now this is the kind of conversation around law
#
so what kind of coercion is authorized
#
laws should authorize narrow specific kinds of coercion
#
when words of law are written in overarching ways
#
then they become too sweeping
#
and then they have horrible unintended consequences
#
so you know you and I have often had this
#
exchange of a difference of opinion
#
that if the United States is a great country today
#
it is because the authors of the code
#
of the United States Constitution
#
and if the United States collapses into Trumpism today
#
it is a failure by the authors of that code
#
so that I don't agree with
#
yeah so this is the way to think about law
#
that if the FEMA created the nightmare
#
of the Indian capital account today
#
I blame it on the authors of the FEMA
#
that is the way I think about law
#
you run the code on a society
#
one generation, two generations, twenty generations
#
does it create freedom, prosperity, decency
#
that is the way to think about law
#
so it's literally like running code
#
so if you create a law saying
#
that the policeman is authorized to break down your door
#
at 7 a.m. without a judicial warrant
#
well it's going to have bad consequences
#
and that bad consequences are laid at the door of the law
#
or if you write down a law
#
as in the United States
#
that if the policeman has to come to my house
#
then they have to pass a certain bar
#
in terms of the working of the legal system
#
and get an authorization from a judge
#
before they can come to my house in daytime hours
#
if they want to come in a pre-dawn visit to my house
#
that requires a different and higher level
#
of authorization from a judge
#
because it is a greater intrusion into my freedom
#
so this is the way laws have to be written
#
that the laws have to tie down the working of the state
#
so think of it both ways
#
that laws authorize coercion
#
laws create the checks and balances
#
that overcome public choice problems
#
that's what laws ought to be
#
not the soft-headed nonsense
#
that is taught by all the leftists in Indian law schools
#
this is the hard conception of law
#
that law is there to create the structures of state coercion
#
and contain the monopoly of violence of the state
#
and it comes in two ways
#
that is the state authorized to coerce me
#
and what kind of check and balance would you put upon state actors
#
so that you overcome public choice problems
#
and get better behavior
#
so for example you want to do a phone tap in India
#
hundreds of requests for phone taps
#
are put up in a file to the home secretary
#
who has a cursory glance of the file
#
and I believe it may sometimes have a cell phone number
#
and a string saying suspected money laundering
#
okay and like this a long table of these things
#
come to the home secretary and she signs on it
#
okay that's it you're done
#
the phone tapping is authorized
#
whereas in the United States
#
it has to go through a court hearing
#
the victim of the phone tapping
#
cannot be present to defend herself in court
#
so there is a legal system around it
#
which is the so-called FISA in the United States
#
where there is a high bar and there is a judge
#
and the government has to produce hundreds of pages of documentation
#
to demonstrate that you know
#
we already know this person is a drug dealer
#
now we want to snoop on their conversations
#
give me a finite time permission
#
to tap that person's phone for so many days
#
only then the authorization comes
#
it is the FISA in America
#
that created these checks and balances
#
to overcome public choice problems
#
so this is my growing up around the world of law
#
and so why is Indian finance broken?
#
because there is just crazy levels of authorization
#
of central planning and arbitrary force
#
by financial agencies in India
#
then public choice theory
#
power corrupts and these agencies have gone bad
#
they run comprehensive central planning systems
#
and we have a broken financial system
#
so the causality is from the intellectualism
#
to the drafting of the laws
#
then for a couple of generations
#
it will play out into its legal effects
#
and you will get or not get civilization
#
I think that there is over here in play
#
the part dependence of a moment in history
#
for example I completely agree with you
#
that fundamental notion of constitutionalism
#
that freedom is the default
#
but our constitution does not embody
#
that principle of constitutionalism
#
in our constitution freedom is not the default
#
the state is the maibaap
#
you know the state is protected from the people
#
instead of the other way around
#
where the people should be protected from the state
#
that just happens to be the way that it is
#
and it has gotten worse over the years
#
because as an old cartoon in the 1950s once said
#
when somebody went to the parliament bookstore
#
to ask for a copy of the constitution
#
sorry we don't stock periodicals
#
and our friend Shruti Rajgopalan
#
has a great talk on youtube on this
#
which we'll link from the show notes
#
whenever any of our leaders
#
wanted to do something unconstitutional
#
they simply changed the constitution
#
to make sure it was not unconstitutional anymore
#
and this in fact begins with our first amendment
#
before that the courts had struck down the sedition law
#
and you know Nehru was more friend of free speech
#
and the first amendment laid the grounds
#
which made the sedition law not unconstitutional anymore
#
so it came back much later
#
it didn't bring it back
#
and the first amendment laid the grounds for that
#
Tripur Dhaman Singh has a great book on this
#
I had a great episode with him as well
#
which I will link from the show notes
#
but the broader point being that
#
one our constitution does not embed
#
this principle of constitutionalism
#
and therefore because it is anti-freedom
#
a lot of laws that would not exist
#
because it would be unconstitutional
#
you know that overarching philosophical framework
#
of freedom being the default simply doesn't exist
#
and therefore the point comes up that
#
when we speak of laws in a normative way
#
that it should be this it should be that
#
and I'm thinking aloud here
#
that you can therefore think of it in two ways
#
hark back to this first principle
#
and say that it should promote freedom
#
and that should be the default
#
and this law is not doing that
#
or this law should do that
#
and that's one way of looking at it
#
except that it is almost a pointless way
#
because our constitution doesn't have that
#
and the second way of looking at it is that
#
we want to make a law that
#
at least as code is efficient
#
whether this law should exist
#
or whether it should do XYZ
#
what is the most efficient way
#
to make sure that it happens
#
and then you build an elegant piece of code
#
and therefore I feel that
#
anyone who is trying to reform law in India
#
can do much more on that second margin
#
where you speak about efficiency
#
but that first core principle freedom as a default
#
can often be fought for by individuals
#
the incentives don't play in that direction
#
So first is everything you say
#
about the constitution of India is correct
#
and I will fit it into my legal determinism
#
that that text was wrong
#
and it has induced bad effects
#
so once again I'm on that
#
I am no great admirer of the drafters
#
of the constitution of India
#
because their knowledge of politics
#
and philosophy and history
#
was actually quite weak
#
for all that Ambedkar lived in the United States
#
he actually did not understand
#
the history of freedom and liberal democracy
#
as we understand it today
#
and it fits under the same rubric of law as code
#
okay part two very well
#
you're operating under this environment
#
and now you are in a situation of being
#
in the place of doing economic policy
#
either in a context like FEMA
#
or in a context like Gold ETF
#
then it behoves the people doing this stuff
#
to think more about these things
#
I fault the individuals who were part of the FEMA
#
a law that was enacted in 1999
#
and drafted in the late 90s
#
that you know they needed a dose of Kelkar and Shah
#
on how you think about the FEMA
#
so that's again law as code
#
that an integral part of economic reform
#
and the modernization of the Republic of India
#
of building a better state in India
#
that path is all about one better law after another
#
and yes while you are allowed to pass
#
a sedition law in India
#
you are also allowed to repeal a sedition law in India
#
so while you are allowed to write a law in India
#
that all cross border transactions are illegal
#
and then proceed to permit a few ones
#
you are also allowed as a thinker and a policymaker
#
to write a law which says freedom is a norm
#
and there will be some exceptions
#
so the role of law is essential
#
and to think about public policy in India
#
and to do public policy in India
#
and our bane has been that the law fraternity
#
has normalized the oppression of the Indian state
#
and we have built law capabilities in India
#
that people who know law
#
and have not thought much about the Republic
#
the typical modern model
#
is that there will be a joint secretary
#
where public choice theory makes the demand
#
for more and more state power
#
and there will be some English speaking 20 year olds
#
from a private organization
#
who will support them in writing laws
#
but they do not have the intellectual capability
#
of actually sparring with the person
#
on what the law should be
#
which are just more and more oppression
#
every year more amendments come out
#
and freedom only goes down
#
and so this is why I want to just raise the issue of laws as code
#
and as long as we are stuck with this present architecture
#
of Indian financial law
#
it would take 50 years or 100 years
#
to get to a meaningful financial system
#
and so we started understanding
#
that you needed to do something deeper
#
you know I'll simply add that
#
while I agree with you that yes
#
just as we can bring bad laws into effect
#
we can also take the bad laws out
#
I agree with you on that
#
but the point is we still have the sedition law number one
#
and many other bad laws
#
if we look at the way incentives work
#
then I don't think that they play out equally
#
the incentives for the state will always be
#
to increase its powers and to raise the oppression
#
and to use the state as a tool of oppression
#
and to build laws to that effect
#
rather than the other way around
#
the other way around it is the exceptions
#
having said that I'm not being completely fatalistic
#
you know our friend Subhashish Bhadra wrote a great book
#
and I had an episode with him
#
where he made the point that
#
you know the US constitution came about at a particular time
#
and the dominant ideas of the day
#
are what led to the value given to individual freedom
#
and federalism in that constitution
#
in the Indian constitution came at a time
#
where the country was basically falling apart
#
and there were riots everywhere
#
and the lines on the map as we know it didn't exist
#
so there was a natural tendency to centralize
#
so we cannot blame the framers so much
#
because we get that natural tendency to centralize
#
we can't really do much about that code right now
#
and you know within that framework
#
I completely agree with all the work you guys do
#
though I think you are swimming against the tide
#
and will keep swimming against the tide
#
we're swimming against the tide
#
but that just means that we should do our work better
#
and we should try harder
#
and I will push legal determinism
#
that lines in laws matter
#
every word in a law matters
#
and you really want to bring
#
the best brain power of the country
#
into writing those laws
#
not just some 20-year-old law students
#
let's continue with your journey
#
that you know you've spoken about
#
your mind is already going beyond
#
matters of the Ministry of Finance
#
after you saw the pensions reformed through
#
after the NPS kind of came into being
#
a story we've told in other episodes
#
so tell me about that period
#
what was your thinking in those times
#
so many things came together
#
one is it is very exhausting
#
doing that life that I was doing
#
in the Ministry of Finance
#
I had one IBM X10 laptop running Linux
#
I wrote all my own code
#
and it was very long days
#
from like 9 a.m to 9 p.m
#
okay so at the end of four years
#
I knew instinctively that
#
ultimately my contribution in this piece
#
is at the level of ideas
#
an official in government
#
you know so there are people
#
who have played great roles
#
and also maybe that was a different world
#
people like Ashok Desai and Montek
#
Alu Alia and Vijay Kelkar
#
and maybe their world was different
#
but my world was different
#
that it was my long-term future
#
lay in the world of ideas
#
and so these things started coming together
#
that I had finished four years
#
I had worked with three finance ministers
#
and you know I felt like
#
I'd really opened my mind
#
and sort of my community
#
after the changes of all those years
#
I think I told you the funny story
#
on my last day at the ministry of finance
#
and K.P. Krishnan walked into my office
#
and I said today is my last day at the DEA
#
and I also put my boxes in my car
#
and at the base of the building
#
I got the call saying that my mother died
#
so all these things were happening at once
#
I should be writing papers
#
that I was not here thinking
#
I should be writing books
#
I was thinking I should be writing papers
#
I felt that across a whole array of these questions
#
there were a lot of gaps
#
in the intellectual landscape
#
and what was needed was intellectual work
#
and I was happy to do it
#
and I wasn't thinking institutionally
#
I was just thinking that
#
it would be a good life to write more papers
#
so in 2005 I exited MOF
#
the first life design at that time
#
and I used to like the third floor
#
of the barista defence colony a lot
#
and so my mental model for days in Delhi
#
was I would sit on the third floor
#
of the defence colony barista
#
so various things had to be organised
#
if people had to come meet me
#
I would do it at the third floor
#
of the defence colony barista
#
for the rest me and my tiny IBM X10
#
I would write some papers
#
and that was the life design
#
so that was the beginning
#
in September or October 2005
#
and I embarked on this life
#
of partly Bombay and Kat
#
and partly some days in Delhi
#
and hanging out in the barista
#
reading, thinking, writing papers
#
Ela and I were working very effectively
#
on international finance
#
and macroeconomics by that time
#
I could see that there was a lovely
#
stream of papers we were writing
#
it was all new knowledge
#
we were pretty much laying
#
the foundations of Indian macroeconomics
#
business cycle knowledge
#
and international finance
#
I was happy to do that stuff
#
so that was the stage one life design
#
and then I blame Ela completely
#
no, we should start a lab
#
that we need a research group
#
and we need to scale ourselves
#
and it will involve raising money
#
and M Govind Rao said to Ela
#
that why don't you build this at NIPFP
#
so that is how the whole idea came
#
of building a research group
#
which at the time was called
#
the macro and finance group
#
where the idea was to build a team
#
and grow these capabilities
#
and pull together all this knowledge
#
of law, public administration, economics
#
be able to do quantitative research
#
and think about the world
#
joint secretary capital markets
#
at the ministry of finance
#
Subba Rao were secretary DEA
#
maybe I got the order wrong
#
Subba Rao and then Ashok Chawla
#
at the ministry of finance
#
and they supported this
#
so this whole thing got going
#
and that was my interregnum
#
from late 2005 to early 2007
#
where I basically lived
#
and the happiness of having
#
a very light 1.2 kg laptop
#
it's not exactly digital nomad
#
you were working out of two cities
#
and you spent a lot of time
#
working in the third floor
#
of the barista defense colony
#
but a true digital nomad
#
and writing from a different city
#
I just meant all by myself
#
were you mentally a digital nomad
#
of everything is everything
#
is complete economics nerd
#
they've heard references of
#
and of course your adventures
#
in the IIT lab and all of that
#
some computers also do that
#
the rest of your mental landscape
#
you're sitting all the time
#
and you're thinking public policy
#
what is the kind of music
#
that you've listened to
#
reading that you're doing
#
I know you've only watched
#
of which are The Matrix
#
but tell me about the rest
#
of your interior landscape
#
what's going on in there
#
and particularly the mountains
#
so I get madly attracted
#
going out into the Himalayas
#
roots of the western Sahyadris
#
our bodies are in great shape
#
and we've also figured out
#
any supplies you have carried with you
#
you're restocking on the way
#
and we figured out everything about
#
very long through trekking
#
we are always looking at each other
#
and saying you know what
#
cannot tell you how wonderful
#
you know those kinds of things
#
out of a sense of responsibility
#
so all the work that I do
#
is out of a sense of responsibility
#
if you leave me to myself
#
isn't it like a throwback
#
to pre-agricultural life
#
that when your instincts were shaped in
#
when our instincts were shaped
#
that forget the worries of the world
#
just keep walking and just
#
and it made me very sad
#
when you said that frankly
#
you want to be buried anonymously
#
in some part of a forest
#
and you want no one to know
#
so they can't come back to that place
#
also I like the concept of burial
#
because you give the nutrients
#
I don't like the concept of cremation
#
you are wasting so much biomass
#
what better beauty can there be
#
and you did keep on walking
#
in that particular journey
#
where you went from MOF
#
what you claim as a digital nomad
#
I started Ajay Shah's blog
#
this is all the fault of
#
Viral Shah and Vikram Agarwal
#
they understood this world before me
#
they basically caught me one afternoon
#
saying we're going to start a blog just now
#
me, me and myself blogging
#
it built an audience over the years
#
today it's a peer-reviewed scientific journal
#
meaning I started it as a blog
#
it acquired an audience
#
and it had its place and time
#
but it has evolved into
#
something completely different
#
and I'm very pleased and proud about it
#
a pro tip for everybody
#
at the top bar of The Leap Blog
#
so it's a curated search
#
on a special set of sites
#
so everybody in my community uses that
#
Google search as a superpower
#
it's our internal knowledge management system
#
I didn't know that till today
#
so I will start using it
#
before we get to the NIPFP days
#
which is that at this time
#
you're about to touch 40, right
#
and what happens typically
#
especially when we are young
#
and brilliant and ambitious
#
there are many things we want to do
#
we think we're going to change the world
#
we're full of ambition and passion and all that
#
you've got to start tempering that stuff
#
you realize that time moves slowly
#
change happens at a glacial pace
#
and at some point you also realize that
#
you cannot play the short game
#
you have to play the long game
#
so did that number of 40
#
have anything to do with it
#
or during this phase in life
#
you've spent so many years in the state
#
you now know the pace of changes
#
glacial that things are pretty dismal
#
how did your mental constructs of yourself
#
what was the thinking around your purpose
#
and what you should be doing
#
my self-conception was that
#
I'm supposed to be the geek and the thinker
#
and that's my value added in this world
#
that I can understand stuff
#
to be able to take any problem
#
any system and take it apart
#
and I know how to think about the world
#
I know how to study data
#
I know I understand systems
#
processes, organizations
#
I can take them apart and rebuild them
#
so that is the thing that I do
#
for example building a risk management system
#
it was a constructive building project
#
of not just writing papers
#
but actually making a machine
#
that gets up and running
#
and at the time arguably
#
one of the highest performance complex
#
computer systems of the country
#
that was my early self-conception
#
that my value added in the world
#
I drifted into the doing
#
and it was just convenient
#
for me to go closer to the doing
#
but that was never the idea
#
so I was supposed to be the person
#
that would play a role in designing the NPS
#
that was my self-conception
#
were supposed to figure out the doing
#
and it just so happened
#
that I was in MOF at the right period
#
but again the critical doing
#
was S. Narayan and UK Sinha
#
that sort of really got the ideas
#
and got excited by the ideas
#
and they carried it forward
#
I was more their internal supporter
#
so I have not occupied executive positions
#
I have never made a decision in government
#
I have just been part of the room
#
where arguments took place
#
I have the gift of the gab
#
I know how to argue about things
#
so that was my early conception
#
so I have already talked about
#
Yashwant Sinha, S. Narayan
#
these are amazing people
#
I have watched what they do
#
that is out of the world
#
so I rapidly understood that
#
that's not my value added in this world
#
that I can be a thinker
#
that is it is my job to think
#
and to talk about these things
#
to be able to persuade others
#
so it was never my conception
#
that I would become a decision maker
#
I never wanted to walk the ladder of
#
trying to become a chief economic advisor
#
those were not the kind of things
#
that I saw myself as going into
#
my job was to build knowledge
#
and put new things on the table
#
that had not previously been thought about
#
to participate in projects
#
like the equity derivatives trading
#
or the new pension system
#
those were the kind of things
#
that I felt I was adding value in
#
until the difficulties of NPS
#
when the NPS community dispersed
#
I slowly started understanding that
#
so I did not think that deeply about community
#
we describe some cute phrases
#
we describe doing public policy
#
as an alpine style assault
#
versus a siege style assault
#
in an alpine style assault
#
one or two guys just run up the mountain
#
with very little resources
#
there are people who have done amazing things
#
walking alone at high speed
#
to go up to Everest and come back
#
in a siege style assault
#
you grind away with large teams
#
then you build a camp two
#
hundred people at camp one
#
and sort of you build this
#
of many many people participating
#
and it gets the job done
#
that the right way to do public policy
#
is that siege style assault
#
a few guys suddenly doing one announcement
#
what you need is to carry a community along
#
and create many many brilliant people
#
who will all be cantankerous
#
and disagree and differ
#
and that's the deeper way
#
in which a country makes progress
#
to have a couple of cool people
#
what you need is an entire network
#
and if they are not talking
#
and arguing with each other
#
then basically all hell will break loose
#
just from pure power play
#
with knowledge or intellectualism
#
and that's basically just
#
a mediocre third world country
#
you know as you are arriving at an IPFP
#
what have you learned about institutions
#
because what you're doing here
#
to the task of building an institution
#
where the question comes into play is
#
how do we design the institution
#
the design of the institution
#
is like code or is like laws
#
there's a determinism to it
#
so what have you learned
#
about good institutional design
#
that this institution is something
#
going to kind of interface
#
and even be dependent on the state
#
for funds and all of that
#
you know what was your thinking
#
and what were your learnings
#
which helped you shape NIPF
#
a good deal of NIPFP was a given
#
Govind Rao was the director
#
so there was a lot that was defined
#
to a chunk of real estate
#
which we were able to use
#
and we started building
#
in terms of formal rules
#
a great deal of the formal rules
#
what we got to have a say on
#
so what we got to have a say on
#
was the kind of recruitment
#
and the internal culture
#
we got to create a culture
#
of debate and discussion
#
we got to create a culture
#
where women were treasured
#
innumerable organizations
#
where women are treated badly
#
where women find it difficult
#
and participate in meetings
#
so there was no question
#
okay so everybody understood
#
that Ela was the person
#
who chose the pay raises
#
a woman not having power
#
practical piece of power
#
we built a nice culture
#
combining the high ideas
#
of public administration
#
of the interdisciplinary toolkit
#
and public administration
#
I felt that this was something
#
plus the internal human culture
#
and how people talk to each other
#
and how people interoperate
#
we surely made mistakes
#
and there were situations
#
so look in every organization
#
there will be some hires
#
there are people that have left
#
so I don't want to make it
#
it went through its difficulties
#
of a unique blend of ideas
#
the economics and the law
#
and the public administration
#
and a unique organizational culture
#
where there was an emphasis
#
on knowledge and creativity
#
and debate and discussion
#
you know many of the badass women
#
who've been on this show
#
are people I met through you
#
you know so there's a community
#
of people known as Ajay's people
#
and most of them are women
#
so people like Bhargavi Zaveri
#
was the founding principle
#
like what is foundational
#
what is absolutely core
#
macro and finance group
#
your micro and finance group
#
so when Ela and I started
#
there was a giant field
#
there is American macroeconomics
#
but it is not much use here
#
there is a development macroeconomics
#
which is like frankly useless
#
that is for a third world country
#
the world view of development
#
and it's a different view
#
India was that middle road
#
where there was an nascent capitalism
#
where it was starting to exhibit
#
business cycle phenomena
#
of the rest of the world
#
and it needed an international twist
#
because once an economy
#
and globalizing and connecting
#
of the old closed economy
#
so these were our distinctive insights
#
that India was starting to face
#
business cycle fluctuations
#
okay so ever since Karl Marx
#
that capitalism is prone
#
to fluctuations bracket
#
the amplitude of the fluctuations
#
but ever since Karl Marx
#
the market economy goes
#
through these systematic fluctuations
#
which are called business cycles
#
and it's a part of life
#
and we need to understand them
#
and that is a core of macroeconomics
#
and there is the question
#
which are macroeconomic policy levers
#
and you need to grapple
#
it's not a small matter
#
many many developing countries
#
have stumbled in their journey
#
to engaging with globalization
#
so the answer is not to be terrorized
#
and to shut down the economy
#
that would be counterproductive
#
we have an everything is everything episode
#
on firms and internationalization
#
about how the internationalization
#
on both the current account
#
and the capital account
#
is of essence in the growth journey
#
that if you want high economic growth
#
we have to always and always foster
#
greater internationalization
#
and again there the development people
#
they just don't get macroeconomics
#
they don't get growth deeply
#
we had this whole distinctive insights
#
and we knew that this needed
#
that a whole literature had to be created
#
firm internationalization
#
and the nature of monetary policy
#
in a more modern economy
#
which has business cycles
#
and is internationalized
#
but is not yet the United States economy
#
so you can't take the toolkit
#
and the papers from the United States
#
so this was the distinctive vision
#
of what we started as NIPFP
#
and we felt that this kind of knowledge
#
is of essence in the future
#
of macroeconomic and financial policy
#
and this is the core task of the DEA
#
so there is a very interesting quiz question
#
that should be asked of everybody in the DEA
#
is to build fiscal financial
#
and monetary institutions
#
that are conducive to the rise of India
#
as a lower middle income economy
#
and to foster high growth in India
#
there was a need of this kind
#
with the practical policy work of DEA
#
because otherwise by default
#
what you get is RBI is saying
#
and the economy should be kept closed
#
and the official in DEA will say
#
okay fine let's do it your way
#
so the story ends there
#
and all possibility of progress ends
#
what is needed is to change
#
the nature of these conversations
#
and bring the intellectual toolkit
#
of modern economics to bear here
#
and Krishnan and Subha Rao
#
and others at the ministry of finance
#
DEA needs this kind of capability
#
and while there was a chief economic advisor
#
and there was an economics division
#
they said that there's plenty to do
#
meaning it's not like we're short of work
#
and so if you guys will build a team
#
and you will build this kind of knowledge
#
that will build knowledge
#
that will create a new body of knowledge
#
in the intellectual debates of India
#
and put new knowledge on the table
#
in the larger public discourse
#
but then those individuals
#
will also develop knowledge and capabilities
#
and then can potentially do
#
some practical policy work
#
so that was the concept
#
of the macro and finance group
#
as conceived by Ela and me
#
into some of the things
#
you know one important conceptual point
#
that I hadn't really thought about
#
everything is everything
#
and we have a bunch of episodes on firms
#
right and I link them from the show notes
#
and I always thought of
#
you know there's society
#
and society has markets
#
markets are how individuals engage
#
with each other to mutual benefit
#
that's a mechanism of capitalism
#
but how we should think about firms
#
didn't was not something
#
I paid explicit thought to
#
though obviously I should have
#
because you know firms are
#
that is how markets organize themselves
#
and that is how all the voluntary exchanges
#
actually happening at scale
#
on the beautiful information system
#
and you know in your notes
#
you have this intriguing line
#
and one of those things is
#
put firms at the center
#
of international finance right
#
so talk a little bit about this
#
not just in the conceptual sense
#
of why firms are so important to growth
#
but also as to why no one else
#
really in the discourse
#
talks about firms at all
#
I don't know why others
#
but for me it was always obvious
#
maybe by growing up in Bombay
#
and you know being more exposed
#
as opposed to you know growing up in Delhi
#
or growing up in economics departments
#
maybe that was my you know
#
edge in terms of understanding
#
but it was always obvious to me
#
that the greatness of the United States
#
is that they have firms like Google
#
it was always obvious to me
#
that it is not about having
#
a better car repair garage
#
it was about having Google
#
that is what makes the United States great
#
then you apply a little more economics reasoning
#
and you understand that productivity
#
are the path to labor productivity
#
so you have to bring better technology
#
and then you get to high labor productivity
#
and the wage of the person
#
is the marginal product of the person
#
so when a great firm comes about
#
a firm obtains vast amounts of capital
#
is able to bring technology
#
process engineering management
#
into the working of the firm
#
the individuals are highly productive
#
and then those individuals get high wages
#
so the country becomes productive
#
and you get high wage individuals
#
and that is the journey to prosperity
#
turning to Indian macroeconomics and finance
#
how do you think about international finance
#
is it some balance of payments data
#
that there is aggregate exports
#
aggregate capital flows
#
and there is some aggregate FDI
#
yeah you could look at those things
#
and you could do some time series analysis
#
but actually in incentives based understanding
#
that think about the incentives
#
of all the players on the capital market
#
how does a steel firm think
#
what are the incentives of a steel firm
#
does it choose to borrow abroad
#
does it choose to obtain foreign equity
#
how does a foreign lender think
#
how does a foreign investor think
#
now you start bringing all these
#
incentive based arguments
#
and now you're on the pathway to insight
#
that to actually understand something
#
you have to go microeconomic
#
you have to think about the incentives
#
and the objectives of all these characters
#
and only then will we get insight
#
have traditionally been prisoners
#
they think of the balance of payments
#
but that's not a path to insight
#
insight comes from thinking about firms
#
and then thinking about their incentives
#
and then you change a rule
#
and the behavior of the firms changes
#
you're off to the races
#
a certain imagined change in policy
#
what would its consequences be
#
because rational self-interested agents
#
would change their behavior
#
so there are some proposals that are terrible
#
there are some proposals that will help
#
suddenly you've got an analytical toolkit
#
field number four of my life
#
that it was this conception
#
that India is growing up
#
and we're becoming an early
#
and there is an incipient
#
that is starting to display
#
business cycle phenomena
#
and is starting to get integrated
#
and we need a new Indian macroeconomics
#
and we need a new international finance
#
that is grounded in firms
#
so that is the kind of field four
#
that Eli and I started building
#
because I think earlier
#
you remember I told you that
#
when I was a PhD student
#
I had done one deep dive into macroeconomics
#
and I had become truly happy
#
learning the story of the 20th century
#
the story of the great depression
#
the work of Bernanke and Friedman
#
meaning I was spiritually deeply
#
and I just left all that knowledge aside
#
because I came back to India
#
and here I sort of reconnected to all that
#
and it was deeply happy
#
I remember endless days
#
where I was just sitting
#
on the terrace of my Barsati
#
and just being high on life
#
to go back to monetary economics
#
and start getting the modern intuition
#
of course the field had moved along
#
and there were many new things
#
but I just remember that happiness
#
that I knew the instincts
#
and I was able to come back
#
and re-engage in the field
#
it was also a very very fruitful collaboration
#
because Ela had great macroeconomics knowledge
#
has to be tightly connected
#
and I brought that finance knowledge
#
and we were able to bring it together
#
so it just worked brilliantly
#
that the two of us got together
#
and basically promised ourselves
#
we were just going to shut up
#
and build this new field number four
#
and that is what we proceeded to do
#
before my next question
#
I have a question for you
#
between Ajay Shah and a normal person
#
okay there are many possible answers
#
the difference between Ajay Shah
#
and a normal person is this
#
a normal person needs to get high
#
Ajay Shah reads papers to get high
#
tell me a little bit more
#
about this collaboration
#
because your collaboration with Ela
#
because that's also really interesting to me
#
okay she got that keen deep inside
#
and you have that keen experiential understanding
#
of the world of finance
#
and they're coming together
#
but how does it really work
#
because in any collaboration
#
there will always be points of friction
#
there might be fundamental things
#
that you don't agree about
#
which run into each other
#
and here there is actually a lot at stake
#
because you're running the same organization together
#
so there is a lot at stake
#
as opposed to just being intellectual sparring partners
#
so how did that kind of work out
#
what did you learn from each other
#
Ela was a PhD student of Paul Levin
#
who is a great macroeconomist
#
at the University of Sare
#
and she was imbued in macroeconomics
#
in a much more recent vintage than me
#
okay so my knowledge had stopped
#
she had stayed in macroeconomics
#
so that was a great edge of hers
#
this idea that India was growing up
#
and developing business cycle phenomena
#
I thought that this is a developing country
#
and none of the American knowledge works here
#
the pleasure of reading Friedman and Lucas
#
that's what happens in America
#
it has nothing to do with what happens in India
#
it was Ela's distinctive insight
#
that after the 91 reforms
#
we started developing that mass
#
of complex firms in India
#
and there was an incipient internationalization
#
there was a modern toolkit of macroeconomics
#
that could fully be applied here
#
on the second thing that you said about
#
discussion, debate, disagreement
#
there are two parts to it
#
one is conflicts around credit
#
and just think of the misery
#
of Simon and Garfunkel being torn apart
#
by bridge over troubled waters
#
like what is wrong with you people
#
after you've done bridge over troubled waters
#
but Paul Simon wrote all the songs
#
but the greatness of bridge over troubled waters
#
because each of them wanted to take
#
a little more of the credit
#
for it was actually mainly my song
#
I think of you and Ela more as John and Paul
#
and not Simon and Garfunkel
#
because Simon and Garfunkel
#
how do you be John and Paul
#
okay so that's part one that
#
you have to just stop talking
#
so that's the first part
#
a person like me has to be mindful
#
brought up on the patriarchy
#
that I present myself as the leader
#
and the woman is a second-class person
#
and Ela doesn't give a damn
#
she's fully capable of holding her own
#
she's way way more badass than you
#
and you are plenty badass
#
of what is a meaningful collaboration
#
no conflict around credit
#
people have to find their piece
#
and then not arguing about who did what
#
because X thinks I'm so cool
#
at a variety of points in time
#
various people have wrongly thought
#
that I was the director of NIPFP
#
and it is the large-heartedness
#
of M Govind Rao or Rathin Roy
#
that they just laughed it off
#
it was never a problem for them
#
you need to be large-hearted
#
that need to be sorted out
#
that there can be no collaboration
#
when there are conflicts
#
you and I work on everything is everything
#
we've never felt awkward
#
you know who's doing what
#
the single reason why everything is
#
everything works so well
#
is none of us have ego about it
#
when we're trying to build a good product
#
you know stop trying to grab credit
#
that is the first thing
#
this is an issue that you know
#
with millennials and gen z
#
has created poorly socialized people
#
to be with human beings
#
and so these kind of issues
#
there's all kinds of jangling
#
what did that person say
#
that endless dialogue inside the head
#
should I report this to HR
#
you know those kinds of things
#
so let's assume this is solved
#
now you come to part two
#
which is creative conflicts
#
and here again one needs
#
we'll sort of find some middle road
#
that when we fight about
#
and everything is everything
#
we've got a way of letting go
#
that okay fine I don't agree
#
and you know we find middle roads
#
and again you need that good cheer
#
so it should not be that
#
because then you've lost
#
the point of collaboration
#
where each person is taking
#
the effort of sincerely arguing
#
and thinking and saying
#
and then when we disagree
#
let's find some middle road
#
and keep moving forward
#
and you find the creative energy
#
from the things that work
#
and you know we got things out
#
and now let's argue about the next one
#
so these are the two elements
#
that you should not be arguing
#
and both or five collaborators
#
all need to be taking effort
#
to contribute ideas and effort
#
and resentful saying okay fine
#
and now I'm going to be passive
#
you know I got to point out
#
Jeff Bezos used in this interview
#
which was disagree but commit
#
where he says that sometimes
#
a senior manager will come to him
#
and he'll feel this guy
#
is so passionate about it
#
but I will let him do it
#
and once I have let him do it
#
and I think some of our best episodes
#
have been disagreement episodes
#
you weren't really sold on the idea
#
of four papers that change the world
#
or even the storytelling episodes
#
you remember how much I argued
#
I said this is not an episode
#
but in the end it was so great
#
in the end it was so great
#
and some of those episodes
#
and equally I disagreed with you
#
like some of the firm's episodes
#
this is so boring and academic
#
and I am so glad it's out there
#
because what an archive
#
another core principle I think about
#
is that we are all human
#
we are all scared bits of wetware
#
daring to come up with a new idea
#
so I feel what all of us should do
#
I will try all I can to say
#
we are also scared inside ourselves
#
and we are trying so little
#
that we would each encourage
#
and that's a healthy place to be
#
so it is better to encourage each other
#
and out of them 8 will fail
#
that is always trying to find reasons
#
why something should not be done
#
so I feel a core part of
#
collaboration and partnership
#
and if somebody is excited
#
even when it goes against the grain
#
and you are not entirely convinced
#
but if the other person
#
I feel that's the way we should do it
#
that's a beautiful sentiment
#
and I really want to underscore that
#
because one of the important lessons
#
I've learned in my life is
#
you got to stay away from negative people
#
and not be negative yourself
#
tells you something which is new
#
the instinctive human response
#
and I watch out for that in myself
#
that I never ever want to do that
#
that you always want to
#
be positive and push the other person
#
they learn something from it
#
but you just have to be positive
#
and you have to stay away
#
about everything you do
#
I mean people have been cynical
#
about our show long before
#
when we have discussed it with them
#
and I absolutely hate that
#
that's a huge character flaw
#
so I think the good approach is that
#
somebody proposes something
#
and then we should immediately
#
get on a constructive agenda
#
and say I want to be a collaborator
#
I want to be a supporter
#
so here here's one idea
#
you know you're saying this
#
but here's a better way
#
where you'll make this better
#
or you'll have a better chance of winning
#
rather than getting into this
#
oh it's not a good idea
#
it's not going to work anyway
#
sometimes we do need to say
#
one should be on a constructive project
#
that if somebody has an idea
#
we also need to create space for ourselves
#
for triaging conversations
#
saying look we are overloaded
#
we are trying too many things
#
should really be fortnightly
#
those kinds of conversations
#
and I think if you know
#
what he's well known for
#
about how do people want to get around
#
and all he would have got
#
from conventional thinkers
#
is that there is a market
#
why don't you breed good horses
#
how do we make horses faster
#
thank all those dead people
#
who did not respond like that
#
and said that you go bro
#
I don't know what the hell you're doing
#
let's take a quick commercial break
#
and talk more about your journey
#
and this sounds like a commercial
#
to check out my latest labor of love
#
I am co-hosting with my good friend
#
the brilliant Ajay Shah
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everything is everything
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we'll speak for about an hour
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on things we care about
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from the profound to the profane
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from the exalted to the everyday
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we range widely across subjects
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and we bring multiple frames
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with which we try to understand the world
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please join us on our journey
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by subscribing to our YouTube channel
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everything is everything
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welcome back to the scene on the on scene
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I'm still with Ajay Shah
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and he's still at an IPFB
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that is in the journey of his life
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you know if he's 58 today
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we're kind of approaching
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the last lap in a manner of speaking
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though when you're running
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what is even a last lap
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you're setting up an IPFB
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like what were the kind of projects
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what was the actual work that you did
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the rhythm of that work
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was that first and foremost
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of a new Indian macroeconomics
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and international finance
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as public domain products
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that agenda worked well
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to the ministry of finance
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open-ended conversations
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we should think about xyz
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sometimes they would say
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so we became an extended
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intellectual capability
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to the ministry of finance
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that these kinds of things
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okay so the Indian state
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ability to work with data
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so imagine if you're not
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who are willing to work
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and they are not able to take in
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so this was an interesting
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economics public administration
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modern state-of-the-art economics
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and then that capability
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for the ministry of finance
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it started with the KP Krishnan
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for a period of nine years
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this kind of arrangement worked
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about that whole concept
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there are people in government
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who look for consulting
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or you have a Bain consultant
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we did not take instructions
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from the joint secretary
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with the joint secretary
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have you thought about this
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you know we're thinking
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in which you can participate
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would you like to contribute
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a billing rate per hour
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working at the instructions
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not agree that this thing
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in this I want to single out
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the 2008 crisis response
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for this concept of a team
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so the 2008 crisis erupted
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and finance policymaker
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in India we were very lucky
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we had a RBI led by Subharao
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we had a SEBI led by CB Bhave
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in the ministry of finance
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because the 2008 crisis
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could easily have spiralled
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into something much worse
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we worked day and night
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that situational awareness
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I know speaking for me personally
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understanding everything
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sending out a last bunch
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thinking about in the morning
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and then back into the story
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and it was a very good arrangement
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because a kind of knowledge
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that we were able to build
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was a valuable addition
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to what was arguably a great team
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this was an unmatched team
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Chidambaram, Ashok Chawla
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foundations of the macroeconomics
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they got a modern India
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at a level that you've never seen before
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and then we were able to
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had the depth in understanding
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what was going on in America
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what was going on in the UK
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understanding their laws
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why was there a run on the bank
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how they were addressing that
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and what is the meaning of a
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a swap given to the South Koreans
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and would the Americans consider
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and Montek spoke with Larry Summers
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and the answer came back
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so we were there in every step
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and I felt it was a good point
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and there's this particular
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which I have recounted before
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with Krishnan on the scene
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and in our Everything is Everything episode
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you know there is a basement in Delhi
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and in that basement in Delhi
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and you are the moderator
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and the other three people
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Subbarao's driver comes
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and then Bhave's driver
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comes and does the same thing
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and then Krishnan's driver
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comes and does the same thing
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because you're skilled enough
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but what really happened here
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and of course you became part of
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you were part of that team as well
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Okay and the next thing
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I spoke earlier about the laws
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the laws are the bottleneck
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and it needs fundamental redesign
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I wrote a business standard op-ed
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that I described to you
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in the business standards
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and you got to go deeper
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that this kind of tinkering
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that we will take 50 years
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to become an advanced economy
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if we keep incrementally
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fixing this at this pace
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was the Finance Minister
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in Krishnan's conversation
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about how we got to FSLRC
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FSLRC is the Financial Sector
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Legislative Reforms Commission
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led by Justice Shri Krishna
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and the dream was audacious
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60 odd badly written laws
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a single clean modern law
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that simultaneously establishes
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and not just a reckless
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for a government agency
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to do whatever they want
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which turns into central planning
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the checks and balances
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surrounding the actions
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so that we are able to combat
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the public choice theory problems
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because it was a nice big
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and only time in my whole life
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that I faced a job interview
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so Shri Krishna was leading this
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and there was some amount of
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and so I was hoping that
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it would be placed at NIPFP
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and I would lead the research team
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being the research team
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that supports the FSLRC
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but that was not a done deal
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and so Shri Krishna said
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and I went to his office in Bombay
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we became the technical team
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a single draft law called
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the Indian Financial Code
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and it's a clean modern law
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that fixes large scale of problems
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in the Indian financial system
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slumbering on the shelf
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but all these things will come
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was the fully articulated picture
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monetary policy committee
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as a new reserve bank of India
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inside the FSLRC draft law
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we began on a separate journey
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that story is recounted
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in the everything is everything
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inflation targeting episode
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so I will not recount it here again
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No and it's an incredibly
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to go and listen to that episode
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and Krishna also talks about it
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but the basic summary is
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besides being a tax on the poor
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at the level of individuals
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can also distort signals
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because firms don't know
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how to react to rising prices
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is it a change in supply and demand
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high and variable inflation
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which is sometimes a problem
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inflation kept at a stable
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and that should be the one job
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all kinds of other nonsense
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it had no business doing
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the entire role of the central bank
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where it was essentially told
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which is to fix inflation
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at a band between 2 and 6
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and you got to get it right
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and again you've spoken about
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how it was a long road to change
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you chatted with Yashwant Sinha
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there has to be an environment
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but it can't just happen
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there has to be an environment
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and over more than a decade
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that environment built up
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till eventually it happened
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and my favorite part of the story
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and I will say it again
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in case people haven't seen
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my favorite part of the story is that
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finally at the start of 2014
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Chidambaram gives a go ahead
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Manmohan is happy with it
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make it a reality right then
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because there are elections due
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and as a matter of courtesy
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for the next finance minister
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that person should decide
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that person is Arun Jaitley
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and when Krishna takes us to Arun Jaitley
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Arun Jaitley after an overnight
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but it is a far-reaching consequence
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don't you want to look at it carefully
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if India's finest economic minds
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and of course he means Chidambaram
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this was the kind of grace that we had
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which disappeared from politics shortly
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inflation targeting is not some wonkery
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it is not some random piece of regulation
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and it was a community of reformers
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with a political consensus in place
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between different parties
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this is a freaking Indian state
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at its best reforming itself
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just to finish my story
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then came field number five
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so my field number five is bankruptcy
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I already spoke a few minutes ago
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about how Krishna saw the lines lurking
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inside the 2015 budget speech
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and went to Jaitley and said
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we should make a full bankruptcy code
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why do it only for MSME
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we had done the FSLRC law
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we knew how to draft a big complex law
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and this is a full story
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you should discuss with Susan
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Susan and I were both members of
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the Bankruptcy Legislative Reforms Committee
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and it is also one of the finest hours
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the committee kind of meandered at first
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and did some relatively trivial things
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and Rajiv Marishi became
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and the committee said to him
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is this the kind of thing
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or do you actually want
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I want a full bankruptcy code
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I don't want to do trivial stuff
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so then suddenly the whole thing
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went back to full energy
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and then Susan led the team
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that drafted the bankruptcy code
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some volunteers from outside
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and with basically negligible resourcing
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a bankruptcy law got done
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we don't actually have an episode on it
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it's been mentioned in my episode
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who also was part of Susan's team
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if any friends of Susan are listening
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please convince her to come on the show
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I have asked her about 40 times
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she's absolutely a remarkable intellectual
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I won't say public intellectual
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because not adequately in my opinion
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and I would love to have her in the show
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also doing a life and times episode
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some of Ajay Shah's hidden foibles
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but quite apart from that
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and why is it so important
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because again for the layperson
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the first time I heard of it
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I thought yeah I mean like
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bankruptcy law are okay
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but you know what is a big deal
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but this is actually also
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more fundamental and far-reaching
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we are in a zone of the market economy
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the market economy is made of firms
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firms are risky ventures
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there is a possibility of failure
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every firm runs a risk of being wrong
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of trying the wrong things
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how does that doing badly happen
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ultimately turns into default
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a firm will default on its lenders
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a firm will fail to pay salaries
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that's how a firm will default
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now the question we face as a society
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is that when that happens
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do you make it a bloody mess
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do you have some pure power play
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come and beat up others
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and grab assets of the firm
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or can you have an orderly script
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for what happens in the end game
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ideally can the firm as an institution
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be protected and survive
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while the lenders take a loss
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so the famous European 2G auctions
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tons of money was bid by telecom companies
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because they thought that
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2G telephony was going to make
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in the event it did not make money
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so there were all these mobile phones
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but the ARPUs were awful
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the annual revenue per user were awful
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so those firms had a lot of debt
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they were going to discharge that debt
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but the greatness of a bankruptcy process
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is that the old equity guys get wiped out
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if you are an equity guy in a failed firm
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the debt guys took a very big ride down
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the firms went into the ownership
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the customer using the cell phone
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of interruption of service
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so the assets of the firm state
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the employees of the firm state
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so the firm as an institution
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rode through the whole thing
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while a whole financial superstructure
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the old equity guys got thrown out
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the debt guys took a giant ride down
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but all that drama played out
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through the bankruptcy code
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while the firm stayed alive
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with cell phone coverage
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working as if nothing ever happened
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so that is the glory of
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the institutional apparatus
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which is called the bankruptcy code
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and if we care about the market economy
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we care about Schumpeterian
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it should be easy to start firms
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it should be easy to close firms
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firms should die all the time
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there should be vibrant competition
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and then you need the rules
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about the end game of a firm
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that when a firm gets into trouble
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and there are five angry people
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one guy is not being paid salary
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one guy is not being paid a loan repayment
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what you're going to do
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how do you arrive at a predictable set of steps
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and a predictable loss allocation
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whereby it becomes a frictionless exit
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my last story I want to tell from the NIPFP days
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is that essentially at the end of that journey
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Ila had one grand insight
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at the time our world view of how to work
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was the work in finance
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the work in macroeconomics
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the work in international finance
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where there was complete intellectual domination
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there was lots of papers
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in-depth understanding of the field
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and then a public policy process in India
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where we used to always say to our people
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that you have no right to give advice
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until you are a demigod in the subject
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that you are no better than any other civil servant
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then you have no right to give them advice
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so just because you speak English
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and you have read western blogs
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it does not give you the right to give advice
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we used to always have this very research heavy approach
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that we need to have complete mastery of the field
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vis-a-vis the traditional
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you know the weak intellectual climate of India
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and then you earn the privilege of claiming
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that I have some thoughts and ideas
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about how you should do this
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this was the way we used to work earlier
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and you can imagine it is so expensive to do this
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which is towards the end of the NIPFP years
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was that actually there is a relatively sterile level of knowledge
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that carries you very far
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which is just market failure, public administration, law
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you don't need to understand agriculture completely
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you only need to understand market failure in agriculture
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so freedom is the default
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the rest we are not interested
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so what free people do is a great subject of inquiry
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but we are not centrally concerned with that
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just focus on the market failure
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so you need to understand the market failure
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then you think of the lowest cost coercive actions by the state
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that will address the market failure
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and you think of the public choice theory problems
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and build the laws and the procedures
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that will contain executive discretion
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and will make sure that civil servants and politicians
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don't become mean people who will harm the people of India
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so relatively sterile version of the knowledge
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in one field after another
#
will actually take you very far
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in terms of figuring out public policy
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so she had this window of
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how to open up this toolkit into far more generality
#
without a 20-year journey to build a full research literature
#
so we did that in three fields
#
she said you don't actually need to do that in all fields
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so if you have a drug quality problem
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you need to understand the drug quality problem
#
you need to write papers on drug quality
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but you don't need that complete mastery of drugs
#
there are many things in drugs you don't need to know
#
you only need to understand the market failure
#
so this was the last cool idea that came at NIPFE
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and this is my summary of 2007 to 2016
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so you know we've done a bunch of episodes
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about when the state should act
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how the state should act
#
you know an episode defining market failures and so on
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and on everything is everything
#
I'll link all those from the show notes
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but for those who haven't heard it
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I think we kind of need to summarize that a little bit
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as a grounding on when the state should act
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and it's obviously part of Ela's toolkit as well
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that in our first episode on the state
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we discussed that look every act of government
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as I once my headline for one of my pieces
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in Times of India was exactly that
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every act of government is an act of violence
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because it comes at a cost
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that cost is a moral cost of coercion
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and that cost is an actual cost on the economy
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as you have pointed out
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in your book in service of the republic
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every rupee taken by the government as taxes
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has an opportunity cost of three rupees on the GDP
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that is what would have been generated with it
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otherwise if it was left originally
#
and therefore we have to not assume
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that the government is all-powerful
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with an endless supply of money
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but that there is a constraint
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which is both a moral and a real financial constraint
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and so we should be able to justify
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every act of government on those grounds
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now when is state action justified
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and in our next episode, episode 26
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what you laid out so well is that
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it is justified only when there are market failures
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now market failure is a technical term
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which doesn't mean what it might intuitively mean
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that oh the market failed to give me something
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so if I go to H&M and there's no black shirt
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I can't say that's a market failure
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and the state should step in
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it has a specific kind of meaning
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and when those particular kind of market failures occur
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those are the only times that the state should step in
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the state needs to think long and hard about
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should it intervene to begin with
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what interventions are optimal and justified
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the lowest cost as you said
#
so I want you to talk a little bit more
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about this foundational thinking
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before we continue talking about
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and the strategic view of finance
#
which is what we're going to talk about next
#
so there are extremes in this world
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some people want to do central planning
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where the government controls the resource allocation
#
the government will say the shirt should be blue
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the payment system should be UPI
#
the airline should be Air India
#
and that's just central planning
#
and that works very poorly
#
because the world is too complex
#
and officials and politicians
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do not have the knowledge and the incentive
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to actually figure out what an advanced economy is
#
too often at the other extreme
#
there is a bit of the libertarian impulse
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and that's also not correct
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because there are things you want a government to do
#
so once you start down saying that
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we want the government to run a military
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we want the government to
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you're straw manning the libertarian position a little bit
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that there's a certain kind of libertarian
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the anarchist libertarian who believes in no state at all
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but most sensible libertarians
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like I would once have classified myself
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though I don't like labels these days
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don't really believe in that
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we believe in a night watchman state
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which should only intervene in specific situations
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you and I are actually on the same page
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so I'm on that middle road
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and the public economics technical term
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for those specific situations is termed market failure
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so market failure is defined as a class of problems
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where a the unrestricted movement of the free market
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leaves a situation where
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it is possible to obtain a Pareto improvement
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that coercive power can create a rearrangement of the world
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in a way that at least one person is better off
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that we are asking that
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I can use coercive power in such a way
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that at least one person in India becomes better off
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that is a high bar and that is market failure
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so market failure is that class of situations
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where you could do this thing
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but then b you come to the question that is it feasible
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is it within the implementation capacity of a government
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is it fouled up and tripped up by public choice theory
#
so just because there is a market failure
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it doesn't mean that you should always have state intervention
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particularly in a place like India
#
where state capability is very poor
#
many many times we have to just let it go saying
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sorry boss you know I can't do this in India
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they can do it in Norway
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it doesn't mean we can do it in India
#
and so you need a more night watchman state in India
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than you would have in Norway
#
okay so this is the strategic picture
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on how to think about the state
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that we view the state with skepticism
#
because there is public choice theory
#
then we think how can I create the checks and balances
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to make the state actually perform
#
that's the journey to state capability
#
state capability changes very slowly
#
you can't will it into being overnight
#
in all the international evidence
#
we know it takes 20 years 50 years 100 years
#
for state capability to emerge
#
nobody should think it can be done quickly
#
we have low state capability
#
we should do the best we can
#
we should try to create those checks and balances
#
and we should have a low opinion
#
about how well this stuff is going to work
#
now within that level of low state capability
#
what kind of market failure might you like to interfere in
#
and the answer is a few
#
and that is the modern doctrine
#
of how we should think about this
#
so the pillars of the entire edifice
#
and this is basically Kelkar and Shah
#
that we need to learn the technical terms
#
be able to apply that to the world
#
be able to see market failure
#
be still my beating heart
#
just because you've seen a market failure
#
it doesn't mean you go set up some
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government coercive intervention into it
#
what kind of lowest cost government intervention
#
and then you think all the things that will go wrong
#
because we have to be wise and skeptical
#
and apply public choice theory
#
that government is not comprised of saints
#
the age of Gandhiji and Nehru is gone
#
government is comprised of regular guys
#
who pursue their own self-interest
#
and so how might we create checks and balances
#
and how might we have modest aspirations
#
for the emergence of state capability
#
nobody should tell you that
#
oh suddenly I'll build one great agency
#
of pervasive state failure in India
#
I mean it just doesn't happen
#
and so you've got to assume that
#
whatever pieces of government
#
they will be reasonably shambolic
#
or there'll be two good officers
#
for a few years it'll go okay
#
and then it'll collapse
#
it'll revert to the mean
#
of the average performance
#
of an awful Indian government organization
#
now that you have all this
#
what kind of state intervention
#
are there still some market failures
#
there should be state intervention about
#
so this is the modern journey
#
of how to do public policy
#
and this is the summary of Gail Karan Shah
#
that we might use terms
#
without listeners really knowing
#
what they are or having
#
especially if they haven't heard us before
#
what public choice theory is
#
is the application of economic thinking
#
to the working of the state
#
that every government consists of people
#
people respond to incentives
#
so bureaucrats will respond
#
to different kinds of incentives
#
politicians will respond
#
to different kinds of incentives
#
and that becomes a big constraint
#
and when you think of it that way
#
you begin to realize one important thing
#
you know people will often speak
#
as if they are incredibly common
#
so the state has to do everything
#
and to that I would simply say
#
that one market failure
#
is actually extremely rare
#
the voluntary action of people
#
takes care of most things
#
but where there is market failure
#
yes there might be a case
#
to be made for the state to come in
#
provided those other conditions are made
#
but government failure is ubiquitous
#
if market failure is rare
#
government failure is ubiquitous
#
the outcome of a rare market failure
#
of the government fixing it smoothly
#
so public choice theory
#
teaches us to be skeptical
#
and then to be rigorous
#
in terms of what precise actions
#
given the reality of the world
#
which is the reality of state capacity
#
the incentives of all the people
#
we've done an episode of
#
everything is everything on this
#
I would also recommend a great book
#
called public choice a primer
#
you can download it for free
#
I'll link it from the show notes
#
and you can really read it in one hour
#
so you know let's let's kind of move on
#
a strategic view of finance
#
which is a super important subject
#
because that's something that
#
you know you would have studied
#
the academic version of it
#
then you dive into the weeds
#
where you're actually doing things
#
then perhaps somewhere along the journey
#
you get the full historical context
#
of the evolution of finance
#
in episode 21 of everything is everything
#
and then having done that
#
you get a far fuller sense
#
what is the landscape here
#
what is the state of finance here
#
state of state regulation here
#
and then you came up with
#
an overarching framework
#
so that's what I want to ask you about
#
the journey of Indian finance
#
this is for an edited book
#
by Tirthankar Roy and some others
#
all this story that I have told
#
about the things that I did in Indian finance
#
and here's my strategic view
#
here are the building blocks
#
that we should take into the reasoning
#
and I'm going to offer six
#
building blocks of the reasoning
#
there is market failure in finance
#
and we need to understand it
#
so we need a precise description
#
of what is the market failure
#
and that was essentially
#
clearly articulated for the first time
#
but I'm not going to go into the details here
#
of what is the market failure
#
you need to do some consumer protection
#
microprudential regulation
#
so there are some pieces
#
we will build some government agencies
#
that are supposed to address this market failure
#
but we must approach it
#
through the lens of public choice theory
#
we should not be goody-goody
#
that oh there'll be some nice economists
#
and they're going to run some agency
#
and everything is going to be great
#
is the correct toolkit to apply
#
these are self-interested actors
#
they will pursue their own self-interest
#
and fostering Indian national development
#
is not in their self-interest
#
the emergence of a capable financial system
#
makes their life more difficult not less
#
because you have to do more work
#
when dealing with a complex financial system
#
whereas if you will just ban everything
#
then you know your life is easy
#
you get to sleep at night
#
given that we are applying
#
to the thinking of government agencies
#
what are the checks and balances that you want
#
so how do you curtail the executive discretion
#
of an official inside SEBI
#
of an official inside RBI
#
how do you create checks and balances
#
around the monetary policy arrangement
#
we have a monetary policy committee
#
you have private citizens as members of the MPC
#
you want private citizens
#
as board members of these organizations
#
you want procedural rules
#
conceptually before a policeman kicks your door in
#
they've got to go get a warrant from a judge
#
so you want all these checks and balances
#
you know giving money and power to a government
#
is like giving whiskey and car keys to teenagers
#
this is a PJ O'Rourke quote
#
I finally recognize something after you refer to it
#
then in this you come to question four
#
which is what is the financial agency architecture
#
will there be a central bank
#
will the central bank do banking regulation
#
will there be one financial regulator
#
which does all the financial regulation work
#
or will it be split into
#
one doing all prudential regulation
#
one doing all consumer protection
#
okay so what is the agency landscape that you want
#
and you know for example in the UK
#
the agency landscape is that there's a central bank
#
that only does inflation targeting
#
it's about 700 people that's all you need
#
it's a very small organization
#
well 700 is not that small
#
it only does inflation targeting
#
then there is a debt management office
#
which does the investment banking for the government
#
there is a prudential agency
#
there is a consumer protection agency like that
#
so what is the map of agencies that you want
#
in the financial agency landscape
#
so there is one agency RBI
#
there's one agency SEBI
#
is this how you want it to be
#
should the RBI regulate banks
#
should the RBI regulate payments companies
#
should the RBI do debt management for the government
#
that is the question four
#
then idea number five is that you know what
#
Indian finance is basically a central planning system
#
so we talk a lot about how the 91 reforms
#
are supposed to have put an end to central planning in India
#
but in finance all the products and all the processes
#
are controlled by the agencies
#
so you got to wake up and say that
#
oops in this field we forgot to do the liberalization
#
and in fact hundreds of employees in financial agencies
#
that interfere in great detail in the working of firms
#
is something you've never seen before
#
the old industrial licensing at the ministry of industry
#
was probably 50 people giving out licenses
#
here you have hundreds of people meddling in every detail
#
every product every process is controlled by these agencies
#
and that's you know not wise
#
central planning systems work poorly
#
and finally sixth and last point
#
that we should see this in the historical context
#
that we had a recognizable community of financial reforms
#
which worked from the late 80s till about 2017
#
and then it has been fully dispersed
#
and today we're basically scratching the ground
#
these are the big ideas around which
#
we should think about Indian finance
#
and as I said if this is interesting please look
#
there's a nice paper I think it's a nice paper
#
called the journey of Indian finance
#
which tells this kind of story
#
you know that that poignant point you mentioned about
#
how there was a community
#
and it you know years if not
#
you know decades of sort of hard work
#
went into building that community
#
and it just dispersed it fell to pieces
#
in hindsight what could you have done differently?
#
The most important thing was to understand
#
that these communities are ephemeral
#
and they need more effort and sustainment
#
and that the complete dispersal of a community
#
we talked about it in the context of pensions as well
#
so when I was young I thought wow this is India
#
we make progress like we in one field
#
after another we put up a community
#
and I did not understand that actually
#
communities require endless effort and nurturing
#
and by default they'll just wither away
#
and they'll fall apart or adverse events
#
will happen in the world and they will get destroyed
#
so this whole business of creating
#
the intellectual leadership and the morale
#
and the interest in building one field after another
#
in my opinion that is the most important site of action
#
in nation building that this is the story
#
in field after field we've got to find
#
the resourcing the organizations the people
#
the dynamism where outside of government
#
and not narrowly only inside government
#
we've got the simmering of ideas
#
and the people with enthusiasm and the energy
#
who are thinking reading studying debating writing
#
and that is the most important engine
#
that keeps the country moving forward
#
then at the policy level people will come and go
#
somebody will be more interested in the work
#
somebody will be less interested in the work
#
here's a question and it leads to you know
#
a larger sort of issue like when I think of these communities
#
that you speak of having built up
#
and then dispersed reforms community
#
a pensions community a finance community
#
what I feel like happened here is a great man theory
#
kind of thing that they happen to be a bunch of good individuals
#
we were lucky there was a perfect storm
#
they came together circumstances were conducive
#
and these communities formed
#
but these great men went away or fell away
#
or fell out of favor or lost interest or whatever happened
#
and the community dispersed
#
and my question then there is that
#
is there a way for them to plan for the future
#
so we are not dependent on great men or great women
#
Ela certainly is one great woman at the center of this
#
but is there a way so that great people are not needed
#
so that you build an institution
#
that sustains this kind of thing
#
like my instinctive response to this is that
#
a great person theory led community might last 20-25 years
#
and not more you got to be lucky
#
but if it's institutional it'll last 50-70 years
#
and I have zero doubt that it will decay
#
and it will become completely you know
#
either ossified or deeply corrupted
#
but that will take a much longer span of time
#
like we've seen happen to some western institutions
#
but how does one think about it
#
like you are playing a long game at an individual level
#
but equally you think about a community
#
playing a long game at a much longer level
#
in the long term individuals are dead
#
but institutions can survive
#
and communities can also survive
#
so what's your thinking on this
#
this is the grand question
#
so if you ask me about the next 50 years of India
#
what you've just articulated in my mind
#
that we've got to get this done
#
meaning there is also stuff happening beyond my pay grade
#
which is the story of the political system
#
the basics of freedom and the constitution
#
and the judicial system
#
and check and balance between the three branches of government
#
that's beyond my pay grade
#
let's assume that those basics are done
#
and there is a modicum of freedom
#
and liberal democracy in the country
#
then after that everything you have described
#
is the heart and soul of the story
#
that how will we ever fix anything
#
and we don't know how to do it
#
and we are all at the early stages of thinking
#
on the positive side I want to say that
#
NIPFP and IJDR have been leadership factories
#
the people who grew up through all these experiences
#
they are all here in this country
#
and it is an incredible
#
next generation of capability
#
and political philosophy
#
and imagination of learning the gritty details
#
about how things are done
#
and all the way down to
#
what kind of typesetting software is used to draft a law
#
which is you know a black art
#
that most people in India do not know
#
there is a great body of knowledge in these orgs
#
which has been dispersed across the landscape
#
in the form of a variety of people
#
who all created this knowledge
#
and it is a contribution
#
that these people are there all across the country
#
the puzzle which we do not know the answer to
#
is how can we create one field at a time
#
and sustain it for years and years
#
and have a realistic assessment
#
about the limitations of the Indian state
#
that the Indian state will come and go
#
there will be some years which are good
#
there'll be some years which are not
#
but if the community defines itself by the government
#
then it's basically a consulting shop
#
that you know if there is a joint secretary
#
he will ask for Bain consulting fine
#
you'll do some assignment
#
when he doesn't ask for the Bain consulting
#
the Bain consultant leaves
#
whereas what is required here
#
is the decades of deep knowledge building
#
of building a literature
#
of developing a point of view
#
of creating intellectual leadership
#
so that these individuals are leading the way
#
for the joint secretary
#
and not following the joint secretary
#
a larger theme we've addressed it before
#
but just to sort of get some more thoughts on it
#
which is again to do with the knowledge ecosystem
#
for a moment leave the state aside
#
and leave policy aside right
#
in the knowledge ecosystem
#
there's a large question of
#
how does knowledge get discovered
#
disseminated learned etc etc
#
there were geographic limitations
#
technology wasn't there
#
the internet wasn't there
#
the university became the site of all of that
#
and it was almost like a holy shrine
#
now today we agreed at number one
#
a lot of the constraints have gone
#
which you know made it necessary
#
that the university would be
#
the only possible site of that
#
and universities also across the world
#
have degraded incredibly
#
especially when it comes to the humanities
#
they are completely irrelevant to the real world
#
they are stuck in a circle
#
academics are generally talking to other academics
#
and a lot of fine minds are wasted
#
and they're not talking to the general public
#
i think i've said this earlier in this episode
#
and we've spoken about it in our episode
#
the knowledge ecosystem
#
but then my question here is
#
that in an indian context
#
how does that world of knowledge now get created
#
like i don't think the universities play a part in it at all
#
a lot of rich elite kids will go to foreign universities
#
and get all kinds of fancy ideas
#
that have no correlation with the real world
#
or a very superficial one at best
#
but a lot of young people
#
especially from small towns
#
are hungry for knowledge
#
they want to contribute to the nation
#
you know they have that sense of purpose
#
where does knowledge come from
#
does credentialism stand as a big block
#
in the way to their being taken seriously
#
because here's what i see
#
i look at the machinery of government
#
and i think that government by necessity
#
eventually becomes an area of generalists
#
especially when is officers are getting transferred
#
from one post to the other every two years
#
you are never building specialized knowledge
#
generalists need specialists to help you
#
a lot of the consultancy world
#
forgive me if i am too harsh
#
it's essentially a scam
#
they don't really provide value
#
and they are winging it
#
and they are also not specialists
#
brief glimmers of a way forward
#
such as rakesh mohan calling someone like you
#
and saying come and work for me
#
the system is not producing people like that
#
the system is not producing
#
avenues of contribution and growth like that
#
so when you look at the system
#
a i want you to tell me what is the system
#
and b in an ideal world
#
and its interface with the state look like
#
these are all huge questions
#
and we don't know a lot of this
#
there is an indian version of this concern
#
that is even more scary for us
#
this is the decline of the traditional
#
research organizations in india
#
so the traditional government university
#
or a government influenced organization
#
for a wide variety of reasons
#
we have a new age of populism
#
and the kind of elite patronage
#
that was there for thinkers and intellectuals
#
under the roof of the government has gone
#
so we are actually at a very troubling moment in india
#
where the old institutional architecture
#
of the knowledge society has been disrupted
#
and we need to find a new way
#
to organize ourselves as a country
#
you and i did this everything is everything
#
episode on the knowledge society
#
and i don't want to pretend that we figured it out
#
but these are certainly the starting block
#
of finding a new country
#
that i have a core proposition
#
that a country cannot be better than its intellectuals
#
a country can be worse than its intellectuals
#
but it can never be better than its intellectuals
#
and we need the intellectuals
#
who are at the frontier
#
who are thinking dreaming imagining
#
and are able to create that north star
#
yes there can always be a collapse
#
you can underperform to that frontier
#
but you can't be better than that frontier
#
and we in india today are in dire straits
#
that that frontier of the best people
#
the thinking people has lost its home
#
that traditionally it was in the government organizations
#
but government controlled organizations
#
are just in deep trouble all over india today
#
and so i think what we need in india
#
is a new world of private organizations
#
of a variety of shapes and sizes
#
now here in the on the teaching side of things
#
there is unfortunately one big mess
#
that you build a normal teaching university
#
and then you get into the trap of the foreign journals
#
that that works for the stem subjects
#
that asking faculty members to publish
#
in the foreign journals
#
is a decent incentive in stem journals
#
but in the humanities and social sciences
#
it is a very weak way to think about the world
#
a person who is very effective
#
in publishing in the foreign journals
#
may know very little about india
#
so how to create the community
#
the respect the currency
#
of how people talk with each other
#
for all the things that really matter
#
which is the humanities and the social sciences
#
and i don't pretend that i've figured it out
#
but it is certainly the starting block
#
of what the indian story
#
for the next 50 years will be
#
but i'm not so much asking as in
#
what can be done about it
#
i'm asking is what is your vision
#
or what is a perfect thing
#
will consist of unknown unknowns
#
and people will figure it out as they go along
#
but what is the ideal ecosystem look like
#
the ecosystem is a bunch of self-driven people
#
that they have to have high levels
#
of intrinsic motivation
#
the puzzle is how to avoid
#
the simple climbing a career ladder
#
what modern academics has turned into
#
is you get one pub at a time
#
and you climb an academic ladder
#
and so then people basically just become
#
fighting for one promotion at a time
#
and that is really not very effective
#
so what we want is a whole bunch of
#
energy of thinking, talking, arguing
#
debating, collaborating
#
and we should be eclectic
#
about what institutional form it takes
#
so particularly because
#
in academic organizations
#
you will turn into this journal publication thing
#
then they will matter less
#
so we need a new wave of other forms
#
in which people will locate themselves
#
and so they will be private organizations
#
to some extent in universities
#
but also non-universities
#
who aspires to be part of that knowledge ecosystem
#
they can look at you as a role model
#
which is that in academia
#
the tendency is you get more and more specialized
#
and enter more and more irrelevant silos
#
while you have essentially been a renaissance person
#
you've been the opposite of that
#
everything is everything
#
which therefore gives me a nice segue
#
to ask you about your next field
#
which no one can predict
#
that you would have gotten into
#
but that field is health
#
so and I remember we were doing a scene
#
and scene episode on economics
#
I think maybe on the farm laws
#
or I don't remember what
#
but I started it off by saying
#
what are you thinking about these days
#
and then for one hour we just spoke about health
#
and not the subject of the episode
#
and it was quite delightful
#
and my mind was just blown with every second sentence
#
so how the hell did you get into this?
#
So one is that as a PhD student
#
I had stumbled into the field of infectious disease
#
just the pure biology of infectious disease
#
I just got so interested
#
all my life I kept on reading
#
but then I do this with so many things
#
meaning there are thousands of things
#
and it's a thread that's running in the mind forever
#
and you know read a couple of articles
#
and papers and books all the time
#
that I can read journal papers
#
so a good game is to go to Google Scholar
#
and keep finding new papers to read
#
and so that way I'd somehow been nurturing
#
infectious disease in my mind all the time
#
then the second milestone
#
was the great man Jeff Hammer
#
when Manmohan Singh became prime minister
#
the World Bank decided to put their
#
Lan Prachet and Jeff Hammer
#
so that they could have a better front end
#
in engaging with the world of Manmohan Singh
#
and that's how I got to meeting
#
Lan Prachet and Jeff Hammer
#
and once we were just having some arguments
#
I don't even remember how it started
#
and Jeff Hammer said to me
#
that you're a child now
#
you're having a good time
#
when you grow up you'll do macroeconomics
#
and you'll have a good time
#
the hardest thing in the world is health
#
and he proceeded to demonstrate to me
#
that there is no harder field in the world than health
#
from a public policy standpoint
#
getting health right is the hardest thing
#
so he said if you're a real man
#
to start thinking about health
#
and it is the hardest thing
#
and do all the other trivial things
#
but when you grow up health awaits
#
like it was just done in
#
Jeff Hammer has been a great friend
#
who has taken interest in me all along
#
so this was his happy way
#
in which he was just nudging me along
#
that you know come to health one day
#
that it is the best subject to do
#
the smartest guy for the biggest problem
#
yeah that sort of thing
#
but also you have to finish with macroeconomics
#
like health is harder than macroeconomics
#
so generally we tell people
#
that you start at small trivial things
#
like finance and grow up to macro
#
you know that if you read PhD textbooks in macro
#
you don't know diddly squat about macro
#
that is just such a painful realization
#
what do they of macro know
#
who only know PhD macro books and papers
#
so macro is a very hard field
#
it needs rich depth in economic history
#
history more broadly institutions
#
and common sense about the world
#
but Jeff was saying to me
#
you ain't remotely done
#
after you finish with macro
#
and you will come to health
#
was always there in my mind
#
and I was kind of reading and thinking
#
then I am really grateful
#
there was a country director of the BMJF
#
would you be interested
#
in doing more first principles
#
and I said yeah it could be
#
we know you're not a health person
#
we don't we know you don't do health
#
in starting to do health
#
and build a body of knowledge
#
the ways in which you have done
#
probably he knew a bit about that
#
like work from first principles
#
participate in the larger life of things
#
I'd be happy to do that
#
that he and Sandhya Venkateshwaran
#
about this kind of work
#
is Bill and Melinda Gates Foundation
#
so they got us going at NIPFP
#
that I went down this path
#
and then actually all over again
#
it was the same toolkit
#
what's the market failure
#
that's the core question
#
and then suddenly you get this
#
enormous powerful insight
#
between the private good of health care
#
that I have a toothache
#
I sit on a dentist chair
#
that is tantamount to eating a chocolate
#
which is a private good
#
so it may be health care
#
but it's a private good
#
where you get purposive state action
#
an entire population at a time
#
that has public good characteristics
#
where private action will not work
#
and so you need a government
#
and only the government
#
will fix the air quality crisis
#
which is the biggest single disaster
#
in health in India today
#
so that kind of reasoning
#
of understanding the distinctions
#
between public health and health care
#
as in every other field
#
if you go read the global literature
#
your mind will just get screwed up
#
and you'll get completely confused
#
have finished all their public health stuff
#
they've got their clean air
#
they've got their clean water
#
this whole bunch of public goods problems
#
in the advanced economies
#
that are in reasonably good shape
#
so they worry about health care
#
the incredible cost of the elderly
#
getting into health care
#
and so if you participate in the West
#
you will get a health care centric view
#
doctors see health care
#
they derive self-esteem
#
you're not feeling well
#
so doctors want health care
#
and public policy in health
#
is a completely different field
#
so you know intuitively
#
to be left to the generals
#
similarly health is too important
#
to be left to the doctors
#
what you want is policy thinkers
#
what you want is public economics
#
you want this whole machinery
#
I did this kind of thing
#
and it worked very well
#
I brought new data to the table
#
the CMIE household survey
#
is the first observation
#
of the health of the people of India
#
and it gives you amazing new measures
#
so I had a very happy time
#
I have had a very happy time
#
it was one more deep dive
#
and it just so happened
#
there was a 2008 crisis
#
I started learning health
#
and there was a covid crisis
#
so suddenly all that knowledge
#
became applicable to study India
#
and that's where we did
#
some episodes of seen and the unseen
#
yeah we've done episodes on
#
you know health care is
#
not just the hardest subject
#
for enthusiasts from the outside
#
like I simply don't get it
#
is one of the best experts
#
in health care in the country
#
I had a great episode with her
#
she is absolutely awesome
#
but I feel that episode
#
gave me much more insight
#
into Amrita than into health care
#
she was lucid and full of clarity
#
but I simply don't get the subject
#
everywhere in the world
#
everybody has got it wrong
#
you know one of the best books
#
I'll link from the show notes
#
I think Frontier and Fortress
#
in American health care
#
but that was in an American context
#
but I don't grok it at all
#
bumper sticker elucidations
#
if it is possible to do those
#
with the way we think about
#
and what would you like to see
#
so pushing aside public health
#
let's focus on health care
#
I mean I'm just using the term
#
okay so in the field of health
#
my bumper stickers would be
#
first always focus on the distinction
#
between public health and health care
#
public health are actions
#
that act upon the people
#
so if you're going to fight mosquitoes
#
which person the mosquito
#
we're going to fight air quality
#
you're going to improve
#
the safety of the roads
#
so we could think of a long list
#
of the social determinants of health
#
and each of them is target rich
#
with public policy questions
#
the coercive power of the state
#
to improve the health of the people
#
and not the health of a person
#
and there is essentially
#
nothing here for doctors
#
so one of the great mistakes
#
in the field of Indian health
#
is the excessive importance
#
doctors come in phase two
#
saying at the end of a public health
#
journey for whatever reason
#
okay so prevention is always better than cure
#
but fine some people get sick
#
now we come to part two
#
here bumper sticker one
#
okay there is an isolated exception
#
but most government health care
#
the entire fantasy of government
#
running primary health centers
#
and government running hospitals
#
the government does not have the ability
#
to do production of health care
#
the good behavior of doctors
#
founders on the problems
#
of public choice theory
#
that the government facilities
#
and those people choose to
#
whatever hundred things go wrong
#
and government health care
#
work phenomenally badly
#
and you basically just want to
#
starve them of resources
#
because it ain't working
#
this is this fits under the
#
don't put money down leaky pipes
#
okay so this is bumper sticker number two
#
bumper sticker number three is
#
there is huge market failure
#
in private sector health care
#
because of the asymmetric information
#
the doctor prescribes an MRI
#
and gets a kickback from the MRI
#
and this is just corrupt and unethical
#
that the pervasive use of kickbacks
#
in India is just corrupt and unethical
#
and it's a huge problem
#
so there is always over prescription
#
and we are being dragged into
#
surgeries we don't need
#
and x-rays we don't need
#
and expensive drugs that we don't need
#
extracting resources from us
#
at worst they are asking us
#
positively harmful for our bodies
#
also the health care journey
#
needs to be a complex conversation
#
between a health care provider
#
whereby over the next 10 years
#
in steady state you will be healthier
#
whereas in Indian private sector health care
#
that I have a toothache fix me
#
beyond that I don't want to know
#
I have a heart attack fix me
#
beyond that I don't want to know
#
so there's really no long-term perspective
#
on the health care provider
#
in thinking about the interests
#
rather it's just transactional
#
I'll fix you now you go home
#
come back to me with the next heart attack
#
so there is just no attempt
#
by private sector health care providers
#
to participate in the lives
#
of their patients in a deeper way
#
in ways that could be transformative
#
there is no simple easy
#
government intervention
#
look at how badly SEBI works
#
in its practical interference
#
in the working of brokerage firms
#
and exchanges and all that
#
now visualize a SEBI like organization
#
meddling inside the lives
#
of doctors and hospitals
#
so you can't you cannot transplant
#
whatever FSLRC type toolkit we have
#
into this field of health
#
because the conversation
#
between a doctor and a patient
#
and then my last bumper sticker
#
is basically Amrita's big idea
#
Amrita's big idea is that
#
the site of action can be
#
the conversation between private
#
health insurance companies
#
and private health care providers
#
and the organizational capability
#
to amass data about one doctor
#
and one hospital at a time
#
for the private health care
#
so they have the correct incentive
#
organizational capability
#
they can create the check and balance
#
doctors and private health care
#
facilities behave better
#
to curtail their behavior
#
to address the market failure
#
to coerce them through private contract
#
to cater to the interests of
#
but that requires large
#
capable private health insurance companies
#
state capability at IRDA
#
and we don't have either of these yet
#
but this is a great field to go into
#
there is a brilliant concept in this field
#
it's a health maintenance organization
#
where there's one single firm
#
which takes thousand rupees
#
and promises to take care of your health
#
now suddenly their interests are aligned
#
and you have more surgeries
#
now they have an interest in prevention
#
so they will take a lifetime NPV
#
and they don't have an incentive
#
to over prescribe or you know
#
give you a drug which is actually bad for you
#
the internalization happens
#
because they are on the hawk
#
for all your future health care
#
there are many pitfalls
#
so this is my rapid bumper sticker summary
#
there are couple of chapters
#
in Kelkar and Shah that are health related
#
which piece together some of this
#
everything is everything episode on vaccines
#
where we do this kind of first principles reasoning
#
that do you really need a government
#
to do everything in terms of vaccination
#
except some role for the government
#
when it comes to eradication
#
vaccination doesn't need to be a government thing
#
let's take a digression
#
I have the plot of a dystopian novel for you
#
and the plot of the dystopian novel is
#
that it will be the HMO
#
it will charge a certain tax
#
and it will look after you for life
#
I don't know about that
#
but so dystopia already playing out
#
hey we are taking money from people
#
but we don't want to spend any of it
#
like taking care of them and all that
#
and so let us make sure they don't fall ill
#
now what is one of the biggest sources
#
of illness in the world
#
it is something called sugar
#
so they institute the ministry of sugar
#
and the ministry of sugar decides
#
we have to make people eat less sugar
#
how the hell do we do that
#
when it is part of our culture
#
and that is when evil scientists in labs
#
create a particular chemical compound
#
which when fed to people
#
make sugar bitter for them
#
a virus is put into the water
#
and that virus runs around your body
#
so that you hate the taste of sugar and fat
#
bacon and egg yolk are superfoods
#
you are deviating from the party line
#
come bang down your door every day
#
and inject everybody with ozempic every day
#
inject you with fake ozempic every day
#
and because it's fake you die
#
and then they don't have to take care of your health
#
because then people will be thin and healthy
#
genuine ozempic is expensive
#
fake ozempic that kills you is cheaper
#
a good modern dystopian novel will be
#
yeah let's just kill them off
#
then the government will subsidize fast food
#
so that the people will die faster
#
this is going to all kinds of interesting places
#
I want to ask you one final question about healthcare
#
you have more fields of course to cover
#
and everything that you described is great description
#
now I'm looking for the possible prescription in this
#
like one prescription obviously is that
#
given state capacity and the nature of India
#
focus on public health first
#
you know problem for advanced countries
#
just focus on public health first
#
and their problems can be easily solved
#
and you can find a solution
#
and you can get it done
#
who's going to clean the air of Delhi
#
it's a political economy problem in Punjab
#
so that is one prescriptive
#
what else is prescriptive
#
I love Amrita's formulation of
#
private insurers talking to private healthcare providers
#
because that acts as a great incentive
#
and a check and balance on the private healthcare providers
#
but I often think about
#
the state of the marketplace right now
#
that in everything else
#
competition is the best kind of regulation
#
and it ensures that providers work
#
do their best to provide the best possible services
#
that takes care of the problem
#
I don't see those results happening in private healthcare
#
like the things you described
#
that a doctor will prescribe 10 tests
#
or an operation you don't need
#
is there a supply problem
#
that I haven't been able to put my finger on
#
so currently it's market failure
#
that there is asymmetric information
#
which is well understood
#
as one of the three categories
#
one of the four categories of market failure
#
is there some kind of state coercion
#
is there something being done to restrict the supply
#
like we have an under supply of doctors
#
because we know that the medical council
#
erstwhile medical council of india was restraining that
#
that all the doctors have the same incentive
#
first of all the corruption of kickbacks
#
is just the lived reality of india
#
a doctor prescribes drugs
#
a doctor prescribes tests
#
the private industry has developed
#
incredible information systems
#
whereby they are able to attribute
#
every purchase of drugs
#
and every purchase of a test
#
and get a kickback back to the doctor
#
that's a vast corrupt system
#
that has been established in india
#
there's no easy way to solve it
#
so first I mean I'm not proposing
#
any simple state intervention
#
I'm just saying that it is
#
amrita's solution is like an index fund idea
#
that we will not ban active management
#
but let private people build index funds
#
individuals will get the point that
#
my god why would I ever go
#
I should instead be buying index funds
#
from all the great democracies of the world
#
and my interests are best served
#
by a diversified portfolio of index funds
#
of the great democracies
#
okay that point is made
#
in the eyes of one person at a time
#
so one family at a time wakes up
#
I've been getting ripped off
#
and my life is better off
#
by going to a portfolio of index funds
#
of the great democracies
#
so by this what you mean is
#
instead of going to a random doctor
#
I go to someone like an hmo
#
and they are the index fund
#
so now let's an hmo still some distance away
#
let's play her level one story
#
that the private health insurance company
#
exerts a regulatory process
#
upon a private health care organization
#
that will make them deliver
#
that insurance at a particularly low cost
#
so when we go buy the health insurance
#
net net we will do better
#
we'll be actually superior
#
compared to going to the doctor ourselves
#
when we go to the doctor ourselves
#
the doctor thinks bakra
#
and they will over prescribe x-rays
#
and get a kickback from crazy drugs
#
the private health insurance company
#
the doctor thinks oh my god
#
my data is being monitored
#
okay so here's a simple metaphor
#
what proportion of women
#
who are pregnant get a cesarean
#
this is a classic measure
#
of the indian medical system
#
that you go to a private health care facility
#
and a ridiculous number of women
#
are pushed into getting a cesarean
#
because they make more money out of that
#
whereas a natural birth is the best thing
#
for the mother and the child
#
a private health insurance company
#
will measure the cesarean rate
#
and pull them up and say
#
why is your cesarean rate so high
#
and start using financial levers
#
now imagine that is established
#
will be actually superior
#
compared to us buying services
#
directly from the hospital
#
so quietly like an index fund story
#
these ideas will spread
#
you're better off getting
#
abcd private health insurance company
#
you get the full deal from them
#
they pay the private health care provider
#
and we don't get ripped off
#
by the private health care provider
#
but i'm thinking of an unintended consequence here
#
you know a demand and supply mismatch here
#
there is a greater demand for doctors
#
there's an undersupply of doctors
#
but the unintended consequence
#
would be that then for every doctor
#
no doctor is taking every patient he can
#
and therefore the natural incentive
#
with a private insurance provider
#
we've reached the stage in india
#
where private health care
#
insurance is a significant force
#
work with all the big insurers
#
what you need is a little more
#
and institutional capability
#
of the health insurance companies
#
plus you need the fslrc
#
quality insurance regulation
#
so today's irda is not up to fslrc
#
so please note everything is everything
#
that fslrc and fixing financial regulation
#
holds the key for fixing health care
#
because until we do that stuff
#
you will not get a working irda
#
and then irda has to exert certain levers
#
that will require an eie episode
#
a next conversation with amrita
#
but it is absolutely essential
#
this story doesn't happen
#
you need proper regulation
#
of the health insurance companies
#
you know we should certainly
#
do an eie episode on health care
#
i think people have been asking for it
#
blockbuster education episode
#
which people love and i love as well
#
and before we talk about
#
the remaining fields in
#
there are three more fields
#
let's talk about the book
#
in service of the republic
#
right and tell me how this came about
#
like i'm super glad it came about
#
because one of my pet peeves
#
about the ecosystem here
#
and i am also to blame for this
#
is that a lot of the thinkers
#
are not writing the books
#
a permanent body of knowledge
#
you know with their columns
#
and articles and papers
#
they are part of the flow of knowledge
#
but they're not contributing
#
to the stock of knowledge
#
which things like a book do
#
and i i convince every good thinker
#
i know that please write a freaking book
#
and no one takes me seriously
#
and and so i'm so glad that
#
you know you and mr kelker
#
i have a great episode on it
#
and it's a seminal book
#
i wish there are many more like it
#
panek otasane is trying his best
#
by bringing out a book every week
#
tell me more about that book
#
that where did you think that
#
i need to write a book now
#
i'm going to do it with vijay kelker
#
these are the subjects we're going to tackle
#
if only i was as sophisticated as that
#
at several points in the conversation
#
today i've always told you stories
#
that somebody came and said something to me
#
and then i said okay yeah
#
okay so very often these things
#
come from external impulses
#
so this book has the most unlikely journey
#
first kelker was invited to do
#
the cd deshmukh memorial lecture
#
at nser by shekhar shah
#
and i helped him to write it
#
i pushed some of these messages
#
and state capability into that
#
and it seemed to work well
#
we should turn this into a book
#
but you know it was like a chore
#
because some of this knowledge
#
is like basic public economics knowledge
#
that economics education is so weak
#
that they don't do any public economics
#
you know it's all just development economics
#
economics in india is uniquely
#
ignorant about economics
#
and to be clear you know
#
when you say that this knowledge
#
what you mean is not the knowledge
#
that markets fail in this manner
#
a the meaning is so restricted
#
and b the state should only act
#
when there is market failure
#
that freedom is the norm
#
and market failure is the exception
#
and there is a clear categorization
#
there are four categories of market failure
#
you'll learn to recognize them
#
you start wondering that
#
is there a state capability
#
to meaningfully participate
#
in this or just lay off
#
because this is too hard for you
#
like i said build a sebi type organization
#
to discuss each hospital in india
#
like it just seems impossible
#
so you know one should just recognize
#
that no it can't be done
#
and don't even go there
#
on this project for quite a while
#
and kelkar just kept on pushing me
#
saying no we should do this
#
and then we started going
#
and i did we built some amount of chapters
#
and the book grew to a certain critical mass
#
and then the book started opening up to me
#
what's peculiar about this book
#
is that it is simultaneously
#
three very distinct things
#
so it's a bit of a tightrope walk
#
to try to win on three objectives
#
but here i am violating
#
the tinbergen principle
#
which says that one instrument one objective
#
here we had one instrument three objectives
#
the first objective was
#
to bring a basic clarity on public economics
#
market failure state capability
#
to the indian community
#
where you have two extremes of
#
the people in officialdom
#
who have illusions about state capability
#
and know nothing of market failure
#
and people in economics
#
who may even have some glimmers
#
about public economics and market failure
#
what actually doing policy means
#
and the problems of state capability
#
can you create a basic foundation
#
of shared knowledge and vocabulary
#
a wide array of actors in india
#
for example because in india
#
we have this funny concept called law school
#
where you learn nothing
#
like you should know the world
#
and then you put a small smattering
#
what do they of law know
#
no no i'm paraphrasing clr james
#
so this is what he said
#
what do they of cricket know
#
so don't correct the grammar
#
so this is the first objective
#
that a simple basic book
#
which gives the funders of
#
market failure state capability
#
the machinery of building
#
state organizations in india
#
that is objective number one
#
objective number two is
#
to put out some novel ideas
#
in the global landscape
#
and public administration
#
you and i have discussed
#
issues like premature state legibility
#
which came up in our discussion
#
on digital public goods
#
issues like invisible infrastructure
#
which have come up in many contexts
#
a french health policy in isolation
#
in the context of rule of law
#
and a whole array of other capabilities
#
that are present in france
#
so there's a whole bunch of novel ideas
#
in the global conversation around
#
public policy public administration
#
that are chapters in this book
#
so things where you would normally
#
put novel ideas out as papers first
#
instead they have turned into
#
the book is a contribution
#
to understanding the most important
#
story and question about india
#
which is that why did a slumbering india
#
rise to a great growth episode
#
and then why did india have
#
difficult times in the economy
#
so it's a simple fun book
#
with short snappy chapters
#
and we got our first edition out
#
but the idea of the book
#
still held a grip on us
#
for two years we got to the first ed
#
and we got to the second ed
#
so overall it was a five-year journey
#
and i'm happy to say that by the time
#
kelkar and i were no longer
#
talking to each other on phone
#
saying you know in this chapter
#
we should have done this
#
of having not done the first edition perfectly
#
nothing happened like that
#
after the second edition
#
so we had the luxury of the time
#
and we are happy and proud
#
of what has been done there
#
and i don't have any important things
#
in the second ed standing in 2024
#
so this is the journey of
#
the book kelkar and sha
#
number one did writing the book
#
make you a better thinker
#
taking all these three strands
#
and bringing it together
#
there were pieces of novel inside
#
how to weave it together
#
i encourage everybody to write a book
#
i would double down on that
#
and say write a book for yourself
#
like leave aside the world
#
we are not writing a book
#
to persuade the world only
#
and as a person that spent one life
#
writing many individual papers
#
i want to totally endorse
#
the dream of writing a book
#
it's playing at a different level altogether
#
it's playing in big ideas
#
it is the very negation of the narrowness
#
of what academic papers have become
#
where they're just tiny tiny tiny
#
questions and then you have to
#
run the gauntlet of the refereeing process
#
where they will look at every sentence
#
and try to shoot you down
#
which is just the way to be small-minded
#
writing books is the way
#
and to challenge yourself
#
i totally recommend that
#
going around the country
#
Kelkar and i did over 100 talks
#
around this book for the first ed
#
and they drove our minds in so many ways
#
we heard hundreds of things
#
Shuvam Mishra sent me a beautiful article
#
where his concept of the article
#
is that when we put something out
#
it's a search query upon the world
#
because when we put something out
#
then people self-select themselves
#
to come forward and speak with you
#
i read this and i don't agree with you
#
and it's just the best deal in the world
#
that by putting this book out
#
we had so many wonderful people
#
have you thought about X
#
and that again drove our thinking
#
for how the journey of building this book
#
was both a service to the republic
#
but also a path for my growth
#
i want to say a last funny thing
#
i never produced a book talk video
#
because i was still fighting with myself
#
and what is the concept of the book
#
and i'm amused to tell you
#
that only now i'm ready
#
with the book talk video
#
so i'll give you the url
#
for the show notes here
#
and it's only being released
#
so you have to give me the url before that
#
and we could also do an everything episode on that
#
to something that you said
#
which will lead me on to my next question
#
this is also a tremendous lesson
#
that i talk to my writing students about
#
because you want to have an impact on other people
#
whatever that impact is
#
you want to entertain them with a story
#
change their mind on something
#
whatever that impact is
#
other people are central to that
#
that's when your writing comes alive
#
when you have the intended effect
#
what a book really does
#
is it serves a very selfish purpose
#
it makes you a better thinker
#
so therefore it is completely okay
#
to think about writing a book
#
it doesn't matter how many copies it sells
#
but it will make me better
#
it is a road to self-improvement
#
write a book only for yourself
#
the caveat i'd like to add there
#
is that that self-improvement will only happen
#
if you try to write with a clarity
#
that will speak to everyone
#
you know clear writing is
#
a way to clear thinking
#
it's not just the other way around
#
if you force yourself to write clearly
#
without academic jargon
#
then you are forcing yourself
#
when you're reaching out
#
to the grandmothers and dentists
#
a phrase that you like to use
#
so it's important therefore
#
to have that in mind also
#
both have to go together
#
pretend that you're writing a book
#
to persuade to enlighten
#
that will force you to write clearly
#
and forcing yourself to write clearly
#
will force you to think clearly
#
and my next question to you here is this
#
that there is tremendous clarity
#
right you're a lucid writer
#
we've done an episode of
#
everything is everything
#
your approach to writing papers
#
all the text in the book was actually
#
the thoughts of course are
#
Mr. Kelkar and you together
#
but the words are yours
#
because you were just quicker
#
and you know beautifully lucid
#
how did you arrive at that
#
because I don't expect that
#
from people coming out of academia
#
when people get into academia
#
it's actually becomes a struggle
#
because the kind of prose
#
you're used to in academia
#
from the mediocre writers
#
I know there are exceptional writers
#
who write with great clarity
#
but the default prose there
#
the kind of prose chat gpt
#
would pick up for example
#
because 95% of everything is crud
#
it's a turgid boring prose
#
full of jargon committing
#
your writing is the opposite of that
#
I'm imagining it's an incentive
#
of writing for business standard
#
that you used to do you know
#
so how did you arrive at that
#
were you always this kind of writer
#
or did it require editors
#
or did you learn over time
#
of course years and years of
#
but you do need a sense
#
of what you want it to be
#
if you don't have the dream
#
and the objective of good writing
#
so I think it needs both
#
that you know one needs to form
#
and then we will fashion
#
and there then I just want to say that
#
there were some great books
#
For Whom the Bell Tolls
#
and essays in persuasion
#
I just worshiped these books
#
and I loved them so badly
#
I felt like when I grow up
#
I want to be like these people
#
and so I challenged myself
#
to go beyond consuming these books
#
to looking at those paragraphs
#
saying how the hell do you guys do this
#
so very very early in the game
#
I wanted to be a writer
#
and so I was always interrogating
#
all the things I was reading
#
wondering oh this is done so well
#
when I first got to Friedman's writing
#
of the quality of the writing
#
when I first got to Lucas
#
the new classical revolution
#
is as much about the ideas of Lucas
#
as about Lucas as a writer
#
he's just one of the most perfect writers
#
not least because he was a humanities student
#
all the way to enrolling
#
he brought those sensibilities
#
so he was not just a great mathematician
#
he was also a great writer
#
and these were deep influences
#
What do they of mathematics know
#
who only mathematics know
#
so these were all my writing influences
#
I did have the dream that
#
to be able to write well
#
as I encountered these great writers
#
each of them I worshiped them
#
and I thought what are they doing
#
and I tried to extract ideas and recipes
#
and also then it becomes
#
the standard against which you play
#
or so that you write bad sentences
#
you write bad paragraphs
#
but it has to well out that
#
and then you fight to make it better
#
and then I've done this forever
#
well you know I told you
#
I wrote an article about
#
the Soviet invasion of Afghanistan
#
your next great venture
#
which of course is XKDR forum
#
with institutions within the bellies
#
and you've also worked within
#
at the Ministry of Finance
#
which itself would have interface
#
with different institutions
#
so you know at this stage
#
where you both of you are 54
#
right at the time XKDR starts
#
what you're trying to do here
#
you don't want to repeat
#
and what are the good practices
#
that you're putting into place
#
the macrofinance group at NIPFP
#
the finance research group at IGIDR
#
these were good successes
#
creation of a literature
#
I feel it worked reasonably well
#
now these government organizations
#
of limitations and difficulties
#
so the curious question to ask is that
#
if many of those constraints
#
would you be able to do it better
#
and I think the main answer is yes
#
that private organizations
#
government organizations
#
with a very very very big problem
#
which is the resourcing
#
so one has to face the challenge
#
and the difficulties of trying
#
also here is a self-conscious attempt
#
that is small and modest
#
our dream for XKDR forum is 20 people
#
there is no attempt at speed
#
there is no attempt at scale
#
there is only an attempt
#
so the idea is keep it small
#
but can you make it high quality
#
this is the kind of org
#
so be in a couple of fields
#
it's not an XKDR institute
#
it is not an XKDR center
#
it's a very modest XKDR forum
#
it's a platform for collaboration
#
so in field after field
#
we join hands with other orgs
#
and we try to build capabilities
#
and we try to have intellectualism
#
and creativity and happiness
#
inside the organization
#
so it's an attempt at being a place
#
some of the intellectual capital of India
#
husband is a good word to use
#
because a collaborator in this
#
and how does this collaboration work out
#
you've been collaborators for decades
#
and you are both fine intellects
#
in slightly aligned fields
#
I think Susan once said something to me
#
Ajay has a mind of a scientist
#
I have the mind of an engineer
#
if I remember correctly
#
so tell me a little bit
#
about this collaboration
#
what are the different skills
#
and what are the sort of
#
of not just being in office together
#
but then going home together after that
#
how does that kind of work out
#
what is this collaboration like
#
we've been together so long
#
we've almost stopped noticing
#
that we like some things
#
and we know what is the happy part
#
and we emphasize the good parts
#
and that's just the basic common sense
#
and we do different things in the org
#
we don't do the same things
#
and that's healthy and sensible
#
so we keep trying to self-select ourselves
#
onto doing the things that we do well
#
and I feel it has worked reasonably well
#
also note she has come from
#
the history and the background
#
of having built the IJDR FRG
#
so equally she has a point of view
#
on what is this kind of org
#
and how it should be done
#
so it's not like anybody has a monopoly
#
we were both at the RAND Corporation
#
and she built IJDR FRG after that
#
the finance research group
#
just like all the other engineering labs
#
that I've described earlier
#
so it was a lab at IJDR
#
and so she built this after I left
#
and I was co-creator of NIPFP
#
macrofinance group with ELA
#
so you know we've both done
#
these kind of things before
#
and we have some shared sense of values
#
in terms of the objectives
#
the dream is very much the same
#
bring knowledge together
#
have that a culture of creativity
#
and once again this is a
#
org where I feel we do well on
#
in leadership roles all over again
#
so I feel it's a lot of the same kind
#
of thing that we've done before
#
but the beauty is this is a private org
#
so it just has a different vibe
#
it doesn't have the invisible heaviness
#
that comes from being in a government organization
#
so it's just a lot more fun
#
you've been to the office
#
that comes from being in a private org
#
it's an awesome place to hang out
#
you also get funky custom beverages
#
which I shall not go into
#
but non-alcoholic obviously
#
and I want you to give this question
#
in what ways has Susan changed you?
#
I can't even discuss it anymore
#
I will say she's co-creator
#
of everything that I am
#
so it's impossible to describe
#
what I do without her in it
#
exactly like I've always said
#
that my father made me like that
#
you've got to make up your mind
#
no I mean it's invisibly there in everything
#
and you know we've argued
#
about so many things so many times
#
that it's actually all over the landscape
#
there's no simple classification
#
by you being a scientist
#
and she being an engineer?
#
I tend to do little more
#
of the imagination side
#
and I think about how the world works
#
she tends to think more about implementation
#
and many times I have started things
#
and she carries them through
#
so very often I start code
#
so I get to be a little more of an architect
#
and she's able to see it through
#
and I'm a little more externally oriented
#
she's a little more building
#
and implementation oriented like that
#
so these are just some of our differences
#
Let's go on now to your three final passions
#
and these are passions that also obviously
#
you know go together with the work
#
that you do at XKDR forum
#
so they fit in beautifully
#
one we spoken earlier about laws
#
but this is a time where you are actively
#
looking at legal system reform
#
and working on that as seriously
#
so tell me a little bit about this
#
The legal system is incredibly important
#
it is not traditionally considered economics
#
there are three branches of government
#
there is a legislative branch
#
there is the judicial branch
#
there is the executive branch
#
there are co-equal branches of government
#
or they are supposed to be
#
co-equal branches of government
#
that is hugely wrong about India
#
is the domination of the executive branch
#
that the other two have really not achieved
#
the power and the role and the significance
#
that part of the checks and balances story
#
is the ceaseless conflict
#
between the three branches
#
which is what keeps all of them under check
#
so we think of one piece that needs to be done
#
which is to make the legal system work
#
the legal system is dominated
#
where lawyers become judges
#
so in a way it is a very limited pool
#
of people who are playing all these roles
#
we don't have the diversity
#
of knowledge experience and capability
#
that we see in other fields
#
also we have seen a great deal of normalization
#
because it is the lawyers that litigate
#
at the courts that are operated and run
#
by the lawyers who have become judges
#
so they've just normalized
#
about how the courts work
#
and they've got used to it
#
and in fact in some ways
#
from the malfunctioning of the Indian court
#
a nice metaphor to think of
#
is that the Indian state is a rakshas
#
who lives on the top of a hill
#
and periodically he comes down
#
to terrorize the villagers
#
and then the villagers have to run
#
to the lawyer and the accountant
#
so the lawyer and the accountant
#
are actually quite fine
#
with the depredations of the rakshas
#
and this is something that
#
needs to be done better
#
I got going thinking about this
#
partly from practical observation of courts
#
and partly because in NIPFP
#
one of the pieces we were working on
#
was called the financial sector appellate tribunal
#
this was supposed to be a bigger version of SAT
#
the securities appellate tribunal
#
which originally used to hear appeals
#
but the dream was to make it
#
all the financial regulators
#
and then the question came commensurately
#
by way of process improvement
#
to make the SAT work better
#
that was swirling after FSLRC
#
that there should be a single piece
#
called the financial sector appellate tribunal
#
which should hear appeals
#
against all the financial agencies
#
whereas at present we just have the SAT
#
and alongside that we started thinking
#
from a viewpoint of processes
#
and engineering and improvements
#
is the separation between
#
the administrative functions
#
and the judicial functions
#
here the analogy is like a heart surgeon
#
you are a great heart surgeon
#
for you a heart surgery
#
there is an entire team
#
that does everything else
#
that puts the patient together
#
then the master surgeon comes
#
does that 15 minutes of amazing work
#
which is extremely complicated and subtle
#
because it is so complicated
#
you don't want to waste
#
the master surgeon's time
#
on doing all the other stuff
#
and that's what you have entire teams for
#
and then the surgeon walks away
#
and goes to another operating theater
#
where again the surgeon
#
is spending her 15 minutes
#
on doing the master surgeon's work
#
while a whole team works
#
on putting the person together again
#
and getting them safely
#
out of anesthesia and so on
#
so this is the metaphor
#
that the time of judges is precious
#
the application of judicial mind
#
required in the country
#
they have to hear complex disputes
#
and they have to make up their mind
#
and it is incredibly important
#
for the future of the country
#
that they have the intellectual capacity
#
and understand complex cases
#
and to be able to come out with
#
where there is a high probability
#
so the correctness rate
#
is one of the important measures
#
about how a judiciary functions
#
what we see in essentially
#
all the advanced economies
#
there are two separate structures
#
there is an admin org structure
#
which runs the practical stuff
#
so setting up a courtroom
#
getting an air conditioner
#
all these things are done by
#
and then the judge comes
#
so it is like the surgeon analogy
#
currently in India judges
#
have to do all the work themselves
#
which is not very bright
#
Indian Courts and Tribunals Services
#
first in an NIPFP working paper
#
where I have a version of that talk
#
which is better than the original paper
#
because the years have gone by
#
and one has had a chance
#
the second piece is more recent
#
when we talked about XKDR forum
#
the idea of collaboration
#
rather than trying to build
#
we want to be a tiny organization
#
and to be a part of the
#
interesting big problems of the world
#
then you have to join hands
#
and you have to collaborate
#
so we got invited to participate
#
in a collaborative journey
#
by an organization named Agami
#
Agami is an organization led
#
by Supriya Shankaran and Sachin Malhan
#
that can we bring energy together
#
to try to make some of the courts
#
so they assembled four orgs
#
consisting of them and us
#
and a development consulting firm
#
with the DNA of time and motion studies
#
and detailed movement of this file
#
and this form from this person
#
named e-governments foundation
#
who are playing a leadership role
#
in terms of software development
#
can you set up some clean logical systems
#
around the working of courts in India
#
it's a very long journey
#
it will take generations
#
we're making some progress
#
we're working in Kerala
#
one court in one district
#
so you know it is important
#
cross the river by feeling the stones
#
and we've begun on that kind of journey
#
we've also begun on a journey
#
on a more traditional track
#
that establish a new data set
#
we are building a high quality data set
#
about the Indian legal system
#
of a quality that we believe
#
has never before been done in India
#
and then we bring our full toolkit
#
then we study that data
#
so we bring statistical methods
#
so there are a couple of efforts
#
that have taken place in the past
#
but we're trying to add value
#
the logical application
#
of sensible statistical methods to this
#
many others have not quite got before
#
and we're making progress
#
on building a literature
#
on how the Indian legal system works
#
so this is a whole body of work
#
around the legal system
#
it's also a field where
#
the new XKDR forum has worked out
#
in a reasonably mature way
#
they have their own excitement
#
they wake up every morning and push it
#
and it's a mature capability
#
and you know for Susan and me
#
the level of participation now
#
is at the level of ideas
#
and intellectual involvement
#
the team has its own energy
#
so I think that's a very healthy
#
way for these things to happen
#
we are a part of a larger process of change
#
and collaboration model
#
enthusiastic energetic team
#
and we think in terms of big ideas
#
about India public policy
#
data sets empirical work
#
so you know we exercise
#
intellectual leadership
#
so it's a happy successful story
#
so I'm just thinking that you know
#
your seventh field as in
#
like I think once jokingly you'd said
#
one and everything is everything
#
sure that I know five things well
#
and now that you thought about it
#
you clarified that and said
#
I know nine things well right
#
and this was the seventh of them
#
I just for my own amusement
#
I wrote down another nine things
#
that I know that you don't talk about
#
in a scene and they aren't seen
#
like what what are they
#
I mean all the other fun stuff of life
#
like here I've written down
#
I wrote down nine fun things
#
instantly tell me those fun things
#
maybe we'll do an everything
#
is everything episode on them
#
but so my question is this
#
that these are areas into which
#
you have done deep dives
#
have practical experience
#
of having worked in all of these fields
#
yet you've written one book
#
which is in service of the republic
#
the art and science of economic policy
#
maybe with two or three of these fields
#
in a peripheral kind of way
#
and is obviously a subject that
#
you know deeply well also
#
besides doing the important work
#
that you guys do with xkdr forum
#
and in the papers that you write
#
for building a larger body of knowledge
#
across each of these fields
#
you were doing with indian macroeconomics
#
do you feel that there is a
#
need to build these foundational works
#
so that future generations can
#
stand on your shoulders
#
that is the right way to approach this
#
in service of the republic
#
in service of the republic
#
is intended as a general technology
#
after the great expansion of 2011
#
and it's a general toolkit
#
that can be applied to all fields
#
and here this is indeed
#
we add value into this ecosystem
#
that's our distinctive tool chain
#
so that's the secret sauce
#
that we bring to every field
#
and that is why we add value
#
because we know how to think
#
that are not the normal
#
conventional thing that
#
others in india know how to do
#
so if you think of communities
#
like economists or lawyers
#
of the keil karan shah book
#
so that's our secret sauce
#
also we bring the tool chain
#
and i'm going to come back to that
#
as the last of the fields
#
for doing more important big books
#
and i have a list of dreams
#
one book on government contracting
#
more books is definitely
#
and we hope to get to that
#
can't say aapke moon mein ghee shakkar
#
aapke moon mein ghee aspartame
#
we have episodes on field 8
#
so field 8 is climate change
#
okay and here my story is that
#
once again from childhood
#
i've always been curious okay
#
so the oil shock happened in 1973
#
and everybody started studying
#
the global oil and energy markets
#
right that's the beginning of
#
i was a full seven years old
#
fully reading the field of energy
#
this invisible infrastructure
#
of knowledge about crude oil
#
the global energy system
#
and the rise of renewables
#
had great sense of wonder
#
when the first solar sails
#
my infectious disease story
#
that this is always humming
#
in my mind as a field to know
#
so i knew it as science engineering
#
i knew it as geopolitics
#
as international relations
#
and i never paid too much
#
with a broad background knowledge
#
then akshay jetli asked me
#
this is during the pandemic
#
on the indian electricity system
#
i said i don't know a whole lot
#
about the indian electricity system
#
i'm happy to work with you
#
he was a guy with extreme
#
knowledge and capability
#
about the indian energy system
#
i mean i help lots of people
#
have to become co-author
#
number of papers and projects
#
but i've helped other people
#
and i'm not particularly
#
fussed about authorship
#
you know i'm old enough
#
but we really got along great
#
and we loved our joint co-creation
#
of a whole body of knowledge
#
on the indian energy transition
#
we call it the coconut paper
#
which is that a market-based
#
transition to an electricity sector
#
but it is the lowest coconut
#
so it's a very tall tree
#
to actually make a market-based
#
upon the indian financial system
#
indian finance never got
#
a memo on central planning
#
and more central planning today
#
there is more central planning
#
in indian finance today
#
it's a completely centrally
#
the government controls everything
#
and there is a very tidy world
#
of energy experts in india
#
so how can we help the government
#
turn some of those knobs better
#
a very engineering approach
#
that the government is on top
#
and we are here to help the government
#
a first principles reasoning
#
that questions the edifice
#
akshay and i have added some value
#
and a whole body of associated work
#
many many papers and products
#
of everything is everything
#
which is on electricity
#
it will really stir your imagination
#
and new ways of thinking that
#
because indian electricity
#
of a central planning system
#
who have become collaborators
#
to the central planners
#
rather than the intellectuals
#
yeah that episode is called
#
of electricity episode 40
#
and one of my absolute favorites
#
double down on that as well
#
and you and akshay of course
#
on an episode of the scene
#
about the paper as well
#
so again i am going to ask you
#
because you are the kind of person
#
who you know can get to the core
#
of something and sum it up
#
and therefore bumper stickers
#
so give me bumper stickers
#
on what you have learned
#
so my bumper sticker one
#
carbon dioxide emission
#
has a negative externality
#
that when anybody emits co2
#
upon everybody else in the world
#
this is a non-negotiated interaction
#
and that's a negative externality
#
so it is a harmful thing
#
and the climate scientists
#
that by the time you get to
#
in the global average temperature
#
unpredictable consequences
#
unpredictable very seriously
#
that it is dangerous to meddle
#
that you only dimly understand
#
if we will make less co2
#
indian self-interest in this
#
you could say i'm a free rider
#
look imagine if you're srilanka
#
you could say i'm a free rider
#
the world emits 100 units of
#
0.1 units of carbon dioxide
#
so yeah yeah everybody else
#
in the world should cut back
#
but look i emit so little
#
i'll just do whatever i want
#
india is the third largest
#
emitter of carbon dioxide
#
you know if india emits
#
carbon dioxide emissions
#
are in india's self-interest
#
because my very rough assessment
#
of the cost-benefit analysis
#
is that it is not that hard
#
to knock out that 10 percent
#
the highway is now clear
#
our electricity eie episode
#
the highway is now clear
#
to get to a non-carbon world
#
and so it's not too expensive
#
to get rid of all carbon dioxide
#
whereas that 10 percent gain
#
climate change is material
#
so that is my bumper sticker one
#
that we should make less co2
#
and it is in our indian self-interest
#
is that the world is in deep trouble
#
1.5 degrees is baked in
#
probably 2 degrees will happen
#
because you know getting collaboration
#
between the united states and china
#
and india on eliminating
#
i mean each of the three countries
#
but it's very difficult
#
to actually do these things
#
the europeans have this right
#
the japanese and the others
#
will do the requisite things
#
the srilanka is too little to matter
#
are big important emitters
#
and they need to take vast steps
#
carbon dioxide emissions
#
and that ain't happening
#
so 1.5 c heating is baked in
#
two degree global average
#
temperature rise is likely
#
and it is essentially certain
#
that horrible things are going to happen
#
okay monsoon patterns will change
#
the sea level will rise
#
poor amit bhai will have to exit
#
because while his house is high
#
the waters will mess with
#
mind-blowing disruption
#
so we need to build a society
#
because no matter what we do
#
on carbon dioxide emission
#
what we can do by decarbonizing
#
the world is play the game
#
and four degrees will be
#
so it's worth stopping that
#
is going to be absolutely terrible
#
so that's bumper sticker 2
#
which includes all these things
#
changing monsoon patterns
#
destruction of coastal cities
#
destruction of coastal real estate
#
just complete dystopian things
#
we should envision a world
#
where we fail on layer 1
#
is to know that the world
#
so we should try all we can
#
all we can to do a layer 2
#
but we should keep a part of our brain
#
active around envisioning
#
so neither do we build resilience
#
nor do we build decarbonization
#
so imagine a four percent
#
sorry a four degree rise
#
in a world that is unprepared
#
what kind of dystopian disasters
#
i think it is the responsibility
#
to also start understanding
#
what it means to be human
#
in that kind of environment
#
it would pretty much be
#
a collapse of civilization
#
to start seriously thinking
#
the one part in the one area
#
where i'll push back very slightly
#
and maybe one day we should
#
for the sake of our readers
#
do a detailed episode on this
#
but i'll kind of push back
#
but the first thing i'll say is that
#
it's not going to happen to Andheri
#
we are going to be okay
#
Andheri is never getting flooded
#
except unless it rains very heavily now
#
which is an entirely different matter
#
but otherwise we are okay
#
the sea levels are not rising
#
i have three things to say
#
if you just look at the incentives
#
and if you think like an economist
#
by saying that climate change is real
#
human made climate change is also real
#
it is no longer a debate
#
you know there is climate change
#
and humans are responsible for it
#
and we need to do something
#
however having said that
#
that economics will tell you
#
that if you follow the incentives
#
of the players in this field
#
the most alarmist predictions
#
the alarmism is all wrong
#
because every organization in the space
#
is incentivized to make things
#
look as bleak as possible
#
and to distort the science
#
more funding comes from
#
if they say things are not so bad
#
their funding accordingly dries up
#
so there is an incentive
#
to greater and greater alarmism
#
as far as projections are concerned
#
illustrated in the fact
#
that most alarmist predictions
#
of the past have basically been wrong
#
everything Al Gore said
#
in his documentary would happen
#
the time came and everything was fine
#
so discount the alarmism
#
yes climate change is real
#
but there is a range of predictions
#
about exactly what is going to happen
#
how high the temperature is going to do
#
the damage that it will cause
#
and you have to discount
#
you know a friend of mine recently said
#
that he's so scared of what will happen
#
that he's going to teach his children
#
and I just thought that that was nuts
#
and for what it's worth
#
I don't know whether he was high or not
#
but he hadn't been reading papers
#
so he wasn't high on reading papers
#
this is someone both you and I know
#
who is loopy in other ways as well
#
the second thing I want to say is
#
that when based on these alarmist predictions
#
people will often come up with
#
the cost is often too high
#
the cost can fall disproportionately
#
who can look at the western world
#
and say hey you guys used a lot of carbon
#
and produced a lot of carbon
#
and you're living OECD lifestyles
#
and we are trying to get to progress
#
and you're getting in our way
#
and that's just not fair
#
that is one way of looking at it
#
and two there is a cost on humanity as well
#
and this is something we've discussed before
#
that people will often talk of degrowth
#
they will say we need degrowth
#
growth does this to the planet
#
and I have a strong opposition to that as well
#
partly because you're basing it
#
on the alarmism which you should not
#
and partly because the costs are in the now
#
and your implied benefits are in the future
#
and are extremely theoretical
#
and you know these alarmist predictions
#
have always been wrong in the past
#
and the third thing I would say
#
is that even if all of this was true
#
you know even if the alarmists were right
#
and things are going to get very bad
#
I am still extremely optimistic
#
because of reasons we did discuss
#
in our electricity episode in fact
#
because I think the solutions
#
one of the big solutions is nuclear
#
it is the safest kind of power possible
#
it has unfortunately gotten a bad name
#
because you know organizations
#
which would campaign against nuclear bombs
#
also automatically started campaigning
#
and the point is that something like
#
Chernobyl was really a failure of the state
#
nuclear technology has advanced to the point
#
that it is the safest form of energy
#
possible out of all the older forms
#
and we discussed that in this in episode 40
#
of everything is everything
#
and what you pointed out there also
#
is that the alternative forms of energy
#
are coming across so bloody well
#
that I am also deeply hopeful
#
especially once we solve
#
many of the storage problems
#
with you know solar energy
#
so I am a optimistic of the tendency
#
that humanity has shown throughout
#
that we adjust to different kinds of
#
scarcities and different kinds of problems
#
which we are doing right now
#
and also I don't think the problem
#
these are my broad thoughts
#
I'm sure people would like to hear a debate
#
so perhaps we'll do an episode someday
#
I'm contradicting you in any way
#
I think everything I said
#
would be a little caveat
#
in whatever you believe
#
and everything you believe
#
is certainly core to what I believe
#
we need to do things about it
#
but let's think about it in sensible ways
#
that we can just solve it
#
if we put our minds to it
#
without doing anything drastic
#
and without you know harming the poor
#
Let's do this thoroughly another day
#
on solving climate change
#
is that the alternatives are so great
#
the fixed cost for the world
#
so we have to close down
#
all the thermal plants of India
#
and there will be costs involved in that
#
that's the puzzle to solve
#
for society to be able to figure out
#
because there are contracts
#
and when people have their contracts abrogated
#
they need to get paid fair and square
#
you can't just tell them to go away
#
so if I built a coal thermal plant
#
and if you will tell me
#
no no I will stop buying electricity
#
then you bloody well owe me
#
a whole bunch of liquidated damages
#
as per standard common law of contracts
#
so there will need to be
#
that go into the decarbonization
#
yeah yeah extremely soluble
#
let's do an episode sometime
#
which in a sense you have referred to
#
earlier in this episode also
#
in a sense it comes full circle
#
to what your dad really did
#
so tell me what's your final field
#
so I'm going to now stand up
#
and say that my ninth field is measurement
#
so in a way measurement has been everywhere
#
I have pushed on measurement
#
is worth a pound of theory
#
to just fight on measurement
#
and also I learned to be
#
fully free of reverence
#
of famous established data sets
#
that just because a government
#
that doesn't mean it's GDP
#
it's just isomorphic mimicry
#
so like if a government says
#
of it being a central bank
#
is as a central bank does
#
and has some coercive power
#
so a secret sauce all my life
#
so another secret sauce
#
is one bag of secret sauce
#
the obsession on measurement
#
the story my father told me
#
made on the island of Uraniborg
#
straight out of some J.R.R. Tolkien
#
and that went to Johannes Kepler
#
who found statistical regularities in it
#
and the statistical regularities
#
went to Newton who found theory
#
and progress is all about
#
that first we establish data
#
then we find regularities in it
#
and then we start theorizing
#
and the theorizing is constrained
#
with the statistical patterns
#
that have been seen before
#
it's just such a beautiful script
#
and I already talked about C.M.I.E
#
was built by D.T. Lakhtawala
#
and now primarily Mahesh Vyas
#
and admire the perfectionism
#
that they care about this stuff
#
they have that invisible magic
#
of an institutional culture
#
which cares about measurement
#
which takes measurement seriously
#
that that is their religion
#
it doesn't mean they're perfect
#
but they'll pretty much do it
#
and they have a whole range of
#
to satellite imagery data
#
and that is going great
#
when butt clouds got in my way
#
which is about improving
#
the NASA night time lights
#
and we're now going after
#
a whole array of sources
#
when I talked about the legal systems
#
we're building an original data set
#
and we're doing a better job
#
has traditionally been done in India
#
so I call this a theme of my life
#
in how to make progress in a field
#
the way to make progress in a field is
#
to not be the regular bloke
#
what other people are bending about
#
as the state of measurement
#
either famous established data sets
#
are actually quite lousy
#
or there are opportunities
#
to do new kinds of measurement
#
that others haven't done
#
to try to ask first principles
#
questions of measurement
#
local area economic activity estimation
#
okay so here the idea is that
#
the latitude and longitudes
#
and the coordinates of an arbitrary shape
#
a closed shape on the map of India
#
okay what do we know about
#
the economy of that region
#
because you don't even know
#
attributing GDP to subnational blocks
#
to small pieces of India
#
let's just leave the word GDP out
#
other proxies of the wealth
#
at the level of an arbitrary shape
#
imposed on the map of India
#
it could be the area of Bombay
#
it could be the area of Andheri
#
and what statements can we make
#
that we are actually able
#
about 300 cities in Karnataka
#
traditionally all you knew
#
which by now is an ancient
#
since we got a census in India
#
so you really don't know
#
anything about the cities
#
about the public finance
#
you'd know the spending
#
of the local municipalities
#
to create novel data sets
#
at the level of 300 cities
#
and it is very exciting
#
in economic measurement in India
#
so this is the kind of fun stuff
#
and I just want to put that up
#
as my field number nine
#
measurement measurement measurement
#
you know there's a great episode
#
is everything which we should do
#
called the history of measurement
#
because actually if you think about it
#
it is such a mind-blowing subject
#
if you go back to prehistory
#
and you come to modern times
#
like one of the new ways
#
of measurement certainly
#
is satellite nighttime imagery
#
tell me a little bit more about that
#
in rich countries rather well
#
there are many difficulties
#
and actually start using the data
#
that a highway comes up
#
how does the prosperity change?
#
It's such a natural thing
#
look at night at 1.30 in the night
#
are you seeing more lights coming up
#
then that's a measure of
#
the growth in prosperity
#
and suddenly you are able to quantify
#
that the externalities caused
#
by building their highway
#
was something like this
#
so there's so many applications
#
as I said in my opinion
#
the enthusiasm by economists
#
there were many mistakes
#
in how this data has been used
#
is an important piece of progress
#
in how you do measurement
#
around nighttime lights data
#
you get a monthly time series
#
for an arbitrary shape file
#
there are no natural experiments
#
because you can't really control
#
the power of free markets
#
we can look at West Germany
#
just see the difference
#
you give freedom to half of them
#
you keep the other oppressed
#
and you can just see the result
#
and I'm just thinking that
#
there can now be a visual depiction
#
I mean the Germanies have unified
#
the Germanies are unified
#
than West Germany even today
#
and you can literally get
#
the time series of the convergence
#
of East Germany to West Germany
#
and how much of the convergence
#
all these kinds of questions
#
the line that has been cut
#
into the heart of Bengal
#
you're just trying to troll me right
#
I just want to do one last piece of poetry
#
on the dream of measurement
#
my childhood friend Faisal Azmi
#
and many many years ago
#
these are sentences that he used
#
and what he said was that
#
in the history of physics
#
got the first telescopes
#
and suddenly you turned your eyes
#
phenomenological research
#
on understanding those phenomena
#
that's the entire energy of science
#
you create the photoelectric effect
#
you create a new instrument
#
you find a new phenomenon
#
and then you start explaining it
#
and that to me is the dream
#
of what we have to be doing
#
that we have to make sound measurement
#
and we have to establish phenomena
#
phenomenological research
#
around causes and consequences
#
and such a beautiful thought
#
I had read a while back called
#
Everybody Lies by Seth Stevens
#
on a new counterintuitive
#
I think what he did was
#
from a bunch of search engines
#
including Google and all
#
and I think it's absolutely correct
#
and absolutely brilliant
#
that people are most truly themselves
#
when they think no one is looking
#
and you can really tell
#
and then he looked at that
#
and an essay I wrote in the book
#
sounds like such a great way
#
inside human nature as well
#
and maybe AI is an instrument
#
will use us as an instrument
#
you know our second episode
#
of Everything is Everything
#
was an argument about AI
#
I'm more of an optimist than you are
#
but that's a matter for another day
#
all of your nine fields
#
and sir I would actually propose
#
that there could be a 10th field
#
which could be the world
#
who are you and what do you do
#
as a journey of making knowledge
#
so my job is to think about the world
#
and try to obtain insight
#
and that's not me alone
#
it's always with collaborators
#
I contribute to work done by others
#
I don't crave authorship
#
in a journey of knowledge
#
to help build knowledge
#
and help build community
#
that's my design of life
#
that is my paramam dhyayam
#
our friend Suryash told me to ask you
#
and so I don't want to forget
#
you know your experience
#
being on the boards of companies
#
you've been on the boards
#
you know what is that like
#
because from the outside
#
it seems that being on a board
#
you are getting a shit ton of money
#
you are meeting twice a year
#
and it's like an awesome life
#
like seriously important
#
being on a board of companies
#
we spoke about firms earlier
#
and the importance of firms
#
you've had many episodes on it
#
you know what are sort of
#
there is isomorphic mimicry
#
transplant policies from the west
#
the same thing actually
#
hasn't happened enough in India
#
it happens and it happens in bad ways
#
but it actually hasn't happened enough
#
have simply not modernized
#
so I think a bunch of things
#
have been unpaid activities
#
so there was no shit ton of money
#
those are NGOs, shangios
#
I will go into a board culture
#
each board has its own culture
#
I will go into a board culture
#
and when in Rome do as Romans do
#
so I will fit into that culture
#
and try to move marginally
#
a few percent here and there
#
compared to what they are
#
because my normative views
#
is not something that I should be
#
and bring into a normal board
#
and a significant control
#
then I feel I have a whole
#
and the role of a board
#
I just blend into the landscape
#
and support in the ways that
#
the culture of that board is working
#
India is actually right now
#
at the cusp of a very big transition
#
many large important corporations
#
the corporate governance problem
#
is really primarily about
#
where there is a lack of a promoter
#
so when the shareholders
#
and the managers are playing truant
#
that is the main corporate governance problem
#
and that is what boards are for
#
and as we see the emergence
#
of these kinds of modern corporations
#
as a third generation thing
#
who builds an organization
#
and essentially has 100% equity
#
the shareholding gets dispersed
#
but there are still a few big shareholders
#
finally you get a large number
#
of atomized shareholders
#
and nobody is in charge
#
at that point the management runs amok
#
so the journey of the concept
#
now needs a new institutional culture
#
and this is almost entirely
#
this is about government
#
and Ministry of Company Affairs
#
does a whole lot of coercion
#
trying to will some boards to life
#
and make them do certain things
#
I think that's all second order
#
of rational voluntary people
#
saying look here we are
#
and we want the company to do well
#
and there is a principal agent problem
#
the managers don't have
#
the interest of the company in mind
#
it's just fundamental human nature
#
that I am a shareholder
#
they are optimizing for themselves
#
they're not optimizing for me
#
it's a very simple basic message of life
#
of an important emergence
#
of the board as a concept
#
of the board as an institution
#
and of that culture in the country
#
I want to use the analogy
#
with accounting culture
#
India has good accounting culture
#
meaning it's not just laws
#
it's much more than that
#
there are many many people
#
and there are certain things
#
it's not driven by the stick of a government
#
it is driven by an old culture of Bombay
#
where there have been families here
#
doing accounting for 10 generations
#
like that we need the emergence
#
of a culture of boards in India
#
and I try to think about this
#
it is a part of my journey
#
of building knowledge about firms
#
it is a part of understanding
#
how the landscape of firms
#
in India has been evolving
#
and I repeatedly get invited
#
to do talks on helping people to think
#
about what does it mean to be a board
#
you know one of the things
#
with which I berate many thinkers
#
is that you make so much effort
#
to understand the world
#
but you don't spend enough effort
#
and that's actually not true of you
#
you have also treated yourself
#
and worked hard on yourself
#
you know the way you think about health
#
the way you think about personal finance
#
the subjects I continually
#
learn from you as we kind of go along
#
and my question here is
#
about longevity and therefore
#
how our mindset should shift
#
so first let's just treat
#
the foundations that there will be
#
longevity and not dementia
#
healthspan along with lifespan
#
so there will be healthspan
#
and there will be very bad things
#
but let's focus on healthspan
#
so healthspan is unprecedented
#
and will get better year after year
#
there's a paper in nature
#
that the annual rate of gain of longevity
#
has stalled in the last 5-10 years
#
but I remain optimistic that
#
you know we are at the beginning
#
of the revolution of data
#
genome sequencing and genetics
#
and implants and devices
#
that healthspan is going to go up tremendously
#
I think rising healthspan
#
is a profound challenge to human culture
#
human culture is absolutely
#
human culture is built around
#
you fade away by 50, 60, 70
#
and then you'll rapidly die
#
but in fact if there is healthspan of 80 years
#
if there's healthspan of 100 years
#
if there's healthspan of 120 years
#
all of which I consider reasonable
#
then everything has to change
#
our very self-conception of who we are
#
and our place in this world
#
our notions of flourishing
#
all these things need to change
#
we're going to need way more inputs
#
because it is very difficult to find reason
#
to stay alive on these lifespans
#
you know so if you give people a trivial problem
#
then you'll bloody get them in 5-10 years
#
and then what are you going to do
#
well a whole range of objectives
#
will get done in 40 years, 50 years
#
now what are you going to do
#
so people are going to need to really
#
find the philosophy of life
#
that will create purpose and reason to believe
#
across these kinds of long-time horizons
#
I see this as a profound challenge
#
the nature of the modern economy will change
#
the working of the labour market will change
#
there'll be all kinds of wonderful older people
#
with immense levels of capability
#
but who are not willing to accept the regimentation
#
the firms and the labour market
#
is going to have to wonder
#
how will I work with all these cool people
#
and harness their knowledge
#
and bring them into the working force
#
not because it's a favour
#
but because it is in the self-interest of the firms
#
to use all the knowledge and experience
#
and capability of the older people
#
so the labour market is one important site of change
#
personal mundane career planning
#
can and should change a lot
#
because actually the world will change
#
and our skills will be obsolete
#
you were the same cricket writer
#
that you were in cricket for
#
you'd be a little bit obsolete today
#
because the world is changing in so many ways
#
and anyway you'd be staring at the existential
#
at the AI looking at the cricket match
#
and writing a ball-by-ball commentary
#
conventional notions of career
#
all this I feel is relatively well understood
#
but I feel the hardest thing
#
is going to be the sense of purpose
#
these are very very important questions
#
I think each person will have to find
#
a set of answers to these questions
#
and you know the old answers
#
like I'm here to take care of my children
#
or I'm here for some religious objectives
#
I feel those old answers
#
have less and less salience
#
given the emergence of modern man
#
and we each of us are going to need to struggle
#
to find a personal philosophy
#
that will carry us through
#
this immense elongation of health span
#
I'm actually incredibly optimistic about this
#
these are hard questions
#
but I'm incredibly optimistic
#
you know it's often said that
#
youth is wasted on the young
#
I like to add to that the appellation
#
that wisdom is wasted on the old
#
but neither of them will be true
#
because the young will be younger for much longer
#
and the old will have time and energy
#
so everything kind of falls into place
#
and my third last question is
#
that supposing some philanthropist
#
listening to this comes to you
#
Ajay I've been following your work for many years
#
I care deeply about India
#
I care deeply about your work
#
I'm going to give you one billion dollars
#
you do with it what you want
#
I'm going to give it to you
#
and I'm going to disappear
#
I would go to the economic growth agenda
#
is a journey of economic growth
#
and the context of political freedom
#
some mixture of a freedom agenda
#
and a freedom agenda on an economic side
#
and that translates into a whole range of
#
practical implementation things
#
Lanprachet and I have just been discussing this
#
that if there was to be a growth agenda
#
and can we write a paper about dreaming
#
the design the sketch of a growth agenda
#
if there had to be a billion dollars
#
making the world a better place
#
I would equally prioritize
#
a political agenda of freedom
#
but a digressive question
#
a follow-up to the third last question
#
wants to contribute to xkdr
#
or to the work that you do
#
the involvement of people
#
come be part of our events
#
talk to us and disagree with us
#
potentially come collaborate with us
#
potentially come work for us
#
potentially come use our capabilities
#
connecting them into your world
#
potentially please donate money
#
to help build the organization
#
yeah and only you would keep donating
#
or first thing they would say is
#
this is a url give give give
#
so but I expected no different from you
#
my second last question is
#
when you look at the ecosystem around you
#
both the knowledge ecosystem
#
in the context of the communities
#
when you look at the indian state
#
in the context of all the good
#
and could happen between 91 and 2011
#
showing what was possible
#
we went backwards after that
#
when you just look at all of this
#
you look at the landscape of your own life
#
and then you think forward
#
to what could be the case
#
and what gives you despair
#
is what has happened to the indian state
#
that the indian state is in a mess
#
and it's very difficult to see
#
how we will come out of that
#
we've come out of one mess before
#
okay so indira gandhi's populism
#
did not doom the indian project
#
and the indian project came back
#
that is one piece of hope I can offer
#
that you know you could have been gloomy
#
standing in the 1969 to 1970s
#
but actually there was enough goodness
#
and greatness in this country
#
that we came back from that
#
now the particular will always be different
#
there are elements of that revival
#
that have been shattered today
#
but I don't want to be that mean
#
I just want to say look
#
we came back from the brink once
#
we could have just turned into
#
an ordinary garden variety
#
third world dictatorship
#
so that's what that's the scariest thing
#
that the indian state has declined
#
to a level that I had never imagined
#
is the state of the intellectual community
#
if you look at the books
#
if you look at the papers
#
if you look at the ideas
#
if you look at the people
#
this is the highest quality
#
gang available in the country today
#
as compared to something
#
that you can think at any previous time
#
so when you put together
#
you know your 50, 100 cool people
#
the capability is just out of the world
#
I think we are truly at the beginning
#
of learning to be a liberal democracy
#
it was just basically fake
#
there was a colonial state
#
there was state coercion
#
in the intellectual landscape
#
starting to get public choice theory
#
ask questions about government surveillance
#
not ready to give unlimited powers
#
to the Reserve Bank of India
#
the journey of check and balance
#
and the public choice theory
#
a skeptical view of the state
#
naive and simplistic notion
#
it is people like Nehru and Gandhiji
#
is just such a big delusion
#
the development economics
#
and the only game in town
#
I think for the first time
#
when we look around India
#
of a new level of intellectual capability
#
so I am not saying we are done
#
we are not remotely done
#
but I see the seed corn today
#
the sprinkling of yeast
#
on the dough is visible
#
you know what you just said
#
about what gives you hope
#
gave me a lot of despair
#
because if our intellectual community
#
today is the best that it has ever been
#
but it tells you what a low bar that is
#
because I just think that
#
there is so much conventional thinking
#
and so much wrong-headed thinking
#
still dominating the discourse
#
so many luxury beliefs from the West
#
still being espoused here
#
and we have an everything is everything episode
#
on luxury beliefs as well
#
there is so much reflexively
#
socialist and Maibab thinking from the past
#
still corroding the airwaves
#
you also embody what I consider my mantra
#
I forget who first used this phrase
#
but it's a great phrase
#
which is pessimism of the intellect
#
but optimism of the will
#
that you just got to keep doing
#
and doing what you're doing
#
and you see at a personal level
#
I have no illusions about how hard this is
#
and the Indian project could fail
#
I do not rule out failure
#
many countries have failed
#
that India will find its way to prosperity
#
one of the most dangerous ideas
#
is that sense of certainty
#
again when you look at the
#
I feel a core mistake of theirs
#
was that they took it for granted
#
that once you have Tagore and Ramanujan
#
you feel like come on we're done
#
and now you just have to do some
#
simple things for 50 years
#
and we'll be as cool as the UK
#
no becoming as cool as the UK is truly hard
#
and failure is on the table
#
and at a personal level
#
my philosophy is very clear
#
that it is our job to dig in and try
#
and you are obliged to try
#
you have no right to ask for results
#
you have no right to ask for success
#
but you're obliged to try
#
but in a detached and intellectual way
#
the dough of the Republic of India today
#
has a tiny sprinkling of yeast
#
no I agree and I often sort of
#
think of one of the purposes of the show
#
as playing to that long term
#
there's a 15 year old girl
#
listening to this episode of ours right now
#
who will be Prime Minister of India in 2050
#
and will have internalized
#
and learned from these journeys
#
and that will make a difference
#
but if there is any young person
#
you know the two things I would say is that
#
one you're going to live a long long time
#
you're going to have a long healthy life
#
you know don't devote it all
#
and building a good life
#
that shit will happen by itself eventually
#
but also think about purpose
#
and not purpose just in an
#
individual sense of self-actualization
#
that will also come with time
#
but also you know the satisfaction
#
that you would no doubt get
#
from solving the larger questions
#
that Ajay and I are playing
#
but a little further along the road
#
so you can actually you know
#
see some results from it
#
so a new penultimate question for you
#
before I go on to the last question
#
is that what would your advice be
#
to people listening to this
#
who might be interested
#
in any of the nine subjects you mentioned
#
or simply in you and in none of them
#
simply in learning about the world
#
what would your advice be on them on
#
you know how should one live one's life
#
I would say never confuse
#
if you start thinking that
#
I'm so cool I have knowledge I'm done
#
that is the biggest mistake you can make
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and my second advice would be
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that don't be narrow and disciplinary
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that this specialization is a trap
#
it interferes with knowledge
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that we've got to take interest in the world
#
in a large-hearted enthusiastic way
#
we have to just keep on building
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because the world is infinitely complex
#
of course there's a role for specialists
#
that you want somebody to be a radiologist
#
but do you really want to be that person
#
I feel you know we each of us
#
so these would be my two big ideas
#
that treat knowledge as a purpose
#
and then don't look for the credentials
#
it's not about the university
#
don't get into this Harvard, MIT, IIT
#
the people who understand the world
#
are not necessarily the credentialed ones
#
you have to find the pockets of knowledge
#
that are found in this world
#
and it will not necessarily be
#
from the famous places and the cool places
#
and don't think in a credentialed way
#
and your search for credentials
#
is distinct from your search for knowledge
#
meaning you know it may be wise and efficient
#
for you as a life strategy
#
to add some three little letters
#
but it should be seen as a cold calculation
#
and not as a problem of knowledge
#
the knowledge is a separate project
#
you have to build knowledge
#
you have to surround yourself
#
you have to argue about this all your life
#
and you have to relentlessly seek breadth
#
in addition to one deep dive
#
you know that one mad romance after another
#
you just get lost in a field
#
with just an extreme sense of absorption
#
you know it is my confident belief
#
human radiologists will simply not exist
#
and therefore I would say
#
so you can learn anything
#
this almost feels like a plug
#
for our course life lessons
#
but it isn't that just something
#
that we are trying to do
#
because we care about it
#
my final question to you
#
and you know even though
#
in a manner of speaking
#
in every single episode
#
of everything is everything
#
but it's about recommendations
#
for me and my listeners
#
recommend books, films, music
#
it will be mostly books and some music
#
oh I learnt more about this field
#
but that are dear to you
#
that you love so deeply
#
that you want to share them
#
and you want to stand on a soapbox
#
and shout with a megaphone
#
that reaches every corner of our planet
#
read this, read this you must
#
in everything is everything
#
so let me talk about music instead
#
because let's not assume
#
that people watch the show
#
I feel these are like just
#
some of the greatest books
#
the way you think about the world
#
Agree on all of these music now
#
in the beginning I told you
#
I grew up with my parents music
#
and it is just something
#
that is stuck in your mind
#
Western classical music
#
and the Hindi movie music
#
and I think these are all great traditions
#
should know them a little more
#
I just recommend these things
#
and I discovered Western rock music
#
the Beatles and Dire Straits
#
so it's like my entire life in IIT
#
one heard one album of Pink Floyd
#
it would be Dark Side of the Moon
#
that was I didn't have eyes
#
I couldn't pay attention
#
then when I went to America
#
there's only six albums
#
but I feel like as a PhD student
#
basically I heard Led Zepp
#
so I heard many many other things
#
that sticks out from that period
#
was understanding Led Zeppelin
#
and just being close to them
#
and thinking deeply about it
#
then after I came back to India
#
I really started off on Bruce Springsteen
#
I'd slightly known his stuff all along
#
I'd known what is considered
#
Born in the USA in 1984
#
where the LP was in my hostel
#
and I heard all the Bruce Springsteen
#
so these are just some of the things
#
that I feel deeply about
#
We have a great episode
#
on Bruce Springsteen of course
#
and everything is everything
#
we spent a lot of time together
#
but recording this episode
#
is the most time we've ever spent
#
If you enjoyed listening to this episode
#
check out the show notes
#
enter Abit Holes at will
#
Also please check out the YouTube show
#
called Everything is Everything
#
signing up for our course Life Lessons
#
You can learn more about it
#
and don't forget to head on over
#
to your nearest bookstore
#
and pick up In Service of the Republic
#
The Art and Science of Economic Policy
#
by Vijay Kelkar and Ajay Shah
#
You can follow Ajay on Twitter
#
You can follow me on Twitter
#
You can browse past episodes
#
of The Scene and the Unseen
#
and every podcast app of your choice
#
Thank you for listening
#
Did you enjoy this episode
#
of The Scene and the Unseen?
#
If so, would you like to support
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the production of the show?
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to sceneunseen.in slash support
#
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