2008 American Financial Crisis (AFC) - 2

Today is the 15th anniversary of the beginning of the 2008 American Financial Crisis (AFC).

The seller of a product/service knows more about it than the buyer. This is called information asymmetry. Information asymmetry leads to the collapse of the market. So to protect buyers from information symmetry (and the market from collapse) government makes some rules and enforces them. This is called regulation. In the case of complex financial products/services, even the sellers (financial companies) do not know anything about them. This is not just information asymmetry - this is information black-hole. In the case of information black-hole, government regulation is absolutely essential.

From around 1980 onwards, America's financial industry started designing more and more complex financial products/services like CDS (Credit Default Swap) and CDO (Collateralised Debt Obligation). This required stricter government regulation. But exactly the opposite happened - in a wave of excessive de-regulation, government regulation went on decreasing. Example: The 1933 Glass-Steagall Act had built a wall between commercial banking and investment banking - in 1999, America withdrew this law. The result of all this excessive de-regulation was the 2008 American Financial Crisis.

Which Is The Best Course?

 WHICH IS THE BEST COURSE?

"Which course must I do?" is the most basic question for youngsters (age 15-21/22). There are 3 major decision-points in education:

1. After 10th std

2. After 12th std

3. After degree

The basic question is: Which is your favourite subject? And the rule is: If your favourite subject is X, then take subject X in the next stage. Example: If your favourite subject in school is history, then do Arts in +2. What if you don't have any favourite subject*? Then take the Best Default Option at that stage. The Best Default Options at each stage are:

1. After 10th std - Science

2. After 12th std - Engineering

3. After degree - MBA

The Best Default Option is the option that will:

A. Guarantee you a decent-paying job

B. Give you the freedom/flexibility to change your path later

In 20th century India, the top 1% took medicine and the bottom 99% took engineering. In 21st century India, almost every field will pay you enough to live a middle class lifestyle (car + house + children's school fees). So youngsters must focus on discovering their potential and achieving their potential. The above education 'algorithm' may help them to do that.

*PS: If you have a hobby you are passionate about (sports, music, art, etc) you can make that your career.

2021 People Of The Year: Healthcare Workers

# For fighting a heroic war against the Chinese virus

# For saving the lives of around 2.5 lakh people

# For putting their duty above themselves and their families

# For proving the ancient saying 'Vaidyo Narayano Hari'

Healthcare workers (doctors + nurses) are 2021's People Of The Year . . .

Hinduism And Hindutva

HINDUISM AND HINDUTVA

Q: What makes humans different from animals?

A: Culture.

Every group of humans have a system of beliefs and practices - ie, a culture. This culture makes us human. Without it, we are no better than animals.

We are Hindus. Our way of life is Hinduism. This way of life has sustained our civilisation for 5000 years. If we lose our way of life, we will be no better than animals. Islamic/Christian fundamentalism have been waging war on Hinduism for 1000 years and have been trying to destroy it. This war continues even today.

Today is Vijay Dashami - the day Goddess Durga killed Mahishasura. It is the victory of Dharma over Adharma, of good over evil. On this sacred occasion, let us vow to fight for Hinduism and against anti-Hinduism in our own humble way. Let us preserve our 5000-year-old way of life - and remain humans.

Sanatana Hindu Dharma ki jai!

Why Mistakes Are Necessary

What is a 'mistake'? You are at point A. You want to go to point B. You think action X will take you to point B - so you do action X. But after doing action X, you end up at point C. Then you analyse the whole process (of you doing action X and going from point A to point C). Based on your analysis, you now think that you should have done another action Y to go to point B. Then you say that action X was a 'mistake'.

When you were at point A, you had a certain amount of information. Based on that information, you decided that action X would take you to point B. Now - after doing action X and going from point A to point C, your information has increased. So now based on this increased information, you are saying that you should have done action Y instead of action X. Did you have this information when you were at point A? No.

You will say: "I should have collected more information when I was at point A". The truth is you collected as much information as you could when you were at point A. There is a limit to how much knowledge we can acquire through mere data-collection - and you had reached that limit at point A. The only way to acquire more knowledge is through experience - ie, doing action X and going from point A to point C.

Another way of understanding this is to ask the question: "In what scenarios will we never make a 'mistake'?". Answer:

1. When we have complete information/knowledge - This is impossible because we are humans, not Gods.

2. When we don't try to go from point A to point B at all - ie, When we don't try anything at all.

Seen this way, we realise that mistakes are the only way for us to reach our goals. That is - mistakes are necessary.

B S Yadiyurappa - The Economic Reformer

The 1991 economic reforms were a revolution in India's history. They freed our economy by removing government-controls on production and trade. But government-controls remained on the three inputs/factors of production – land, labour and capital. So our economy became only 50% free. Making our economy 100% free and unleashing its full potential requires removing these government-controls also – ie, carrying out factor-market reforms. Economists call this as Second Generation Reforms – and have been demanding it since 1991.

In 2015, Prime Minister Narendra Modi tried to carry out land-reforms – ie, removing government-controls on selling and buying land. Congress Party (which wants the pre-1991 govt-controlled socialism) said the land-reforms were 'pro-rich' and 'anti-poor'. Rahul Gandhi famously said: "Aapki sarkar suit-boot ki sarkar hai". The Modi-government was afraid of being seen as pro-rich/anti-poor – so it dropped the land-reforms and said it would leave it to the states. And how many state-governments (including BJP state-governments) carried out the land-reforms? Answer: Zero.

In 2019, BJP came to power in Karnataka and B S Yadiyurappa became Chief Minister. In January 2020, he attended the World Economic Forum at Davos and then announced that he would carry out the land-reforms in Karnataka. In September, he pushed the Land Reforms Bill through both the Houses of the Karnataka Legislature and carried out the land-reforms. Now (10 months later) the first benefits of the land-reforms are already visible: land prices, land sales and government revenue have all increased.

Today B S Yadiyurappa resigned as Chief Minister of Karnataka and brought an end to his long political career. He will go down in history not just as the man who brought BJP to power in South India but also as the greatest economic reformer among India's Chief Ministers.

India's 1991 Revolution

Today is the 30th anniversary of India's 1991 economic reforms. When we became free in 1947, Prime Minister Jawaharlal Nehru adopted the inefficient govt-controlled socialism as our economic system. After him, his daughter Indira Gandhi also continued with the same inefficient economic system. As a result, our GDP grew by around 3.5% per year. Our population grew by around 2% per year – so our per capita income grew only by around 1.5% per year.

But the countries of East Asia and South East Asia adopted the efficient free-market capitalism as their economic system. As a result, their GDPs grew by up to 10% per year. Consequently, the East Asian countries (Japan, Korea, Taiwan) became high-income countries and the South East Asian countries (Thailand, Malaysia, Indonesia, etc) became middle-income countries whereas we remained a low-income country – though they were poorer than us in 1947.

Finally in 1991, Prime Minister P V Narasimha Rao started the process of changing our economic system from inefficient govt-controlled socialism to efficient free-market capitalism. As a result:
# Our GDP has grown by around 8% per year. Our population has grown by around 1.5% per year – so our per capita income has grown by around 6.5% per year.

# We have lifted around 60 crore people out of poverty – drastically reducing our poverty from around 50% in 1991 to around 5% today.

# Our economy has grown more than 10 times from $ 270 billion (#17 in the world) in 1991 to $ 3 trillion (#5 in the world) today.

Today's youngsters have not seen pre-1991 socialist India – so they do not know how revolutionary the 1991 economic reforms were. We can understand this revolution by looking at the lifestyle of a middle-class family in pre-1991 socialist India:

# Only a few middle-class families had cars – most had only scooters.

# Only doctors got telephones immediately – other middle-class families had to be in a waiting-list.

# There was only one TV channel for the whole country – the government channel (Door Darshan).

Thus the 1991 economic reforms brought about sweeping and unimaginable changes in India. So we must call the event by its correct name: not 'reforms' – but 'revolution'. But the process is still incomplete. Our economy is still 50% socialist. We must take the 1991 Revolution to its logical conclusion by making our economy 100% capitalist – to lift all our people out of poverty and make India a superpower.

Online Classes Is NOT Education

ONLINE CLASSES IS NOT EDUCATION

# Sitting in a real classroom with your classmates and discussing the subjects with your Professors is education.
# Living in a hostel with your batchmates + seniors + juniors and interacting with them is education.
# Eating in a mess with your batchmates + seniors + juniors and complaining about the bad food is education.
# Seeing your classmates, talking to them, cracking jokes with them and laughing with them is education.

# Sitting in front of a laptop at your home in your home-town is NOT education.

India, Hinduism, Conservatism & Liberalism

INDIA, HINDUISM, CONSERVATISM & LIBERALISM

Conservatism says order is more important than freedom. Liberalism says freedom is more important than order. The genius of Indian/Hindu civilisation is that it has always aimed at a perfect balance between both order and freedom. Thus Hinduism is both conservative and liberal. But if we are forced to choose between order and freedom, which should we choose? The Second Law of Thermodynamics gives us the answer to this question. It says that a system's entropy (disorder) always tends to increase. That is: the natural tendency is for a system's disorder to increase – and order to decrease. In other words: in the tug-of-war between order and freedom, freedom has the natural advantage – and order has the natural disadvantage. So if we are forced to choose between order and freedom, we must always choose order. If we err on the side of too much order (and too little freedom) that error is reversible – because the natural tendency of the universe will correct this error. But if we err on the side of too much freedom (and too little order) that error is irreversible – because the natural tendency of the universe will magnify this error. In other words: freedom lost can always be regained – but order lost is lost forever.

India And Freedom/Democracy/Human-Rights Index

Every international freedom/democracy/human-rights 'index' is reducing India's rank/score every year. They are using the formula:

-X = X0/Y

Where:
-X = Reduction in India's score this year
X0 = India's score last year
Y = Number of years they expect the Modi/BJP/NDA government to last

So India's score will go on decreasing every year and reach zero in the (estimated) last year of the Modi/BJP/NDA government.
Also we can use this formula to find out the value of Y for the authors/creators of each such 'index'.

Karl Marx, Levi Strauss, Blue Jeans And Capitalism

Karl Marx was from a Jewish family whose surname was Levi. His father converted to Christianity and changed the surname to 'Marx'. Meanwhile another Jew called Levi Strauss started making and selling blue jeans in America. This blue jeans went on to become the biggest symbol not just of America – but also of its economic system: ie, free-market capitalism. So when the Soviet Union collapsed in 1991 and free-market capitalism triumphed over Karl Marx's socialism, it was also the triumph of one Levi (who did not change his name and religion) over another Levi (who changed his name and religion).

Modi, BJP And Free-Market Capitalism

MODI, B.J.P AND FREE-MARKET CAPITALISM

February 10 was a historic day for India. For the first time, a Prime Minister praised the private-sector and wealth-creators on the floor of the Parliament. Since 1947, our country (especially our political system) has been suffering from an evil called socialism. This evil kept us poor for half a century – while the poorer countries of East Asia and South East Asia became rich with free-market capitalism. In 1991, Prime Minister P V Narasimha Rao started destroying this evil. But almost 3 decades later, this evil is still very powerful in our country – the rich farmers' protest is a perfect example of this. Even the 'right-wing' political party BJP has been suffering from this evil. That is why the February 10 speech is so important. Yes – the Prime Minister did not go far enough to use the term 'mukt-bazar punjivad' (free-market capitalism). But socialism being our second national religion (after Hinduism) even the words 'private-sector' and 'wealth-creators' are revolutionary enough. Let us hope the Prime Minister, the government and the BJP embrace free-market capitalism completely. And let us support them 100% in this regard. Bharat Mata ki jai.

America, Conservatism And Republican Party

Till the 1960s, race was not a factor at all in American politics. A) The country was 90% white and B) the non-whites were mainly blacks – who were not allowed to vote. But then two developments happened in quick succession that caused a tectonic shift in American society – and brought race to the centre of American politics. First, America passed the Civil Rights Act in 1964 – allowing blacks to vote. Second, immigration from Mexico exploded from 1970 onwards – leading to a huge influx of Latinos/Hispanics. As a result, today whites are only 60% of the country – and non-whites are 40%. Inevitably, race became the central factor of American politics.

Specifically, these two developments led to a crystallisation of the two political parties. The liberal Democratic Party made racial equality/justice its #1 agenda/ideology – and got a solid vote-bank of 30% (13% blacks + 17% Latinos/Hispanics). Now conservatives and liberals are evenly matched in America. But this support of the racial minorities gave the Democratic Party a huge advantage. How could the conservative Republican Party even compete against a vote-bank like this? Republican leaders like Richard Nixon and Ronald Reagan came up with the answer: ally with white racists and Christian fundamentalists. The strategy was successful – from 1968 to 2016, the Republican Party won 8 out of 13 Presidential elections.

So far, so good. But there is a fundamental contradiction between conservatism/nationalism and white racism / Christian fundamentalism. Thus there was a fundamental contradiction in the alliance of the Republican Party. So how did this contradictory alliance not merely survive but also succeed for almost half a century? Winning elections in an industrialised democracy requires mainly 3 things: organisation machinery, money and media. The conservative leaders and strategists of the Republican Party (like their counterparts in the Democratic Party) controlled all these 3 things. Whereas the white racists / Christian fundamentalists are mostly middle-class and lower-class people – who only have numbers, but not control over these 3 things.

Enter the 21st century – with its cocktail of Internet, 24-hour news/media and reality TV. This cocktail revolutionised the world by democratising it. But for the Republican Party, it threatened its contradictory alliance. Because now a white racist / Christian fundamentalist leader could use this cocktail to by-pass conservative leaders/strategists, directly reach out to the large number of white racist / Christian fundamentalist voters – and use their numbers to take over the Republican Party. And that is exactly what happened in 2016. Donald Trump (a real-estate tycoon and reality TV star) threw conservatism into the dustbin, openly embraced white racism / Christian fundamentalism, reached out openly to white racist / Christian fundamentalist voters and became the Republican Party's Presidential candidate – and then America's President.

This is the tragedy of American conservatism and the Republican Party – getting undone by the country's racial demography.

Agriculture Reforms, Farmers Protest And Supreme Court

AGRICULTURE REFORMS, FARMERS PROTEST AND SUPREME COURT

Legislature's job is making the rules, executive's job is enforcing the rules (made by the legislature) and judiciary's job is interpreting the rules (made by the legislature and enforced by the executive). This is the Fundamental Law Of Democracy. The Supreme Court can strike down a law made by the Parliament ONLY if it violates the Constitution - NOT because a mob of rich farmers has been strangulating the national capital for 50 days. By suspending 3 laws passed by the Parliament (which is elected by the people of India) the Supreme Court violated the Fundamental Law Of Democracy - and turned India into a mobocracy + judicial dictatorship. Today was a black day for India . . .

2020 Men Of The Year: Galwan Valley Martyrs

# For making the ultimate sacrifice for the Motherland

# For defending the Motherland till their last breath

# For their fearlessness in the face of an evil enemy

# For reminding us that our freedom is not free

The 20 martyrs of the Galwan Valley Battle are 2020's Men Of The Year . . .

Mistakes Are Good

Everybody says "Make mistakes - but don't repeat your mistakes". This advice is well-intentioned, but it is wrong - both logically and practically:

1. Logically - There is no need to say "Don't repeat your mistakes". Who repeats their mistakes? Nobody does - because the human brain is built and programmed to learn from its mistakes. And in case somebody 'repeats' his/her mistake, it only means that the original learning was not enough - because the original mistake was not big enough; so a 'repetition' is needed.

2. Practically - If we keep saying "Don't repeat your mistakes", then people make it as their rule #1. And what is the best way to avoid repeating mistakes? Simple: Don't make any mistakes at all - ie, play safe and don't take any risks. So "Don't repeat your mistakes" practically becomes "Don't make any mistakes".

So instead of saying the well-intentioned but completely wrong "Make mistakes - but don't repeat your mistakes", we should simply say "Mistakes are good".

Obsolete Managers: Flat Vs Hierarchical Organisation

Let:
N = Number of levels in an organisation
a = Entry-level age (years)
A = Retirement age (years)
T = Number of years (on average) to move from one level to the next level
Then T = (A - a)/N
Usually a = 25 and A = 60. So T = 35/N. More generally, T is inversely proportional to N.

Let P(Obs) = Probability of the managers' knowledge about the core-work becoming obsolete. Then P(Obs) is proportional to T. So P(Obs) is inversely proportional to N. In a flat organisation, N is low - so P(Obs) is high. In a hierarchical organisation, N is high - so P(Obs) is low. The conventional view is that a flat organisation is good and a hierarchical organisation is bad. But from the point-of-view of the managers becoming obsolete, hierarchical organisations are superior to flat organisations.

Why Managers Are Obsolete

WHY MANAGERS ARE OBSOLETE

An organisation is like a pyramid:
1. It consists of different levels.
2. People at different levels do different types of work.
Specifically:
3. The people at the bottom do the core-work of the organisation.
4. The job of the people at the top is to help/support the bottom-people.
The top-people have moved to the top from the bottom. That is: earlier they were at the bottom – and were doing the core-work of the organisation.

In a static/unchanging world, this model would be perfect:
1. People start at the bottom doing the core-work.
2. As time passes, they move up to the top-levels.
3. They have experience/knowledge about the core-work.
4. With this experience/knowledge, they help/support the bottom-people.
But the problem is the 21st century world is not a static/unchanging world – it is a dynamic/fast-changing world. And how we do a work is a function of the world/environment. So when the environment changes, how we do a work also changes.

Thus some time after the bottom-people move to the top (and become top-people), the technology/environment changes – and the top-people's knowledge/experience about the core-work becomes obsolete. They know about doing the core-work when the technology/environment was in its previous state. But they do not know anything about doing the core-work NOW – when the technology/environment is in a completely new state. But still, they keep giving orders to the bottom-people – who actually know how to do the core-work NOW (with the technology/environment in its current state).

Therefore managers (top-people) are inherently obsolete. And the traditional management model / organisation structure is also inherently obsolete.

Laws Of System Complexity, Output Quality, Environment Dynamism And Operating Intelligence

LAWS OF SYSTEMS

1. Law of system complexity and operating intelligence:
The intelligence required to run a system is proportional to the system's complexity.

2. Law of system complexity and output quality:
For a given level of intelligence of the people running a system, the quality of the system's output is inversely proportional to the system's complexity.

3. Law of environment dynamism and operating intelligence:
The intelligence required to run a system is proportional to the dynamism of the system's environment.

4. Law of environment dynamism and output quality:
For a given level of intelligence of the people running a system, the quality of the system's output is inversely proportional to the dynamism of the system's environment.

Pranab Mukherjee: The Last Liberal

Which was the defining point of Pranab Mukherjee's long and illustrious political career?
A. 31 Oct 1984 – Congress Party made Rajiv Gandhi as Prime Minister, pushing aside its senior-most leader Pranab-ji
B. 22 May 2004 – Sonia Gandhi made Manmohan Singh as Prime Minister, pushing aside their senior-most leader Pranab-ji
C. 25 Jul 2012 – Pranab-ji became the 13th President of India, the highest office of our Republic
D. 7 Jun 2018 – Pranab-ji attended the valedictory function of RSS's training camp at its Nagpur headquarters
Cynics will say A and B. Most people will say C. But for me, it was D.

Liberals see and treat the RSS as an untouchable Hindu fascist organisation. Yet Pranab Mukherjee, who had occupied the highest office of our Republic and was fully aware of its sanctity, attended the RSS's most important annual event as its Chief Guest. Why? Because he knew that in a society, people will have different viewpoints and the only way to run a society is to be open-minded and try to understand other viewpoints. In that sense, he was a true liberal – an open-minded man who engaged constructively with people he disagreed with. In fact, he was India's last liberal – and the people who call themselves liberals can definitely learn a thing or two from him.

A great son of Mother India has left us. May God give strength to his family . . .