Social Waves

A few days ago, a friend asked a rhetorical question about Rajat Gupta and the mess he finds himself in - "What made him do it?" One answer could be what Nassim Taleb describes in Fooled by Randomness. He simply lived on the wrong street. When you are one of the best and the brightest, and see others less capable earning multiples of what you did or will, you get desperate. And you go with the flow and try to get a piece of the action for yourself. Until the tide turns!

I first came across the idea of social tides turning in a book by Ravi Batra, called the "Great Depression of the 1990's". Unfortunately for Batra, the 1990's did not have a Great Depression, so his views lost popular interest. But in the book, he referred to Social Cycles defined by PR Sarkar (http://en.wikipedia.org/wiki/Prabhat_Ranjan_Sarkar). Sarkar had, in his turn, drawn upon the Four Ages framework that is part of Hindu mythology.

Sarkar had named the four ages to be that of the Warrior, the Intellectual, the Acquisitor and the Laborer (the last was also called the age of Lawlessness). These ages are supposed to follow each other in the same sequence, because each age in its progress creates an environment that triggers the next age.

I found an echo of this in Socionomics, formulated by Robert Prechter, who is the chief disciple and propagator of R.N. Elliott's Wave Theory for financial markets. Elliott had proposed that financial markets go through predictable waves that show fractal patterns. Fractal patterns have the property that when we magnify a small part, we find a micro version of the larger pattern. Prechter has extrapolated this fractal wave theory to social markets and mass human behaviour.

When we combine these two frameworks, we can imagine that there are fractal "ages' going through their social cycles even within years or months. Rajat Gupta is a classic example of someone who got caught in these cross-currents. A blue-chip consultant, he rose to power during an age (perhaps only a fractal age) of the Intellectual in American business (remember the time when McKinsey were called the Brahmins or high priests of management?). But sadly for him, the age changed to that of the Acquisitor, where he felt himself less powerful than young hedge fund managers half his age, who earned in one year more than he had done during his entire career. So, he, and many others such as Bernie Madoff, moved into the age of Lawlessness, where rules did not matter for a while. But, the age of Lawlessness caused the financial crisis, that triggered the age of the Warrior, and he now finds financial policemen breathing down his neck.

The only solace I can offer him is that if he does weather this storm, the next age is once again that of the Intellectual, and he could find his star rising once again. Unfortunately, the social cycle and wave theories are only good at predicting the sequence of these changes, but not their timing. So, it could be a bit of a long wait for him!

Tit for Tat

Does mindset -- religious or otherwise -- influence behaviour? Yes, of course. When we say that "structures influence behavior" (see post on "We are like that only") we must also take into account 'internal' structures, ie. values, beliefs and attitudes, which I will collectively refer to as mindset.

So, which mindsets promote good behaviour? In this connection, I recalled a nice article by Douglas Hofstadter I had read many years back in the Scientific American (May 1983), about a simulation exercise done around the "Prisoner's Dilemna". By way of background, the Prisoner's Dilemna is a game theory problem that goes as follows:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (defects from the other) for the prosecution against the other and the other remains silent (cooperates with the other), the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act? (Source: Wikipedia: http://en.wikipedia.org/wiki/Prisoner's_dilemma)

This problem captures the essence of the dilemna that all of us face - should we be selfish or should we cooperate? A lot of research has gone into the implication of this problem on evolution, diplomacy, etc, some of which is described in the Wikipedia page. Getting back to Hofstadter's article, he described an exercise where many simulation programs competed with each other over multiple rounds to find which program or rules score the most points. The result - a very simple program called 'Tit for Tat' won hands down! The rules of Tit for Tat (http://en.wikipedia.org/wiki/Tit_for_tat) were the following:

1. Be Nice: Don't be the first to cheat
2. Hit Back: If your opponent cheats, then don't ignore the bad behaviour. Cheat on the next move.
3. Be Forgiving: Don't hold grudges. Don't keep cheating, just because your opponent cheated on you once.
4. Don't be Envious: Don't try to score more than your opponent.

I still find it amazing that these simple rules were so effective.

Now, there are a lot of assumptions that were made while defining the Prisoner's Dilemna problem, which may not be true in real life. Yet, the winning rules are so similar to the rules that govern long-lasting societies and religions! A classic example is the law of reciprocity that defines Christainity - 'Do Unto Others As You Would Have Them Do Unto You'. These rules or their variants also make Indian culture and Hinduism strong.

So...be nice, protect yourself, be forgiving and avoid envy!

We are like that only

I wrote this in response to an article by Mr Aakar Patel that was recently circulated in one of the mailing lists I belong to. You may find the article at:

http://www.livemint.com/2009/07/02203454/Why-Indians-don8217t-give-b.html?d=1

In the article, Mr Patel tries to analyse what drives Indian behaviour, seeking answers in religion, etc.

From my management consulting experience, I have come across a hypothesis that seems intuitively right, viz., ‘structures influence behavior’. Let me summarize the structures that, I believe, currently influence Indian behavior. 1. Scarcity of infrastructure and natural resources. 2. Underpaid government positions. 3. Lack of mechanisms to transparently fund political parties. 4. Excessive government presence in business.

These structures combine to make the average Indian desperate…the average government employee corrupt…the average politician corrupt…and the temptation to blame the government for all ills. Indians are not unique in this. Wherever these structures exist, be it Egypt or Philippines, the behavior of the average citizen is similar.

Can anything be done about these structures? Scarcity is a very tricky one, particularly of natural resources such as fuel, water and land. This cannot be changed overnight…so, I guess we will need to be patient. Let’s turn to the other structures. Paying government employees may seem a dumb thing to do, particularly in a situation of scarcity. However, from Chanakya to Lee Kwan Yew, smart administrators have consistently recommended doing this in order to reduce corruption. Formalizing mechanisms to fund political parties openly will help reduce “poll tax” a bit. Reducing government presence in businesses, such as electricity, railways, airlines, petroleum, roads, etc., will allow economic pricing, which over time, might reduce scarcity.

Is real change of this magnitude possible in India, by simply changing a few structures? I believe so, particularly from the experience of the last few years. The huge surge in economic growth, productivity and export of services that has happened in India during the past 10 years was triggered by changing of three structures – licenses, import duties and telecom infrastructure. Licenses were removed or reduced, import duties were drastically reduced and government withdrew from telecoms monopoly. Enough has been written about the cause-and-effect of these changes, so I won’t repeat them. But, what is our main takeaway? It is that, ‘Structures do influence behavior…and a few structures can be changed with momentous effect’.

All this has very little to do with Brahma or Hinduism. A lot more is due to foresight, vision and pragmatism. Let’s hope our Indian-ism, which has helped us survive so far and flourish periodically in history, takes us forward once again.

Need for Wisdom

The Information Age is bringing a lot of information and knowledge to us, some of which is beginning to overwhelm us. However, as human beings, the need to distill the essence from a lot of inputs is not new. All around us, there is a continuous dance of events and activities - physical, chemical, astronomical - which give our senses a lot of stimulus. Without our ability to recognize patterns, these stimuli would be noise. In reality, our senses and mind have evolved to recognize patterns. We are able to organize and distill sensory data -- smell, sight, sound, etc. -- from the noise. But this process of recognition, organization and distillation does not stop there.

Organized data becomes information. Organized information becomes knowledge. Organized knowledge becomes wisdom. In the Information Age, we need to absorb wisdom instead of trying to soak in a flood of information and knowledge.

The Beginning

Vakratunda mahakaya suryakoti samaprabha
Nirvighnam kuru mey deva sarva kaaryeshu sarvada.
(I pray to the Lord Ganesha with the curved trunk, powerful body and the brilliance of a million suns, to help me always accomplish all that I set out do).

I begin this blog with the intent to record and share some insights that I have collected in my life so far. Having reached this far in my journey of learning, I have come to realize that there is very little new wisdom to be created. However, finding nuggets of wisdom, recalling them at the proper time, and, using them suitably in our lives brings joy and happiness. I hope that the contents of this blog contributes to your happiness, health and prosperity.

These fragments I have shored against my ruins
Why then Ile fit you. Hieronymo's mad againe.
Datta. Dayadhvam. Damyata.
Shantih Shantih Shantih

- T.S. Eliot, The Waste Land