Ep 402: Ajay Shah Brings the Dreams of the 20th Century

[Music] The world is full of so much beauty and so much knowledge that it is both so exciting and so terrifying. 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. Interesting people, interesting books around us. Some of us retained at 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 you 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. Academy are makes us specialise. Life coaxes us into comfortable grooves. Where we were one seekers and thinkers, we end up as creatures of habit and auto complete machines. I have felt these terrible tugs as well. These are the default forces and 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 one thing. They were Renaissance men and women. The whole world was alive to them and that is why they were truly alive. I aspire to that. I aspire to travel widely to drink from many streams, to have many ways of looking at this complex world. 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 etched here 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 behavioral science. Please welcome your host Amit Varma. Welcome to the scene in 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 lives. If at all. 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, we'll 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 a 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 in jargon to you, but as you listen to these episodes, you'll 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 Kalker, 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's also being a fearlessly outspoken public intellectual, and someone who's made an effort to build an intellectual ecosystem in India. Many people have referred to the episode I did with his friend K.P. Krishnan as a masterclass in the Indian state. If that is so, this episode is both a history lesson and a masterclass in 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 such a great picture. 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're going to hear. Many of the things I have learnt 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 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've 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 stuff. 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 the 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 meetups once a year. Basically, while we've always been sharing what we have learned in a piecemeal way in our show and our writings here and there diffused, this is an effort to synthesize our knowledge for you. So please head on over to check out life lessons at lifelessons.co.in. Never stop learning. Ajay, welcome to the scene in the Unseen. Thank you Mr. Varma. I'm so happy to be here with you. I think I have the vague impression that we've done some 13 episodes of the scene in the Unseen so far. So you're kind of behind Sruti Rajopalan, who's on 19 I think. But this is the first time, let me tell you that we are actually doing a life and 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 have announced people is what is the story you tell yourself about yourself or told yourself about yourself and etc. 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 it's an act of dramatic reconstruction, story telling almost. As you say, there are stories that we tell ourselves and I've 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 someone openly on lady luck, right? I mean, 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 was selective memory for the good parts. If you 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 just 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 flavor 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 highly random. 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 wheels 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 be 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 purpose. So there are some very deep ways in which I basically was forged as a teenager and I have moral estate 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 here. That's 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 from time to time. And it strikes me that you know 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 like that. 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 wish of cycle. So it's really a virtue cycle versus a wish of cycle. Yes, 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 you know 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 dollars. And a lot of people say no, I would don't know how on earth I would produce 400 dollars when faced with an emergency. And I recognize that that is a difficult state and it is hard to write poetry when you are in that kind of state. 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 about the everyday life. And 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 choices. So you know, what priority do you give the practical things in life? What priority do you give the everyday shallow social engagement? Those kinds of things I feel you know 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 you know I feel that empathy and it would be great if we could make a good example. It would make their lives better and you know 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 is elevating. I actually meant exactly people like us when I spoke about the wishes in which we are cycles. Many people don't have the good fortune to be positive because so much shit is happening to them. But at the same time no one is like I see the most privileged and fortunate people also sitting around whining every day. And I take a digressive question before we kind of get to biography. That you know 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 of time 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 will be a calendar invite and it will be like 630 to 9 and eventually you learn not to show up late because you have to leave it 9 when the calendar entry ends and you always sleep early and etc. So everything is calendarized months in advance and I am thinking of it in I am 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 in 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 Chagupal 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 at a certain space for spontaneity. Kind of goes out of the window that if the most valuable resource is time then why are you you know giving it away so much in advance and how do you think about that sort of allocation so. 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 hurry 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 tradeoffs 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 Namsita and you and I made a plan to go to hike at Kotli. 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 months. So soon so you know I forecasted that 26 September would be the first available time when it is relatively dry bracket this was wrong 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 to months we are always busy so by that reasoning each of us will tend to be filled up with the practical constraints of life 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 life so how will I ever make space for the good things in life that matter and the answer is calendar to them well I had 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 things so this is a trick I'm using so as an example just last week I you should I agreed that winter say I the rest track for the day. 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 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 when can I meet you and 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. Yeah just to give context to our listeners Nomsita in Veshnavar the brilliant young crew we have on everything is everything in a few months back Nomsita right old 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 Nomsita said this months ago and Ajay said y'all it's true let's calendarize it and Nomsita in Veshnav duly burst out laughing that months in advance is man wants to calendarize a trek but Ajay did calendarize it and my plan was that okay if Nomsita and Ajay are going away for a trek I will go with Veshnav when we will write some there but I imagine it will be a trek lasting a few days then 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 writing course it was a court 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 us for writing right and then you restart block of ours and then it becomes like mind blowing the heart which is really I think the big tragedy of my life like somewhere behind you were recording this movie home studio somewhere behind you in that bookshelf. There is this artifact I got from Chandigarh after my dad passed away. We went to Eklia Debe, his entire library gave away a few thousand books. And I kept only things which were meaningful to me or interesting books which were completely out of print. And one of the things I kept from there somehow it was still in that house was a diary of 1986. 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 sensory presentation, you know, of my life that I never got down to it. So this is a life question for me and I think many people who are asking that you you're someone who's been very productive. You're not only showing up but you're getting the job done after you show up. 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 bit. So all these episodes we mentioned will be linked from the show notes and meant a supplementary. But essentially, how did you sort of arrive at work at the end of the discipline and taming the monkey mind? So 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. So this will be my alone time of reading. Okay. So I wonder whether this would be useful to many people because it's a way to systemize it. It's not 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 you know, 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 reading papers. I've just got that down day after day. I am reading thousands of words and pages all the time. So that's me. But for many other people, I have often found resonance around this trick that by default, we fill up a 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 useful trick because the way all of us are working or most of us are working in this world is we obey the calendar. So if a calendar is free, then you'll say, "Yashur, 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. Okay. Back to writing. My experience, so let me put it into two categories. One category is my life experience with the business standard. Okay. 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 or 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 writing on?" 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. That's just something that happens deep inside the human mind that's sleeping over a problem helps 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 and I send it to them. So that's become a drill and I just fortnight up to 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 entries. So I will literally skip meetings I will cancel meetings I will just say sorry I'm not available I have not attended both 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 do your best that 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 scene 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 know you wait for the Lord to give you the spark and then when the spark comes you 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 are full of the idea don't do anything else just like be in it with all heart and soul so you know writing code writing pros these are magical things to be done at the highest level of lucidity and priority and then at that time just you know 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 talent 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 okay 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 sees 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 write 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 your 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 then 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 X is good now you do X don't do anything else and that time just blow away everything else be rude cut off everything else flick out on deadlines and violate calendar promises and so on then don't have four more then don't let all the other 150 unfinished papers on your computer intrude on your consciousness when you're there just be there so that's my result I heard a great story from Ninal Pandey Ji. She did this lovely episode with me. I've also recorded episodes with her sister, Yira Pandey and her cousin Pushpesh Pandey are all great. And Ninal Ji and Yira Ji are of course the daughters of the great Hindi novelist Shivani. And what she told me about the 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 winding 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 mummy is not to be disturbed but at which point also she would cut herself off effectively. She would never wine ki oh I have so much work I have so many people around me you know and she would just find a way to get the job done and this is why I am more and more skeptical of writers block the phrase that people use. 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 etc etc. 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 in the husband and all of that and it is just a way that it is a 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 to write okay and I think that's just like 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 this out of your head first. 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 okay and we are fine I think most of us are well adjusted we're 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 then we'll give you a way about is the only way to write that's not true okay so when we look back at our heroes okay George Orwell and Hemingway wrote under very dire conditions 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 not the shallow stuff the hardest thing in my opinion is to be able to be anti-social so most of us are programmed that if you're surrounded by our people then you know we will engage with them or we will make eye contact with them or we will over here 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 women 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 anti-social and if you're a man you need to respect women more and you know we 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 sync which are eating up most people so I feel that's easy I feel that's the first stage that everybody needs to think about so you know we should think about the time that is being expanded 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 of what Indian politics is zero and the time in shallow social engagement is low so that creates whole blocks of time this idea I'm stealing from Nandan Nilaykani who was one speaking with me and I said to him like wow your 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 six super power 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 person 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 away at and then you create space for intensity for depth I mean when I think allowed 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 pass it out into productive blocks and etc etc that sounds crazy 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 yeah I can work for eight hours in fact if I work for four five hours in a day it's phenomenally productive because all the work really happens in four five hours yeah 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 and you know I remember in the 1980s I was really fortunate my dad was 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 Corosava and so on and so forth and today we can see any damn thing we want so even our leisure time I think there is a certain way of kind of you know designing that so I would put principles here like deep engagement there's 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 and 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 a 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 in 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're doing a show like every time I go to a bookstore I'm not just looking at books is a part of my brain which is looking at potential scene 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 and everything is everything episode you and you've shifted forms many times you've done blog articles like if a show this I 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 and 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 poster day frequency though I have and you have also written a book which requires a completely different kind of emotion 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 midst 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. Okay. So, George Orwell wrote essays, wrote books, Colors. He never started a podcast. He's just one of the greatest men of the 20th century and more power to him. So I'm not 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 with the pure creative face. So we should be so fluent in the form that we stop noticing. We just know how to read 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'm 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? Okay. 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. It has to be topical. 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 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 and 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 and 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 this also syncs well with that advice that people give about habits. 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. 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 off to something more basic that at first. Cycling is a hundred percent 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 outright 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 was. 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 one at Thursday two days before the zero the 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 and I'll you men say probably going to be Pogacha. So moving on to sort of another aspect that I want to double click on before we you know 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'm wondering about how you structure that like there are times where I'll say that for the next one or I'm just going to chill I'm not going to look at my laptop and 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 wondering and it made 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 calendarise things like reflection time mostly date night and then the pressures just gets and like then 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 or to your family if you have some guess do. Yeah my life story is very much located in the prehistory of my family my father was born in 1926 in Hyderabad Sainth which at that time was just you know a dusty small town 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 1% human capital in 1926 and 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 into an intellectual there was no school beyond class six in Hyderabad Sainth 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 Kuroswawa 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 on nothing in Bombay so I asked him what did you do when the train reached Bombay is that 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 it 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 a 11 standard kid all alone in Bombay and gradually he found his way in that world and he moved out His prime attention was politics, whose 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, Nairu 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 this was his life. 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 salary 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 heal up 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 Parli Vajnath. So for the third time, my father, bracket, zero money, found his way to Parli Vajnath and figured out a third elopement. And by this time there were diathrets that if you dare come back and trouble our daughter, then 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 and 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 thirties because he just never got the time and focused 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, CME. 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. We had the news week and we had the foreign affairs and we had the scientific American. 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 Tatsun'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? What is going on? Things like that. And in 1976 he started CMI 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. I was 10 years old. So please don't overestimate my cognitive capacity. I was just a baby. I was 10 years old. But I was with him till 1983. So I left home in 1983. 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 CMI, which was a mixture of principles and practicality that it is a far profit business. It had to make ends meet. There was no support or philanthropy or grants or anything. It had to stand on its own feet. So there was a business site to it about how you build and sustain an organization. But there was a dream inside it. CMI 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. Many 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 for a higher cause. And I got that. I got that whole experience of being with him in building a far 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 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 I'm an old person today, but really it started there. I left home when I was 17. He died when I was 18. So 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 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 Quiddh India movement and all of that, I am also sort of reminded of VP Menon. I did an episode with Naraani, Basu and VP Menon and we've spoken about his story on everything as well. Where, you know, when he's 11 or 12, he burns his school down because it ate 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 15 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 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 I think that also helps that when you describe him, it seems a lot in a sense like you're describing yourself, that that optimism, that openness, that willingness to treasure out and, you know, so, and I'm kind of thinking a lot about 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. Okay. 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. Okay. 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 a Bombay, he had to come ticket less 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 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 oratious things. And the venture capitalists 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'll be one in 10. So you should 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 that's a field 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 the we we talk more about the 20-year-olds who make an Ola and bracket. We know how that worked out versus we talk less about the startups by a 50-year-old by 50 my father knew this shit. He knew how to do it. 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 a 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 happen to think that it was a good moment a sensible moment but I started relatively late. Susan and I were both 54, 56. Now let me remember 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 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 is no question they are ventures. So you are putting in your own equity or putting your time you're putting a passion. Money is not the thing you know money is easy everybody has money. 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 help 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 are 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 to 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 and we are a kid that they are a parent mother it is a role it is a particular thing and we never revised 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 our 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 at in one respect what she did in a local 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 yeah so tell me a bit tell me about her yeah they were mad people is 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 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 they 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 CME in small ways when 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 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 8-0. 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. Like let us say, young boy goes out to make money, something works, he makes money, but then he has anchored to dad and he is in that group forever. It 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 further of it, you know guided by that one core principle of freedom and that one core anger at the subversion of the British. But then joins a 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 treatment and high up 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 can deeply about people. He can deeply about the world. My sister Shobna 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 Jutt 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 purpose of individual action. We 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 Gandhi Ji and Haru. 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 an 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 five foot six, malnutrition, and childhood and all that. And I remember we'd be walking on a street. And several times I have seen this myself. There'd 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. Which is that kind of character. It was his job. There would be 100 spectators where people are beating each other. 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. 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 everyday 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 we hear otherwise you know, how 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 up front and say that okay, everything I do is informed by this. What were the things that he was intentional about because I imagined that going through life or 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 they would be intentionality in the things that he did in the in the kind of husband he was in the kind of father he was in the way he treated his co-workers at his start up all of those things. So give me a 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 CMI that CMI 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 at my 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've I've I've not it I've 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 okay 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 people 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 and he lived that 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 and you know there were so many people with more fancy credentials who did not start CMI and he did like that so you know 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 you know actually credentials don't matter at all it's because 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 you know 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. You know like 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 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 going to the lack of credentials. He picked up more knowledge and the capability and the insight which led to the creation of CMI. So that's one direct line in the fashion that you describe that he got to the ability and the confidence to build CMI partly by virtue of being the outsider of being the less credentialed one. And the second part that I don't know but I am 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 measurements the thing. That's a novel idea. It's a deep idea. 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 he Greenspan also felt the thing that I know my father felt that you know 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 a 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 Taikobrahhe and Newton Taikobrahhe was this mad Danish count who lived on an island called Uranneborg 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. That 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 marshalled 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 vitally divergent. How can we argue with each other? The modern predicament of alternative facts and the polarization of the social of the political discourse is exactly the state of physics, Allah 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 Taikobrah he gets us to Kapler where we think oh there ellipses and then once you figure out there 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 and it could well be, 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 ungrid and sheld 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 have often said to you which makes you win every time where 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 piquity 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, it is nonsense. 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 Kostler who wrote in that book and these things came to him and the 1953 Christchurch speech was a very big thing. By the way, these things came with a lag. It was many years later because many people dismissed the western reporting around the Christchurch speech at first as CIA misinformation. 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. So it was his. One day in the life of you and the life of you and the life of you and the life of you and the life of 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 you know 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 adviser to government that helped because he understood that the greatness and the energy of a country lies in the private sector in the firms 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 in 1955 was 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 you know there is a bunch of 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 something's lost and something's 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 OK. 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. That's it. It was just simple black and white. 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 disgusting. 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. So that foundational humanism and the dream of what are we trying to do? We're trying to build a decent society that never went away. And the drama of the political ideas of the 20th century was about finding a means to that end, that how do you do it? 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 Johnny Mitchell? Like, what was his cultural, artistic life like? So we were poor, but he had this idea that you never caught 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 have been purchased and not yet paid for every month. So that was his credit relationship with his books, a lot, 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 anything, everything else. But we will never cut corners on buying records and buying books. And so I grew up in a house with a record player. And just lots of great music of 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. So I learned to think, 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 of what we're trying to do with our course life lessons is something akin to, in a sense, what you're 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 not 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, your dad did that. 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 fathers on interaction in very innocuous ways, you know, informs, you know, you're 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, your cool books, cool things, your father's telling you cool stories. Later on when you look back and hindsight, that's everything. 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 Tiko Brahe did, you know, and what Tiko Brahe did when you're a kid is just a fun story. Today it is fucking the center of everything, right? So give me a sense of that sort of learning, what did he teach you? How did that happen? 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 that excitement every day is to talk about what happened in terms of something in Bombay and Delhi and in Washington, DC 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 gonna work. And my view was that they were gonna win and it was gonna work. And his view was, no, it's not gonna work. And we argued with each other and he said, write a paper. So he said, sit with your typewriter and write a paper. - If you've got 13 years old, then he answered it in a paper. - So 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. We are irrelevant. 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 an normative, that was a prediction that this is gonna work. And an normative view that what do you think about the foreign policy of how the Americans should be handling this, things like that. So it was always this sense that we may be some irrelevant father and son sitting in far away 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 in a different age. It might have been a blog article by a teenager, a pimply teenager sitting in a bedroom and making claims about why the Soviet Union is gonna 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 dango 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 and 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 are former triangle where they're influencing each other, shaping 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. What was that like? Were you writing a lot? Were you reading a lot? - It was not writing a lot. So this Afghanistan article was an exception, not the rule, 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 batchah 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 and in modern times, times 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 and that was great. 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 and also in that age 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 that he was writing and it would get typed up and it would first come to me. So the first pass fixing of all his writing was done by me and it was all done very seriously that you know you have to fix the damn errors and it's important. 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. It was real. 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. That was huge. 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 that a child puts because you've been told the serious work of finding grammatical and typographical errors and the spelling mistakes. You know, these are very serious things for a child to do. 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 remember I was in a room with Chitra Ramakrishna in the NSC project 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 and what I was saying. I 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. That under Indian law, you don't need to take 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 I 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 Kaelkar 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 and then you know your gold. 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 RJ and everything. So we were poor. 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 just 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 you know everybody should read Jim Corbett's books because it's unputdownable 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. I trek the Syadri's by Harish Kapadia and I bought the book and that book contained a half page about each hike. So it's just a little bit of a high level description about each hike and a bunch of people from Patrakar society in Bandarised. We got a hedge 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 Syadri's then the book and then something about the risk-taking and being venture some and saying you don't know Didley Squat and there's nobody who's ever hiked in the Syadri's before and a bunch of boys and I was all of 13 we went out into the Syadri's 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 gentle 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 the name came to you 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 unless you're one of those really dull people who is sticking off a box and you say okay by 7 pm we must reach Kotli God 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 being in nature you're soaking everything in there is nothing to do 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 that all of us are in where everything that kids do today often seems to be either goal directed or dopamine inducing in the short term that you're not doing something goal directed but it is not just at freedom of being around nature or around anything at all that particular mind space of that so can you talk a bit about that because you know one code that I learned from you is a Zen you find in the mountains is a Zen you take with you you know where it at Zen come from was it something that had to be cultivated was it something that was present less in the younger Ajay Shahan 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 climb this mountain that's silliness of the highest order it's something we do for itself how did I grow into it 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'm more or less stayed in that forever so I tend to say Adhri is hiking Himalayas I think California I hike in the UK is 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 you know it is 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 Syahadri is than in the Himalayas the easy Himalayan trekster I do 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 it's very controlled whereas in the Syahadri's go wrong so hiking in the Syahadri's is more difficult than hiking in the Himalayas because of the physicality because of the problems of root finding and things happens So it's actually far more adventurous and you open your mind everyday with a sense of like, okay, what's going to happen today? And it's interesting, 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 Kotli-Gar 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 just enjoyed them. I was happy and calm and kind to them. I felt goodwill towards the bees. But you're strong with 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 stung 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 the so tell me about that. 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. But he fully knew that 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 Chandrashekar 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's 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 general readers. I am the normal Indian child. I studied for the IIT, JEE, I did four courses in maths at IIT and I'm really pissed that I never got an exposure to higher maths that 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 that I didn't do it. I know probability theory but I don't know measure theory, things like that. 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. Yeah, one of the modules in a forthcoming life lesson course is in fact called quantitative intuition and it's one of my regrets as well that I never learnt 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 took kind of understand probably probabilities and I had to understand some amount of game theory which at a theoretical level and even in fact making, you know I made my living because I had to know that shit. So it kind of worked for me but nothing systematic, 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 to the real world, 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. So I think what sort of another aspect of privilege that you want to have spoken of often you have often you know referred to a gym heckman studies on early childhood and again we've spoken on this in our everything is everything episode on education at some length but just to summarize it for the general readers gym heckman did a bunch of studies on early childhood learning and for me what is one of his takeaway findings many take away findings I'm just speaking one aspect but one of his takeaway 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 it's great 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 then it doesn't help 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 allowed 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 and more of the scientific way whereas I had more of the humanity's saying thousands of books etc etc and give me a sense of 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 you appears 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 over I've read so many books and plus signs you know so much faster and 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 help 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 C.P. 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 we need both 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 world 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 like the way you have and each of us is different and we each come we each of us complement each other in different ways on the maths I also want to emphasize the lifetime journey of learning that as in everything you should never close your mind to the learning so as an example I landed up as an economics PhD student in 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 a 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 Rajivakarandika got me excited into going after this from first principles and looking at it from a full knowledge of stochastic calculus and ito's lemma and all that and I'm trying to remember this would be I think in 2001 when I was in the minister of finance so I was an employee at the minister of finance and by that time I had understood that now I need this shit that I need to do stochastic differential equations and I need ito's lemma and I need to understand Gaussian Brownian motion and so 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 ito's lemma derive the black sholes 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 itos lemma and you get some lovely results based on it and this was like late life 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 all our life. We should never become complacent. We should never feel finished. Okay, in terms of interoperating with other people and being in the world. So first I was young and I was stupid like everybody else and we are vain and we are arrogant and we are insecure and we are thirsty for approval. We are thirsty for praise. We're thirsty for respect and I satisfied all these stupid characteristics to the nth degree. So I was the idiotic IIT guy that you love to hate okay in all respects. I have no I'm 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 of being a philosopher 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 that 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 try to understand and find empathy and get involved. So I think like everybody else I also went through a learning process and gradually started growing up and rather so when we are stupid I think yesterday I was coming up with a four-part four-level classifications scheme of how we do talks 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 or out of an audience 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 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 then we are done okay and that's widely 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 their own belief and our ability to actually communicate an idea and persuade anybody is exactly zero but then I have 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 and in front of you I will never admit that I learned something from you because I am a stupid person but over the next week I will ruminate over it and I will update to some extent moving in your direction and that is my take away 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 that comes out 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 hey the music started and this sounds like a commercial but it isn't 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 we've called it 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 and please support us by subscribing to our youtube channel at youtube.com/amithwarmaamitvairame the show is called everything is everything please do check it out welcome back to the scene and the unseen and still with Ajay Shah over here and by the way would some of the general readers like to calculate how many hours we have spent talking to each other on the record across you know all the scene and the unseen episodes and everything is everything that could 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 what took your fancy and is there anything specific that you remember is 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 there was everything so I got a full exposure to the world there was Rabindranath Tagore in English there was Rabindranath Tagore in Bengali sorry in Gujarati okay like that there was a great deal of material we also had that peculiar old-style thing called an Encyclopedia so we had an Encyclopedia Britannica and the McGrawill Encyclopedia of Science in Engineering and I have endless afternoons randomly picking up something from the McGrawill 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 and so on 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 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 the spirit 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 that 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 are also seems so delightful in the sense of building that mindset of everything is everything right otherwise people will often read only for instrumental purposes examples can I 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 at lucky sir interview 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 bookstall bookstalls okay so Bombay people will remember it used to be a glorious institution Mr. Shanbag ran strand bookstore and he did two things he did some current books and then he did what I called remain third books which were books that were sold abroad by the KG after the 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 kill and Shanbag was killed in the ways of traveling abroad and accessing these markets and buying these books and so strand book stop had this two-tier thing that there were full-priced 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 Chanbuk so we used to spend a lot of time at Stanbukstall and I would periodically be deposited into Stanbukstall for babysitting. So my father would have worked to do elsewhere in the city and I would be dumped into Stanbukstall for one to three hours 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 browsed books, I eclectically looked at all kinds of books and then I would make a pile of what books we were buying today and then the deal was some of the trade books are at MRP. The other books basically Chanbuk would just give me at ridiculously low prices because we were friends so he would just make up numbers and say this is 100 rupees. So like that. So that was my regular ritual of going to Stanbukstall and getting books and while I'm on the subject I got another great experience in that period that oftentimes I would be dumped into Stanbukstall for babysitting and then in the evening my father would come to Stanbukstall 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 from Stanbukstall 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 and I learned history and I also got to feel the meaning of being in an ancient city 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 a lot 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 walking in markets whether they are malls or whether they are just random markets out there. I think one of my friends once came up with this great line he replaced Ne Pal with the commerce where he said I love this smell of commerce in the morning. And the market sign 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. Whether any you know in your serendipitious the jaunts through the lanes of this great bookshop which I remember only do you remember any interesting discoveries or someone that you would not otherwise have come across but you're like wow this is. It was too long ago I no longer have the sense of you know some books came because of like a review in foreign affairs or scientific American and some books came serendipitiously. I think Lawrence Daryl came from strand books 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 depend to any of them that's great but if you are to actually think that okay if you're going 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 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. So the complicated question and my thoughts may not be necessarily correct for many situations 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 that matter the most. So I would say to everybody that leave a child aside you are the side 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 ask each of them 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 so you're right all mean my episode with him that he was in Baroda and I think he got his first salary and he was in Baroda and even to a bookshop and he just laid down 7000 rupees or 8000 rupees or whatever it was 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 4 or 5 hours speaking 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. Shanbagh must have shaped so many people who would have gone they're not just you because you were being babysired 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 for example right and I wonder if you know books non-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 a Bangalore which is remarkable bookstores you know blossoms bookworm just in church tree it's just such a treasure. I mixed feelings on this I don't know that the world of physical bookshops is scalable and replicable into the future I know that in America there are many people who are really fighting for that tradition of a community store where there is it's a moment 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 and it's just great so a good thumb rule is to keep away from like the mainstream stuff the famous stuff what is sold in airports like 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 if the years go by and people are still talking about a book there's a good chance that you should be thinking more about that book so for example many of our gentle listeners will have probably noticed that saying like a state by James C Scott is something we just keep coming back to again and again and we talk about it and I consider it a difficult book to read it's not an easy book it it's a book that you have to devote yourself to and think deeply deeply about it and argue about it and you know it will be great while on this subject Susan is very passionate about the concept of a book club of communal book readings so right now she's running book reading system she and Bhargavi are running a book reading system they're right now they are on tyranny of the experts by Billy Sterley and a bunch of people commit themselves that we will read 100 pages at a time come together discuss and I think this is the best way that all of us can foster a culture of books that a bunch of people commit to each other that I won't come as a spectator I will read 100 pages that we each of us should read 100 pages at a time and then meet up and think about it argue about it discuss it there is no better way to get deep into this and that way we can you know bring one book at a time into our world and into our consciousness and we have 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 retribble sense like a computer but there's something going on at a deeper level and we should treasure that I can't agree more so just thinking aloud if listeners of this episode I want a virtual version of this maybe you know 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 let's 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 grow up in you know the neighborhood in bandra east which is known as a place of culture not only are there many economies have grown up in the same lane as you but there are all kinds of writers musicians you mentioned Suresh Beas earlier you know 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 it's a place of culture and learning and and all of you are of course elites but not necessarily in English speaking, derasinated elites because there are writers and playwrights and poets who are in speaking Marathi, write 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 Balthakre. And there was a JJ School of Arts student hostel. Then there was Saithya 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 we'll try to bring these people together. In hindsight, I wish to say, "A." That was pretty cool. "B." I just want to scream at all these people. "O ye urban planners, could you not have pleased on one more thing? Could you not have shattered the walls that separated all of us?" So just think what sense does it make? There's Saithya Savas, there's Patrakar, and they have a wall in between them. 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 transaction's cost matters. Well, so I grew up in this world and it mattered. 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 and English Medium. There were two sections of English Medium and I was there. And my friend from that period is Manisha Purohith, whose father K.J. Purohith was a poet in Marathi living inside the Savas. So this was the kind of little world that I grew up in. 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. Faisal asked me, "Kalpak dighe and Shrikant Ranglekar were my community at school and on the journey up to the JEE?" Faisal in particular took me in when I was really struggling in figuring out things and he helped me to explode and it was just absolutely perfect. Just at the right time he made all the difference to my learning trajectory and it also makes you think about all of us and the life. At the right time you meet the right person and they help you in the right ways. It just makes so much of a difference. And I am eternally grateful to all these people because they made me. And I also wish for these kind of good people to happen to everybody. In what way did you help you? So I was stuck on certain things. 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 Faisal was just kind and he took to me and there were a couple of critical days when he made me cross certain boundaries. And then after that suddenly I was in, I was seeing the world in a new way. And then after that he and I we did everything together. Kulpak, Srikanth, Faisal and I did everything together and I was a first class participant in that world. But I vividly remember I was just completely stuck and just Faisal 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 in the 11th and 12th resting in holiday and the calculus. Many aspects of our nature and our character are contingent. We even have seen everything as everything episode on this. But somehow 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 maybe even myself and they're completely different. Right. So there is a course somewhere which is the same but otherwise they change a lot. So when you look back on that young Ajay Shah, let's say you look back on an 18 year old Ajay Shah from 40 years ago, you know, what is he? Like what is what do he and you have in common and what does he not have that you have gained through your journey? So I think the values and the dreams are the same. There is then 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've become calm. I'm not so much in a hurry. I am reconciled to the way the world works in a good way 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. And I'm sithapragnar when things don't work. Sithapragnar 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. You're taking so much both through a smosses and directly from your dad. At this point, what is the story you're telling yourself? What do you want to be because you can be anything? Because luckily unlike many people, you have all these books that open different worlds to you, etc. 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 in engineering and physics, I was already deeply imprinted with stories like the Manhattan Project. Okay, you've heard me talk about Openheimer. And that would be the way to think of doing it. 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 you have to find your Manhattan Project. 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 engineering education and being an engineer, but it was being a first-class citizen of the 20th century. What does that mean? Let's stop for a moment. It means to care about the world, to think about the world, to participate in the grand questions of the world. And in a sense, to be your ennossance mind, 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. But it was, there was a personal accident that there was a wonderful woman named Ira Bidikar. She was an economics professor at IIT Bombay. So she moved to work at IIT Bombay in those years, I think in the 70s. And she was a friend of my parents. So because of that, we took to visiting the IIT Bombay campus at Powai. And that's how my folks learned about IIT Bombay. It was an age when there was very little hype about the IITs, but it was the idea was it it's a good college. And you'll get firm grounding in quantitative thinking and being able to work with models and so on. That was the principle and the philosophy. And so that's how the idea appeared that once you try to take this entrance and in those days, we used to have this thing called the NTS, the National Talent Search, which was like 250 people a year. And I got through that in the 10th. So it was reasonably optimistic that the GE was going to work. And so that was how we arrived at this idea that once you try to do the IIT entrance and the backup plan was to study maths as an undergrad degree in Bombay University. So that was the two things that were attempted, which is either you try to go to IIT or you do an undergrad in maths at Bombay University. And I mentioned four people who were with me in school and sadly Shrikant and I joined IIT, but Kulpak did not and Manisha did not and she did not even take the exam. And Faisal got through one year later. So that's how 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 Bandra East school 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 NTS scholars of India and we both got through the IIT entrance. And I conclude from that that this influence is really matter that we all impinged on each other and we created some remarkable bubble of excitement and enthusiasm and quality. 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 make up as also practical things like I described to you how important it was that at a critical moment in my life Faisal was key to me. No, and that's very resonant for me because I don't think we realize the extent to which we are shaped by those around us. If you were not a kid in Bandra, if you were a kid in Khatkoper and you never met Matt Srikant, the Culpa Commoni Shelf as well. Your whole life could have been different. I'm sure you would have been successful wherever you were, but the whole life could have been different. So tell me about that IIT sort of experience because it almost seems that you would just you know it's just one of those things that almost happened to you that you happened to go to that place and you your parents new professor there and you like the place and you do the entrance exam and you get through and you're there. What happens once you're there? Like what are you studying there and is there a sense of like I imagine that you know you could at one level be thinking of what are the things I'm interested in at another level thinking of what are the things you know I am actually good at and when diagram might largely even be the same circle in your case and you could be thinking at what should I do as a career what is so what was your thinking how was it evolving during this time once you were actually over there? Well mostly I was young and clueless so there was not much strategic thinking my father died shortly after I joined IIT so I really had no adult supervision from that point onwards I was on my own. So when I look back here is my opinions about what was going on. I never took to the more regimented machinery of courses and grades and exams and that's not me and I wasn't excited and I wasn't doing it I was doing it badly. But a whole bunch of things happened to me that were absolutely wonderful and I consider those years to be formative years and it really worked well for me. I got taken in by two professors Gopal Shavre and K Sudhakar they were in the aeronautical engineering department they were running a computational fluid mechanics lab and they just they were kind they liked me they took me in. And for no particular reason I cannot imagine why me I do not do not know why they chose me but I'm just so grateful that they did. So I joined an engineering lab. So in engineering universities all the work is organized around a lab a lab is like a small firm it's a small org as a bunch of people professors PhD students younger students funded projects equipment it sits together and that's like the immediate unit of collaboration and I have to think that's absolutely the right way to organize higher ed 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 with each other and they collaborate you know systematic way typically the lab will have a name and so on. So Shavre and Sudhakar took me in as an aside they also so I met Susan at IIT and she was technically a student of civil engineering but they took her in also into the lab so they were looking for mad people I think and so maybe we fit the bill and that lab was a tender of its time. Well in 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 and they thought they could ask these things of us 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 Rajapa, IIT, Susan and I were in the same lab with Shavre and Sudhakar and that worked very well for me so that was one piece that really worked well it was the experience in being like an org where day after day there is a sustained chipping away at a certain field they were doing computational fluid mechanics they were part of the early research on the design of what is now called the Tejas aircraft 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 even if what they do does not directly feed to the craft to the aircraft it becomes the knowledge and the capabilities that are developed inside the country. So that was one piece that worked very well for me. The second piece that worked very well for me was at IIT I discovered computers so that was in age when there were no computers at IIT there would be 1986, 1993, 1993, 1993 at IIT Bombay when I joined in 1983 there was one computer it was a Russian ripoff of the IBM 360. Okay the IBM 360 was made out of transistors not gates not ICs meaning there was not even an IC that had gates it was transistors that were used to make a computer and there was one of these which was a favor done by the Russians it was called EC 1030 it was a Russian ripoff of the IBM 360 the Russians did not have the ability to make this computer themselves they stole the design of the IBM 360 and they made it they industrialized the manufacture of that computer and one of those came to IIT Bombay so there was this ancient mainframe computer 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 that was there but it was a computer okay and we were very lucky we could get a pause on it and we started learning with these things and I just loved it I took to it something I know how to think algorithmically so I often think that there are four great languages in the universe there is the language of human language like English where I think I do reasonably well there is the language of thinking algorithmically but I think I do equally well I feel like I have an instinctive ability to think algorithmically and to be able to live in the world of computer code then there is a third language of mathematics where I think I'm B grade or C grade and there is the language of the genes where I'm like 0 so there are these different different languages and it's interesting to think of what is the language of the genes just the deep understanding of how ACTG makes life so it's a language that your code is specified in some language of four letters and I have no knowledge and intuition there I was very lucky that I landed up there and somehow I just took to this and I enjoyed it there was there was severe constraints in getting access to computers so I remember there was something called a BBC micro it was a small computer being pushed along with BBC instructional material in the UK I think it had a 6502 processor with 64K of RAM and there was a bunch of these BBC micro which had come as a gift to IIT Bombay 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 deep in the night entering a room where I'm not supposed to be entering by jumpsome walls you mean it really jumps on the walls yeah okay you just broke into it basically I broke into the room and I started writing code with the BBC micro so I remember one of the first things I was doing was there is this equation del square phi equal to 0 which you solve for the flow of a fluid around a circular shape around a cylinder and it was some primitive computer but I was up and running solving for these shapes and slowly laboriously it would paint this screen on a graphics screen so this was like miraculous stuff we had never seen graphics screens before and I was painting the solution on the screen and I was fully up and running with the solution to del square phi equal to 0 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 Chevrolet that you know I've done this there I'm solving she was in the aeronautical engineering department I was I'm solving del square phi equal to 0 and I have a graphical representation of the solution and he said oh that's nice show me then I became really embarrassed because I said you know I'm not supposed to go that I've been illegally going into that room this is don't worry I'm a faculty member I can go so I was like very nervous walking with him into the computer science department where I was illegally going and using the baby he reassured me I am a faculty member I can do anything don't worry just just come with me show me what you've done so he walked with me and he saw that and he said this is good so these these are the sorts of things that you know I just kept going and learning these things and Rajapa I year and I used to be crazy we used to keep talking with each other and building stuff and there was no reason to do these things we were just like the old hackers enjoying ourselves 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 I broke my hands once and I broke my right arm once these cars on my right arm and at the time there used to be a PC game called Digger and various people in IIT used to compete to get a higher score and it would keep the high score encrypted on a disc so there was no easy way to get a high score 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 so I basically stared at the assembly code of Digger for a long time 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 so I re-merged at IIT after my right arm had hit me 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 is Rajapaya? Where are Sri Kantan, Kulpa, Kahn Manisha and Faisal? Manisha had a health crisis and her life has crashed. Faisal lives in Bandraist. 200 meters from me, we meet occasionally. And we have all the same warmth. Faisal has multiplexed his life on one and he does some amount of teaching. And for the rest, he is pursuing the great love of his life, which is to learn gravity. So his dream in life, he endlessly pushes himself to learn general relativity and think about gravity, that is the passion of his life. Kulpa at last count was in the United States. He was doing nuclear non-proliferation work for the United States government and Sri Kant lives in the US and I've lost sight of what he does. Outstanding. Do you feel that you took to computers because your mind was just naturally attuned to that kind of systematic thinking? Or do you feel that it helped you become a better thinker? Just in the same case that if you weren't in Bandra, if you were a kid in Khatkoper, you wouldn't have been the same person. Is it fair to say that had you been to bin in IITs three years earlier when they might not have been a computer? You know, you would have been a different person as well. How much of a world does algorithmic thinking actually play in the person that you've gone on to become? So as I said, I think there are four kinds of thinking where you know, you need to learn to think about the gene and I don't know how to do that. And my mind is dead to the possibility. I look at the world and I'm unable to see things. Then I am 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 have had some dreams of imagining new theorems, but generally not. But I recognize that failing and it is a whole, it's like a part of your mind start singing, whereas otherwise it can be dead. And that's the way in which I think of thinking algorithmically is just something beautiful that happened to me. I'm so grateful 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 because I can think 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 in the 1970s, Ram Guha, a friend, KP Krishna. 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 in the same school. And this is not, 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. But nevertheless, Jay 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 smarter skater on the block. And two, who are some of the interesting people fellow students who had an influence on you? It was not scary. It was just delicious. I enjoyed it. It was a pleasure. I sometimes think that 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 Kulpa and Sri Katha, I wasn't really talking to a lot of people. I became more verbose once I landed up at the hostel in IIT. Now, Jay 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 universe, the early universe becomes lumpy and not smoothly distributed. So it is believed that the batches of the girls at IIT are small groups. There 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, the 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. So my wing chose me 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 the wing chose me and I just landed up in a wing that was a little interesting. So as an example, I remember that on that EC-1030 computer, the Russians only had the stolen 434 compiler and 434 had evolved after that. So folks at IIT Bombay had built a 437 compiler entirely home-brown. So sitting in IIT Bombay, they built a full 437 compiler, which is quite a feat. They wrote a compiler in India in the late 70s and the early 80s, which is quite a feat. And there was no documentation for it because it was homemade. There were no books for it. All the standard Western books on 437 were all a little idiosyncratic and didn't quite work because you know this is the IIT 437 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 4. In a local non-standard 437, which was the 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. So in my wing, the older fellows invented a project. Let's write a book on 437. And I got drafted into it. I was an enthusiast and I got drafted into it. But there was a bunch of people in the wing who got together and in my wing, they invented the project. They we will write a book on 437. And now I feel that you know it's not so normal. Like there were so many wings, there were so many hostels. Why did nobody else do it? Why did these guys do it? So I'm thinking that there was something interesting and exceptional going on. And again, I'm so grateful that Mahesh Krishna Murthy, who is now in Omidya Network and Mini Ganesh, who is now an adjunct faculty member at Carnegie Mellon University, they chose me as a Bacchara saying you will write chapter one where it will have ABCD. Okay, so I had to go read and figure out 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 on all of us that we were writing a book. And by the way, 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 sold in IIT Bombay. And kids from all over the campus were buying our book and using it to supplement their first year education. How many authors were there? Five. Oh, so you actually had your names on the book as well? Yeah, so I had my name on a double quotes published book, Surka 1984. Amazing when you were 18 years old. And who were the other authors? Do you remember many of them? So Sanjay Jain was my good friend from that period. Now again, think of the accidents of history. This is the same Sanjay Jain who ended up as I think product architect in the UID AI. And he now leads digital public infrastructure at the Gates Foundation. And he was like my childhood friend and like two rooms removed from my room in the hostel at IIT. Similarly again about that wing. So I used to like to row. We had boats in the powai lake and I would go rowing in the powai lake. And I had the upper body strength and mini Ganesh 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. Like he was doing computer science. He was doing discrete maths. And that was the kind of culture that we had that it was a world of knowledge and imagination. And we thank you so much. Where is mini Ganesh now? Mini Ganesh is in America. He's as I said, he's 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 in this otherwise uniform sorting, which is the IITJ. There is an organization in Delhi, a research organization in climate change. which is called IRADE. They recently did a search process for members of their board. So four people were shortlisted for the board 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 climate change space 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. Wow. 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 and collaboration and building culture and sharing culture all that just took off and I was so lucky that I was surrounded by all these people. Amazing. I would talk about one of the common anxieties that all of us have to encounter and go through and in your case it every every once case 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 and fitting in and getting along well and etc etc and at one level I am imagining that your hobbies and interests would have made it easy for you because you would immediately have found like my main 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 how to talk to girls and yet here you are a Casanova already at 17 or 18 meeting Susan and IIT and indeed staying with her all these years and etc etc so what was that like because I think of you like when I first met you I a you came across as extremely nerdy almost funny nerdy and almost from the spectrum in the sense that it's like okay he doesn't really know how he kind of b in social situations he'll just you know always in his sort of in his nerdy little brain so how did that aspect work out like did it make because I remember like I'm a few years younger than you but I remember that you know just talking to girls was a fricking project it was like no one had an idea of what to do we didn't it was just you know so intimidating and especially if your ideas came from popular culture which you have to remember there's no internet in those days there's nothing this fucking body would which basically teaches men to be creepy stalkers so did it help that you had three elder sisters at home and all of that one is that I was brought up by my three sisters and I'm sure that helped I think it also helped that IIT was a peculiar bubble and a safe space at the time it was not a modern style troubled environment like today there are all kinds of walls and gates and a posh committees and all kinds of difficulties it was a innocent simple space so I think you know one just got the opportunity to be simple and be human without having too too much other complexity the entire burden of the machinery of the modern world 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 is a lot like you in the sense also a geek incredibly bright etc etc perhaps outdoors you in nerdiness in some ways so do you think that that was a lucky accident that she turned out to be like that because you know the heart wants for the heart wants is no guarantee here who you're going to fall in love with etc etc so how did that play out and how did that kind of shape you in terms of what happened from then through your early adult life does it give a sense of stability does it make you look at things differently you know that relationships been a big part of your life so I do not mean to price how much I would like to know more about it it's been a huge influence that you know 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 we decided to laugh and share some of these ideas and be mad in pursuing these things together so you know we sinked at a very fundamental level about what it meant to be in this world and what are the kind of things worth trying so I think we both managed to encourage each other in the madness and that has worked out absolutely great. Take me to the next part of your journey so you've done your IIT one would assume that 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 and yet you because you get you end up 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 really have physicist to an economist who wanted to be with physics and we 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 around the whole drama and the tragedy and the glory of the 20th century and he was an economist so I always knew that kind of economics 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 and then Susan and I made the joint decision that why not try to do that so we sort of figure out how to make the jump that even though we had undergrad degrees in engineering you had to get good GRE scores and you could apply directly to a PhD 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 to the open-minded education system in the US that they don't get stuck on these things that there is flexibility and they're not going to say that because you did not study economics we will not accept you. I remember many years later there was an absolutely wonderful young person with a law degree that wanted to join Indira Gandhi Institute to do a PhD in economics and the answer was no if you have a law degree we will not allow you to start a PhD in economics that's the kind of foolishness in how we run organizations in India but luckily that was not how it works abroad and so we were able to make that jump 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 and sensible approach that whatever be the disabilities will overcome them and I think that's the right way to think rather than having some lofty black and white vision 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 and by the way I did an absolutely terrible job of that screening test on probability and statistics because at the time in my IIT education I'd got zero probability and statistics so they said look you have a problem you have to overcome that and so I was put through the correct sequence of steps to overcome that and it worked great for me and I'm very grateful for the things that happen but I think this is the right sensible way to approach it rather than saying that there is some black and white thing you have it or you don't have it I find it a interesting experience when I look back 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 become truly happy 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 for my life then I think the second was what I did around computer science and computer engineering at IIT between Miving Janta and Rajapaya and Susan and me I just felt lost and I went deep into those things and I got really good at it a third was the mountaineering at IIT Bombay I think we've discussed in the everything is everything episode just things happened that were out of this world and you can't believe the level and the quality and the capability the risk-taking the mind-blowing achievements and the disasters that happened in that period it was just a very very big dramatic experience that filled the mind and I think that's what we are made of and I think similarly I went through I went through three such deep experiences at PhD one around probability and statistics and the second in microeconomics and the third in macroeconomics all these happened 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 was really great and I just I'm so happy about those deep types that there were weeks and weeks where I was just lost in some ideas and I was in some books and I was understanding everything and I was deeply immersed in those things and I'm so happy for those things the rest was okay meaning PhD was in blah 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 deep and lost myself and got lost in a world of of probability statistics and my microeconomics and macroeconomics and the intuition that depth I got there has stood with me till today. Till today, I am rock clear on some of these basics and each of these things. So far I've described several things. I feel that is my way 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 they try to rush and build some products. And that has its own merits. But that's not my way. My way is depth. That I know a few things and then I'll build first principles. And I often index my life as one after another. That where did I get those few weeks, few months at a time of just going flat out mad where I'm 24 hours a day. I'm lost in something because that is how you achieve extremes of intuition and depth. It may not be advanced material. The point is whatever you know, you know it inside out. 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 that you are saying Los Angeles. I'm going to do a lot of double clicking on this, but first a broader question like my sense is that when you learn something deeply, truly deeply, it changes a way you look at the world fundamentally. 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 your as systematically as you. But having applied it for all the years that I played poker, I feel that I can look at the world around me probabilistically. And therefore be just alarmed at the judgements. People seem to be coming to all the time. And equally the little that I love about economics, you know, the reason I think of it as a study of human behavior is once you figure out how people respond to incentives. What are the ways that is like you can 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, like these three and even even physics, even mountaineering would have given you a certain perspective on a different way of living. Tell me a little bit about that because all of those then become critical to who you are and how you see the world. So when I experienced probability and statistics at USC, I remember it felt as great as learning calculus. And you know, you as a child when you learn calculus, you think there can be never there can never be anything as beautiful as this again, but low and behold, there was a second. And it was so good. 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. The first is remember I had come with my inheritance of my father's economics, which was relatively basic like, you know, late. 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 that had taken place, which some really important things that had happened over the 20th century. And both in micro economics and in micro economics and I got those and it was a completely new level of development where I became comfortable with the toolkit of modern quantitative micro economics is completely. A theoretical subject in macro economics, there is a more complex interaction between the models, the data, the political economy, the policy, the world. 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. In terms of the timing, I was very lucky that I came into this at the time of some grand theoretical discussions in macro economics where the world was coming out of the Keynesian visions of an economy that you can control into the more Milton Friedman Robert Lucas program of respecting the fact that there are agents 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, or DSG model, it seems all polished and finished when you see modern textbooks, you don't they are told in a historical way. But I deeply believe that we only learn in a historical way that you must see the ideas and the sequence in which they emerged and the problems 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 a historical you just take into the textbook and you are told here is Schrodinger's equation. It is true. And now we're going to figure out how to explain things using Schrodinger's equation. I feel that's particularly limited when it comes to a feel like economics, which is actually a humanity 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 10 years at a time that what did we know what were the debates, 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 of the 20th century. 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 for Neumann and other scientists 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 then I jumped with us at the US in Los Angeles. So he took me in. He gave me a job at the Rand corporation. He became my PhD advisor and my other PhD advisor was and the weeks in the economics department. And we picked a 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 front years of the application of certain theoretical and econometric tools that they were building. And so I was the person told to go there and apply this toolkit and develop this as an application. So that was a kind of PhD thesis that I did and that was okay. So it was not great. I don't don't remember it with the happiness that I remember about the three deep dives that I described. 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 Furnoyman. 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. Okay. They've played an incredible contribution. Tom Shelling 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. So I was I was open to this dream and I was curious about it. it and I feel I took that away. For the rest it was okay. I mean I'm not thrilled about my PhD thesis. It was okay. The first time I heard about the PhD thesis and this is a story for the listeners again. That is a while back, Ajay and I did an episode of everything is everything on population. And this was my idea. And I didn't, you know, columns in the past, writing about how the traditional notion that over population is a problem is just bad. Population is good. People are brainstorming stomachs and I wanted this episode to sort of unveil my ideas as it were once again. So Ajay said, yeah, you go ahead. I'll just I'll just add something if I feel like it. And so we did that. 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 do that. And then Ajay comes in and I think there was a magical 10, 15 minutes spell where you spoke about fertility and how fertility tends to decline in countries which lose hope and so on and so forth. And your worries about India's declining fertility rate were built into that. And I thought it was magical. And I was wondering like, what the fuck? I had no idea that this guy know, 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 your PhD was on the fertility of women in Malaysia, which was news to me. 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 as 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. It becomes science. But in some areas like ethics, for example, they are so difficult that they actually remain philosophy and progress through the century 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. No, it's an evolution that historical evolution is super important to just getting a grasp of what the questions are. And I want to ask that in a much more compressed sense if he 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. And then you move on, you know, you have the great depression and you understand, okay, the Kinsey and ideas are naturally going to come up here, you know, and later on through time, you know, Friedman and Hayuk Mimik, Mimik, come back. So I get the historical context of all of these. But my question really is that how easy or hard 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 everyone can agree and it is testable and it is for, you know, shit is falsifiable in say ethics or aesthetics or the classic philosophy, you know, those classic philosophical fields, you really can't. It's an argument that will be ongoing for a while. In economics, I would assume that there is so much data, so much has happened 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 that economics appears, 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 assumed that there is an arc of progress and it will get closer to the truth. Is that really the case? How does it progress? 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 in the pursuit of truth and how fast it progresses? A couple of things. Some parts of economics have succeeded wildly. There are things that happen that you can't believe on how well they work, most notably finance. Okay, so there are parts of finance, basically derivatives, where there are models that give you predictions that are just e really good, they fit the world and it can be used for engineering. So the word financial engineering is used for a reason. 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. I believe today, 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 are 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 which teaches us that in a well-functioning market, the stock price will not be forecastable because any forecast stability would have been used up by competitive agents and a healthy market 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. So this is one part 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 of being an economist 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 pubs 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 human flourishing and how all of us can do a little bit better in our time on this right-herd earth. So I think that that dream remains important in this modern world 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, I will proudly claim 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, they get mad, they become mobs, they kill others, all those things are there but at heart the most useful set of insights and the core of understanding the human condition remains economics 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 I'm 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'm thinking the key to understanding mobs is really at the intersection of exactly two subjects which are biology and economics. 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's very little work but it is starting to happen where people are bringing evolutionary theory and economics together 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 homoeconomic setting where we exchange, where we do voluntary exchange. I feel that would be a very, very fruitful line of inquiry. I think it's just about beginning but it would be a great way to push on understanding the world in a deeper way. And you know, there's 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 the personal journey, another question double-clicking on, you know, the point you mentioned about those three delightful deep dives into those subjects which you know again 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's one of the skills that I realized that I have in many of the disparate fields that I've picked up or the skills that I've got that after a point, like initially I will just immerse myself and do the thing. But after some point, I can think deeper and get to the first principles myself, even if they're not written down anywhere and kind of figure it out. And once I do that, 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'm sure a lot of that learning must just have happened surely from joy and happiness. You're not really thinking about what is a framework for learning. You're just diving into it and you're 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 and he's like, "Kima, kase karu, 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 those kind of first principles or is it a mix of both? Does it depend on what kind of temperament I have, etc., etc.? 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? How did we get here? And again and again, I find that is a tremendous source of insight as opposed to an A historical 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. There was very little that doctors could do to cure anybody or make a meaningful contribution to the health of a person. We could just distinguish from my listener, zoom in, or you've spoken about this many times before. Health care is where 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. So in history, the clean water and the clean air came first. Control of mosquitoes came first. Control of the rats came first. So the first wave of improvement of health in the first world countries was public health. And today public health in the West is considered a completely solved problem. There's nothing to it. Meaning 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 that we're grappling with today. But once you think about it in historical order, you will realize that to do health in India is not to do health care. To do health in India, 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 that if you go today 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 30 year 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 in 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 your treating a malaria. But if you do the public health properly, the health care component is vastly simplified. So this is method one, 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 in chronological order. And also that permits odd interconnections that while open I was doing while openheimer 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 at every point in time because your 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 type and get the technical details. Let get the correct models, the correct equations, the correct proofs 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. Would you push on the third track will feed back into your first track. But this is my way, this is my recipe, this is how I learn all fields. And I'm just sinking a lot and applying it to her someone may learn chess. For example, 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, Squeen's Gambit, etc, etc. The right way would probably be that you get attracted to the historical perspective where you will see games by Morphe and Anderson, which are spectacular, immortal game, evergreen game. But then you see a game maybe by Kappag Blanca, which is much more boring, but you recognize that there's a certain elegance in it. Then from there you come to the first principles which to me are everything, which is not what the moves are, but why games are playing out the way they are, which is when you learn basically two things from me, which is spaces important and therefore you occupy the center or you take the hyper modern approach of attacking it from the flanks and the fiancitors. And number two, that initiative is important. Therefore you are developing the pieces. And then when you look at Morphe and Anderson's spectacular combinations, which frankly are pretty basic right now, anybody who is on tactics trainer would just get them or not allow them to happen to him. But then immediately makes sense because everything comes down to space and initiative and just those two. And I feel that once you get there, you are sorted. You can learn the rest yourself because everything flows out of these. After these when you're getting into advanced theory and you start using computers for the better, gogy and all of that. And we have a great episode on chess, so for everything is everything which the general reader should also check out. But after that, everything falls into place. So does that make sense? It's kind of you know, 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 the center matter, but you haven't got it deeply. Fascinating. Let's talk about now your journey back to India. But before your journey back to India, couple of things are going 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? What do you think it is? Because at one level, 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 he was a man of hope. That's why he was a manufacturing from his sense of hope. Plus the neighborhood that you're growing up in would have been 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 and all of that. At the same time, I'm guessing that a part of your brain 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 receive wisdom that the state is a solution to everything. And you know, if planning is failing, that means planning wasn't good enough to do better planning, Baba. You know, that's a kind of default view that you have, you know, markets are looked upon with great suspicion. So how did your view across those fundamental questions evolve and how did that affect the way that you looked at India? I was lucky. So my father had the delight of his own discovery of how the developmental state has failed. So the entire journey of central planning and developmental state was about things that he once believed and then he understood that they don't work. And he had that passion of a recent convert of talking about all this and explaining it to me and like showing me that this stuff is broken. And I used to think this and I was wrong, you know, those kinds of things. So I was like fully cognizant of these difficulties. And remember, I said to you, I was precocious in 1976 when Milton Friedman produced free to choose. I was a 10 year old reading that. So I never went through a big state world view. Now in my work in the world of public policy, my views have shifted and evolved. I've become far more public choice theory over the years. Earlier, I was more in a bubble that folks mean well. And it's a matter of, you know, persuading and shifting their ideology away from socialism. People mean well. And they have the wrong approach to these things. I've grown to understand public choice theory more clearly that it is a game of control. It is a self-interest. So today I view these things a little differently than I used to in the early years. I was really quite an innocent one in emphasizing the ideas that you know, really once you get it, surely you will not continue in these ways. And I think the nature of the Indian state has also changed. So I feel that you got to be far more careful and you know, police on the questions of self-interest and public choice theory in the way we think today. I think that in 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. Some of them would be non-serious people who are just making a career. And some of them would be the visionaries and the dreamers. But the kind of hard-headed maximization of money and power that we see today was not present in the first two generations after independence. So I feel the nature of the Indian state has changed and I have also learned slowly about that evolution and that shapes our thinking on how we might think about policy. So before I ask you why you came back to India, I also want to ask about Academy of course, I had a great episode on this, fixing the knowledge society. I think it's episode 23 of everything is everything phenomenon was 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. It was a center for the reduction of knowledge, the discovery of knowledge, the dissemination of knowledge, the whole game happened there. Whereas now when I look at it in my view, may well be Hoshyadanyas, but I look at it, I just think it is, it's a joke that, you know, especially in the humanities, it will just a big circle, joke, game, academics, talking to academics, nothing they say is of consequence to the real world. People getting deeper and deeper into more and more specialized silos like weak production and southern Mexico in it's between 1634 and 1638. Shit like that. And it seems to me that and this part, I know you'll agree with that a lot of really fine minds, waste lives and academy, when they could instead be trying to make a difference to the real world. So give me a sense of what you felt about academy, then has academy changed, have your feelings towards it changed. And what was it that made you decide to come back? Was there a push factor as much as a pull factor? On academics, so I remember that my PhD experience of writing papers and getting a PhD thesis was a little blah, as I said, it was okay, it was not fun. Meaning yeah, I did all these things and I was left unsatisfied. I did not feel the happiness that comes from doing research. In fact, in many ways, I learned to write papers only after coming back to India and after I fully woke up to the subject. So this technical idea of universities that my two advisors are developing a technical toolkit and I will apply it into Malaysia as an exploration of what these kind of tools can do, you know, that left me a little cold. I need to take interest in the question that it is a question that drives us and we should always be alive to what it is we're doing and why it matters. And I felt I did not enjoy that. And also I was only starting to understand the incredible publication pressure that happens in modern mainstream academics. They openly talk about a word publication orientation, which is a code word for your supposed to shut up and stop taking interest in the world and not engage in any other activities and speculation. You're supposed to focus on one paper at a time and bloody get it done and each paper is a multi year journey and it involves a dulling of the imagination. It invites the success of regimented people and that works better. In all this, there has been a problem of high powered incentives that people are offered very high career and status and money in return for playing this game. And I think that just brings out the worst people. So there was a different world in the early years where the American universities and the journals worked in a more sensible way. But the application of high powered incentives and years and years of that filtration that the interesting curious people got thrown out and the people who ran the race harder tended to stay. And then they made the next wave of the tenure decisions and they made the next wave of the journal acceptances. So it just intensified a certain kind of process. So I feel that things are not good in the world of academics. But I understand that much more clearly today than I did at that time. At that time, I was just accepting that, okay, fine, this is the way the world works. Like done in episode of everything is everything around the knowledge society and that is this kind of material. Okay. And now on the question about India, July 1991 happened, the Manman Singh speech happened Ashok Desai was a friend and I had access to him and he was telling me stories about what was going on in India. And I felt that I want to be part of this moment that I knew enough history to know that these moments are not things that happen often. Like today, we know with the benefit of hindsight that from 1947 to 2024, July 1991 was one of the greatest moments in India's history. And that community, those people did the work that laid the foundations of the greatest growth episode in India's history from 1991 to 2011. And we're able to say that today, but standing there in 1991, 1992, I had the intuition that this is the way in which we should think about these things. So I was keen to be back in India quickly. I was suffering from the usual difficulties and delays of late PhD completion. So I remember in early 1993, Susan and I were looking at each other and looking at my misery of finishing the PhD. So we decided that, okay, fine, this is enough now. Like cut the crap and let's get it done. 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 to go back to India. And then all the steps had to be put into place to fit that deadline. So we had planned that before my flying back to India, we also had to check out off the rented house there because she would move to something else while I was gone. And we wanted to go hiking in Yellowstone National Park before that. So all these things were then back calculated that this is the exit date from America. This is the exit date from the rented house. This is the dates for the hiking in Yellowstone. Therefore this is the region where you want a PhD defense. And so I went to my advisors and got an agreement on the PhD defense. And then I pushed myself in the intervening months to finish my PhD thesis. So see, this is long range calendar. Once again, it works. I recommend it to everybody. The funny thing is everything worked out as planned other than one minor thing that we missed a flight to India. It's quite the very end up the packing up out of the house and getting to the airport. We were late and we missed a flight to India. How can you do that? So what happened? You took the next several levels flight. Yeah. So all the planning work PhD thesis, defense worked on time, Yellowstone worked on time coming back, emptying out the house, handing over the keys, returning the rented car, getting to the airport one hour late and missing the flight. So missing the flight means what happens? You're going to pay again for a fresh ticket or the day in those days they would charge you some relatively minor fees and give you a next day's flight. And I don't remember 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. You are also by now you have also arrived at finance, which is the first big field in which you you know, immersed yourself and kind of thought new ground. So tell me a bit about that. Why finance 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 is a beauty of finance, which is a beautiful episode to be it's a beauty of everything is everything. But tell me about you know when did you start to fall in love with it and when did you realize ready fine coming back to India. This is the thing to do. So in fertility and demographics, I had great coursework by Jeff Nugent and Richard Easterlin in economics and demographic transitions and population and all that. But in finance my lifetime some total of course work is zero. So I'd never done a course in finance. Susan started a PhD thesis in finance and she did courses in finance and I of course I read all her books and that is how I started waking up to finance. 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 comes out something qualitatively ahead of anything else we see in economics. So the state of the art in quantitative work in economics is labor economics. Labor was the best that we got and labor economics is a mess. And then I discovered finance and finance was just magical. It was amazing how well we understood some things and it had dreams of science offered different level compared to everything else in economics. So this was one charm. I already mentioned like in derivatives pricing. This stuff is not just a theory. It is reality. It works too like you get predictions of option prices to within half percent. It is unbelievable how well these models work and they drive engineering. They drive recipes that are used in the real world and it is a great edifice that has been built. That was kind of that was a group of reasons number one that it is an unusually clean place where one can have the pleasure of doing science. Okay, it's a guilty pleasure. It is a delight that come on. You can just do this. It is so perfect. You can actually do it. The physics and maths notes in you went wild. Yeah. I have been as 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 was macro economics. It is the hardest of all fields. Today I count myself as a full macro economist but it has really taken decades. If somebody says 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, "Do microeconomics? Do finance? That's where you'll learn. You cut your teeth on simple technical things." And then when you grow up, you do macroeconomics. By the way, this is what Ashok Desai told me when I was a young person. He said that you should do other things for 10-20 years. And then you will come back to monetary economics. And he was right 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 about the world. If you hide inside some models, you're not understanding macro. So that's part one about why to do finance. Part two was just a simple common sense about socialism that if India is going to emerge out of socialism, then there will be an enormous role to be played by finance. So finance is the brain of the economy. Wall Street tells main street what to do. So the working of the financial system is a critical piece that needs to be done in order to make a normal capitalism work. So in the olden days, the capitalism was stifled and there was a central planning system. The government told you what products and processes to use. And if India is going to evolve out of that, there will be a need for a financial system. So I felt that this would be a place where it would be a ferment. There would be a great deal of creative activity. I also had simple common sense, elementary knowledge of development, which is that while agriculture at the time was some 30% of GDP, it was going to keep declining and begun. While the poverty rate was 30% defined 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 base of older people who know how to do agriculture, who know how to do poverty. I don't need to do those fields because anyway, the importance of these fields is going to go away. And there is established expertise. So later on, I have ended up writing papers on agriculture. We have an EIE episode on agriculture, but I did not feel it was a priority that it was over served for a subject of shrinking importance, whereas finance was underserved for a subject of dramatically increased importance. So that was the logic about why do finance and I like late in my PhD for the last one year, I did my next deep dive where I just went mad on finance. I was just reading papers, reading books, enjoying myself, thinking deeply and really, really understanding what was going on. Again, entirely self-taught. It was just Susan who was doing some stuff and me, I was reading and I was talking to her. I know other people to discuss finance with and that's okay. I have no problems. I don't need too many people. I did it by myself. So by the time I came to India, I had zero coursework and a fair amount of reading of finance. So that's how in 1983 I moved back to India and announced to others and also to myself that you know, I know some finance. Amazing. Let's take a quick commercial break and also get to know some beverage and we'll come back on the other side. Have you always wanted to be a writer but never quite gotten down to it? Well, I'd love to help you. Since April 2020, I've enjoyed teaching 27 cohorts of my online course, The Art of Clear Writing and an online community has now sprung up before my past students. We have workshops and newsletters to showcase the work of students and vibrant community interaction. In the course itself, through four webinars spread over four weekends, I share all I know about the craft and practice of clear writing. There are many exercises, much interaction and a lovely and lively community at the end of it. The course course to piece 10,000 per GST, or about $150. If you're interested, head on over to register at indiauncard.com/clearwriting. That's indiauncard.com/clearwriting. Being a good writer doesn't require God-given talent. Just a willingness to work hard in a clear idea of what you need to do to refine your skills. I can help you. Welcome back to the scene in the Unseen. I'm still with Ajay Shah who is now back in India. I mean, we are recording this in India in my home studio, but back in India, back in India in the larger narrative that you've gone abroad, you've done the PhD and then you've sort of come back. At this point when you came back, was there a sense within you that this is where you want to be? Was it just that let's go back now? This is an exciting moment? Was it a decision that, okay, I'm going to spend the rest of my life in India? That is my karimbhoomi as it were. I was very clear that I had to be here. I wanted to be here 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 work reasonably well. You know, the standard fable about the two salesmen who go to Africa, one of them says that the people aren't wearing shoes, there's no demand for shoes. And the other guy says 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. It's not an easy life. It's a difficult life, but it can be very rewarding because there's so much waiting to be done. And I can imagine 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 anyway in Wall Street and you know, with your skills, just make a really great life for yourself out there. It would even be easy to sell yourself the rationalization that let me first make myself completely secure and make a great life for myself. And then I will have the resources to do what I want to for my country, etc, etc. One can go down those road roads endlessly. But it seems that you had more clarity than people typically do at that age when they're in the 20s where you know, they're the sort of making decisions like this. So what were the kind of conversations you went Susan had about this? And was your what was your sense of purpose then? Like we've spoken about purpose on the on everything is everything before 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? Make a difference. 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 of the 20th century 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 paths by the way was to go work at the World Bank and the IMF. So I remember Surinder Dave said you should first go work in the World Bank for some years and then come to India and that was feasible but the problem was July 1991 and happened. So you know, spending more years would mean missing the important years in India and I just happy 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 happen to be the right person at the right time in a bunch of historic things that happened and just a few years later I would have missed these events and activities. In some ideal world I would have been here maybe one year earlier, two years earlier 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 would have happened and I'm sure a different fun life would have happened. So I don't want to overstate the particularity of what happened to me but I personally feel very lucky that I was here and I think I understood it strategically and conceptually correctly that July 1991 had happened. 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 felt that I just felt like a great load being lifted off my back when it felt like 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. And so in that context July 1991 felt like a very important beginning. It felt more important than we know now with the benefit of hindsight. With the benefit of hindsight, you know my views. I'm a little lukewarm about the reforms of 1991. They were okay, they were not great. At the time I was foolish enough 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 lined up for you here? You know take me on that journey. So my father died in 1984 after that CME was being run first by DT Lakravala, the great Indian economist and then by Mahesh Vyas. So I first showed up at CME and then shortly later I moved to IJDR 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 Sabi and shortly after that I met RH Partil and Ravina Rayan who were building NSC 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 love them enormously. 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, I met CB Bhaway and then I met a knowledge party and Raveen Arun. 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 an event today. I feel that they had a great insight and they had a great point of view. And they were doing really important stuff. Just for clarity, what were they doing? CB Bhaway was the number two person at SEBI. So he was part of the team building of the project of building a securities regulator. And Raveen Arun and RH Partyl were building NSC. 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 Dave was the chairman and his team was Raveen Arun and Chitra Ramakrishna. And Raghavan Putran and Nagesh, Jeevi Nagesh Kumar, Nagesh, Jeevi Nageshwar Rao. Okay. That was his team, all drawn from IDBI. And they had no powers at the time and then came the 1992 Harsha Dmeta scandal. And the way 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 Harsha Dmeta 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. They was a former IS officer who had exited the IS and come into SEBI. And Raveen Arun and RH Partyl also, XIDBI were building NSC. 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 NSC. And so I met these people. They told me some sense of their values and the philosophy and what they thought they were doing. And I requested to volunteer and they took me in. So I'm going to take two digressions here before we go further into this 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. So these people and in the rest of the conversation, any other important people, I feel that, you know, that we forget all of this. And I'd like that 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. Maybe some stories that illustrate aspects of the character. CB Bhave is IAS Maharashtra Carter. He worked with YB Chawan. So he had access to the old great Congress style chief ministers of India. I 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 are a bit similar 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 narrow use of the word commanding heights, the financial system, the financial markets are the commanding heights of India and Bhave had that kind of principles and philosophy. And it was a wild west at the time. There was the old Bombay Stock Exchange, which did not work too well and there was very little knowledge. So a lot of the stories I'm going to tell you look easy in hindsight. But there was a lot of figuring out to be done and less 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 of advanced economies, but it can never transplant here. It has to be figured out here from scratch and as land pressure emphasizes, a practitioner in the first world is like a New York taxi cab driver. He knows how to get rides and driver taxi cab. He doesn't have a subtle understanding about how and why the taxi system works and how a car works and how the pieces come together. But here in India, we have to have the full first principles understanding of who does what? What are the incentives? Why this will work? And of course, nothing can be transplanted. You have to work incrementally with what you got and you have to start building a better world here. So it is a tremendous creative act of bringing understanding real world knowledge, a sense of political economy and the difficulties or what can be done in what order, sequencing capacity building, all these things. 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. It's never some 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. And that is what all these people were doing. So you never get big dramatic announcements, but what you get is strategic sense that they had a deep insight into what is going on in the Indian financial system and the nature of the work that needs to be done. And they built towards that over many, many years slowly fighting very, very difficult odds and in some cases, paying an enormous personal price because the world will often make sure that no good deed goes unpunished. So these are the real heroes of India. So Bhabhi was that I.S. civil servant, exited that world came in as senior executive director of Sabi and over a few years he developed this whole insight and philosophy of what we are doing in this space. 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 clueless and I learned enormously from him. So a lot of the knowledge see I get to make more noise because I write in public. He was a civil servant. He didn't get to write 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 and what people think 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. So that's CB Bhabhi then I come to RH party RH party grew up in IDBI. He's the MA classmate of Surendra Dave and of my father and back to how India works in 1984. There was a GS Patel committee on the reforms of the capital markets. So these committee reports are there to diagnose how the world works listen to contemporary state of the art knowledge sift through the debates and legitimize certain views. So there's a whole body of knowledge in the GS Patel committee report of 1984 which was shaping the reforms of the Dave period in Sebi and the early years of the 1990s after Sebi came along and NSC came along. So these things are not created out of thin air they come from a context well in the preface of the GS Patel committee report. The GS Patel committee thanks the contribution of economist deputed by IDBI to serve as the technical team for the GS Patel committee who is RH party. Okay, so this is the way knowledge gets built that RH party was in IDBI was an economist was a PhD economics was studying this field was learning this field had worked in the GS Patel committee report and you can see the intellectual connections between what was written in the GS Patel committee report and then later what these guys are out to build then again think of the period from 1988 to 1992 the statue the Sebi without power was created in 1988. So it was frankly a study group. Okay, so it was so renderadave Raveenara and Chitra bunch of others 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. The people poo poo that period and X-curried 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 to understand the problems of the system and you figure out what can be done what can't be done. So out of all this they develop the insight that what you need is a electronic exchange which is called NSC. So BSE used to do floor trading they used to shout at each other on the floor and they used to rip off their customers and they used to periodically have a payments crisis because they could not efficiently process money and shares. And NSC built electronic trading which created full transparency. The electronic trading went to people all over the country so it was no longer just Bombay and it was Sebi Bhaves idea and he pushed and he literally bugged everybody. In the NSC project to build a new institution which is called the clearing corporation this is straight Williams and type institution building that the clearing corporation enables safe trading between strangers by putting up an institution so you trade against me. You don't trust me, I don't trust you. I might pay you money, you might not give me the shares. You might give me shares, I might not give you the money, we have this mistrust. So, a middle man comes up between us, which is the clearing cooperation. This is a new institution that is created, that facilitates transactions between strangers. And the legal fiction is called "novation, no va for Latin New". That, you and I do a trade on the exchange and one millisecond later, the legal fiction that is created is that the clearing cooperation has a trade against me, and the clearing cooperation has a trade against you. So, if you default, the clearing cooperation will chase you, they'll fight with you, whatever, but I am protected. Or if I default, the clearing cooperation will hound me, but you are protected. So, suddenly, strangers are doing business with each other. Simple, brilliant idea was prevalent all over the world, but our people understood. So, Bhave and Aarach Patil and Ravina Ran understood that this holds the key, that we have low levels of trust in a economy spread all over the country, 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. So, this was the nature of their institution building. They were building electronic trading, they were building this clearing cooperation, they were building the depository. So, Bhave stepped out in 1995 from Sabi and became the founding leader of the depository. So, there again, the actual incubation of the depository project, this is the NSDL, which holds our shares in electronic form. This project was incubated inside NSC. It was led by Chitra Ramakrishna, and Surendra Dave as UTI, Greenlighted, the equity capital to build the depository, and Bhave came as the CEO of this depository, took a well-incubated project that had been nurtured by Chitra and significant amount of developmental work had already happened, and that built the depository. And so, we started getting this full machinery of a regulator and electronic exchange, and the depository, 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 of foreign investment into India had started, and it had instantly collapsed on the problems of physical paper and settlement and BSE. There were truckloads of shares certificates, playing up and down in the roads of Bombay, and there was chaos and pandemonium on pieces of paper, counterfeit paper, who owns watchers, all this kind of mess was coming. And it was not possible for India to absorb large scale for an investment with this kind of market capability. So, people don't adequately make the connection between the rise of the Indian software industry and the enabling framework for the equity market and foreign investment that was created through the ages of SEBI and NSE. So, these are all the pieces that were happening in that period. And Susan and I had the luxury of becoming part of this, becoming part of this, being advisors, we were mostly volunteers, meaning I got paid some sitting fees for attending meetings. I never got paid in all this, but we were volunteers. And we got to be a part of this story. 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. So, you know, before kind of double clicking and going further on this, a continuation of the last question and then a further meta question. A continuation of the last question would again be not just about those three people, but we also have an episode on the reformers and everything is everything about a different kind of reformers. And it strikes me that in the generation before yours, there were a whole bunch of people who were working within the system who did not even have the self-aggrandestment of being able to publish columns in their names and get their ideas out there. They were not public intellectuals. And they went against prevailing conventional thought at a personal risk to themselves. And their careers, but they went against it and they silently for that battle at the back end till the time was right and they were able to do what they went on to do. And the time may never have come in the lives may have seemed futile if things didn't change. And what I often wonder about it is why? Because again, 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 the departments that if people look after a certain narrow definition of self-interest, then you go with the prevailing wind that there's a status quo bias, why rock the boat. Having said that while people respond to incentives, they respond to different kinds of incentives and there are subtler incentives in play here. So I therefore am always very curious about trying to get a sense of what is driving these people. Whereas a purpose coming from, I understand you. You are sitting in America when 91 happens and then you come back and it's a brave, exciting time, but it's already happened. You're on the way. You're just joining the party. When these people are there, there is no party. They could die alone to take the metaphor too far. And yet they do it. So you are absolutely right. What I'm describing as these three people are of course created by that larger community. So there was a community of thinkers, of economists, of civil servants, who were all with each other. And I think that they created the peer pressure 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 and they managed to keep the ship moving forward. Through the great years when India was making progress, this is the machinery through which it happened. So there is no way to think of this story without going upstream to the Montec Alu Alia and the Shankar Acharya and the Ashok Desai at the Ministry of Finance to Manman Singh being a Prime Minister, to Narasimharaw being a Prime Minister. All this is a political superstructure which created the conditions where these appointments took place. Otherwise there would be no Bhaway and Arach Patil and Raveen Arain in these critical positions. And the story goes further back to the 1960s when Manmohan is meeting Montec at the World Bank and Singh was come back to India. So all these people are the network which led to this external manifestation of projects like NSC and Sabi and NSDL and all that. It ultimately comes from one coherent community and the tools of power that lie at the Ministry of Finance. And for example, we know that many years later that those same tools were used in very different ways. The New Delhi started bringing a very different breed of people into Indian Finance and New Delhi hurled agencies against these organizations. So in that age 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 of course that's what Delhi will do. Meaning you know 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 you know we've had a procession of great people in this field through those years. And only you know you don't know what you've got till it's gone. And it's only later on you understand that no, you're New Delhi capable of being perfectly perverse and actually you know 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 into this community 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 from the show notes which if you're a new listener, I hope you're not. You should be listening to which is you know we did a great episode of the 91 reforms. I've got episodes with Monte Carlo Alia, KP Krishna and that touch on all of these. And of course episode 28 of everything is everything the reformers. A meta question I want to ask now is about finance itself that I think there is a danger here when we talk about the financial system and the reforms and all that to commit the curse of knowledge. I'm assuming that many listeners of the show into a large extent even me don't really and whatever I've learnt in fact about the Indian financial system. I've learnt only through you and through us masses. So break it down to me as a famine kindergarten as to you know what do you what you mean when you say that finance occupies the commanding heights. What does it mean? Why? Why is that so critical? We've done an episode in the scene and the unseen and exactly this a few years ago and that was your first episode with me. We've spoken about it and everything is everything in this very good episode. But describe it to me that a you know what is the importance of finance in an economy and especially why in that post 91 period. You know why it became even more critical to bring India into the modern age as far as for finance was concerned. Let's focus on the non financial sector which is of course the bulk of every economy. The financial sector can be like you know 10% of GDP 90% of GDP is non financial. So the resource allocation problem is how will you allocate capital between different industries and different firms. Okay. In the old world the central planner did that. So a planning commission would decide that we shall have steel factories or a planning commission would decide that. at ah. 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 of industrial policy and this was done as a part of central planning. They decided this industry is good, this industry is bad. I think, Jagatish Bhagwati's book, Indian Transition 1993 tells a story where the planners decided that it is immoral to use aluminum for the purpose of making cans of soft drinks. So, that was banned. So, they have decided that aluminum is a rare thing, is a precious thing. It can be used to make the hull of a laptop, but it cannot be used to make the hull of a soft-ring can. So, this is the world of central planning. Very well, we are at the collapse of the Soviet Union in 1989. We have understood that this central planning stuff doesn't work. Sadly, we are standing in 2024 and we know that most people in the Indian state have not yet got the memo, but let it be. And we are standing in 1991 where more people have got the memo that central planning does not work. And we are trying to imagine a world without a central planner. So, we want to think of what is that world without you? And the answer is it is 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 is wealth maximizing. The person is going to build a business, is going to build a factory where they feel that putting in 100 rupees of capital will generate more wealth. How does that happen? That happens by looking at the valuation on the stock market. So, imagine if the price to book ratio of a cement company is 5, what that means is that I am going to put in 100 rupees of equity capital 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, "Oh, I could do that." That's Wall Street, Telling Main Street, what to do. It is showing them that price to book ratios. And 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, Vipro needs to go out of vegetable oils into software. Okay. So, chase the high price to books. This is how people think. Or similarly, imagine you want to be a startup person. What is a startup person looking to do? Is he looking to build a company, run it for 5 years and sell it. Sell it for what kind of valuation based on market peers? So, you look at the valuation of the companies available today. And you think that you know this kind of company, these kinds of healthcare companies have a very good valuation. And I have the ability to manufacture such a healthcare company within the short period of 5 years. So, that is the nature of the startup that I should do. And then we come away from the industry to the person. Okay. So, person X1 is famous for being a crook and defaulting on every project that they have done. 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. Find do it. 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. It is not a trivial matter to raise money. It is feasible. But you will be asked 20 questions. And that's 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 and industries. Every day this free information comes out in the newspaper. So, the price to book of firms and industries is the public good that is made by the financial system. The entire huffing and puffing and the frenzy of the speculative drama of the financial system results in one public good. And the public good is a daily valuation measure. The price to book ratio of every company of every industry comes out into the newspaper. And then every business guy looks at this and wonders, oh, I could do that. So, the great rush of every term they can carry coming up with a software company in India. How did that happen? The info system 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. Why don't we try? Let's put in 100 rupees and try to build us off a company. And if it works, the market will reward us handsomely. And if it fails, it fails. But that is the machine of capitalism. So, this is the sense in which with the decline of the central planning system, you need its supplementation by the system of financial markets. That finance is the brain of the economy. But finance is not a sterile back box. Finance is institutions is human beings is vast sums of money is the pressures of corruption is all the wrong people wanting to get their hands on the steering wheel and to get the money. 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 almost to some people seems disconnected from the real world. It seems like a casino 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, people will point to is they will say, look our economy is growing badly. We know that 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 their explanation and say, you want to do the easing in the US created easy money coming in and that flooded our stock markets. And yeah, there is no link between the there's no direct necessary link between stock markets and real markets, etc. 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 lifelike of everything. It is YV scale. It is responsible for so much of human progress and unseen ways. 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 where their mouth is. So you and I talk to each other. We say, oh, AI great. Oh, AI bullshit fine. We'll talk about it. We'll argue about it. The speculator is going and putting a bet on the Nvidia stock. 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 or if you think no, 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 speculating forecasting the future and not being content with idle chai conversations but putting their money where they mouth it mouth is. So there is a dead intent there. Another way to think about this is that the large profits and losses from financials, speculation in the hands of professional investors gives them the incentives to spend money on gathering information and making forecasts. So that is another way to think about the finance commission that we have replaced the thinkers of the planning commission and the industry ministry with a distributed self organizing system of thinkers. Where people are putting resources into obtaining data, obtaining information, creating expertise, buying expertise, forming views about the world, forming forecasts about the world and not just as idle speculation but putting them money where their mouth is. They are incentivized to think about the future in a way that officials in a ministry of industry are fundamentally not incentivized. So that is why when anybody says industrial policy, I think that, "Oh, so you mean some official in the ministry of industry is going to decide that electric vehicles good and green hydrogen bad, but how will they achieve that information? How will they achieve that analysis? And most important, what skin do they have in this game? The industrial policy approach has none of the three. There is a lack of information, there is a lack of expertise and there is a lack of skin. Speculation in financial markets on the other hand has all the three. That the people who are playing are looking at green energy, they are looking at EVs. They are 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 would be making vast amounts of money. And if you were wrong, you would lose money. So that's the role of finance and I think it is great. The great tragedy of my life and you are completely aware of this is that five years ago I would have said Nvidia is going awesome because I have always been an AI optimist. And if I was investing five years ago, I would have put a lot of money on Nvidia. And I simply didn't because I am just a Bengali lazy guy and I made no investments. investments and I'm looking forward to you helping me kind of plan my finances now. little there is of it. I people should get a sophisticated sense of personal finance, 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, often a cliched image which will come up for it. If you look at stock images and get 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 that deeply exciting because what is happening is it's not numbers going up and down on a green screen. It is a marketplace of ideas. It is conversations. These are real people talking to each other. I think Nvidia is good. No, I think it's bad. I think EVs will do this. I think this EV company is good. I think that one is a fraud, etc. etc. And it is through these conversations that we arrive at the most sophisticated version possible of the truth, which no bureaucrat sitting in some industrial policy ministry can ever come up with. In this, I want to say one more thing that all of us should repeat to ourselves every morning. 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. So the bar is not that 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 is working imperfectly if it makes mistakes or if it is vulnerable to human frailty. Because we only have humans around here. So far on this planet, we haven't found any demigods. So what are you going to do? Okay, you want some officials to do this stuff? No. Now take me into what the Indian financial system looked like at that time. Like you already painted the image of you know, trucks full of shared certificates and paper going from place to place. So what did the system look like and what were the ways in which it interfaced with the state? Because you know, in our most recent episode of everything is everything EPSIX-REATE. You know, you've spoken about how when you think about it, the state has a monopoly on violence and monopoly on coercion. It parcels out aspects of this monopoly to different agencies. And to do that, the ideal way to do it is you create contracts which control the principle agency agent problem, which you know, make those agencies accountable for the limited amount of coercion that is pass it out to them. So there are really two pieces of the puzzle. One is what does the financial system look like and be 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 what does it look like 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 where everything comes. Okay. So what you need is for the exchange to work properly. What does working properly constitute? Working properly means 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. A 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. Okay. 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 front line of supervision where it has to enforce against market power in the trading process. Okay. So 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're close to the action and governments are far away. So the exchange has to be the front line 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. As recently as 1992, what we had was a crisis at the Bombay Stock Exchange where there was a payment failure and the exchange closed on for some three weeks or something. It was the Harchad Metha scandal where the prices were manipulated. There was the malpractice on trading 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 is even good for them 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 millionfold as it did in the following years. I was a fool then 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 Koshian bargan 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 you know it would be so great if private action would have gone after these problems but it didn't 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 who said you know what we can build a new exchange and that 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 may be having a little bit of a public ownership and a public effort in promoting a new exchange would be a good thing. So they put down 49% of private, sorry 49% of public shareholding by public sector organizations 51% shareholding by private financial firms and created the NSE 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 inside 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 Chawan 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 all over India 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 a 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 the trade took place so their entire abuse of customers was eliminated. Then comes problem number three about enforcement against market manipulation. So 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 not the brokers. 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 otherwise at the BSE 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 they put an end to the problems of the physical paper and truck loads of paper. So this was the result. 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. Okay. The people from the whole country and the world now came to the NSE 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. You know 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. So just in those terms, it just, you know, enormously path-breaking and what's your personal journey during this time? Like 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 you know, we got to meet people regularly. So Ravi Narayan, R.H. Patil, Chitra, Ramakrishna, Ashish Chawan, Raghavan Putra and these are all great people and we got to meet them. We were self-appointed busy bodies. We would keep getting ideas and you know, 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, you know, 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 Sabi 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 got to talking 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 or can you do better? 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 of exchange trading which was now happening at NSNA 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 NSC 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. And so for example why should there be 50 companies in NSC? We first went back to NSC 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 RH Partils had shut up it will be 50 and it's got to stay 50s 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 work closely with Ashish Chauhan and others in NSC on this and in those days the computers were incredibly primitive between Susan and me we had one tiny Toshiba laptop because you couldn't have for 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 so 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 so 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 they would figure out what is the list of the firms that should be in the index they would work out rules for the they would apply the rules for index inclusion index deletion compute the index the whole works 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 you know 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 that the professionals moved out to the nifty and that was pretty cool so in the benefit of 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 and replicate it 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 so what would you do how would you exploit the opportunities of this new information set so that that is the delight of life to think from scratch and figure out stuff so in a sense nifty were is it fair to say that it was the most advanced index in the world given the data sets and 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 that 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 in through that yeah this was pretty neat and clever and what I also find interesting is that typically when people 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 no we don't want it this is our service yeah so we just handed over the IP to NSE saying you know we are only here to do it for the pleasure of doing it yeah and amazing you said two stories what's the second one the first system 50 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 right then Susan was repeatedly writing LATIC files do you know LATIC it's a type setting system I've heard about it from you I think you mentioned it during our unique episode yeah 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 LATIC so you don't have to write NSE 50 and so you know NSE is a small the NSE is a small cap so it has to be typeset as a small caps - 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-50 because that was just in the type setting of the LATIC 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 moving on yeah the second fun story I want to tell is about risk management when you do a derivative 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 okay and this has been known since the 19th century when future trading first began so I described the institution of the clearing corporation but that begs the next question how is a clearing corporation going to be safe okay there's a clearing corporation will rapidly run out of capital and go bankrupt and then suddenly you have a big mess so this brings a 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 okay 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 forfated and that 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 a 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 Raveenara and Greenlighted the idea that we should build a proof of concept inside IGIDR. So we worked with a bunch of old PCs and students and did some cool computer engineering and built 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 and was there like what were the new challenges that you were kind of falling in love with and 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 whether it's sebi and nse and your building nifty your building prism you're doing all of this you're engrossed in that but this is not only where 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 a Indian states 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 okay 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 operation 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 okay 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 they were working and see this this involves problems of the old india there were 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 were 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 nse succeeded then a lot of people got really unhappy about the next stage which was derivative trading I think in their hearts everybody knew from the western data that basically the big game was derivative trading that derivative trading was going to dwarf the working of the equity market and so that unfortunately turned into a big flashpoint and for years and years it just got stuck so in march 1996 the nifty was launched and in 1996 the clearing operation was launched so in my opinion in 1997 you were ready to go okay like there was really no reason to deal I mean I know prison was not ready but fundamentally you were ready to go with derivative trading in 1997 but a whole bunch of people were very unhappy and there was political economy there were rival views 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 bomb based stock exchange and a 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 derivative 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 derivative trading and you know unfortunately it took 18 months when it could have been done in march but there was a lot of conflict there by the way you may have heard me mention the name Percy mystery Percy mystery is a remarkable Indian guy he is a Percy 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 Montyk and Rakesh Mohan and so on so Percy was one of the members of the LC Gupta committee and so I was a member Percy was a member 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 derivative trading but still after that the years went by and it didn't get done 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 Parik accusations and at that time finally came the impetus to move forward with the derivative trading and I seem to remember the nifty futures trading started on the 12th of June 2000 so you know potentially what could have been done in 1997 got done in 2000 now now that I'm all wise and grown up I think wow that is pretty good but at the time I was very can't I guess I was very unhappy why I be spending years and years just not moving and I was extremely unhappy about all those events but that's okay now now that I'm older I think that's fine what is derivative trading and why is it important you are a speculator you believe NVIDIA is good okay now that 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 derivative trading so derivative 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 derivative trading helps put more power with the people who have more brains and less money so what were the debates around it like 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 you know how did eventually 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 derivative trading the firms that plane 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 information game 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. So when you have derivative trading, the prices become more informative. That's it. 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, right? I could be pretty Marxist in this. Hmm, that's a thought. The Marxist case for derivative trading. I think you should ask J.P.T. to write an essay on this. I would prefer it if you wrote it as a, we don't want to add J.P.T. to write anything up the cert, these are. See, J.P.T. 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. J.P.T. depends on an LLM which follows Georgian's law of 95% of everything is crap. So somehow the train 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 derivative 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 to 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. You make mistakes. 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 would be an earthquake 15 minutes from now and you and me will be thinking, why were we so stupid to sit here and be recording? And so on. 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. Is it perfect? No. It will make mistakes. And it's churning burns up many people. But hey, it's voluntary. If you don't want to run the risk of being burned up, don't play. It's a voluntary decision. Freedom includes 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 capitalists and the businessman decides to build new companies. Prices, information, incentives, what is not to love. We shall also link to 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. This one I want to ask you about IG idea which is of course Indra Gandhi University which is in Bombay, where you were based during this period. So what was that like like what was your arrangement with them what kind of working atmosphere was it as an institution what was it like for you? IG idea was built by Kirith Parik. It is funded by the Reserve Bank and Kirith Parik 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 he supported that and it was a remarkable environment. IG idea 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. We would do a 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 IG idea 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 Kirid Parik that leadership like Kirid Parik 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 IG idea and it was working well and you know everybody was chilled 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 you know public intellectuals in India and this was happy and comfortable and supported by the management and the board of the organization. You mentioned earlier that one of the things that may have worked in your dad's favour or maybe underscored his iconoclasm was ready wasn't in Delhi he was in Bombay he was far away 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 years 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 the spirit 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 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 is which is 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 finances like if you're going to do financial markets then Bombay is the place that that ecosystem is here the culture is here the knowledge is here 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 left some people shouting people make losses doing derivative trading there's no genuine understanding of derivative trading in Delhi so that's a deeper problem so if you want to do finance you should 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 by the rivers are if you're going to do financial markets you have to be in Bombay is 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 so you just said that There was no understanding of derivative stating 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 intellectual during this time. 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 a 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 and you basically want because the demand end is what rules it politicians will immediately give the demand and what they want 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. It's coming from Delhi you assume that okay now we've gone upon the path that will always be there and boom look where we are today equally you know when it comes to IGIDR you said oh you know I've assumed that this is how things are going to be and Kirith Parik 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 the shit for granted that maybe and this is a question I post to Krishna and he you know didn't agree with my thesis but my thesis is all these great reformers we celebrate our outliers in a sense event against a 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 one to for 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 next year you'll. So here's a list of thoughts on this problem so there was a policy community to persuade we did that okay 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 that because all in all in the thinking and debating part of the policy community the case was made 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 trade does and on day one there are none and then this is a chicken and egg if you're very few derivatives trade does 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 trade does 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 brown here we are amplifying your brown but this needed to be done all over the country so NSE built a large number of these kinds of little teaching arrangements all over the country 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 she's the young woman from IIT couple of years my junior four years my junior and she was in CNBC so she had this idea 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 day after day on CNBC do they exist anywhere I don't know where they are we got to do everything is everything episodes in this verse mega episode on derivatives trading coming up so this just turned it into a very mass thing where lots of people got exposure there what's the futures 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 individuals incentives are aligned the customers incentives are aligned the firms incentives are aligned these were all just the kind of arguments that one had to deal with and so at the time we were part of building a what was then a very novel thing which was an electronic testing system where on weekends at nsc 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 isn't out yet it's out two weeks from now but still there is an episode coming everything is everything on competitive exams and in that I think I mentioned this a bit so show one mixture of built implementation and we participated in the concepts and the design and the curriculum shama for nandes was part of this work so that's how there was this push on and 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 and it takes off then you're done it's gold because then it's an network effect it feeds on itself that one-straiding works then more people want to come in and join the party 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 has been dispersed and there is no replacement inside 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 that financial markets 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 NSE and some of the people at the periphery like Susan and me where you know for years and years this was just a labor of love of building this whole thing and you know that's 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 to talk about pensions you know we have a long episode on pensions in the scene in the unseen which came out I think a year and a half ago or a year 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 pensions scheme the NPS and we wouldn't go into it in much depth I'll ask listeners to just either listen to the scene on scene episode of the very least 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 pithyrs way possible and it's quite clear 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're working with the NSE and all you had built nifty 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 that was pensions there was a conference in Goa organized jointly between the world bank and the Ministry of Finance on finance no or was it broader I don't remember Jim Hanson of the world bank organized a conference at Goa and there were a bunch of people there at that conference Shankar Acharya who was the enchantee economic advisor had suggested to Jim Hanson that we should invite a person named Anand Baudia who was then the joint secretary at the Ministry of Social Justice and Empowerment MSGE and Anand Baudia 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 so that's how I got connected to Anand Baudia Anand Baudia 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 in a community way it's not a one person thing many many people are required. Look at equity market work where we have 20, 30, super brilliant people across many, many organizations at MOF, at SEBI, at NSC and in academics. This four-way partnership is required to make financial policy work. That you need people at NSC, you need people at SEBI, you need people in the Ministry of Finance, you need people in academics, they all need to be intellectually capable. They need to have principles, values, philosophy, argue with each other, disagree in public, write newspaper articles attacking each other and that's how you get progress. So I said it has to be a more of a community project and then Anand Bhadriya worked with Kautam Bhadavach to pull together a project where Surendra Dave was at the leadership of this, again coming from his history and capability of UTI and SEBI. He was the right person to think about pension funds and their regulation is 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 as were several others and in this basically Dave invented the problem statement that what you want is a frictionless low-cost fund mechanism where we get the glories of investment in equities and the long-term performance of equities without bringing in the transactions costs and the fees and expenses of conventional fund management and we participated in the design of that new system which is called the new pension system and so that is something that began in 1999 or rather the Oasis committee was complete report was completed in 1999. I think that conference in Goa was 1998 and that is how the work on pension reforms began and we'll come back to this in my years about MOF but also I think we've fully talked about that story about how the dispersing a community works badly because then you're left with no replacement. 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? The old pension system was for only civil servants which are probably 2% or 3% of the overall workforce and I'm jumping around on time meaning we did not know this at the time numerically we knew it instinctively. In 2003 we understood that the implicit pension debt commensurate with the burden of the old pension system with a 50% guarantee was about 70% of GDP. 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. For the people so far there was the EPF4 which had some bad programs so that was the idea of project voices and the design of the new pension system that can you design an intellectually sound pension system which can work for the great unorganized sector which can become a engine for the reforms of the EPF4 which can become a replacement for the civil service pension so that was the NPS. Now in the event it got used for civil servants not for military folk many twists and turns but that was a principle that used 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 out everything is everything episode and listen to a scene on scene episode on on pensions but to quickly kind of wrap it up that when pensions first began it was you know in the 19th century a voluntary way of younger people to thank the older guys who were retired who retired at 70 who would probably you know given life expectancy not survive too long and it was a lot of people contributing a little bit of money for a few people who wouldn't be around for too long then Bismarck came along and he you know made it something mandated by the state 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 whose life expectancy again wasn't so great back then but over time what happened is that you know that pyramid structure in terms of age became more of a cylinder where you had fewer and fewer younger people supporting more and more older people and you know that kind of coercion certain to effect and then over time there came these two new claims that seem entirely reasonable one is that you link the pension that people are getting to inflation because hey you know the cost of living is going up that's only fair and two that you link it to current wages of somebody who is in that position which the person retired on and all of it sounds reasonable till you realize that it is a massive fiscal burden and like you said you know over here the implicit pension that would have you know led to say amounted to 68% of GDP so it was complete not something had to be done and the genius of the NPS is that you are no longer coercing you know Paul to pay for Peter you are coercing Paul to pay something for his own future pension but it is his own money and you are doing it in such a way that he has a choice of ways to invest it and it allows him equity investment which has much better returns over the long term and we've discussed it in you know detail in those two episodes so I won't kind of go more into it over there as we come up kind of a political hot potato tell me also about you know what were you doing apart from the economics during this time apart from the economics and the policy you know because you again in your US years you were deeply into music you fell in love with Roos Springsteen and said we have an episode in Roos Springsteen that showcases your passion on the boss as it were and so on and so forth so what is Ajay Shah outside of this wang wang kiri there was a cat a cat adopted my mother and my mother had diabetes and bad feet so Susan and I took the cat home and she changed our lives so that was just an amazing experience that she was a small cat and I was with her through her and the rest of her entire life and that was a great thing there were young people Susan's younger sister Sujah Thomas Viral Shah the person who went into UID AI and later built Julia Vikram Agarwal who is now in the Germany project at Google okay these people just were in the house all the time and that was my human community in the later part of that reno kasaane showed up at the house and so that's my human world there we had the PhD students so that was the life at ijidr with a cat and a bunch of young adults who were both PhD students and reno kha Viral Vikram and Sujah and it was a simple happy life I can it was actually extremely hard working this period so we had very little by way of stuff and I told you in the early years we Susan and I had only one computer because we couldn't afford to buy two laptops and we worked very very very hard we wrote all the code ourselves which is rotary dickulous amounts of code in all this work and we just built it ourselves and that that was the time when the platforms also were not so great so writing code was hard I seem to remember my first versions of the code for nifty were it an in pearl and I don't recommend that to anybody it is not fun writing a lot of pearl but at the time I was fluent in pearl so it was a extremely hard working period I was not doing a whole lot show them Mishra built fabulous loudspeakers for me in the house 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 that was very high I have similar levels of intensity actually going on in for many years life really changed later and we'll talk about it there's a friend of mine who runs a bank and he told me recently and he almost had up he got very sentimental about it that when he was in his 20s there was some people he worked with he named who were much much older than him and he was in his 20s and they had no reason to take him seriously they should have treated him like an intern but they took him seriously they invited him into a lot of discussions and because of that his career went really fast and he moved and my friend was sort of sentimental about it because he said at the time I didn't think of it 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 I find in myself which I try to correct it is that I don't spend so much time with young people and you know paying it back as it were and in your story not just during this episode but even otherwise your story is full of a couple of elements and one of those elements is that there are all these older people who took you under their wing who were extremely kind to you people like Bhave people like you know the way people just so many Kharat Parikh all of these older people who had no real reason to take you seriously they could have been sanctimonious they could have been patronizing you know they could have patty on the back from a distance but so many people almost mentored you and cared about you and I have seen you do the same with others constantly you know and I am of course the kind of extreme introvert who goes with Sathra statement hell is other people right and I understand at an intellectual level that one must be kind and one must You know, nurture people and I'm also coming to that sort of belief that it is super important to have friends We're much older than you and much younger than you and both of us have, you know much younger friends Or you have many more than me. So tell me about how your philosophy towards people evolved was it always like this in the sense Was your dad perhaps like that? Or is it something that you had to actually think about because it is really not natural For people of our age say to be hanging out with people who are 20 and be completely natural with them and yet I see that you have so many friends who are much younger so many friends who are much older so much kindness shown towards you like Is it does it then become something internalized within you that I must also be kind to people or does it take an act of Intentionality where you think about what is a good way to live in the world and you figure out that this is one good way Invest in people I never thought about it formally meaning now in hindsight I can describe this and call it a philosophy but you know when Vikram Agarwal and Viral Shah and Renuka Sane showed up it was never a question about how to behave it just felt like You know to be good is to Stir their minds and show them ideas and Proposed mad things that can be done and they jumped to it With all their heart and passion so that's basically all I ask that Young people should be going at life. I get tired of cynical people of bored people, you know, so that pose of I'm a cool bored person is the most Boring thing in the world for me and then I'm not interested so similarly I've had lots of students and when I understand that what the student is after is that grade is that diploma Then I lose interest because that's not interesting whereas if the Heart and mind of the person is in the journey of knowledge and ideas then I just feel Attracted and obliged to participate and help and It always works well because it is so interesting to look at the world and look I carry the stories of the 20th century so I often say to young people today now that I'm really old I say I'm your time traveler from the 20th century. I am the old foggy like hell when I was born It's just like India's Independence from the British had just barely happened and the second world war was barely finished and the buildings had not yet been rebuilt in London and Berlin okay, I come from that world and That's something unique and wonderful and now that we are in a quarter of the way into the 21st century I now understand that the lessons of the 20th century are something wonderful and important and precious that I think we got some Knowledge from that period which is really great and it's good to be able to pass it on You bring them the lessons of the 20th century 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 So my final question before we you know break for the day and reconvene tomorrow is about cats right to me I've always from I've never had pets but from a distance I've always really like dogs because they are warm and fuzzy and they give you unconditional love cats are fucking sociopaths right So tell me a little bit about falling in love with the cat and then having so many of them You've had so many cats over the days. So just tell me that what's the deal there? So the first one was because she chose my mother Okay, and we were only helping that you know my mother's feet were not good. So we took her from Bandara to Gauriga Thinking that we are helping my mother and we had no interest in the cat. That was the theory Okay, within two days 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 then Every now and then there will be cats in great distress and you will feel morally obliged that you have to help them So that is the nature of how it went and that's how there were more and more cats So there was a friend cat not a pet cat a friend cat who chose to come up the stairs at ijr and give birth to a little and then go off and die Okay, now what are you gonna do? You know you have to take in that little like Decently demands that you have to take in that little things like that. So just cats kept happening to us 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 you have to learn to love unconditionally and Cats are the right vehicle to learn that 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 to shower affection And if you're not interested too bad, it's your loss. So cats are the best education on being a full human being because they teach you How to do unconditional love another thing I learned from cats is that I watched the entire lifespan of My first cat pooch and many other cats 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 Knowledge inducing it made me think about the human lifespan the human lifespan is so long We don't observe it enough. Okay, like you and I are aging, but we barely perceive it in us because it's all happening Slowly and we don't understand it as it is happening whereas For me observing cats was a journey of going from being an infant to being old in a finite number of years And I got to observe all those things and it helped me to think about what it means to you know, we are here We do we go it's finite and it is all we have That's a beautiful sentiment, but do cats love you? I think yes On that note until tomorrow Many of the things 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 that we need to make the most of ourselves in this world I learned my lessons when life happened to me and I happened to be paying attention for many years now I've 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 stuff so we created life lessons which you can check out at life lessons.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 the 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 meetups once a year Basically, while we've always been sharing what we have learned in a piecemeal way in our show and our writings here and there diffused This is an effort to synthesize our knowledge for you So please head on over to check out life lessons at life lessons.co.in Never stop learning Welcome back to the scene in the unseen a whole day has passed but hopefully for you just a few seconds Ajay and I took an overnight break and now we are on 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 grow up in bandwraised You then move on to IT then you go to the US you do your PhD you get your credentials as it were Then you come back and you are you know working in finance over here doing incredibly exciting things like you know NSC, Nifty, Prism, all of that, the pensions reform What takes you to Delhi? So there was a context of a financial crisis I had mentioned it short while ago that there was a collapse of the Calcutta stock exchange There was a funding crisis inside the UTI 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 the financial crisis 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 D.A. Rakesh Mohan was the Chief Economic Advisor Yashvan Sinha was the Finance Minister, Jai Mene Bhagwati was the Joint Secretary Capital Market So these were conversations between them I'm sure And one fine day I got a call on Thursday from Rakesh Mohan saying that We're thinking do you want to work at the Ministry of Finance? I said yeah potentially I could, what are you thinking? How would it work? He said come here tomorrow So on Friday I flew to Delhi and on Monday I had the appointment later So that's how I landed up as an employee 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 it doing the gritty institution building type work. So, you know, what I described to you, the nation building of the equity market, I am convinced that 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. I don't need to do other things, but suddenly this came along, and also there was a context of that financial crisis. 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, the problems of UTI, and also to come and be part of the Ministry of Finance. It was a age where there was much more of lateral entry by economists into the Ministry of Finance. Okay, so that has kind of died down in the following years, but I was one out of a long tradition of many, many people. 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 inside the Ministry. 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 G-Gental readers who have never contemplated a government file in its good years, that is, before the Right to Information Act, in its good years, a government file was a deep complex brainstorming and debate done in writing. Okay, so imagine we can mean again and again, and we do many complex arguments face to face. But imagine now I'm telling you that we're never allowed to meet. So, now imagine a series of arguments conducted in handwriting or type written notes that are put together. 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, the decision is made, 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 are a delight. They are beautiful, wonderful people, they're great people. I learned to love the people. And, you know, having the luxury, the opportunity, of reading the handwritten file, notings of people like Monte Carlo, Alia and Shankaracharya, it is just a delight. I've got to read the file debates between Rangarajan and Shankaracharya and Monte Carlo, on capital account, decontrol, spoiler alert. Rangarajan was the one advocating more decontrol and the MOF folks were saying, "No, no, no, we have to be very careful." So, all these are written down. The argument is done in writing. So, imagine the absence of physical meetings, because these are institutions derived from British India, where, for all you know, the winter capital is in Shimla, and there is a debate going on with the collector of Alabad. And the way it works 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 a decision process, and it is stored for posterity, because you can always open it up and wonder who did what and why. All this was spoiled 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, which is a pity. Anyway, I learned how to read files. Monumental cluelessness, I did not know what is law. I had no idea. So, Kalkar and Shah is the book that I recommend for every aspiring public policy person to get your basics right, that what is a law? In what ways is the law, the code, their authorizes state coercion, and that contains the rules through which you overcome public choice theory problems, that basic stuff. If somebody had told me a para or two of this kind of language, I would have got it in a flash, and I just didn't know, and it took me a very long time to understand basics, 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 contract act that interfered with the working of the derivatives market, and it was part of the drafting of a section that overcame that, but it was like a people involvement into one section of law, rather than a conceptual first principle understanding of what is law, what is a constitution? What do you write? That is not ultra-virus, the constitution. How do laws interact with each other? What is a bill? What is an amendment? All these things I did not know. So, I was very clueless when I showed up at Moff. What I knew was what I knew, which was finance. I also had a deep set of human relationships in Bombay, which was a great asset, because the folks in Delhi do not know Bombay. 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, and did not know it then, of course. In the paradox of power is the idea, which is also used in Kalkaran Shah, which is that the more power you accumulate, the more you lose your cognitive ability to parse the world, because everybody starts lying to you. - Wow. - So, like imagine, you're 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 will suck up to you and try to influence your worldview to make you write things that are good for them. So, they will butter you up, just day after day, 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 for one minute that would be good for their self-interest. And the better finance ministers know this, and then what they, one aspect in which they respond is a generalized cynicism, which is also equally harmful. If you will not listen to people, where will you learn? So, I understood it is so difficult to be in ministry of finance and have a sense of the world. So, more generally, to be in a government organization, to be powerful, to be a billionaire, all these things are occurs, because then suddenly everybody is lying to you, and this was all new to me, I did not understood it. - Is this your formulation of the paradox, Pa? - I think it is from other people, but so here's the beautiful sentence that I got from somebody else, I'm not able to recall. The further away you are from power, the more clearly you see. It's, I think it's a beautiful pithy formulation that I stole from somebody. - In fact, I think one of Taksashi-Los, the collections of columns is called Distance from Delhi, which I think is, you know, says a lot. - I mean, there is a different problem of the culture of Delhi, which is all about proximity to power, but here I'm after something far more visceral that at the Ministry of Finance, I saw the problem of seeing like a state. How do you see when you are a state? How do you see when the smartest people of the world are organizing themselves to make sure you do not see? And I came in with very strong human networks in Bombay, where at least in that little zone of my previous years, I had access to good knowledge, because I had no power, so people would talk to me openly and honestly. And also, I think that there was, there were the human relationships whereby, through the MOF years, people would speak to me, honestly, candidly, and I would know what is actually going on on the ground. 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 Minister of Finance in Delhi tends to be filtered through RBI and SEBI, but it is elementary to understand that they have their own self-interest. So actually knowing what is happening in the Indian financial system is very different from the institutional views and self-interest 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 with firms and players and real people. So I felt that that was one of the pieces of value that I brought into the Ministry. And I stayed for four years totally. I was very privileged. That was an age when there was no partisanship. It didn't matter 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 frogs to do economics properly. Otherwise, you will endangere the fate of the country. And it was a great environment where nobody asked you ideological litmus test questions. So I was hired by Yashwansina. And I worked closely with him. And I admire him immensely. He is a great man. I cannot tell you how much I respect his knowledge, his infinite database. Like I used to think that I know a lot and I have memorized a lot. And I realized that this guy's 20x of me, that his lifetime of experience was rich. And he had that same kind of memory that he was. basically remembered everything. He knew in this year this happened in this file that is this story. It's just it is incredible the level of knowledge. Then also the level of hard work. I watched him work essentially 11 hours a day. And by the way, in when you're a finance minister, 11 hours a day 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 of being there for mind blowing important half hour meetings where you have to make decisions that really matter. And then okay, it's done. And now we're going into a next deep dive into something completely different. That is the challenge 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. And in those years, the minister 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 minister finance, all the departments put together. There are basically about 20 people who do the everything. 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 of the institution. Then I stayed when just one thing became finance minister. And when just one thing was finance, minister Kailkar 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 just one thing directly. I worked with Narayan. I worked with Kailkar. And it was absolutely great. Both great leaders, outstanding people, amazing brain power, amazing human capabilities, just an absolutely charmed life for the ministry of finance. Germany, Bhagwati moved on. UK Sinar replaced him as joint secretary capital markets. And you know, it was all great. And then S Narayan moved as secretary to the prime minister into the PMO, just across the road. Yes, once in a while was external affairs minister. So that was my life that I would regularly run up and down between the PM's office where S Narayan had his office. And the ministry of finance where Kailkar had his office. And I got to be part of the thinking process on lots of things. And then just one thing 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 that in a way, this was known to everybody. But he said we got to fix this. His genius was that he had a strategic view that he was always pushing the words in meetings. We have to think for 25 years just again and again. It was his amazing ability. So I remember once Rakesh Mohan and I went to meet him and we had finished some batch of mundane stuff. You sort of at the closing stages of the entire UTI crisis and the Kailkar Tastok exchange crisis and the BSE crisis and he sort of asked us, so what are you thinking of next? Okay, we finished all this, this chapter is closed. Now what are you guys thinking of next? And we kind of looked at each other because we'd actually not gone with a prepared mind. And he said that India is doing well in IT. IT is about brain power. Then India can do finance because finance is about brain power. And in 25 years India can compete with the UK. Bombay can compete with London. What would we need to do to set course for that? Okay, just imagine that level of brain power that he started us 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 in 25 years. And yes, it will require a hundred difficult things. But let's figure it out and let's get going and who could have predicted that India would be an IT superpower. Okay, 25 years ago we were just like a stupid third world country, but it happened. So, you know, why should we begin at pessimism? Let us begin at a big dream and that led to the creation of Percy Mysteries, Bombay as an International Financial Center committee and report where these kinds of things were worked out. And it was great because it just put a different slice of knowledge and capability into our system. And the other thing was the FRBM. So, the FRBM act had been passed and then just one thing said, but show me how is it going to work? Why will it work? Just because you pass a law, it doesn't mean you get fiscal responsibility. So, show me the plan. Like, how are you going to implement it? Don't just tell me that the deficit shall go down. Show me the plan. So, a kill curve and Derenc Waroop and some others became a committee on FRBM implementation task force and Arbin Modi and I was staff for that committee. And one main idea that came out of that group was the GST. The GST had previously been proposed by Govindrao and others in previous work in India, but I felt, you know, we had the depth of trying to think it through in considerable detail and also understanding its revenue implications about how it makes a material difference in overcoming the fiscal mess. It creates better tax foundations for the Indian state and you can see in all these things that I started doing were diverging from the trivial game of a nifty futures market. Okay. And that is what the Minister of Finance did to me. So, kill curve always told me right from the start that now that you are Minister of Finance, you can't say that you only do finance. When you are Minister of Finance, you have to do everything. You are, you have to think about the Indian economy, you have to broaden your vision. One small side note, small funny story, there was just an accident that in the first week when I joined the Minister of Finance, I met Bimal Jalan, okay, who was then the Arbiyah Governor and you know, he knew me from before and so he sat with me and I said, I started here, what do you think? He said, you should understand one thing crystal clear, you should understand that you work for the joint secretaries. So, have no illusions 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. They run the shop, it is their signatures on file that make the decisions, your job is to support them. And as long as you watch your human dynamics with the joint secretaries, you will be fine. And I felt like I was doing that merrily, but I took it to heart and that's precisely how my life with the Minister of Finance worked that we had a series of great joint secretaries in the Minister of Finance Pradeep Dev, Jameenib Bhagwati, UK Sina, KP Krishna and you know, I just was able to become their thinker and philosopher and rise to the level where they would do the open ended brainstorming with me rather than being narrow and transactional around a practical office matter. Meaning we do that also. But the real value is that Minister of Finance needs intellectuals, they need the entire world view, they need the full picture and that is what people like us have to bring to that. And I feel that I had a good time in those years doing that. You know, the great CLR James who wrote the classic cricket book beyond the boundary once said, "What do they have cricket know, who only cricket know?" And similarly, I think one could say, "What do they have finance know, who only finance know?" Because everything indeed is everything. I have a couple of small observations and that one, two, three, four big questions, which might be three, if I blend two of them as it were. My first sort of reflection is that what you pointed out about Rakesh Mohan calling you up and saying, "Hey, come to Delhi and then you go there and it's almost one thing." Seems also similar to other stories we've discussed in the past like how Manmohan that tells Monty come back to India or a Manmohan tells Kailkar that come and work with me in the government. And these are heartening stories, a heartening stories of a certain kind of openness that you could easily, you know, what mediocre people do is they will shut out other smart people because that increases their chances of being influential and successful. What great people do is they look for minds greater than themselves. So together you can build a strong intellectual community which is kind of what has happened in many ways. I see that in the things that you do as well. My second observation is I was just coming to that. The Joint Secretary Capital Market was Germany Bhagwati. Now with the benefit of hindsight, I know these things. At the time, I didn't understand what was going on. He was ruling the Roost on Matters of Finance. He was a PhD in finance. He knew finance very well. He worked in World Bank Treasury. He was a local demigod of finance. It could easily be that he became prickly about me. Instead, he opened his arms wide and took me in, unstintingly took me in. He was cripplessly friendly and supportive, opened all information to me, just never hesitated in taking me in as his younger brother and it was so great. And at the time, I kind of took it for granted and now I know, no, it was Germany. It was the largeness of his heart that he had no hang up. He was a completely secure, full human being and he had no friction, he had no awkwardness with me. Whereas, I seem to trigger off all kinds of insecurities in many people. But in this community at the Ministry of Finance, they were just amazing human beings. Yeah, in that, that also. seems like an outlier. I mean, we've discussed this before with both in terms of big-hearted politicians talking to each other and in terms of bureaucrats of this manner. It seems that we don't really have that caliber of people anymore. It ended a while ago. My second observation is about how we understand history. Part of what we need to do in the current world, I think, is understand everything that has come before. I think that's also the first step of knowing a new subject that you understand historical context. And so much of that depends on records. Right? So when you describe the government file, I am thinking that 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 that is lost today. And this is actually perhaps a larger lament because what has happened in this electronic age is that no more will you have the situation of say what Nero did when he was writing letters to chief ministers or people writing down their thoughts while in office writing long letters to each other. And there are two consequences that that doesn't happen that we are communicating more by what SAP and SMS if at all. And one consequence of course is that it becomes harder for historians to figure out exactly what happened and why and it opens the gate to speculation. But the other aspect of it also I think is that it affects the clarity of thought of the people concerned that when you are forcing yourself to write down things and argue with people in writing and you're considering what they have written, I think the quality of thought that comes out is much better than if there are four people around the water cooler trying to discuss something in four minutes where the power dynamics between them may affect what someone says and how she says it. So that's an observation I have to make which is a lament really there's nothing one can do. Historians are the unacknowledged conscious 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 a first draft of history, there is implicit in that something that says that there is a final draft which contains a 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 it's deeply complex and therefore the and we have the small matter that we don't yet have time machines. The small matter but even if we had time machines, even if I can somehow go and my ethereal being without being observed can sit in a meeting where you in your Shun Sena and Germany are talking to each other, I would still miss so much between the lines. The world is deeply complex and history is a necessarily an important simplistic narrative but we want it to be as detailed as possible and this stuff gets in the way. The first of my larger questions is about seeing like a state not the book itself but what it taught you about the state because 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 state see, 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 I can look at that big bureaucratic beast 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 one of my in my next question perhaps on how it works but I'm just interested in how it sees. Modern Manage realism wants to view the joint secretary as a middle manager of a bank, your operating processes, your being efficient and I feel that this misses the essence of what it is to be the monopoly of course a violence in the country. To do public policy is a deeply theoretical project you need to understand the reality and you need to form a theory of how the world works where is the market failure what is the lowest cost to society intervention that can be introduced and then we need to be on that constant feedback loop of doing something figuring did it work did it not work and how I need to change course never a big move cross the river by feeling the stones all this requires that the policymakers 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 and more complex there are things in the world that are not dreamed of in your philosophy so a policy maker also needs to be deeply connected to human beings to get the texture of what is going on and also to get the political economy a policy maker cannot be blind to the political economy it's not just the analytical public economics it is the map of interests of political economy and the coalition formation through which a variety of people are pursuing their own self interest all this is the task of the policy maker in everything that I have described the task in a place like India where the data is weak leads to a greater accent on a more humanities and an ethnographic type knowledge building which requires conversations interest with large numbers of people so in a high-end sense the knowledge is nuggets that are distributed all over the landscape and the policy makers obliged to wander the landscape and create moments of trust and discover that knowledge all too often what happens in a place like the Ministry of Finance is that when private persons show up at the Ministry of Finance it is their incentive to not tell the truth and to gaslight the policy maker and ask for policy actions that work for their own self interest when information comes into a Ministry of Finance that is supplied by government agencies it is public choice theory and the self interest of those agencies those agencies have no interest in Indian national development they only have interest in their own power and their own peace of mind and them not being asked difficult questions so by default the Ministry of Finance collapses into a state of lack of knowledge and if all of us 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 of what it means to be a policy maker in India and combined with you know the paradox of power as you so eloquently put it so I want to describe the life of Yashvan Sinha he had some brilliant ways of working which helped to overcome this so I'll give you one example he asked me that build a group of 10 people from Bombay Finance and we will spend one afternoon with them every month okay so yes recognizing that these people would shade the reality in what they say it's better to meet them and argue with them than not to do it so I built this group and we ran regular meetings just unstructured open and did no agenda conversations because it is important for a Minister of Finance to have a sense of what is happening in the Bombay Financial System and that was pretty cool and you know I was the owner and manager of that project I remember funny stories Rakesh Mohan said to me you're clueless 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 like it's an internal Minister of Finance group why are you so fast you know I was an email type person lots of things would happen by traffic you know write down everything because I promise you parliament questions are going to come on this and indeed they did so several parliament questions came and then I had to pull out all my logs and these were the persons invited these were the meetings that took place these were the matters that were discussed you know in government your life is an open book so that was an interesting little episode of that here's the second thing that Yashvan Senart did that was really brilliant what he would do is that he would read 10 newspapers every morning before coming to office okay his capacity for work was out of the world okay I was a young person I was 35 and he would out hard work me can you imagine my level of energy and strength he worked very very hard anyway so at home he would read 10 papers and so probably there would be 20 opinion pieces in that day okay he would pick 3 4 5 of them the interesting ones the good ones are well argued ones some of which would be critical some of which would not be critical never mind he would run that beauty parade in the morning and he would pick 3 4 5 of the good ones then he would reach the office old technology okay no URLs and all that they would cut the opinion piece and paste it with glue on a piece of white paper and he would send it to the appropriate joint secretary with his signature saying please discuss wow just think of the pressure it put on the joint secretary that you have the best minds in the country out there writing opinion pieces okay very often attacking the government very often criticizing the government and they have no connection with the government see it solves these problems of the lying and the gaslighting and information coming through government agencies who are suffused with public choice theory yeah these are independent people writing into the free press in those days the press was free okay and those articles are thrown into the face of the joint secretary saying please discuss so the poor joint secretary now has to have the level of intellectualism of sparring with those experts and going up meeting the minister saying this is what he's saying and why is he saying it and what do we think and are we wrong and what should we do different. So just think what a simple management idea that a leader should use that reach out to your critics find the people who don't agree find the people who have an end run around the bad information systems that's around the Ministry of Finance and give attention don't just listen to your friends but listen to the people who are criticizing you and in those days my God op-eds were really tough on the government it was a different world it was a free level of freedom that you know we cannot imagine in modern India so these are the kind of things that I saw and I learned and this was my waking up and growing up beyond my narrow foundations of economics into understanding the country and the state. I know what I talk about process how the state does things and I feel that there is sort of an interesting trade off here. You know that can go wrong in either direction and this sort of involves a phrase that we often use a bias for action I think we have finally come to after debating it for many episodes of everything is everything we are finally come to. A compromise that for the individual it is essential to have a bias for action for a state it is terrible and one place where we haven't agreed is for a company what should the case be where I think that you know you should both have it and not have it but having it is actually extremely important in modern times where things move so fast and big companies can get ossified but leaving companies aside talking about the state right I mean at the level of an individual the reason I say it is I've lived experience I mean we've seen everything is everything life lessons it's all bias for action on my part that's how I see it you got to go out there do things learn from them throw things at the wall at the level of state as you pointed out various times that is a terrible terrible mistake you simply have too much power every action had has deep consequences many of them unintended and you cannot act in haste right so there has to be a process and the process also acts as a check and balance on arbitrary power being you know over applied and that process will in the world. All of the things that we love to satirize in our yes minister yes Prime Minister influenced sort of thinking even in a public choice influencing King that O committees will sit and they will order some osars and then on a coming one committee will appoint another committee and they will talk forever and you know term red tape comes because files used to be bound up in red tape and all of that and that's sort of the terrible caricature where everything is held up forever no decision takes place as a status go buyers there are all kinds of into place of power and I think to some extent that is true to some extent that is true and inevitable and not just government but any big organization but government more than any other because it is a biggest and it has monopoly on violence and few checks and balances often becomes like that but the point that you have often made is that no process is super important when done right you know in terms of checks and balances in terms of getting a diversity of views to weigh in on something there by you know in maximizing the chance of overcoming the vacuum of knowledge yeah in places of power by default the further you are way the further you are from power the less you see its corollary the deeper you are near the center of power the blender you are brilliantly put so I want you to take me through that trade off that what are these processes because I am guessing that you have seen every side of both of these you know where a process is an absolute killer and nothing gets done where a process is awesome and you arrive at the truth and make useful reforms through it where a bias for action can actually help in some ways and where where a bias for action is absolutely terrible and uncalled for like to just give examples of a bias for action both going right and wrong for me going right is that in 1991 a lot of the things that happened were you know done really quickly now it wasn't that you know there as we've discussed very often there were 15 20 years 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 and a certain set of reforms we wish they would have done much more so in their bias for action helped in many of them weren't even placed before parliament where it goes completely wrong is nonsense like demonetization for example so anyway that's exactly the matter first that I experienced so consider for example the work of the equity market I described a long stock that there was a political economy log jam and I see was fully ready by 1997 to launch the nifty futures and if the options and in my opinion that would have been great and there was a political economy log jam but as the years went by the documentation was falling into place one by one papers committee reports were happening there was a community of experts there were questions of detail that the community knew such as can you build a real time risk management system within Indian style budgets using parallel computation and commodity CPUs answer is yes you know it's been done or questions at level of high philosophy that what is the place of derivative trading in your vision of India as an advanced economy having complex strategic conversations amongst the economics people that was also happening so you needed the community of experts that was building a point of view and was developing capabilities was developing that gritty knowledge and then all this came to a head when there was the UTI crisis the bomb based stock exchange crisis and the Calcutta stock exchange crisis all these happened together and in the parliament as once in a announced that we are agreeing that the old trading ways of India are broken and we will now launch the derivatives trading jimin was his joint secretary they were able to stand on the knowledge and the community building of all these years and the implementation confidence that there is our party land ravine our and chitra Ramakrishna and a whole bunch of people who will be able to pull this off so you need all that and that's exactly the story it's the same as the thoughts that you expressed a moment ago in similar ways let me describe another of my great experiences of the ministry of finance which is around pensions we've told the story elsewhere but I just want to link it here that from 1998 there was a pension reforms journey in India out in the public domain a community was being built okay Surendra Dave Gautam Bharadwaj project oasis whole bunch of papers knowledge debate okay many many people started writing by and large there was an increasing consensus that the NPS is a good idea and then I showed up in the ministry of finance there was some debates at the time when Yashvan Sina was there there was a great selfless moment where Minkar Gandhi who was a minister for social justice went up to Yashvan Sina and said we have incubated this but this is too big only finance can do it ministry of social justice cannot do 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 just one thing as the minister S Narayan worked with UK Sina and me in great detail and convinced himself that okay I agree with you guys this is the right way forward then S Narayan strategized everything S Narayan worked with just one thing just one thing got the idea they went to Advani and just one thing and Advani and watch by all came on the same page and then they strategized implementation details watch by personally came into the calculations on 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 was community there were people who could make these calculations so you know I I feel the sadness of the people trying to do UPS because what calculations will they make they have no people they have no teams they have no data sets so they basically just doing guesswork and it is no surprise there is no committee report that has been released you know there are no research programs at research organizations which are able to do this kind of complex thinking for them but all this was there at that time in the pension reforms journey there were a series of experts in the country who were thinking who were writing and who were available when the government had questions and when policymakers needed to discuss trade-offs and hard calculations and that's how we got to the NPS so it's exactly that template that we have to grow knowledge and community and incubate it for long years and then yes you also need the people inside government who are able to make those decisions and each of these is a binding constraint neither one makes the other but you need both I feel that the theories that we have pulled together for example in the everything is if everything episode on the long road to change my theorizing about the process of change comes out of all these experiences out of watching the 90 one reforms out of watching my years in the ministry of finance is how I put together all this construct but you know what could argue you've cherry picked examples of when the process has worked yes isn't it ubiquitous for the process not to work of for that is my India is a third world country because mostly these kinds of things do not come together and my plea and my exhortation to all the gentle readers is we need to debate and share an agreement on the theory of change because if you have a theory of change Then you can start. purposeively acting upon it. Otherwise, if our theory of change is that, you know, 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 English speaking staff and get brain consulting to work for them. Then, you know, we'll do the wrong things. So we don't need to think and debate what's the theory of change. Is part of an ideal process, also the fact that there should be a public interface. For example, you pointed out that when the pensions were started in 1998, it was public from the start. There was a community building around it. And my sense is that if a life as much of the process as possible is also in public and this 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 really bad ideas which have been universally criticized, then, you know, it is that much harder. Again, Yashvan Sena was my mentor and teacher in all these things. He used to say very clearly to me, look, I'm a finance minister. I can't do anything. So, you know, he had their 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 a agreement and a consensus that these are the 15 things that make sense. Then I am the politician. I will work on figuring out how to do things, but I can't lead. I can't go to places where you guys have not thrashed it out. The third of my big questions is about a phrase you use for Yashvan Singh where you said that he had a strategic vision. And I think about all the people that you worked with and described during the journey and it would strike me that people like Yashvan Singh, like Manmohan had strategic vision. Perhaps, ever others like Narsimharah 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 and follow through. I imagine, watch by would have been a mix of both. I imagine Chidambaram would have been a mix in some ways. That strikes me as something really unusual because the immediate incentives of a politician has been known 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 immediate incentive and say that, okay, this is my strategic vision 25 years out. Like if 25 years out, like, you know, if you know Mumbai was to become a London so to say in terms of the financial system, no one would be sitting and giving just one sink 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 and I do not know, 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? Why 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 in the Raghandhi, the populist? There was actually the decency of having elections in 1977, okay? Things like that. How does a country come out of all that madness and come back to the Rajiv Gandhi years and then the Narsimhar hours and then to the 20 years of good performance of 1991 to 2011? I do not know. 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 in this story and we have to chip away being good and doing good things. And you cannot tell when the world is ready for some of that work and some of those creations. And if we don't do all that hard work well ahead of time, then the right people and the right documents are not available inside the body politic for the right time when it comes. And you say to me, is there a certainty that there will be a right time? Well, who knows? Imagine after the fall of the USSR, in fact, they never got good times. They only got worse. 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 before then Xioping. So there are no certainties in these things. Political and social catastrophes are always possible. But what are we to do? What's the point of being despondent and saying, "Kuchine, you know, you might as well just give up in Unix language kill zero." But rather, let's take upon ourselves a constructive agenda that we are here. It is our job to think, 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 build culture. 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 of decide 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 just one that actually asked you, "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 to go into make its way through the veins of the state till it's completely internalized until it actually works? For example, 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 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 works 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 that you know takes us from B to A and helps things, 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 and I'm thinking allowed that there are huge transaction costs involved in just that switch. Right? Like in your experience, how did this play out? Because my imagination is you go there as an enthusiastic young turks saying we will do change. At some point you realize or perhaps you had already realized before you joined the state at this takes time 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 as design and that's in fact exactly what happened to you know the NPS. So give me a sense of that the working of the state and you know how we should think about it. Right to different parts one is to get to the written policy outcomes such as a new law. Okay? There is a lot of political economy that goes into that period. So as an example at the time the Minister of Finance and the Sebi worked well compared to other organizations in India and there is in fact a natural analogy where future trading on commodities for example future trading on gold is a close analog to future trading on nifty or on the currency. So it made sense to get economies of scale and economies of scope by bringing all this together and it was also thought that Minister 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 Foward Markets Commission which used to come under the Ministry of Consumer Affairs. Okay? So Ministry of Consumer Affairs is not very effective at thinking about financial regulation of commodity futures markets and there was a separate agency called Foward Markets Commission. Now there were some people who benefited from regulatory capture of the Foward Markets Commission and they did not like the project of merging Foward Markets Commission and Sebi. So there was a lot of conflict around it and I remember there was one meeting between Chidambaram and Sharat Power where the decision was no we are not going to do this. Okay? Things like that. 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. So there is no great 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 Bhaway. And in fact, we lost that. So, you know, the twists and turns of the reality will surprise us and things will go bad. The second and distinct idea is about implementation and let me tell you about one success story in implementation. Imagine you say we're gonna do the NPS. Okay, so Chidambaram was finance minister. All systems go, 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? And the answer is yes. Because if there is a guarantee of a 50% defined benefit nominal pension, then it is OPS. And if it is OPS, it will come into the NPS. So imagine the project of immersing a database of all the organizations of government where there is a pay and account officer, where the pension contributions for the NPS must be scooped up and sent into the NPS system. That's actually a Harkulean 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 that no Indu Arca, 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. So I think I mentioned in the context of earlier discussions on pensions elsewhere 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. They just don't know the footprint of their empire. And that makes implementation very difficult. So that's a second kind of implementation problem. The third kind of implementation problem is consider IBC that there was a law and there was some process and you know, Susan led a team that drafted the Insolvency and Bankruptcy code. But then after that, they needed to be organization building and capacity building in the bankruptcy regulator, the IBBI in the judicial system at the NCLT. And any such law should be seen as a first draft. And then you have to kick off a process of research where you're watching this thing working and you discover what works and what doesn't work. And you create feedback loops. The way things worked out, there were no researchers. And the picture, it was just practitioners. So it was a variety of, you know, informal feedback, oftentimes backed in political economy. And the teams were weak. So the kind of learning process never happened. There was a big hold out. There is a bank of India actually never wanted. The IBC to work correctly because it interfered with their concepts of having fragile banks. So all in all, the IBC implementation never quite worked out. And they're the concept of what is implementation is a little different. 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 great care and caution, these government formations will just be bad. So this is all a variety of implementation failure. And this is all the richness of knowledge of actually doing public policy in India that at least I, as a normal economist, absolutely did not have. And, you know, my thoughts, my advice for everybody else would be that you need the Kailkar and Shah type package of knowledge in addition to all the economics. So there is a body of knowledge that is economics, and that is great. And, you know, preferably more and more of normal economics and not what passes for modern development economics. But then you need the Kailkar and Shah package of thinking through the political science, the legal system, the law, the public choice theory, the problems of building bureaucracies and organizations in government. And now you are closer and you're talking sense about how to actually build government. Otherwise, you know, we are just a little lost. So a person in pain consulting does not know how to build government because they've never faced coercive power before. A person in development economics does not know how to build government because they've actually just done humanitarian things before. They're thinking about poverty and redistribution and how to feed the children. So things like that. The machinery of government is a completely distinct thing from many established disciplines that we have in India. And I feel it's possible to take for granted and wrongly take for granted the conception that institutional memory will survive that, you know, sedimentary layer upon sedimentary layer of knowledge will pile up. So a future generation will learn from the actions and mistakes of the past. And that doesn't really happen. It is possible, in fact, for institutional memory to be lost for all of it to be a complete waste. I mean-- For a long time, it used to happen. And then it stopped happening. And in fact, we burned up an entire generation of capability. Yeah, which is why, you know, at that one level, when, you know, you and Vijay write a book like in service of the Republic, that's great. That is-- that's one book. 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. Let's get back to talking now about the Ministry of Finance, your experiences there. And through these experiences, I also want to understand what is the engine room there, like-- what is it like to work in a ministry? Like, what's the deal? Like you go in there, you know, one will have a very certain car vision that you walk in there, and it's all Barbues and there are files on tables and all of that. What was the deal? Were you actually-- did you have an office in the MOF? Who were you reporting to? Just the describe all that to me. So I had an office in North Block. And let me remember, I think technically, I was reporting to the chief economic advisor. Realistically, I was reporting to the Secretary DEA and to Minister of State Kalkar when he was there. And in my day-to-day life, I was working with joint secretaries like Germany, Bhagwati, UK, Sina, Pradeep Deb. I was collaborating with Arbind Modi on the fiscal work. So that was my little world of the people that I got to talk to and work with. There is a nice phrase we should think about, which is situational awareness. It is the job, at Minister of Finance, to have a sense of the world, to understand what is going on, and then wonder 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. So if you want to just put your head down and process files, then actually you have a full day. But the puzzle is to rise above that and actually have a sense of the world of what is going on and what are our priorities and given that we have very limited state capability and very limited time, and there are only 20 thinking people at the Minister of Finance. What should we be doing? So for example, when Rakesh Mohan was there, he and Vasudev used to run very nice meetings where we would put the files aside. He would put the practical firefighting aside and ask each other, what's going on? What should we be thinking? What are the big problems? What are the big opportunities? Similarly, one of my happiest periods was when Kaelkar was there. And Kaelkar's machinery was like this, that he would show up to work every day at 11. He used to say, 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. And from 11 till lunch, it was always he and Arbin Modi and I. I said, 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 a situational awareness. What are our priorities? What is important? What is not important? And what should we be doing? What can we do? Can we talk to so-and-so? Can we persuade so-and-so on this? And so on? That's how we operate it. And then my little happy life, then Kaelkar would go home for lunch every day. And because I was a starving orphan, he would take me home for lunch every day. So that was my rhythm when Kaelkar was there. That 11 o'clock show up at his office. Do the brainstorming with Arbin than him. And then go home with him for lunch. And then come back and then do the rest of my day. So we would have made up a work plan for ourselves. This needs to be done. That needs to be done. And go write stuff, go meet people, do everything. But I think that's a disproportionately important thing that often gets forgotten. Because it is so easy in the Ministry of Finance to become a help desk. Then you're responding to other people. Whereas you got to wake up and say, what are we doing? Do I have some time and mind that I get to allocate? I'm stealing from Ila. That Ila has this keen sense that when am I excited and energetic about my agenda, as opposed to when am I being a help desk that I'm here? A variety of people come to me. They ask stuff of 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 being a help desk. I'm not actually pushing my own agenda. And I haven't thought about the world. And I don't have something positive that I wish to do. So that's a nice distinction to make. So this was one piece that happened in the Ministry of Finance. The budget process used to be different than the budget process used to be run better and matter much more. And I just want to describe it. I was not part of the core. There's something that I'm going to say. called the budget team, which are the secretaries of the Ministry of Finance, the minister and the chief economic advisor. And this was called the budget team. And they would meet every day for two months leading up to the budget and they would argue about what goes in. And in those days, the budget was much more than just a budget. It was actually a commitment device around a work plan for the entire Union government through the year. So the way it worked was that every sentence of the budget speech went into a spreadsheet operated at the Prime Minister's office. And it would be tagged to a list of people who are held accountable for delivering on that sentence. So it was not just things you say. It was followed through by the PMO saying, who in government, 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. And then at its best, the budget process was a negotiation by the Ministry of Finance where money was exchanged for reforms. So I'll give you an example. I was brought by SNRion into the negotiation with the Ministry of Civil Aviation on airport reform. Okay. So he told me to be the bad guy and argue about airport privatization for Bombay and Delhi. So there was a meeting. There was a secretary of civil aviation and there was me and there was SNRion. And I had been programmed that my job was to talk about the importance of the work. The importance of privatization for the Bombay Airport and the Delhi Airport. And what Narayan was doing was doing a bargain that I'll give you money to build AI airports. But in return, you have to let go of Bombay and Delhi Airport. And that was the trade that was made. So if any of us enjoy the glory of the modern Bombay Airport and the Delhi Airport, this is where it came. It is SNRion using the budget process to get shit done. That the Ministry of Finance, the DEA has the power to make the budget. And therefore, this places the burden upon the DEA 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 these negotiations and exchange money for progress in all the departments. And this is why the Ministry of Finance used to be disproportionately important. Now I was an outsider because I was not in the budget team. Meaning I was an employee of the Ministry of Finance. But there is a great deal of secrecy that surrounds the budget process. So my rhythm became that I would make a long list of mad ideas and sell them to anybody. So all my interlocutors in government would get my views that they are Pradip Dev, you are JS infrastructure. I think we should do ABCD. Okay. They are UKCNR, you are JS capital markets. I would meet the Secretary, I would meet Kailkar, I would pedal all kinds of ideas. Some of them would say write a note on this, give it to me. No problem. I would write 20 notes about everything. And I had a very happy approach saying this is my job. This is the most I can do. Most of it will not work out. Most of it will be short down. That's okay. It is my job to do all this. So I would pedal all kinds of ideas to everybody. And I did not have a seat on the table in the budget group, which would actually choose what goes in the budget. So I developed this practice that would go to sleep. The budget day would come. I could never bear to hear the budget speech is boring. I would just wait and wait till one got the PDF 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 the highlighter and mark out the fun things that happen 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, the good initiatives. Then I would go back and knock on doors saying, oh, this is so nice. Can I help you do this? Because now this has already agreed and approved. And I know some joint secretary is going to be tormented by the PMO that, hey, what have you done about implementing this? And they're all short of implementation capacity. So you have to strike while the iron is warm. So you have to go to the joint secretary the next day and say, oh, this is so great. And so happy we're doing this. This is really important milestone. This is going to change the fate of the world. And can I help you to do it? And so a random subset of it would come my way in terms of the work plan of the rest of the year. So this was the way these things work. Can you give examples of some such fun ideas? The greatest example is something which I missed, but Kepi Christian got the Ministry of Small and Medium Enterprises had got a budget line that will build a bankruptcy code for small firms. Now because it was small and medium, basically my eyes had stopped reading. Okay, this is many years later. This is many 15 jet leaves budget speech. It was deep inside the type is a party of the budget speech. And I was not reading 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 for small firms, who cares? Not interesting. Christian and saw it and his, the antenna saw that, oh, there's something interesting here. And he went to jetty and he said, yeah, we can do that. But don't you think 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 saying this is done. 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. So you have fulfilled the legal obligation of doing everything that the budget speech requires. So you know, I love the process where you talk about how you're giving fun idea after fun idea to different joint secretaries. Now a small subset of those fun ideas actually make it into the budget. And once you make it into the budget, you know, while, 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. Okay. Okay. 90% of what I would ask for would not happen. And that's perfectly okay. Because the 10% was fun and exciting and it kept me going. And in any case, remember, it is only me and my tiny IBM X10 laptop. I had no stuff. I had no team. Everything was alone. I wrote all my code. Okay. I was just alone in the Ministry of Finance. I had no stuff. There was no NIPFP, IJIDR type capability in those years. There was just nobody. I was alone. So I love this. You know, you give them idea of the small subset of those go through and make it to the budget, you go and ask to work on them and you get to work on a small subset of them and that itself is fun. Or even if it's not my idea, if something comes through in the budget speech, which fits my conception. You do. You know, what is the journey for the Republic of India? I would go volunteer saying, oh, this is so good. I hadn't thought about it. If you wish, I can help. 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, honestly, I'm 100% sure you were an outlier there. So my question is that how does the budget then get decided? How do the line items get fixed? You know, for example, Jonathan Rauch has a great book called, "Gumman's End" very talks about special interest taking over America. And he wrote the book in 96 and it's very prescient. Ever how almost everything is developed by is taken over by special interest and they rule the roost. I don't think the problem is so bad in India yet because of special interest. Aren't really organized in the kind of manner they are with hundreds of lobbying firms. They're in the grip of an administrative state with government on top. The private sector has no voice. Has no voice right now though I'm sure that it has some voice or electoral vote banks will have some voice like for example small retailers will want FDI against, will be against FDI in retail etc etc. So tell me about how the rest of it gets decided. Like we see a budget, we see a lot of items, we see key ismaith, now PASA etc etc. What are the interests that drive that? Is it officials doing stuff because they have to do stuff? Is it that special interest 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 and everything is everything episode on the great British budget process. For this conversation the Indian process is not good. It's a bloody mess. So a budget is supposed to be the stop down clarity that it's got to add up to 100 and then you're allocating. If I put 30 years there's only 70 available there. If 30 goes to 35 70 has to go down to 65 like that. It is this jostling but there is a lack of that kind of machinery in the Indian state. It's a mixture of multiple things. So somebody will invent a scheme that scheme will be well loved by powerful people. It will get in. So imagine Vajpayee and Co started the Golden Quadrilateral program and so it just, this is coming from very powerful people and this much money has to be allocated to it. So it would get in. All the departments, all the ministries ask for more money for their pet schemes. The Ministry of Finance in my years used to have a good instinct which is that we generally want to give less money for all government programs. By default it was a stingy approach that we mistrust government by default. We will spend less by default. Chidambaram had a great line that there is no point putting more water down leaky pipe. So there was a generalized mistrust of spending ministries, welfare programs, all that stuff. And it was the burden of proof lay on the spender that spending ministries had to produce positive evidence that their stuff is working. And money went back to the stuff that was perceived to be working not in ways that you and I may like. For example, 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 in the first place. The institutional culture of the Ministry of Finance was just primarily about outrageous corruption and waste and just government organizations buying cars and making buildings for themselves and not actually doing anything useful. That was the lens through which Ministry of Finance looked at the rest of the Indian state that spending generally works badly. Our job is to be stingy and to cut back on every. money and you are guilty until proven innocent and you have to prove that your spending programs make sense otherwise we will stagnate it in nominal terms or we'll cut it in nominal terms so there would be a spending squeeze on everybody it was not a great budget process now these things would of course be negotiated between the finance minister and the prime minister so a finance minister a prime minister roads minister would sit and debate 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 as your overall budget so it's not a great budget process but that's how it used to work I'm also interested in how your intellectual landscape is shifting during this time like in the few years before you move to Delhi you were completely focused on finance right and now suddenly you're thinking about macroeconomics you're thinking about public finance you eventually move on to what you call your field three you know your third big field of work after finance and pensions there is fiscal right so explain to me all of this because all of these are very separate things like after spending years immersed in finance is it that you you know you became a sort of a specialist in finance only and a generalist and other things over you always kind of thinking deeply about everything else I was always curious about everything so my reading was wide and eclectic always but here I got one deep dive after another so my first life deep dive was finance my second deep dive was pensions here the minister of finance makes you fiscal like you you may not think you want to be fiscal but you can't be in a minister of finance and not a fiscal explain fiscal for my listness fiscal economics is the game of taxation expenditure deficits debt a government has to tax so you need to learn the entire economic theory of tax policy bracket general reader if you want to do tax policy you really need high economics the economists have tremendous breakthroughs in deeply understanding taxes it's not your opinion that this is a good tax this is a bad tax the economists have done great things then you come to tax administration this is a blackout that how will you build organizations government organizations that will obtain tax money from the people while abiding by rule of law how do you get to tax income to the government tax revenues to the government and not tax terrorism okay that is the field of tax administration it's a very very difficult blackout and you know in some ways I feel like only about 10 years ago I developed a fully articulated point of view on how to do tax administration through my MOF years I did not know how to do tax administration I admit I appreciated the problem but you know I was just partly mostly differential that Arbin Modi had to figure that out it was not my job to figure it out then comes expenditure what should you spend on how should you spend that is the next piece 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 on running deficits should you have a simple crude FRBM can you have an FRBM under the constitution of India bracket you can't only recently Eli and I and some others got a paper out where we demonstrate that under the constitution of India it makes no sense to have an FRBM act just ponder this that you needed to know back in 2000 you needed to tell the economists that dude please read the constitution of India and understand it because it makes no sense you can't have a meaningfully enforced FRBM act living under the umbrella of the constitution of India we got a paper out only six months ago and finally you get to debt management when a government wants to borrow how does it borrow a government has a stock of debt how does it maintain that debt aloft that is a rich and deep interaction with finance co-finance and again only in recent years have I started putting all these pieces together and a bunch of collaborators and I we have a new paper out only recently which is called who lends to the Indian state which I think is a nice pioneering project on starting to think deeply and ask first principles around strategic choices of how the Indian state borrows it should not just go grab money from the banks and so how do you want to think about the strategy for borrowing of the Indian state this is a flavor of public finance in all this of course there is a union government there's a state government there's a city government how do you think about urban public finance what is the spending in Bombay per capita bracket nobody knows okay nobody knows what is government spending per capita in Bombay what should urban public finance be all this is the field of public finance it's a glorious field and I had the luxury of just picking it up by osmosis by being in the minister of finance by being in the minister of finance for four years every day you learn public finance and you know I was a good bacha I went back and read papers so along the way every day there would be the lived reality of being in meetings with public finance and I would go home and read the theory I would read books and economics papers so I was able to combine a more theoretical view of public finance and a lived reality of public finance so Ajay my next question for you is is that you are in the ministry of finance you are in the bubbles of this organization this really large organization and what can sometimes happen in these large organizations is that no matter how enthusiastic you are and you love the job and all that is that you can get lost in the small details and just get into the groove of you know doing the things that you do every day and all of that is really important and clearly you loved your work which is also important but I would imagine that at some level you are continuing to think about the larger questions and the broader questions and not just okay how do I sort of be part of the central planning machine and make sure the state controls everything but also a larger question on what's good for India what's good for the economy what should the design of the state be etc etc so you know tell me about how you manage to you know reconcile those things it is indeed very difficult at MOF as I said I would try to look for things that I believed in and put my time and effort on them sometimes my ideas many times other people's ideas but you know if I felt good that this is something that we believed then you know I would go volunteer to people saying can I help and I would try to participate in the thing so I always try to have my own strategic sense that you know we're building the republic what is good what are the priorities and there was one experience which was a bit of an eye opener late in my years at MOF there was a problem which is called gold exchange traded fund now let me introduce this in an exchange traded fund the gold would sit in a warehouse and we would get pieces of paper of electronic tokens which correspond to that gold and we would trade it with each other in the exchange so it looks like an exchange traded instrument but actually we are trading gold on the spot market whereas the gold is stored physically in some safe place probably kept in Switzerland you know we don't care this is a simple clean idea it is only a step forward okay for anybody who has gold in your house you know you correspondingly have the complexities of keeping it safe and you know facing the risk of a burglary of moving physical pieces of paper to the trading point when you want to either buy or sell whereas isn't it beautiful and frictionless 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 this turned out to be quite a mess in India with rules by the Reserve Bank of India rules by the Forward Markets Commission rules by Sebi rules by some government ministries and so if you were the innovator and at the time there was a new mutual fund organization named benchmark mutual fund which was the innovator they wanted to launch this and they basically just got the run around that each of these agencies said no but I have this requirement or no we have to consider 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 is the economy the private sector to dream and imagine that you know let's go I'll keep it an award I'll issue units people will decide whether they feel like having this or not and the financial regulatory function is only to establish 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 so there is indeed a financial regulatory function that you do want the state to play that role in overcoming asymmetric information which is a market failure otherwise any scamster will issue these units and at random households will discover oh my god there's actually no gold there it is indeed a concern but there's only one concern and then it is for the Indian state apparatus to figure out and resolve who's going to do that regulatory function but they were instead getting the runaround and you case in I and I just took interest in this as a demo as a case study in how you do financial innovation in India so we thought of this as a trivial trivial financial innovation and we worked on it and just chased it through jumping all the hoops of RBI and FMC and CBN all that general reader there is a little chronology of this as a table inside the Percy Miss 3 committee report Mumbai as an international financial center where we hold this up as a demo of how broken this is that in finance you're supposed to innovate you're supposed to come up with new ideas but if it's a multi-year journey of getting approvals where everything is banned unless you get approvals of the government and years and years go in approvals, then there is going to be no innovation. And yeah, we got this done and the gold ETFs came about and today they are highly successful, product class and it is great, but it also got all of us thinking. And you can say, "Ni and I would sit with each other and say, 'This is too much work.' But if you want to become a sophisticated world-class financial system, there are probably 5,000 moves of the scale and complexity of this trivial move. Gold ETF is trivial. And if he and I, like senior expensive resources, had to put so much time and trouble for frankly a tiny step, then we are going to take 100 years to get to a capable financial system. So I think that experience and as I said, this was late in my life in MOF and I was also starting to get tired that my enthusiasm is not inexhaustible and it got me to start thinking and you can say, 'Now encourage me to start opening laws and reading laws.' So by that time, another great thing had happened in my life. By 3rd and 4th year in the Ministry of Finance, I started understanding laws for everybody on this who is listening, who is thinking of these things. I have a simple recipe that I started employing, which is as bedtime reading every day, you should for half an hour or one hour, you should read bear acts, just read the pure bear acts in fields that you know and then start thinking that how do these words of code induce legal effects upon the world. You don't need to know the world. It makes no sense. I feel that being a degree in law is a silly thing 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. Then you start reading the words of code and start wondering, 'Ah, this line generates that effect. This line constrains the mutual fund in that fashion.' So then you start understanding laws. So by this time I was reading laws and it was dawning on me the obstacle course that all the Indian financial laws that constituted the written manifestation of the Indian central planning system were. In Eukesina was killed in law and he started helping me to see all this. And so it started dawning on me that this is not about economists thinking one at a time that you need to liberalize this or this needs to happen. But the doing is all in the law and at present it is just an obstacle course that every doing is a Herculean effort. You need huge inputs of energy. At the time my argument Eukesina and I were only saying to each other, at this rate we will take 50 years to make Indian advanced economy. That's all. Today I would add another thing that you know what there are no guarantees. You won't get that MOF of just one thing and Kailkar and Esnara and Eukesina and myself. Those teams don't happen lightly. Then the years go by and you're not making progress in fighting with this obstacle course. So I think this was a good set of experiences but then it opened my mind to the deeper problems that you've got to go after the law, the institutions, the nature of coercive power of the state and how the government organizations are holding back the emergence of a capable India and those are the really important questions worth asking. 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, you're a crib, you know laws create the constraints and the incentives to which people respond but equally when you write a piece of software code, you know if 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 and etc. So tell me about what you learned about them because at the basic definition level, yeah, sure everybody knows what laws is but like you said, it took you years and years of working within the system to really get it, right? So what is that really getting it? What is it that Ajay Shah of today knows that the Ajay Shah who was maybe 34 years old did not get about laws 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 constitution, realism, freedom is the norm and coercion is the exception which is a sentence you and I would totally sign on to. But it's not people have forgotten. But our constitution doesn't encode that. It is a philosophy in ethos of constitution, realism and all good constitutional scholars know it. That freedom is the norm and the parliament is authorized to coerc people on some things. It is not that being a prisoner is the norm and occasionally getting a walk out in the prison yard is the exception that is authorized by the law. Now sadly, that's not how this works. Many laws are badly done. So I think we are discussed the other day. The Fema, the law that creates capital controls and current account restrictions in India. It starts by saying all cross-verted transactions are banned and then it opens up a few chinks in its arm and says, okay, fine, because you're a nice guy, I'll give you these permissions. And I consider this abhorrent. I consider this violative of the principles of liberal democracy than your slaves. If the first section says that everything is banned, then your slaves and this gets you to fundamental philosophy and principles of constitution, realism, what the law and political science people know that economists don't know. Okay. So it was civil servants at RBI who drafted the Fema 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. Okay. 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 where I say that if the United States is a great country today, it is because the authors of the code of the United States constitution did a pretty good job. I agree with that. And if the United States collapses into Trumpism today, it is a failure by the authors of that code. So that 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. The law is the code. Run the code on a society, one generation, two generations, 20 generations. Does it create freedom, prosperity, decency? Then the law was good or not. Then I blame the law. That is the way to think about law. So it's literally like running code. So if you create a law saying that the police man 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 police man has to come to my house in the daytime hours, 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. On the other hand, if they want to come in a pre-done 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. Isn't this wonderful? 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. The 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 curse 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 not even a name and a string saying suspected money laundering. And like this, a long table of these things come to the home secretary and she signs on it. That's it. You're done. The phone tapping is authorized. And then it commences. Okay. Whereas in the United States, it has to go through a court hearing. Now, by its very nature, 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 as 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. All this is in laws. 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. A couple of thoughts, I think that there is over here in play the part dependence of a moment in history. For example, I completely agree with you and heartily endose that fundamental notion of constitutionalism that freedom is the default, right? But our constitution does not embody that principle of constitutionalism. In our constitution freedom is not the default. The state is a mybap. 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, the person replied, sorry, we don't stock periodicals. Right again and again, like Nehru onwards and our friend Shruti Rajgopalan has a great talk on YouTube on this which will link from the show notes. Nehru onwards, 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 no 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, but it came back in the first amendment laid the grounds for that. Tripodaman 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 in this regard, a lot of laws that would not exist in say in the US because it would be unconstitutional actually do exist. 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 an normative way that it should be this it should be that you are and I'm thinking allowed here that you can therefore think of it in two ways. One way is you can hack 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 of looking at it 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. Forget for a moment whether this law should exist or whether it should do XYZ. But if it does that 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 who care about it. But apart from that it's it's not systemic 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. Okay 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. Okay 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. So that's part one 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 behooves the people doing this stuff to think more about these things. Okay so as I say I've 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 Kalkaran Shah on how you think about the Fema. So that's again law as code that it is our job that an integral part of a 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 this edition law in India you are also allowed to repeal this edition law in India. So while you are allowed to write a law in India they're all cross-border transactions illegal and then proceed to permit a few ones you are also allowed as a thinker and a policy maker to write a law which says freedom is a norm and there will be some exception. So the role of law is essential and to think about public policy in India and to do public policy in India this is of essence 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 as vertical expertise 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 non-government 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. So laws get drafted 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 to that 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 this addition law number one and many other bad laws and the other point is 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 the 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 Subashish Bhadra wrote a great book and I had an episode with him very 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 heights 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 however you know we can't really do much about that code right now it is what it is and you know within that framework I completely agree with all the work you guys do though I think you are swimming against a tide and we'll keep swimming against a tide. I reckon we're swimming against a 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. Couldn't agree more let's continue with your journey that you know you've spoken about how during this time your mind is already going beyond matters of the ministry of finance and all of that and then in 2005 after you saw the pensions reforms through after the NPS kind of came into being a story we've told in other episodes you then moved on so tell me about that period what was your thinking in those times and you know how what prompted the move. So many things came together one is it is very exhausting doing that life that I was doing in the ministry of finance so as I said to you I was working alone 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. and I was tired okay so at the end of four years I was tired it was a consideration another was I knew instinctively that ultimately my contribution in this piece in the story of India is at the level of ideas that I'm not a person cut out to be an official in government you know so there are people who have played great roles in the government and also maybe that was a different world so you know we admire people like Ashok Desai and Montek, Alu Aliya and Vijay Kalkar but that was not me and maybe their world was different but my world was different and I did not feel that it was my long-term future my role in the piece 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 it also mattered that Kalkar had left SNR I and had left and sort of my community had been disrupted after the changes of all those years I think I told you the funny story before that on my last day at the Ministry of Finance I packed my and KP Krishna walked into my office saying, "Hello, I have joined the DE." And I said, "Today's my last day at the DE." And I also put my boxes in my car and drove back home and at the base of the building, I got the call saying that my mother died. So all these things were happening at once. And my idea was that I should be a thinker, I should be writing papers. I was young enough that I was not here thinking I should be writing books. I was thinking I should be writing papers. I felt that across the whole area 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 was to have no job. So my plan was being Bombay, being Delhi and have no job and do some consulting. And I used to like the third floor of the barista defense colony a lot. And so my mental model for days in Delhi was, I would sit on the third floor of the defense colony barista and meet people there. So various things had to be organized. If people had to come meet me, I would do it at the third floor of the defense colony barista. And 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 that I exited MOF in September or October 2005. And I embarked on this life of partly Bombay and Cat and partly some days in Delhi and hanging out in the barista. And me and my computer reading, thinking, writing papers, Eli 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 that in some ways, 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 Eli completely. Eli sold to me that, no, we should start a lab that we need a research group and we need to scale ourselves. And it will involve raising money, which is difficult. But we should do this. And Em Govindar, I was set to ILA that why don't you build this at NIPFP? So that is how the whole idea came of building a research group at NIPFP, 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, assemble data sets, be able to do quantitative research and think about the world. And KP Krishnan was a joint Secretary Capital Markets at the Ministry of Finance, Ashok Chawla, and then Subaraw were Secretary D. Oh, maybe I got the order wrong. Subaraw and then Ashok Chawla were the Secretary D 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 a digital nomad life and no job. And the happiness of having a very light 1.2 kg laptop. It's not exactly digital nomad. I mean, fine, you were working out of two cities, Mumbai and Delhi. And you spent a lot of time working in that hard floor of the barista defense colony, as it were. But a true digital nomad is traveling the world and writing from a different city every day. No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no. I just meant all by myself. Were you mentally a digital nomad like so far? I mean, I of course know you much better. And we've done so much of everything as everything. But so far, the image most people who would have had of you through this episode is complete economics, not. They've heard references of line-ups and unics. And of course, your adventures in the IIT lab and all of that. So, he could-- some computers, too, but just kind of fill me into the rest of your mental landscape. Like, it is not that you're sitting all the time in your thinking public policy, right? What is the kind of music that you've listened to through this time? What is the kind of reading that you're doing? I know you've only watched, you know, 20 films in the last 20 years. You once mentioned 11 of which are the metrics. But tell me about the rest of your interior landscape was going on in there. I'm deeply attracted to being a nomad in the world and particularly the mountains. So, I get madly attracted at projects of going out into the Himalayas and basically to run and to run and to never stop. Many, many times when Aiyush and I are on a 10 day or a 12 day project on the north-south routes of the Westen Saiyadri's in Maharashtra, on date 10 and 11, we look at each other. Because by date 10, 11, we have fully sorted. Our bodies are in great shape and we've also figured out all the runtime stuff that is, it's no longer any supplies you have carried with you. By date 10, 11, you're restocking on the way and we've figured out everything about very long, through trekking. By date 10, 11, we're always looking at each other and saying, you know what? We can just keep going till Kanya Kumari. That tug is very real and I cannot tell you how wonderful it would be to just go to Nepal and walk to Ladakh, you know, those kinds of things. So I feel that. I do all this stuff out of a sense of responsibility. That, you know, I have to do all this. So all the work that I do is out of a sense of responsibility. If you leave me to myself, I'd just go to Nepal. - And in a sense, isn't it like a throwback to pre agricultural life that when your instincts were shaped and when our instincts were shaped in any case, that forget the worries of the world, just keep walking and just. - You were born to run. - You once told me and it would be very sad when you said that frankly, that when you die, you want to be buried anonymously in some part of a forest by your friends and you want no one to know where it is so they can't come back to that place. - Also, I like the concept of burial because you give the nutrients back to the soil. I don't like the concept of cremation because you know, you're wasting so much biomass and it should just turn into trees. What better beauty can there be? - Well, keep on walking and you did keep on walking in that particular journey where you went from M.O.F to the life of what you claim is a digital nomad and then to NIPFP. - And along the way, by 2005, I started Ajay Shah's blog. Okay, 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 gonna start a blog just now. So they did that. And so at first it was Mimi and myself blogging. It built an audience over the years, the name changed to the leap blog. Today it's a peer-reviewed scientific journal. So it's great. Meaning I started it as a blog, it acquired an audience and that was good 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. The Google search at the top bar of the leap blog is magical. 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 what I'd tell today. So I will start using it. Another question before we get to the NIPFP days, which is that at this time you're about to touch 40, right? And what happens typically when we are young, especially when we are young in brilliant and ambitious as you know, doubt were, you know, what happens is that there are many things we want to do. We think we're gonna change the world we're full of ambition and passion and all that. And at some point you've got to start tempering that stuff. You realize that time moves slowly, world 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 you know, 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, this moment that it takes time. How did your mental constructs of yourself and your purpose shift? Like when do you used, you know, what was the thinking around your purpose and what you should be doing? - So in the early years, 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. What I do well is to be able to take any problem, any system and take it apart. And you know, 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, you know, building a risk management system inside NSE is a constructive building project of not just writing papers, but actually making a machine that gets up and running. And you know, at the time, arguably, one of the highest performance complex computer systems of the country, things like that. That was my early self conception that my value added in the world was the thinking. I drifted into the doing out of accidents and you know, 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, not in doing it. it. That was my self conception that other people were supposed to figure out the doing. And it just so happened that I was in MOF at the right periods. But again, the critical doing was SNR and UK Sina and KP Krishna. These are the people that sort of really got the ideas and absorbed the ideas and got excited by the ideas and they carried it forward. I was more their internal supporter and problem solver rather than the doer. So I have not occupied executive positions. I've never made a decision in government. I've just been part of the room where arguments took place and that's my thing. I have the gift of the gap. I know how to argue about things. So that was my early conception. In Ministry of Finance, I learned to respect the finance minister and the secretary DEA. Okay. So I've already talked about Yashvan Sina, SNR and these are amazing people. I admire them. They are remarkable. I have watched what they do. It is a brain power. It is a determination that is out of the world and it is not me. So I rapidly understood that that's not my value. I did in this world. My value added is that I can be a thinker. That is it is my job to think and to analyze and to talk about these things to be able to pursue it others. Okay. 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 or a secretary DEA. 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 derivative trading or the new pension system or the GST. Those were the kind of things that I felt I was adding value in. Until the difficulties of NPS started happening, in many ways when the NPS community dispersed. I slowly started understanding that this is truly bad. So I did not think that deeply about community. In Kielkar and Shah, 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 and come back and boom it's done it's miraculous with very little resources at a very high speed you climb the mountain and it can be done. 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, you build a camp one, then you build a camp two, hundred people at camp one, supply camp two, thirty people at camp two, supply camp three and sort of you build this pyramidical system of many many people participating and it grinds away and it is remorseless and it is less risky and it gets the job done. And over the years I came to understand that the right way to do public policy is that siege style assault. It's not about one guy of you guys suddenly doing one announcement what you need is to carry a community along and create many many brilliant people thinking people who will all be cantankeras and disagree and differ and that's just good. And that's the deeper way in which a country makes progress. It doesn't work to have a couple of cool people. What you need is an entire network of very smart people who are thinking, who are arguing, who are debating and if they are not talking about these things and arguing with each other then basically all hell will break loose. Then you will get a variety of you know announcements coming just from pure power play that are not inflected with knowledge or intellectualism and that's basically just a mediocre third world country. In this time you know as you are arriving at an ipfp what have you learned about institutions because what you're doing here is for the first time you're actually you know getting down to the task of building an institution where the question comes into play is how do we design the institution because in a sense a design of the institution is like code or is like laws is a determinism to it. So what have you learned about good institutional design and especially when that this institution is something that is you know going to kind of interface with the state and even be dependent on the state for funds and all of that. But you know what was your thinking and what were your learnings up till this point which helped you shape an ipf. So to some extent a good deal of an ipfp was a given. It was up and running. Covinderau was the director. He was great. So there was a lot that was defined. We were very lucky. We got real estate. There was easy access to a chunk of real estate which we were able to use and we started building a new research group. In terms of formal rules a great deal of the formal rules by an ipfp. What we got to have a seon was culture. So what we got to have a seon was the kind of recruitment that we did and the kind of people that we built and the internal culture of the laughter and the creativity and the imagination. We got to create a culture of debate and discussion. We got to create a culture where women were treasured and given power. So I have seen innumerable organizations where women are treated badly where women find it difficult to speak up and participate in meetings. It helped that ELA did the pair aises. So there was no question where the power lay. So everybody understood that ELA was the person who chose the pair aises. There was no question about a woman not having power in agency in an organization where a very important practical piece of power lay with a woman. I feel that we built a nice culture and a community combining the high ideas of economics, of freedom, of law, of public administration, of rule of law, of the coercive power of the state, of the interdisciplinary toolkit of law and public administration and economics. I felt that this was something that had never before been done in India. Plus the internal human culture of people and how people talk to each other and how people interoperate. We surely made mistakes and there were situations that did not work. So look in every organization there will be some hires where it doesn't work and that culture that kind of work doesn't click and you know there are people that have left. So I don't want to make it sound all goody goody like a bunch of people came together and it was magical. It went through its difficulties but it came together as a coherent, identifiable culture of a unique blend of ideas at the level of fusing the economics and the law and the public administration and a unique organizational culture of research in India where there was an emphasis on knowledge and creativity and imagination and debate and discussion and disagreement and badass women. Yeah, in fact, you know many of the badass women who've been on the show are people I met through you. So there's a community of people known as Ajay people and most of them are women. So people like Bhargaviz Avery or Renuka Sane, Rajeshwari Shingobto etc etc. I met Amrit Agarwal through you as well. What would you say was the founding principle behind NIPFP? Like what is foundational? What is absolutely core? NIPFP or macro and finance group. So when Eli and I started we knew there was a giant field waiting to be done which was a ground up Indian macroeconomics. Okay, so there is American macroeconomics which is great. It works for them but it is not much use here. There is a development macroeconomics which is like frankly useless. Okay, that is for a third world country where you have the world view of development where there is poverty and the different view. India was at middle road where there was an nascent capitalism and a financial system where it was starting to exhibit business cycle phenomena that are reminiscent of the rest of the world and it needed an international twist because once an economy starts opening up and globalizing and connecting into the world the rules of the game of the old closed economy no longer work. So these were our distinctive insights into the world by then that India was starting to face business cycle fluctuations. Okay, so ever since Karl Marx we have known that capitalism is prone to fluctuations bracket the amplitude of the fluctuations does not grow go up over time he was wrong but ever since Karl Marx we have known that 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 of fiscal policy of monetary policy which are macroeconomic policy levers and you need to grapple with globalization 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 okay we have and everything is everything episode on firms and internationalization about how the internationalization of the economy on on both the current account and the capital account is of essence in the growth journey. That if you want high economic growth in India, we have to always and always foster greater internationalization of the country. And again, they're the development people are pretty clueless. They just don't get macroeconomics. They don't get growth deeply. Okay, so we had this whole distinctive insights into the world and we knew that this needed a body of knowledge that a whole literature had to be created around business cycles, monetary policy, capital flows, capital controls, firm internationalization and the nature of monetary policy and fiscal 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 textbooks and the papers from the United States and use them here. 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's a very interesting quiz question that should be asked of everybody in the DEA which is what is DEA and this is the answer that the job of 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, that is DEA. And so we felt that there was a need of this kind of body of knowledge that would partner with the practical policy work of DEA because otherwise by default, what you get is RBI saying no, it's very dangerous that 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. So this was our idea and Krishna and Subarao and others at the Ministry of Finance, they agreed that DEA needs this kind of capability and while there was a chief economic advisor at the DEA and there was an economics division at the DEA, they said 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 and our idea was we will build a team that will build knowledge, that will write papers, that will create a new body of knowledge that will engage 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 for the DEA also. So that was the concept of the Macro and Finance group at NIPFP as conceived by Ila and me in early 2007. - You know, before I, before we dive deep into some of the things that you actually did, I want to also, you know, talk about, you know, one important conceptual point, which is something that I hadn't really thought about till we started doing everything is everything and we have a bunch of episodes on firms, right? And I'll link them from the show notes. And I always thought of, you know, the units of, oh, there is a state and oh, there are, you know, the society and society has markets, markets are how individuals engage with each other to mutual benefit, et cetera, et cetera, 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 at the heart of it. That is how markets organize themselves and that is how all the voluntary exchanges actually happening at scale. That is how you act on the beautiful information system that are prices and so on and so forth. And, you know, in your notes for this period, which you've sent me, you have this intriguing line about what you did at NIPFP 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 don't think about it, but for me it was always obvious, maybe by growing up in Bombay and, you know, being more exposed to Indian capitalism, 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. Okay, that is it, that is what it means to be a great country. It was always obvious to me that it is not about having better car repair garage in Springfield, Ohio. 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 and capital deepening are the path to labor productivity. So you have to bring better technology and deepen the capital one firm at a time, 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. In that 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. So once again, firms 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 and there are some 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, incentives based understanding is the key. The think about the incentives of investors, of foreign investors, of non-financial firms, 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 you actually understand something. You have to go micro-economic. You have to think about the incentives and the objectives of all these characters and only then will we get insight. So macro-economists have traditionally been prisoners of macro-economic data. They think of the GDP, 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. And now you're up, you're off to the races in terms of figuring how the world works, why things happen. And if you anticipated a certain imagined change in policy, what would its consequences be? Because rational, self-interested agents would change their behavior and response to a rule. So there are some proposals that are terrible. There are some proposals that will help. Suddenly you've got an analytical toolkit. So this is how field number four of my life came together that it was this conception that India is growing up and we're becoming an early middle-income economy and there is an incipient, nascent capitalism that is starting to display business cycle phenomena and starting to get integrated into the world economy 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. And for me also it was very happy 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 and Lucas and all that. Meaning I was spiritually deeply into all that and I just left all that knowledge aside because I came back to India and I did other fields. 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 in New Rajendra Nagar reading papers and just being high on life. Like I was so happy 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 that happened but I just remember that happiness that I knew the instincts of macroeconomics cold 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 but modern macro has to be tightly connected to modern finance 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 that for some years, we were just going to shut up and build this new field number 4 and that is what we proceeded to do. Before my next question, I have a question for you and that question is what is the difference between Ajay Shah and a normal person? Okay, there are many possible answers obviously. The difference between Ajay Shah and a normal person is this. A normal person needs to get high to read papers. Ajay Shah reads papers to get high. So well done with that. Tell me a little bit more about this collaboration because your collaboration with Ila because that's also really interesting to me because at one level, she got that keen deep inside into macroeconomics and you have that keen experiential understanding of the world of finance and they are 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 so on and so forth. 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 were the dynamics? What did you learn from each other? Ila was a PhD student of Paul Levin who is a great macroeconomist at the University of Saray and she was imbued in macroeconomics in a much more recent vintage than me. So my knowledge had stopped as a PhD student shared stayed in macroeconomics. That was a great edge of hers. This idea that India was growing up and developing business cycle phenomena was hers. I did not know this. So I thought that this is a developing country and none of the American knowledge works here. Meaning for me, the pleasure of reading Friedman and Lucas was just like, that's what happens in America. It has nothing to do with what happens in India. It was Ila's distinctive insight that after the 91 reforms, we started developing that mass of complex firms in India and there was an incipient internationalization going on in India. So now suddenly there was a modern toolkit of macroeconomics that could be fully applied here. On the second thing that you said about discussion, debate, disagreement and creative conflicts, 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 trouble waters. Like, what is wrong with you people? After you've done bridge over trouble waters, you start squabbling over who gets a credit. But Paul Simon wrote all the songs. But the greatness of bridge over trouble waters made them come apart 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 Ila more as John and Paul in the Beatles and not Simon and Garfunkel because Simon and Garfunkel there's a clear problem. How do you be John and Paul? Okay. So that's part one that you have to just stop talking about the word credit. Okay. So that's the first part. And also, you know, a person like me has to be mindful of the way V in India brought up on the patriarchy. And so in meetings, it should never happen that I present myself as the leader. And the woman is a second class person. Now, you know, Ila is bad ass and Ila doesn't give a damn about anybody else. She's fully capable of holding her own. She's way way more bad ass than you and you are plenty bad ass here. Yeah. So it helps. But that is part one of what is a meaningful collaboration that there has to be no conflict around credit. So, you know, people have to find their peace in terms of sharing to build something and they're not arguing about who did what and not being first because X thinks I'm so cool. So, you know, at a variety of points in time, various people have wrongly thought that I was the director of NIPFB. And it is the large heartedness of M. Govindarav or Rathin Roy that they just laughed it off. It was never a problem for them that, you know, you need to be large hearted on questions of credit. So these are things that need to be sorted out. So this is part one that there can be no collaboration when there are conflicts. You know, you and I work on everything is everything. We've never felt awkward, uncomfortable about, you know, who's doing what? We just let it be. No, no, I'll tell you the single reason where everything is, everything works well is none of us have ego about it. And that is essential. That we come together and we are worshipping at the show when we're trying to build a good product. And so you've got to, you know, stop trying to grab credit. That is the first thing that has to happen. And I feel that for younger people, this is an issue that, you know, in growing up, maybe a little more with millennials and Gen Z than ever before that social media has created poorly socialized people and you've not learned to be with human beings. And so these kind of issues matter more. There's all kinds of jangling going on. Oh, what did I say? What did that person say that endless dialogue inside the head that is this fair? Is this not fair? Should I report this to HR? You know, those kinds of things keep on happening. Okay, this is part one. So let's assume this is solved and you put it aside. Now you come to part two, which is creative conflicts on what is being done. And here again, one needs to give and take a look. I don't agree. Fine. We'll go along. We'll sort of find some middle road and go along again, like you and me that when we fight about many episode designs and everything is everything. We've got a way of letting go. There, okay, fine. I don't agree, but let's go do it. And, you know, we find middle roads and again, you need that good cheer of being able to argue. So it should not be that it is only one mind because then you've lost the point of collaboration. It's going to be two minds where each person is taking the effort of sincerely arguing and thinking and saying, you know, I think X and then when we disagree, look, it's okay. 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 of collaboration that you should not be arguing about credit and both or five collaborators all need to be taking effort to contribute ideas and effort. So that somebody becomes surly and resentful saying, okay, fine, help with you, have it your way and now I'm going to be passive aggressive about it. You know, I got a point and I love the phrase Jeff Bezos used in this interview with Lex Friedman, which was disagree, but commit where he says that sometimes the senior manager will come to him with an idea and he'll feel this guy is so passionate about it. I disagree with him, but I will let him do it and once I have let him do it, I will totally commit and I think some of our best episodes have been the agreement episodes. For example, you weren't really sold on the idea of four papers that changed the world or even the storytelling episodes. Sir, I'm a pity. You remember how much I argued with sir and I said, this is not an episode, but in the end, you're so great. In the end, it was so great and some of those episodes have been great and equally I disagreed with you on many subjects like some of the firms episodes, for example, where I said, "Ajj, this is so boring and academy who will give it damn and I am so glad it's out there because what an archive." Another core principle I think about is that we're all human, we're all scared bits of wet wear and daring to dream, daring to imagine, daring to come up with a new idea, daring to take risks is a scare's flame inside each of us. So I feel what all of us should do for each other is encourage the other. So, if you will come up with a mad idea, I will try all I can to say we should do it because by default, we are also scared inside ourselves and we are trying so little. So, you know, I think Eli and I did a good job of that that we would each encourage the other's madness and that's a healthy place to be. So it is better to encourage each other and try 10 mad things and out of them, it will fail rather than be the cynic and the skeptic and the wet blanket that is always trying to find reasons why something should not be done. So I feel a core part of collaboration and partnership is that nourish and support the ideas of the other and if somebody is excited about something, then do all you can to help and support even when it goes against the grain and you're not entirely convinced but if the other person feels it's stronger than you should do it line from bond to run, well, when they let me and I want to be your friend, I want to guard your dreams and visions. 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. You know, there is, whenever someone tells you something which is new, the instinctive human response is to say, but and we should really, you know, 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 even if they fail, they'll learn something from it. But you just have to be positive and you have to stay away from negative people who reflexively will be cynical 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. The good approach is that somebody proposes something and then we should immediately get on a constructive agenda, suspend our disbelief and say, I want to be a collaborator, I want to be a supporter, I want to build this. So here's one idea, here's another idea. We could do this. You know, you're saying this, but here's a better way where you'll make this better or you will have a better chance of winning rather than getting into this negative spiral of, oh, it's not a good idea. Why are we doing it? It's not going to work anyway or it's a dumb idea or it's wrong. Meaning, yeah, sometimes we do need to say this is wrong. But as far as possible, one should be on a constructive project that if somebody has an idea, as far as possible, I want to say, yeah, that's pretty good. In all this, then we also need to create space for ourselves for triaging conversations. So look, we are overloaded. We are trying to many things. I mean, by, we love you dearly, but seen and unseen should really be fortnightly and not weekly, those kinds of conversations. Yeah, yeah. I think if you know, imagine Henry Ford before he starts what he's well known for, you know, ask people about how do people want to get around and all he would have got as a response from conventional thinkers is that there is a market for better horses why don't you breed good horses how do we make horses faster right and I just want to at this point in time thank all those red people who did not respond like that and said that you go bro I don't know what the hell you're doing but we believe in you go follow the dream yeah let's take a quick commercial break and after that let's come back and talk more about your journey hey the music started and this sounds like a commercial but it isn't 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 we've called it 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 and please support us by subscribing to our youtube channel at youtube.com/amithwarmaaimitv arme the show is called everything is everything please to check it out welcome back to the scene in the unseen I'm still with Ajay Shah and he's still at nipfp that is in the journey of his life you know if he's 58 today we've reached year 41 so you know we're kind of approaching the last lap in a manner of speaking though when you're running an ultramarathon what is even a last lap but so you know we've spoken about you're setting up nipfp the kind of principles that went into it the broad areas you wanted to work on and the collaboration between you and elab but now let's get down to the brass stacks like what were the kind of projects you'd look at what was the actual work that you did the rhythm of that work was that first and foremost we were thinkers pursuing that journey of a new Indian macroeconomics and international finance building papers putting them out as public domain products okay and I feel that that agenda worked well then we were partners to the ministry of finance and sometimes we would go into open ended conversations with them saying you know what we should think about xyz sometimes they would say we are thinking z will you be able to do something for us so we became an extended intellectual capability it was available to the ministry of finance and I felt that this was a very good model of engagement so christianan often says that these kinds of things are needed to augment the indian state okay so the indian state has a deep crisis in terms of its level of capability and intellectualism ability to work with data recruitment problems the kind of people who are willing so imagine if you're not a mainline is the kind of people who are willing to work in government today is rather restricted and they're not able to take in some of the talent and capability that is their outside so this was an interesting middle road that people were incubated working on law economics public administration modern state of the art economics and then that capability was available from time to time for the ministry of finance so this arrangement worked reasonably well roughly 2007 to 2016 which is not bad so across many joint secretaries across many changes in government this broad arrangement kept on working so some people get surprised that it started with a kp christianan but it did not end with the kp christianan it actually worked across many different teams in the d a as i said from 2007 to 2016 for a period of nine years this kind of arrangement worked and so i was i'm pretty pleased about that whole concept of what is the meaning of partnership there are people in government who look for HR who look for consulting where you know either as i said you have a 20 year old english speaker or you have a bane consultant and they do work at the instructions of the joint secretary we were not that we did not take instructions from the joint secretary we would either swamoto propose a conversation with the joint secretary saying you know what have you thought about this we think x or the joint secretary would ask us that you know we're thinking about this other ways in which you can participate would you like to contribute and so we were not a billing rate per hour not a labor crew working at the instructions of the joint secretary and we would think for ourselves we would disagree on many things we would just totally not agree that this thing does not make sense okay things like that so that's the period 2007 in to 2016 in this i want to single out the 2008 crisis response in my opinion that was a good moment for this concept of a team so the 2008 crisis erupted it was very very hard for every economics and finance policy maker in the whole world uh in india we were very lucky that you know we had amazing people at all three corners we had a rb i led by subaro we had a sebi led by sebi bhave in the ministry of finance we had pijadambaram and ashoq javla kp krisnan a bunch of others so this was just India's peak moment in terms of capability and it was very lucky that this was there because the 2008 crisis could easily have spiraled into something much worse and in that we were the little researchers supporting this work we work day and night we developed that situational awareness i know speaking for me personally i basically ran 9 a.m to 9 p.m days every day at n ipfp not least because every night i would stay up into american time watching markets understanding everything sending out a last bunch of emails at night about what is going on and what we should be thinking about in the morning and then back into the story in the morning and it was a very good arrangement because a kind of knowledge brain power data work that we were able to build was a valuable addition to what was arguably a great team like this was an unmatched team that put together chitambaram ashoq javla kp krisnan sebi bhave and subaro it is a dream team in terms of the foundations of the macro economics and finance these were modernizers these were liberals they got a modern India at a level that you've never seen before and then we were able to be bit players contributing data evidence knowledge deep understanding of what was going on elsewhere in the world you know so we by that time had the depth in understanding what was going on in america what was going on in the uk understanding their laws why was there a run on the bank in the uk how they were addressing that and what is the meaning of a swap given to the south koreans and would the americans consider giving a swap to india and montex spoke with larry summers and the answer came back no it can't be done like that so we were there in every step of that journey and it I felt it was a good point and there's this particular cinematic scene which I have recounted before in my episode with krisnan on the scene and in our everything is everything episode the reformers which is that you know there is a basement in deli and in that basement in deli there is a panel that is assembling and you are the moderator of the panel and the other three people are kp krisnan subaro and bhave and no phone signal can reach inside so you would imagine this will be a nice uninterrupted panel except suddenly subaro's driver comes and whisper something in his ear and he runs off and then bhave's driver comes and that's the same thing and then krisnan's driver comes and does the same thing and suddenly you the moderator are all alone on stage which is fine because you're skilled enough to take it all alone but what really happened here was that it was chidambaram reaching out to them at the a key moment in the 2008 crisis saying come up guys I really need you and of course you became part of you apart of that team as well okay and the next thing that happened was fslrc I spoke earlier about the laws the laws are the bottleneck and it needs fundamental redesign shortly after I left ministry of finance I wrote a business standard op it drawing on my angst and the discussions is you case in other I describe to you about the gold ETF and I wrote a column in the business and it's saying you got a gold deeper that this kind of tinkering is not going to work that we will take 50 years 100 years to become an advanced economy if we keep incrementally fixing this at this pace and so pranamokalji was the finance minister and I think in krisnan's conversation with you on the scene and the unseen he tells that story about how we got to fslrc fslrc is the financial sector legislative reforms commission led by justice re-christina and the dream was audacious that there are some 60 odd badly written laws in indian finance can we come up with a single clean modern law that simultaneously establishes market failure as the motivation for state coercion and not just a reckless extreme power for a government agency to do whatever they want which turns into central planning and can you establish the checks and balances surrounding the actions of financial agencies so that we are able to combat the public choice theory problems it was a nice big audacious projects fun story that was the first and only time in my whole life that I faced a job interview so she christina was leading this and there was some amount of problems around what should be done on implementing it and so I was hoping that it would be placed at nipfp and I I would lead the research team and so that you know ilai and i would end up being the research team that supports the fslrc but that was not a done deal and so she christina said I will interview you so I say great and I went to his office in Bombay, and he interviewed me and he said, okay fine, this guy is cool. So that's how we became the technical team in FSLC. The FSLC has drafted a single draft law called the Indian financial code. And it's a clean modern law that fixes large scale of problems in the Indian financial system. And it is currently slumbering on the shelf, but all these things will come. There will be a day when these documents will come back to life. Hiding inside FSLC was the fully articulated picture of inflation targeting. So inflation targeting monetary policy committee, all these things are built in as a new reserve bank of India inside the FSLC draft law, which finished in 2015. But independently, we began on a separate journey to inflation targeting. That story is recounted in the everything is everything inflation targeting episode. So I will not recount it here again. But that is a piece that grew out of FSLC. No, and it's an incredibly important piece. I would ask everyone to go and listen to that episode. And Krishna also talks about it in his episode. But the basic summary is that inflation besides being attacks on the poor, which is a problem at the level of individuals can also distort signals within the economy because firms don't know how to react to rising prices. Is it a change in supply and demand? Or is it just high and variable inflation, which is sometimes a problem? And therefore you need to have inflation kept at a stable and low level. And that should be the one job of the central bank. And until 2015, the central bank did all kinds of other nonsense it had no business doing. But not this. And in 2015, the entire role of the central bank was finally redefined where it was essentially told that you have one job, which is to fix inflation at a band between two and six and you got to get it right. And again, you spoken about how it was a long road to change as it were. You chatted with Yashvan Sinha about it circa 2002. And he said, look, there has to be an environment. This is a great law, but it can't just happen. There has to be an environment. And over more than a decade, that environment built up until eventually it happened. And my favorite part of the story, and I will say it again, in case people haven't seen the other episodes, my favorite part of the story is that finally, at the start of 2014 or at the end of 2013, Chidambaram gives a go ahead. Manmohan is happy with it. But they don't, you know, make it a reality right then because there are elections, and as a matter of courtesy, Chidambaram says, let me leave it for the next finance minister. If it is me, great, if it is not, that person should decide. That person is around Jatli. And when Krishna takes us to Arun Jatli, Arun Jatli, after an overnight per user of the thing, says yes, and Krishna says, look, I support this law. It is our dream. It is incredible. But it is a far-reaching consequence. Don't you want to look at it carefully? And Jatli says, if India's finance, economic minds have said yes to this, who am I to this degree? And of course, he means Chidambaram. And Manmohan, this was the kind of grace that we had, which disappeared from politics shortly after that for reasons we won't get into. So I love this story. This is inflation targeting is not some wonkery. It is not some random piece of regulation or a random rule, does put out there. It is fundamental. It is far-reaching. It is seminal. And it was a community of reformers who made it happen with a political consensus in place between different parties. This is a freaking Indian state at its best reforming itself. Just to finish my story about the NIPFP period, then came field number five, which was bankruptcy. So my field number five is bankruptcy. I already spoke a few minutes ago about how Krishna saw the lines lurking inside the 2015 budget speech and went to Jatli and said, we should make a full bankruptcy code out of this. Why do it only for MSME? And by that time, we had done the FSLRC law. We knew how to draft a big complex law. And this is a full story you should discuss with Susan. Susan and I were both members of the Bankruptcy Legislative Reforms Committee. And it is also one of the finest hours of Rajiv Marishi. The committee kind of meandered at first and did some relatively trivial things, some incremental mods to the Companies Act. And Rajiv Marishi became the new secretary DA and met the committee and the committee's set. Is this the kind of thing you're thinking of? Or do you actually want a full bankruptcy code? And Rajiv growled. I want a full bankruptcy code. I don't want to do trivial stuff. So then suddenly the whole thing went back to full energy and then Susan led the team that drafted the bankruptcy code. Some people from IGDR, some people from NIPFP, some volunteers from outside and with basically negligible resourcing a bankruptcy law got done. Now this is something we don't actually have an episode on it. It's been mentioned in my episode with Varga. He's a very who also was part of Susan's team. And if any friends of Susan are listening, please convince her to come on the show. I have asked her about 40 times. Ishtam, I ask her. She says, next year, next year, never comes. She's absolutely a remarkable intellectual. I won't say public intellectual because not adequately in my opinion. And I would love to have her in the show also doing a life in times episode and hopefully exposing some of Ajay Shah's hidden fibles. But quite apart from that, tell me about this law and why is it so important? Because again for the layperson, the first time I heard of it, I thought, yeah, I mean, like what's a big deal fine bankruptcy law or tea care, but you know, what is a big deal? Why is it far reaching? But this is actually also more fundamental and far reaching than people realize. So we are in a zone of the market economy. The market economy is made of firms, firms are risky ventures. If you think that there is a possibility of failure, it is everywhere. Every firm runs a risk of being wrong, of trying the wrong things and then doing badly. How does that doing badly happen ultimately turns into default? A firm will default on its lenders, a firm will fail to pace allergies to its own people. That's how a firm will default. Now the question we face as a society is that when that happens, do you make it a bloody mess? Do you have some pure power play where powerful lenders come and beat up others and grab assets of the firm? Or can you have an orderly script for what happens in the end game once a firm defaults? Ideally, can the firm as an institution be protected and survive while the lenders take a loss? So the famous European 2G auctions, tons of money was bid by telecom companies because they thought that 2G telephony was going to make a lot of money. In the event, it did not make money. So there were all these mobile phones, but the Arpus were awful. The annual revenue per user were awful. So those firms had a lot of debt and there was no way they were going to discharge that debt. But the greatness of a bankruptcy process is that the old equity guys get wiped out. They go to zero. Their shares are lost. If you are an equity guy in a failed firm, you are knocked out. The debt guys took a very big ride down. The firms went into the ownership of new people, but the firm survived. The customer using the cell phone never had a moment of interruption of service. So the assets of the firm state, the employees of the firm state. So the firm as an institution rode through the whole thing while a whole financial superstructure was changed completely. The old equity guys got thrown out. The debt guys took a giant ride down. New equity guys came. But all that drama played out through the bankruptcy code. While the firm stayed alive with cell phone coverage working as if nothing ever happened. So that is the glory of the institutional apparatus covering firm failure, which is called the bankruptcy code. And if we care about the market economy, we care about shimpiteria and creative destruction. It should be easy to start firms. It should be easy to close firms. Firms should die all the time. They should be vibrant competition. And then you need the rules about the end game of a firm. That when a firm gets into trouble and there are five angry people. One guy's not being paid salary. One guy's not being paid alone. Repent. What are you going to do? How do you arrive at a predictable set of steps and a predictable loss allocation? Whereby it becomes a frictionless exit. That's bankruptcy. Okay, my last story I want to tell from the NIPFP days is that essentially at the end of that journey, ELA had one grand insight. At the time of a world view of how to work was the work in finance, the work in pensions, the work in macroeconomics, the work in international finance, where there was complete intellectual domination, there was lots of papers, in-depth understanding of the field and then a public policy process in India where we used to always say to our people that you have no right to give advice until you are a demigod in the subject that you are no better than any other civil servant. Then you have no right to give them advice. So just because you speak English and you have read western blogs, it does not give you the right to give advice. We still always have this very research heavy approach that we need to have complete mastery of the field. We have to win debates vis-à-vis the traditional, you know, the weak intellectual climate of India and then you earn the privilege of claiming that I have some thoughts and ideas about how you should do this. This was the way we used to work earlier and you can imagine it is so expensive to do this. Then ELA's big insight which is towards the end of the NIPF years was that actually there is a relatively sterile level of knowledge that carries you very far which is just market failure, public administration, law. That's all. You don't need to understand agriculture completely, you only need to understand market failure and agriculture. So freedom is a default. There has to be an out-interested. So what free people do is a great subject of inquiry, but we are not centrally concerned with that. Just focus on the market failure. So you need to understand the market failure. Then you think of the lowest cost coercive actions by the state that will address the market failure. And you think of the public choice theory problems and build the laws and the procedures that will contain executive discretion and will make sure that civil servants and politicians don't become mean people who will harm the people of India. So a relatively sterile version of the knowledge in one field after another will actually take you very far in terms of figuring out public policy. So she had this window of how to open up this toolkit into far more generality without a 20 years journey to build a full research literature in field after field. So we did that in three fields, but we did she said you don't actually need to do that in all fields. So if you have a drug quality problem, you need to understand the drug quality problem. You need to write papers on drug quality, but you don't need that complete mastery of drugs. And 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 an IPF and this is my summary of 2007 to 2016. So you know, we've done a bunch of episodes about when the state should act, how the state should act, you know, an episode defining market failures and so on. And on everything is everything. I'll link all those from the show notes, but for those who haven't heard it, I think we kind of need to summarize that a little bit as a grounding on when the state should act. And it's obviously part of ELAW's toolkit as well that in our first episode on the state which was episode 25, we discussed that look every act of government is an act of violence. I once, my headline for one of my pieces in terms of India was exactly that every act of government is an act of violence because it comes at a cost at cost is a moral cost of coercion and that cost is an actual cost on the economy as you have pointed out in your book and service of the Republic. Every rupee taken by the government as taxes has an opportunity cost of three rupees on the GDP. That is what would have been generated with it. Otherwise, if it was left originally. And therefore, we have to not assume that the government is all powerful within endless supply of money, but that there is a constraint which is both a moral and a real financial constraint. And so we should be able to justify every act of government on those grounds. Now, when is state action justified? And in our next episode, episode 26, what you laid out so well is that it will justify it only when there are market failures. Now market failure is a technical term which doesn't mean what it might intuitively mean that oh, the market failed to give me something. So if I go to H&M and there's no black shirt, I can't say that's a market failure and the state should step in. It is not. It has a specific kind of meaning and when those particular kind of market failures occur, those are the only times that the state should step in and even after that the state needs to think long and hard about should it intervene to begin with and if so, what interventions are optimal and justify the lowest cost as you said. So I want you to talk a little bit more about this foundational thinking. Before we continue talking about policy in general and a strategic view of finance, which is what we're going to talk about next. So there are extremes in this world. Some people want to do central planning where the government controls a resource allocation, the government will say the shirt should be blue, the payment system should be UPI, the airline should be Air India, okay, whatever. And that's just central planning and that works very poorly because the world is too complex and officials and politicians do not have the knowledge and the incentive to actually figure out what an advanced economy is. So that's one extreme. Too often at the other extreme there is a bit of the libertarian impulse where we want to say freedom in everything and that's also not correct because there are things you want a government to do. So once you start down saying that we want the government to run a military, we want the government to. If I may intervene, I would just say that you're strong manning the libertarian position a little bit. There are there's a certain kind of libertarian, the anarchist libertarian who believes in no state at all, but most sensible libertarians like I would once have classified myself though I don't like labels these days, don't really believe in that. We believe in a night watchman state which should only intervene in specific situations and by and large you and I are actually on the same page. So I'm on that middle road and the public economics technical term for those specific situations is termed market failure. So market failure is defined as a class of problems where a the unrestricted movement of the free market leaves a situation where it is possible to obtain a Pareto improvement that courtship power can create a rearrangement of the world in a way that at least one person is better off and nobody's worse off. So what a high bar that we are asking that I can use courtship power in such a way that at least one person in India becomes better off and nobody's worse off. That is a high bar and that is market failure. So market failure is that class of situations where you could do this thing but then B you come to the question that is it feasible? Is it within the implementation capacity of a government? Is it fouled up and tripped up by public choice theory with state failure? It may or may not be so just because there is a market failure. It doesn't mean that you should always have state intervention particularly in a place like India where state capability is very poor. Many many times we have to just let it go. Sorry boss. You know, I can't do this in India. They can do it in Norway. It doesn't mean we can do it in India. And so you need a more night watchman state in India than you would have in Norway. Okay. So this is the strategic picture on how to think about the state that we view the state with skepticism because there is public choice theory. Then we think how can I create the checks and balances 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. Fine. So we are here. 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 that all of us need and this is basically Kale Karansha that we need to learn the technical terms market failure. Be able to apply that to the world. Be able to see market failure. And yet be cautious. Be still my beating heart just because you've seen a market failure. It doesn't mean you go set up some government coercive intervention into it. Now you wonder what kind of lowest cost government intervention could you envision? 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 Nero 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 which will do X in the broader context of pervasive state failure in India. It's not fair. It just doesn't happen. Everything is broken. And so you've got to assume that whatever pieces of government are the site of action, they will be reasonably shambolic or there'll be two good officers for few years at local. And then it will collapse. It'll river to the mean of the average performance of an awful Indian government organization. Now that you have all this, please reconsider what kind of state intervention do you want to do? Are there still some market failures that you feel they 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. Brilliant summary. And I sometimes worry that we might use terms without listeners really knowing what they are or having, especially if they haven't heard us before. So I'll quickly say what public choice theory is. Public choice theory is the application of economic thinking to the working of the state way wherein you recognize 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, did to voters and that becomes a big constraint. And when you think of it that way, you begin to realize one important thing that number one, you know, people will often speak of market failures as if they're 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, we cannot compare the outcome of a rare market failure with the intention of the government fixing it smoothly. That rarely happens. So public choice theory teaches us to be skeptical and then to be rigorous in terms of what precise actions we prescribe given the reality of the world, which is the reality of state capacity and the reality of the incentives of all the people within the system. We've done an episode of everything is everything on this episode 33. I would also recommend a great book called Public Choice, a primer by Imon Butler. Excellent read. You can download it for free. I'll link it from the show notes and you can really read it. it in one hour, excellent book. So, you know, let's let's kind of move on and talk about a strategic viewer finance, which is a super important subject because that's something that, you know, you would have studied in a sense first by getting, you know, the academic version of it while doing your PhD, etc., etc. 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 and so on as you've laid out for us in Episode 21 of Everything is Everything. And then having done that, you get a far, fuller sense of the Indian reality. What is a landscape here? What is a state of finance here? What is a state of state regulation here as it were? And then you came up with an overarching framework of looking at it. So, that's what I want to ask you about. A few months ago, I wrote a paper which is titled the Journey of Indian Finance. This is for an edited book by Tithankar Roy and some others. And it puts together 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. So, building block one, there is market failure in finance. And we need to understand it. So, we need a precise description of what is the market failure in Indian finance. And that was essentially clearly articulated for the first time in FSLRC. But I'm not going to go into the details here. One needs that clarity of what is the market failure? You need to do some consumer protection. You need to do some microprovential regulation and so on. So, there are some pieces that need to be done. Second, 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. Public choice theory is the correct tool kit 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. In fact, 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 your life is easy. You get to go for, you get to sleep at night. So, questions see. Given that we are applying public choice theory 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 SABI, 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 NPC. 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. Otherwise, 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. Yeah. Okay. 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? Will it be split into one doing all potential regulation, one doing all consumer protection? Okay. So, what is the agency landscape that you want? 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, but that's all it does. It only does inflation targeting. Then there is a debt management office, which does the investment banking for the government. There is a potential 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, Sabi. 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 and so on? Okay. 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. It's unprecedented. 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 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 is a very real problem. 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 moral 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 this purse to reforms community, a pensions community, a finance community. What I feel like happened here is a great man theory, kind of thing that they happened 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 to 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 the to plan for the future. So we are not dependent on great men or great women for that matter. I mean, Elah certainly is one great woman in 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're going 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 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 in this? So A, we don't know. 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 is a critical question 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 and 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 morey come 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? This is the answer. And we don't know how to do it and we are all at the early stages of thinking and figuring this out. On the positive side, I want to say that an IPFP and IJ idea have been leadership factories. The people who grew up through all these experiences are not gone. 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 type settings software is used to draft the law, which is a black art that most people in India do not know. Things like that. 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 drank from it. 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 of this kind of energy and sustain it for years and years and have a realistic assessment about the limitations of the Indian state. The Indian state will come and go, there will be some years which are good, there will be some years which are not. But if the community defines itself by the government, then it is basically a consulting shop that if there is a joint secretary, he will ask for a Bain Consulting fine. You will do some assignment when he doesn't ask for the Bain Consulting, the Bain Consultant Leaps. Whereas what is required here is the decades of deep knowledge, 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. So a larger question, a larger theme we've addressed it before, but just to sort of get some more thoughts on it from you, 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, learnt, etc, etc. And in earlier, ERAs, 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. 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, Joe, game of their own. Academics are generally talking to other academics and a lot of fine minds are wasted in their, 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 of 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 and they are useless. But a lot of young people, especially from small towns, are hungry for knowledge, they are ambitious, they want to contribute to the nation. They have that sense of purpose. What are they to do? 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 I as officers are getting transferred from one post to the other every two years. You are never building specialised knowledge, you are generalist, generalist need specialist to help you. A lot of the consultancy world forgive me if I am too harsh is essentially a scam. They don't really provide value and they are winging it and they are also not specialists a lot of the time. So you have sort of brief glimmers of a way forward such as Rakesh Mohan calling someone like you and saying come and work for me. But that is one you. 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 this system and B, in an ideal world, what would this system, this knowledge economy and its interface with the state look like? These are all huge questions and we don't know a lot of this. I share your angst, I share your concerns. There is an Indian version of this concern that is even more scary for us. This is the decline of the traditional government controlled research organizations in India. So the traditional government university or government influenced organization is in deep trouble 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. UNI 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 of knowledge and ideas. Then after that, yes, they 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 for many reasons. So I think what we need in India is a new world of private organizations of a variety of shapes and sizes. Now here, on the teaching side of things, there is unfortunately one big mess which is going on that you build a normal teaching university and then you get into the trap of the foreign journals that works for the STEM subjects that asking faculty members to publish in the foreign journals is a decent incentive in STEM journals with its own problems 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 in the Indian setting for all the things that really matter which is the humanities and the social sciences. This is very hard and I don't pretend that I have 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 of what is a perfect thing? What can we aspire to? How we get there? A lot of that journey if it is ever made 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 in each field that they have to have high levels of intrinsic motivation. The puzzle is how to avoid the simple climbing a career ladder. So for example, what modern academics has turned into is you get one power better time and you climb an academic ladder. So then people basically just become like corporate guys fighting for one promotion at a time and that is really not very effective. What we want is a whole bunch of energy of thinking, talking, arguing, debating, collaborating. We should be eclectic about what institutional form it takes. Particularly because in academic organizations you will turn into this journal publication thing. Then they will matter less. We need a new wave of other forms in which people will locate themselves, find an income, find colleagues, find collaborators, find arguments. So they will be private organizations to some extent in universities but also non-universities. And for any individual who aspires to be part of the knowledge ecosystem, they can look at you as a role model in one important way, which is that in academia, the tendency is you get more and more specialized and enter more and more relevant silos. Well 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 now 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 you said health 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 and I was enchanted. I just got so interested and I kept on reading, all my life I kept on reading, but then I do this with so many things, meaning there are thousands of things where I take interest 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 and keep going. I'm a lucky person that I can read journal papers in many, many fields. So a good game is to go to Google's caller and keep finding new papers to read and so that way. I had somehow been nurturing infectious disease in my mind all the time. Then the second milestone was the great man, Jeff Hammer. When Manmon Singh became Prime Minister, the World Bank decided to put there two best economists, Land Pritchett and Jeff Hammer to live in Delhi, so that they could have a better frontend in engaging with the world of Manmon Singh. And that's how I got to meeting Land Pritchett 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 doing finance, you're having a good time. When you grow up, you'll do macroeconomics and you'll have a good time. But I tell you, 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, that getting health right is the hardest thing that anybody can do. So he said, if you're a real man, then when you grow up, you will have the guts to start thinking about health. And it is the hardest thing. And we'll take your time. Like, limber up and do all the other trivial things that you want to do. But when you grow up, health awaits. It was just done in Jeff Hammer has been a great friend and an enthusiast who has taken interest in me all along. So this was his happy way in which he was just nudging me along that come to health one day and you will see 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 started small trivial things like finance and grow up to macro. Macro is hard. 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 that you have to get and you have what do what do they of macro know? Only macro know only know PhD macro books and papers. So macros are very hard field. It needs rich depth in economic history, history more broadly institutions and common sense about the world and all that. And then you get that. But Jeff was saying to me, no, no, no, no, no, you ain't done. You ain't remotely done. After you finish with macro, then you will grow up and you will come to health. So this sort of stuff was always there in my mind and I was kind of reading and thinking. Then I'm really grateful. There was a country director of the BMGF called Garendra Behari, who is sadly no more. He met me and he said, would you be interested in doing more first principles thinking around health? And I said, yeah, it could be. So he said, you know, we know you're not a health person. We don't, we know you don't do health. Will you take interest in starting to do health and build a body of knowledge, the ways in which you have done other fields. Probably he knew a bit about that. You know, like work from first principles, build knowledge, build literature, build community, participate in the larger life of things. And I said, yes, I'd be happy to do that. And I'm very grateful that he and Sandhya Venkateshwaran and Naji Ketmore and Amrit Agarwal were all enthusiasts about this kind of work. BMGF, by the way, is Bill and Melinda Gates Foundation for those of us? They got us going at an IPFP, doing work on health. And I'm very happy that I've endowed this path. And then actually all over again, it was the same toolkit. What's the market failure? That's it. That's the core question. And then suddenly you get this enormous, powerful insight of the distinction between the private good of health care that I have a toothache, I sit on a dentist's chair, I get fixed, I benefit. That is tantamount to eating a chocolate, which is a private good. So it may be health care, but it's a private good. Whereas public health where you get purposeive state action that seeks to act upon 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 of North India, 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. Once again, 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. The advanced economies have finished all their public health stuff. Okay, they've got their clean air, they've got their clean water, there's a whole bunch of public goods problems in the advanced economies that are in reasonably good shape. So they worry about health care, they worry about the incredible cost of the elderly, getting into health care in old age. So if you participate in the West, you will get a health care centric view. If you talk to doctors, doctors see health care, they derive self esteem that you come to me, you're not feeling well, I cure you, you become happy, I become happy, you feel gratitude. So doctors want health care. And public policy in health policy is a completely different field. So intuitively, what is too important 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 of market failure, state failure, state capability, public choice theory, checks and balances. This is the machinery to apply into health and so for many years, I did this kind of thing and it worked very well. I brought new data to the table, the CME, household survey is the first observation of the health of the people of India. And it gives you amazing new measures, things like that. So I had a very happy time, I have had a very happy time in the field of health. It was one more deep dive learning and new subject. And it just so happened that I knew finance, there was a 2008 crisis. I started learning health and there was a COVID crisis. So suddenly, all that knowledge that entire toolkit became applicable to study India at the time of COVID. And that's where we did some episodes of scene and the unseen. Yeah, we've done episodes on COVID and vaccination and so on and so forth. You know, health care is not just the hardest subject for economists. I think it's even the hardest subjects for enthusiasts from the outside like me to grasp. Like I simply don't get it. Like you had once said that Amritagarwal is one of the best experts in health care in the country. I had a great episode with her. She is absolutely awesome, incredibly underrated. But I feel that episode gave me much more insight into Amritagar than into health care because she was great. She was lucid and full of clarity. But I simply don't get the subject because I think that everywhere in the world, everybody has got it wrong. Nothing seems to work. You know, one of the best books I read on it, I'll link from the show notes was by Robert Gribboye's. I think Frontier and fourth, Fortress in American health care, but that was in an American context, which was useful, but I don't crock it at all. So I just want you in an Indian context to sort of give me bumper sticker elucidations. If it is possible to do those in a bumper sticker about what is wrong with the way we think about health care here and what would you like to see being done differently? So pushing aside public health, let's focus on health care here is my list. Or even public health. I mean, I'm just using the term really loosely, not in, you know, 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, not a person. Okay, so if you're going to fight mosquitoes, that's public health because you don't know which person the mosquito is going to bite. We're going to fight air quality. That's public health. You're going to improve the safety of the roads. That's public health and so on. 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. That how could we use 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 given to doctors. Doctors come in phase two, which is health care saying at the end of a public health journey for whatever reason, somebody is sick. Okay, so prevention is always better than cure, but find some people get sick. Now we come to part two, health care. Here, bumper sticker one is that by and large, the government run health care facilities work poorly. Okay, there is an isolated exception like aims in Delhi, but most government health care works reasonably badly. The entire fantasy of government running primary health centers and government running hospitals and all that. The government running ESIC hospitals, all these things is a bit of a fantasy. The government does not have the ability to do production of health care. Again, the idealism, the good behavior of doctors, all that stuff, founders on the problems of public choice theory that the government facilities are run by real people and those people choose to, you know, not show up, be corrupt, whatever. 100 things go wrong. And government health care facilities in India work phenomenally badly. And you basically just want to starve them of resources because it ain't working. This is this fits under the Chidambaram rule of don't put money down leaky pipes. Okay, so this is bumper sticker number two. Bump sticker number three is there is huge market failure in private sector health care because of the asymmetric information. When you meet a doctor, the doctor prescribes an MRI and gets a kick back 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 an X-rays. We don't need an expensive drugs that we don't need. Where at best, they are extracting resources from us at worst, they're asking us to do things that are positively harmful for our bodies. Also, the health care journey needs to be a complex conversation between a health care provider and the person saying here's a list of steps whereby over the next 10 years in steady state you will be healthier. Whereas in Indian private sector healthcare, we're just transactional. That I have a toothache, fix me beyond that. I don't want to know where this came from. I have a heart attack, fix me beyond that. So there's really no long term perspective on the healthcare provider in thinking about the interests of the patient. Rather, it's just transactional. You got a heart attack. I'll fix you. Now you go home, lead a terrible life, come back to me with a next heart attack. So there is just no attempt by private sector healthcare providers to participate in the lives of their patients in a deeper way in ways that could be transformative and improve the health of the people of India. Next bumper sticker, there is no simple, easy government intervention that look at sebi, 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. It will be a disaster. So you cannot transplant whatever a facility type toolkit we have into this field of health because the conversation between a doctor and a patient is too complex. And then my last bumper sticker is basically Amrita's big idea. Amrita's big idea is that the site of action can be and should be the conversation between private health insurance companies and private healthcare providers. It is private health insurance companies who have the incentive and the organizational capability to amass data about one doctor and one hospital at a time and detect malfeasance and malpractice and create incentives for the private healthcare providers to do better. So they have the correct incentive, they have the correct organizational capability. They can create the check and balance to make private doctors and private healthcare facilities behave better, to curtail their behavior, to address the market failure, to coerce them through private contract to cater to the interests of consumers better. But that requires large capable private health insurance companies and it also requires state capability at IRDA and we don't have either of these yet but this is a great field to go into. Last point, there is a brilliant concept in this field which is called an HMO. It's a health maintenance organization where there's one single firm which takes 1000 rupees from you every month and promises to take care of your health. Now suddenly their interests are aligned that if you fall sick and you have more surgeries they will spend more. Now they have an interest in prevention and not cure. So they will take a lifetime NPV view of your health and make you healthier and they don't have an incentive to over-prescribe or give you a drug which is actually bad for you. All those things. The internalization happens because they are on the hawk for all your future health care. This is called an HMO. It's a cool concept. It needs to be done. There are many pitfalls we enter. So this is my rapid bumpers ticker summary of the field of health. There are a couple of chapters in Kalkar and Shah that are health related which piece together some of this. So when I have 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 and the answer is no except some role for the government when it comes to eradication, Allah, smallpox or polio other than that 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 the state decides that it will be the HMO. It will charge a certain tax and it will look after you for life. But for UK NHS. But whatever. I don't know about that. So dystopia already playing out. But in this case the state says that hey we are taking money from people but we don't want to spend any of it on all this bullshit 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, sugar is poison. So they institute the Ministry of Sugar and the Ministry of Sugar decides that 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. So not a chemical virus is put into the water. Yes. And that virus runs around your body and edits your genes. So that you hit the taste of sugar and fat. No fat is great. Sugar is poison. Fat is wonderful. Bacon and egg yolk are superfoods. What are you saying? You are deviating from the party line Ajay Shah. We shall put you away. Or here's another where the policeman come bang down your door every day and inject everybody with ozampic everyday. Ozampic is expensive but yeah. Inject you with fake ozampic everyday 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 or they will lose their appetite for bacon. Fake ozampic that kills you with cheaper. That is true. A good modern dystopia novel will be let's just kill them off. Or imagine then the government will subsidize fast food so that the people will die faster. This is going to all kinds of interesting places. But let's continue. I want to ask you one final question about healthcare. You have more fields of course to cover so we will go there 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. Healthcare is a problem for advanced country. Just focus on public health first and there problems can be easily solved. You know and can be defined and you can find a solution and you can get it done. You're not all easy who's going to clean the air of Delhi. It's a political economy problem in Punjab but leaving that aside. So that is one prescription. What else is prescription? 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 to the consumers 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 etc etc. What is wrong there? Is there a supply problem that I haven't been able to put my finger on or what's going on? So currently it's market failure that there is asymmetric information which is well understood as one of the four categories of market failure. But at the heart of it is there some kind of state coercion? For example, is there something being done to restrict the supply? Like we have an under supply of doctors because we know that the medical consular medical consular of India was restraining that. All the doctors have the same incentive that they want. First of all the corruption of kickbacks is just a 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 to a doctor 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 that we are here. So Amrita's solution here's an analogy. Amrita's solution is like an index fund idea that we will not ban active management but let private people build index funds and then one by one individuals will get the point that my God, why would I ever go to an active manager? 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 and says, Oh my God, I've been getting ripped off by active management 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 if an HMO exists and they are the index fund which looks after me. 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 by the health insurance from that company 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 Baccarra and they will over prescribe X-rays and get a kick back from crazy drugs and so on. When we go through the private health insurance company, the doctor thinks, Oh my God, my data is being monitored. Okay. Simple metaphor. What proportion of women who are pregnant get a cesarean. This is a classic measure of the malfeasance 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, but that's measurable. A private health insurance company will measure the cesarean rate for each hospital and pull them up and say, why is your cesarean rate so high and start using financial levers to arm twisted? Now imagine that is established as an equilibrium. Now their price to us 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 know what? You're better off getting A, B, C, D private health insurance company. You get the full deal from them. They pay the private healthcare provider, and we don't get ripped off by the private healthcare provider. But I'm thinking of an unintended consequence here, which is that there is a demand and supply mismatch here, where there is a greater demand for doctors than the suppliers. There's an under supply of doctors. No, no, no. In medical education, but the unintended consequence would be that then for every doctor, no doctor is taking every patient he can. He can pick and choose. And therefore, the natural incentive for the doctor is that don't take anyone with a private insurance provider. Take only the bakrass. We've reached the stage in India where private healthcare insurance is a significant force. All the big hospitals work with all the big insurers. What you need is a little more bulking up on the size and institutional capability of the health insurance companies. Plus, you need the FSLC quality insurance regulation. So today's IRDA is not up to FSLC. So please note, everything is everything that FSLC and fixing financial regulation holds the key for fixing healthcare. 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 or you have to do next conversation with Amrita. But it is absolutely essential to make IRDA work because bites at this story doesn't happen. You need proper regulation of the health insurance companies. We should certainly do an EIE episode on healthcare. I think people have been asking for it, especially since our blogbuster education episode, which people love and I love as well. Let's move on now. And before we talk about the remaining fields in which you've done work and spoiler alert, there are three more fields beyond these six. Let's talk about the book. Let's talk about 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. They are not creating a permanent body of knowledge. They are in a sense, 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 convince every good thinker and all that, please write a freaking book. And no one takes me seriously. And so I'm so glad that you know, you know Mr. Kalker did write that book. I have a great episode on it. And it's a seminal book. It's a great book. I wish there are many more like it. Panek O Tessaneer is trying his best by bringing out book every week. And he's fantastic. Tell me more about that book that where did you think that okay, the time has come. I need to write a book now. I'm going to do it with Vijay Kalker. 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, let's go to it. Okay, so very often these things come from external impulses. So this book has the most unlikely journey. First Kalker was invited to do the CD Daeshmook Memorial Lecture at N.C.E.R. by Shekhar Shah. And I helped him to write it. I pushed some of these messages like Market Failure and State Capability into that. And it seemed to work well. He was very happy. So he came back home and he said to me, we should turn this into a book. And I said, okay, but you know, it was like a chore because some of this knowledge in Market Failure is like basic public economics knowledge. It's only in India that economics education is so weak that they don't do any public economics. You know, it's all just development economics and happens in India. So economics in India is uniquely ignorant about economics. And to be clear, you know, when you say that this knowledge of Market Failure, what you mean is not the knowledge that markets fail in this manner. But the point is that A, the meaning is so restricted and B, the state should only act when there is Market Failure. Freedom is the norm and Market Failure is the exception. And there is a clear categorization. There are four categories of Market Failure. You learn to recognize him otherwise freedom. And then in those four, 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 sabitip organization to discuss each hospital in India. Like it just seems impossible. So, you know, once you just recognize that no, it can't be done and don't even go there. So I was a little dull on this project for quite a while and Kalkar just kept on pushing me saying, no, we should do this, 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. And I understood that 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 Tinberg and 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 official dumb 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, but have no idea about what actually doing policy means and the problems of state capability. So like can you create a basic foundation of shared knowledge and vocabulary and capability between a wide array of actors in India? For example, you know, because in India we have this funny concept called law school, where you learn nothing but you learn law, which you know is a weird thing. Like you should know the world and then you put a small smattering of law on top of it. What do they have law know who only law know? Only no law. No, no, I'm paraphrasing CLR James. So this is what he said. What do they have cricket know who only cricket knows. So don't correct the grammar. These are his words. So this is the first objective that a simple basic book which gives a funders of state, freedom, coercion, market failure, state capability, the machinery of building state organizations in India, public choice theory that is objective number one objective number two is to put out some novel ideas in the global landscape of public policy and public administration. You and I have discussed many of these things 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 that you can't see a French health policy in isolation. You have to see it in the context of rule of law and a whole array of other capabilities that are present in France and so on. 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 chapters here first. And the third is 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 1991 to 2011 and then why did India have difficult times in the economy after 2011? So these three are really one intricately interconnected story and it had to be done within the structures of a trade book. So it's a simple fun book which shots snappy chapters and we got our first edition out in 2019 but the idea of the book still held a grip on us. So we kept going so 2017 to 2019 for two years we got to the first head and then 2019 to 2022 three years more and we got to the second head. So overall it was a five year journey and we got to the book and I'm happy to say that by the time the second head came out the book was exercised I was finished with it. Kalkar and I were no longer talking to each other on phones and you know in this chapter we should have done this. So that's sort of regret 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 have happy and proud of what has been done there and I don't have any important things I'd like to change in the second head standing in 2024. So this is the journey of the book Kalkar and Shah. Couple of questions number one did writing the book make you a better thinker? Absolutely. So this challenge of taking all these three strands and bringing it together there were pieces of novel inside how to weave it together how to argue it. So you say that 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 by writing a book we improve our brains and as a person that spend 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 referring process where they will look at every sentence and try to shoot you down which is just the way to be small minded in your thinking writing books is the way to get to big ideas. and to challenge yourself and to think and dream. I totally recommend that. I loved the process of going around the country and doing book talks. Kailkaran, I did over 100 talks around this book for the first head. And they drove our minds in so many ways. We heard hundreds of things. Shavam Misra sent me a beautiful article where the 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 saying, "You know what? 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 come out to us and say, "Have you thought about X?" And that again drove our thinking to get better. So I'm truly grateful for how the journey of building this book was both a service to the Republic, but also a path for my growth. And while we are here, I want to say a last funny thing. I never produced a book talk video because I was still fighting with myself on what is this book 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 a day after tomorrow. Oh, amazing. So you have to give me the URL before that. And we could also do everything. It's everything episode on that. I want to add an advance to something that you said which will lead me on to my next question. And the nuance is that this is also a tremendous lesson that I talk to my writing students about. That at one level, yes, you're writing because you want to have an impact on other people. Whatever that impact is, you want to entertain them with the story, change their mind on something, whatever that impact is. Other people are central to that. That's when your writing comes alive and you have the intended effect on the intended reader. At the same time, what a book really does is it serves a very selfish purpose. It makes you a better thinker. As you said, so therefore it is completely okay to think about writing a book is not just for it doesn't matter how many copies it sells, but it will make me better. It is a road to self improvement. However, when you said 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. You force yourself to write clearly without abstract prose, without academic jargon. When you are forcing yourself to think clearly when you're reaching out to the grandmother's and dentist's phrase that you like to use. So it's important, therefore, to have that in mind also that in my view, both have to go together. Pretend that you're writing a book to persuade, to enlighten that it 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 in your prose, right? You're a lucid writer. We've done an episode of everything is everything where you speak about your approach to writing papers. All the text in the book was actually, these are your words, the thoughts, of course, Mr. Kalker 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 academy, when people get into academy, it actually becomes a struggle to write clearly because the kind of prose you're used to in academy from the mediocre writers. I know the right 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 the curse of knowledge. Your writing is the opposite of that, right? Now, at one level, I'm imagining it's an incentive of writing for business standard, the Fortnightly column 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 at business standard or did you learn over time just by doing? So, of course, years and years of practicing the craft, made it better, but you do need a sense inside your mind of what you wanted to be. If you don't have the dream and the objective of good writing, you won't get that. So, I think it needs both. That, you know, one needs to form a sense of the dream. And then, we will fashion our feeble bodies to pursue that dream. And then, I just want to say that I grew up with books. And as a teenager, there were some great books in my life for whom the belt holds by a Hemingway and essays in persuasion, essays in biography by John Maynard Keynes, Jacob Brunavowski, the Ascent of Man. I just worshipped 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 with a sense of wonders and how the hell do you guys do this? So, very, very early in the game, I knew that one day 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. So, you know, I remember when I first got to freedman's writing, I was all in awe of the quality of the writing. When I first got to Lucas, the new classical revolution in macroeconomics is as much about the ideas of Lucas, as about Lucas as a writer. He's just one of the most perfect writers in the world. Not least because he was a humanities student all the way to enrolling for a history PhD. He brought those sensibilities into this field. So, he was not just a great mathematician. He was also a great writer. And these were deep influences. What do they have mathematics now? Only mathematics now continue. So, these were all my writing influences. But very early on, I did have the dream that it would be so cool to be able to write well. And so, one by one, as I encountered these great writers, each of them I worshipped 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 such, that you write bad sentences, you write bad paragraphs. But it has to well out that, oh, this sucks. 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 when I was 13. Magnificent. Let's talk about your next great venture, which of course is XKD or forum. And by this time, you've had experiences with institutions within the bellies of small little beasts like IGIDR and NIPFP. And you also worked within that huge beast at the Ministry of Finance, which itself would have interfaced with different institutions. So, you know, at this stage, where you, both of you are 54, right, at the time XKDR starts. What is the sense of what you're trying to do here? What are the mistakes you don't want to repeat? And what are the good practices that you're putting into place? So, I feel that the macro finance group at NIPFP, the finance research group at IGIDR, these were good successes. There's good output, creation of people, creation of community, creation of a literature. In all these metrics, I feel it worked reasonably well. Now, these government organizations come with a whole raft of limitations and difficulties. So, the curious question to ask is that if many of those constraints were taken away, would you be able to do it better? And I think the main answer is yes, that private organizations work better than government organizations. And of course, it comes with a very, very, very big problem, which is the resourcing. So, one has to face the challenge and the difficulties of trying to raise some money. Also, here is a self-conscious attempt at trying something 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 at artisanal quality. So, the idea is keep it small, but can you make it high quality? This is the kind of org that we are trying. So, being a couple of fields, not too much and have a small team. Also, it's a deeply collaborative model hence the word forum. 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 where we can husband some of the intellectual capital of India. Husband is a good word to use because you're a collaborator in this, of course, is Susan. And how does this collaboration work out? Because at one level, you've been collaborators for decades and you are both fine intellects in slightly aligned fields. I think Susan once said something to me to the effect of that. You know, Ajay has a mind of a scientist. I have the mind of an engineer, something like that. If I remember correctly. So, tell me a little bit about this collaboration. What are the different skills you bring into play? And what are the sort of, how does it dynamic of not just, you know, being in office together, but then going home together after that? How does that kind of work out just overall? What is this collaboration like? Well, in some ways, we've been together so long. We've almost stopped noticing that. That we're together. Yeah, 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 of every relationship. But we are different and we do different things in the org. We don't do the same thing. 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 ijidr 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 on that knowledge set. We were both at the rank corporation. We were both at ijidr then I left and she built ijidr frg after that. What's the finance research group? It was a lab at ijidr just like all the other engineering labs that I've described earlier. So it was a lab at ijidr and so she built this after I left entirely by herself and I was co-creator of an IPFP macrophanets group with ILA. So we 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 that small artisanal high quality interdisciplinary bring knowledge together. Have that a culture of creativity and debate. And once again this is a org where I feel we do well on taking in and nurturing women. We are creating people 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 so you can feel that sense of comfort 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. In what way is that I want you to give this question serious consideration and then answer it. In what ways has Susan changed you? It's been so long 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 it's I've always said that my father made me like that. You know Susan made me. You're going to make up your mind one of the made you. It's invisibly there in everything. So it's been so long and you know we've argued about so many things so many times that it's actually all over the landscape. And what's the simple classification and what did she mean 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 she builds them so very often I start code and she completes it. So I get to be a little more of an architect and she's able to see it through and get it done. And I'm a little more externally oriented. She's a little more building and system 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 and so on and so forth. So they fit in beautifully one we spoke earlier about laws but this is a time where you are actively looking at legal system reform and working on that as seriously as on economic policy from most seriously. So tell me a little bit about this. The legal system is incredibly important. It is not traditionally considered economics but you know you have 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. And one of the things 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 by lawyers and judges. It's a revolving door 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 of mal functioning 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 and everyday failure about how the courts work and they've got used to it. And in fact in some ways they stand to benefit from the mal functioning of the Indian court. A nice metaphor to think of is that the Indian state is a raqshas 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 to protect themselves. So the lawyer and the accountant are actually quite fine with the depredations of the raqshas 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 an IPFP 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 her appeals against sebi but the dream was to make it her appeals against all the financial regulators. And then the question came comments or it what would you do by way of process improvement to make the sat work better. So that was an idea that was swirling after FSLRC so FSLRC proposed that there should be a single piece called the financial sector appellate tribunal which would her 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. And the first big idea 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 is actually 15 minutes. There is an entire team that does the everything else. So there is a team that puts the patient together does the anesthesia, cuts open the rib cage with an electric saw, gets everything ready. Then the master surgeon comes does that 15 minutes of amazing work which is extremely complicated and subtle but then precisely because it is so complicated and so subtle. 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 the whole team works on putting the person together again and getting them safely out of anesthesia and so on. So this is the metaphor to think about judges that the time of judges is precious. The application of judicial mind is some of the highest intellectual capacity 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 the focus of the entire society. The whole capacity and the focus to be able to hear and understand complex cases and to be able to come out with good orders where there is a high probability of being correct. So the correctness rate is one of the important measures about how a judiciary functions. What we see in essentially all the advanced economies is that there are two separate structures. So admin org structure which runs the practical stuff. So setting up a courtroom getting an air conditioner, having an IT system, cleaning the benches, having parking, all these things are done by an admin organization. And then the judge comes and sits in the chair. So it's like the surgeon analogy that other people have done all the prep currently in India judges have to do all the work themselves, which is not very bright. So this idea is called Indian courts and tribunal services. It was proposed first in an NIPF working paper and many years later there is an XKDR forum YouTube video 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 to think a little more. So that is one piece it's an old idea. The second piece is more recent and I mentioned when we talked about XKDR forum the idea of collaboration rather than trying to build a big organization. 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 Mulhan, both remarkable people and they had the dream that can be bring energy together to try to make some of the courts in India better. So they assembled four orgs consisting of them and us and a development consulting firm called Samagra with the DNA of time and motion studies and detailed movement of this file and this form from this person to that person and a Bangalore org named E-Government Foundation who are playing a leadership role in terms of software development. And the dream was that can you set up some clean logical systems around the working of courts in India. It's a very long journey. I have no doubt it will take generations to get this right. But we've begun, we're making some progress. We're working in Kerala on one district, one court in one district on one case type. So, you know, it is important to always start small, learn from mistakes, cross river by feeling the stones and we've begun on that kind of journey. We've also begun on 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 a full toolkit of empirical research. Then we study that data. So, we bring statistical methods to study that data. So, there are a couple of efforts of this nature that have taken place in the past. But we're trying to add value with a better data set, the logical application of sensible statistical methods to this in a way that we feel many others have not quite caught 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. There is a team, 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, not as management. The team has its own energy. So, I think that's a very healthy way for these things to happen. So, we remain small, we remain artisanal. We are a part of a larger process of change through a partnership and collaboration model. And we have a happy, enthusiastic, energetic team. And we think in terms of big ideas and intellectualism about India, public policy, policy strategy, data sets, empirical work. So, you know, we exercise intellectual leadership in all these things. So, it's a happy, successful story. So, I'm just thinking that, you know, this was your seventh field as in, like I think one 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. And you've written by the side by side, I just, for my own amusement, I wrote down another nine things that I know that you don't talk about in a scene in the unseen. Like what other? All the other fun stuff of life. No, okay. Like, here I've written down nine fields like that, I wrote down nine fun things. Instantly tell me those fun things. Right now. No, no, no, no. You don't want to say, okay, okay, fine. We'll come to it later. Maybe we'll do and everything is everything episode on them. But so my question is this that these are areas into which you have done deep dives, have deep knowledge of, have practical experience of having worked in all of these fields, know them really well. Yet you've written one book, which is in service of the Republic, the Art and Science of Economic Policy, which deals 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. Do you also think that besides doing the important work that you guys do with XKDR forum and in the papers that you write, do you feel that there is also a space for building a larger body of knowledge across each of these fields? Like what Eli and you were doing with Indian macroeconomics, for example, at an IPFP? Do you feel that there is a need to build these foundational works so that future generations can, you know, stand on your shoulders? So, absolutely, that is the right way to approach this. Just to distinguish in service of the Republic, Kalkaran Shad 2022 from these fields, in service of the Republic is intended as a general technology. It's a toolkit, market failure, state capability, public choice theory, why India went wrong after the great expansion of 2011 of 1991 to 2011. And it's a general toolkit that can be applied to all fields. And here, this is indeed the life that we live in field after field we add value into this ecosystem. That's a distinctive tool chain. So, that's the secret sauce that we bring to every field. And that is why we add value in field after field because we know how to think in these ways 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 or civil servants or consultants, etc. What they don't know is the whole toolkit of the Kalkaran Shad book. So, that's our secret sauce. And so, we do that in field after field. Also, we bring the tool chain of working with data. And I'm going to come back to that as the last of the fields. There is a case for doing more important big books. And I do know that. And I have a list of dreams of big ambitious books that bring together some of these fields. Susan is dreaming of one book on government contracting. So, like that, more books is definitely in our next five years. And we hope to get to that. More part of you. Your momai ghee and sugar substitute. Can't say your momai ghee sugar. G. Anas Patami. Your momai ghee as Patami. Or ghee stevia. But whatever. Leaving that aside. Okay, field aid. We have episodes on field aid, including in the scene and the unseen. But yeah, go for it. So, field aid 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 thinking about energy as an important part of human endeavor. And by 1973, I was a full seven years old. Okay. So, I was like fully reading the field of energy from age seven onwards. I was an impure. Yeah. So, from age seven, I was fully reading the field of energy. So, in a way, I just had this invisible infrastructure of knowledge about crude oil and knowledge about the global energy system and nuclear energy and the rise of renewables and engineering geek happy to learn about solar photovoltaics. I'd great sense of wonder when the first solar sales started cracking the shockly limit, things like that. So, this is all, like 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 attention to India. But I was always there with a broad background knowledge of that field. Then, uh, actually, I asked me in 2020. This is during the pandemic. He said, let's work 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. I'll help you. So, my mood was he was a guy with extreme knowledge and capability and depth and detail about the Indian energy system. My mental model is I'll help him along. And that's okay. I mean, I help lots of people. I don't necessarily have to become co-author. There are innumerable number of papers and projects where I've helped other people and I'm not particularly first about authorship. You know, I'm old enough that I don't care. But we really got along great and we became friends and we loved our joint co-creation of a whole body of knowledge on the Indian energy transition. We call it the coconut paper. The title of the papers is lowest fruit of the coconut tree, which is that a market-based transition to an electricity sector is hard, but it is the lowest coconut on a coconut tree. So, it's a very tall tree. It's very difficult to actually make a market-based electricity sector. So, I cast a wigslur upon the Indian financial system saying that actually Indian finance never got a memo on central planning in 1991. In fact, there is more and more central planning today. There is more central planning in Indian finance today than there was in 1991. In similar fashion, Indian electricity is just awful. It's a completely centrally planned system. The government controls everything and there is a very tidy world of energy experts in India who play that game that the government controls anything. 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 do its thing better. There has not been the emergence of a first principles reasoning that questions the edifice. And I think Akshay and I have added some value by building this paper and a whole body of associated work. There are by now many, many papers and products and a workstream that we have done. I would like to tell gentle reader, please, please watch a really fun episode of everything is everything which is on electricity. And I feel it will really stir your imagination because it is full of a whole load of new concepts and new ways of thinking that particularly in India are not known because Indian electricity is the backwater of a central planning system and a whole bunch of experts who have become collaborators to the central planners rather than the intellectuals who will think about how to find a way out of this dead end. Yeah, that episode is called the Brave New Future of Electricity episode 40 and one of my absolute favorites. So, I will sort of double down on that as well. And you and Akshay of course have been guests on an episode of the scene in the on scene where we have spoken about the paper as well. So, again, I am going to ask you for bumper stickers because you are the kind of person who You can get to the core of something and sum it up, crisply and elegantly and therefore bummer. compass triggers are quite your thing. So give me, bumpers triggers and what you have learned about electricity and climate change. So my bumper sticker one will be that carbon dioxide emission has a negative externality that when anybody emits CO2 anywhere in the world, it imposes harm 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 are warning us that by the time you get to a 1.5 C gain in the global average temperature, it leads to fairly unpredictable consequences for climate. And I take the word unpredictable very seriously that it is dangerous to meddle with something that you only dimly understand. So it would be good if we will make less CO2. And here straight away, I want to bring Indian self interest in this. You could say I'm a free rider. Look, imagine if you're Sri Lanka, you could say I'm a free rider. It's not my problem. The world emits 100 units of carbon dioxide and Sri Lanka emits 0.1 units of carbon dioxide. So yeah, yeah, everybody else in the world should cut back on carbon dioxide. But look, I am it so little, so don't bug me, I'll just do whatever I want. But that's not India. India is the third largest emitter of carbon dioxide in the world. And roughly speaking, you know, if India emits a tenth of the world's carbon dioxide, then Indian efforts on controlling 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%. Okay, 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 emissions in India, whereas that 10% gain on the catastrophic fees of 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 to go to zero. My bumper sticker two is that the world is in deep trouble, 1.5 degrees is baked in probably two degrees will happen, because you know, getting collaboration between the United States and China and India on eliminating carbon dioxide is hard. I mean, each of the three countries gets self interest, 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 Sri Lanka is too little to matter. But the United States and China and India are big important emitters and they need to take vast steps to cut back on their 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 floods will happen, hurricanes will come, the sea level will rise, poor Amit Bhai will have to exit because while his house is high and about the waters, the waters will mess with this part of Andheri. And it's going to be a mind blowing disruption of everybody's life. So we need to build a society that is more resilient to a warming world because no matter what we do on the cutting back on carbon dioxide emission, what we can do by decarbonizing the world is play the game of two degrees and not four degrees. And four degrees will be even more horrendous. So it's worth stopping that. But 1.5 to two degrees is going to happen and 1.5 to two degrees is going to be absolutely terrible. So that's bumper sticker 2. The builder world that is more resilient to the warming world, which includes all these things changing monsoon patterns, sea level rising, destruction of coastal cities, destruction of coastal real estate, just complete dystopian things coming out. Kim Stanley Robinson, layer three, we should envision a world where we fail on layer one and we fail on layer two. So to do philosophy is to know that the world is a bad place. So we should try all we can to do a layer one and we should try all we can to do a layer two. But we should keep a part of our brain active around envisioning where all this fails. So neither do we build resilience, nor do we build decarbonization. So imagine a 4% sorry, a 4 degree rise in a world that is unprepared for climate change. What kind of dystopian disasters would happen? I think it is a responsibility of all thinkers and philosophers to also start understanding that world and thinking about what it means to be human in that kind of environment. It would pretty much be a collapse of civilization as we know it. And it is time for us to start seriously thinking and envisioning that don't bet that the good people working on layer one and layer two are going to solve it. So you know, this is the one part in the one area where I'll push back very slightly and maybe one day we shoot for the sake of our readers and the discourse to a detailed episode on this. But I'll kind of push back and say three things. But the first thing I'll say is that no, and there is fine as not going to happen to one theory. We are going to be okay. And there 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 one of those is that if you just look at the incentives and if you think like an economist and before that, I will preface that by saying that climate change is real, I agree with that human made climate change is also real. It was once a debate. 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, I feel three things. Number one, that economics will tell you that if you follow the incentives of the players in this field, you have to discount the most alarmist predictions of what will happen. The alarmism is all wrong and often it is absurd because every organization in the space, every NGO in the space is incentive wise to make things look as bleak as possible and to distort the science, which indeed they do, because that is where more funding comes from. If they say things are not so bad, they're, you know, their funding accordingly dries up. So there is an incentive to greater and greater alarmism and extremism as far as projections are concerned. And this is sort of illustrated in the fact that most alarmist predictions of the past have basically been wrong. Everything Al Gore said in his documentary, what happened? Did not happen? The time came and everything was fine. So this count 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 right, it will cause. And you have to discount the alarmist end. Otherwise, you get into pretty loopy territory. 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 to grow their own food. And I just thought that that was nuts. And for what it's worth, I don't know whether he was high or not, 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 we should do X, we should do Y. The cost is often too high. The cost can fall disproportionately on the poor 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 fucked 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 true. And two, there is a cost on humanity as well. And this is something we've discussed before as a luxury belief that people will often talk of degrowth. And this is one reason they will say we need degrowth growth is bad. Growth does this to the planet, et cetera, et cetera. 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 are staring at us. One of the big solutions is nuclear. It is a safest kind of power possible far better than any. It is unfortunately got in a bad name because you know, organizations which would which would campaign against nuclear bombs also automatically started campaigning against nuclear power. 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 firms. And we discussed that in this in episode 40 of everything is everything. And what you pointed out there also is at the alternative forms of energy is like solar and wind coming across so bloody well that I am also deeply hopeful of those working out, 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 by being innovative, which we are doing right now. And also I don't think the problem is as bad as it is. But even if you assume it is as bad as it is, I think we'll be fine. These are my broad thoughts. I'm sure people would like to hear a debate. So perhaps we'll do an episode someday. And I don't even think I'm contradicting you in any way. I think everything I said would be a little caveat and a footnote in whatever you believe when everything you believe is certainly core to what I believe that it is real. We need to do things about it. But let's think about It is sensible ways because I'm confident that we can just solve it if we put our minds to it without doing anything drastic and without, you know, humming the poor. Yeah, let's do this thoroughly another day. I agree with you that the optimistic case on solving climate change is that the alternatives are so great. Now the puzzle is the fixed cost for the world of crossing that hump. Okay, so we have to close down all the thermal plants of India. Okay, and there will be costs involved in that. That's the puzzle to solve. And this is a hurdle for society to be able to figure out because there are contracts and when people have their contracts, I've located they need to get paid fair and square. You can't just tell them to go away. So if I built a cold thermal plant and I had a PPA and if you will tell me no, 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 inputs of money that go into the decarbonization. Yeah, yeah, extremely soluble. Let's do an episode sometime and let's move on to your final field 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 all through my life. I have pushed on measurement because I understand that an ounce of facts is worth a pound of theory that it's far better to just fight on measurement. And also I learned to be fully free of reverence or famous established data sets that just because the government say something is GDP that doesn't mean it's GDP. It's just isomorphic mimicry. So like if if a government says this is a central bank that doesn't end out with the attributes of it being a central bank that a central bank is as a central bank does and not just the fact that it is a building and has some coercive power. So a secret sauce all my life. So another secret sauce like Kielkar and Shia is one bag of secret sauce. Another secret sauce all my life has been the obsession on measurement and I already narrated the story by father told me about Brahe's data set made on the island of Uraniborg. What a beautiful name of an island, right? I mean if you wanted an island named straight out of some jarra Tolkien it would be Uraniborg. Brilliant name. And that went to Johannes Kepler who found statistical regularities in it and the statistical regularity is went to Newton who found theory. Okay and that is really the great metaphor about what knowledge and progress is all about. That first we established data then we find regularities in it and then we start theorizing and the theorizing is constrained to correctly fit with the statistical patterns that I've been seen before. It's just such a beautiful script of knowledge. And I already talked about CMI the modern CMI after my father was built by D.T. Lakravala and now primarily Maheshwias and I just love and admire the perfectionism and the care and the decency that they care about this stuff. They have that invisible magic of an institutional culture which cares about measurement which takes measurement seriously. That is their religion, they love it, they do it well. They try day and night to measure better. It doesn't mean they're perfect but they'll pretty much do it as best as can be done. And they have a whole range of economic data and firm data and household data and that's great. Then Ayush has helped open up our pathway to satellite imagery data and that is going great. We have a paper which is called when but clouds got in my way which is about improving the NASA night time lights satellite imagery data and we're now going after a whole array of sources. When I talked about the legal systems I said we're building an original data set and we're doing a better job of creating data about the legal system as compared to what has traditionally been done in India. And so on. So I call this a theme of my life. It's an expertise. It's a sense of taste. It's a secret sauce in how to make progress in a field. The way to make progress in a field is to not be the regular bloke who will just accept 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 and it is always good to try to ask first principle's questions of measurement and make progress. And when recent field we are enjoying a lot is what we call local area economic activity estimation. Okay so here the idea is that imagine I give you the latitude and longitudes and the coordinates of an arbitrary shape a closed shape on the map of India. It could be a district it could be a city it could be a block. Okay what do we know about the economy of that region. I'm being careful don't use our GDP because you don't even know the Indian GDP and so leave alone attributing GDP to subnational blocks to small pieces of India. Let's just leave the word GDP out. Other proxies of the wealth of the prosperity 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 Anderi and what statements can we make about these things. And we are thrilled that we are actually able to assemble a data set for the first time about 300 cities in Karnataka. Traditionally all you know about a city was the census data which by now is an ancient 2011 data right I mean this is now it's been 13 years since we got a census in India so you really don't know anything about the cities in India today. And you knew something about the public finance you'd know the spending of the local municipalities. For the rest there has been no data at the level of a city in India to speak of whereas we are able to create novel data sets at the level of 300 cities in Karnataka and it is very exciting it's a whole new stage in economic measurement in India. So this is the kind of fun stuff we are doing and I just want to put that up as my field number nine measurement measurement measurement. You know there's a great episode in this of everything is everything which we should do call the history of measurement because actually if you think about it as such a mind-blowing subject if you go back to prehistory and you come to modern times and in modern times like one of the new ways of measurement certainly is satellite night time imagery tell me a little bit more about that like you know what what kind of insights does that give you. It's not perfect it correlates with GDP of large areas in rich countries rather well so it's very tempting there are many difficulties when you go closer to the problem and actually start using the data but here's an example that a highway comes up that near the highway how does a prosperity change it's such a natural thing look at night at 1.30 in the night are using more lights coming up then that's a measure of the growth in prosperity along a highway and suddenly you're able to quantify that the externalities caused to the society by building their highway was something like this. So there's so many applications it's just target rich with applications as I said in my opinion in the first wave of the enthusiasm by economists in this field there were many mistakes in how this data has been used so we would advocate a far more cautious and sensible approach so our paper is an important piece of progress in how you do measurement around nighttime lights in data but the basic dream is just beautiful that you get a monthly time series for an arbitrary shape file in the country that is so cool that's amazing I remember you know in economics there are no natural experiments possible right because you can't really control for stuff but when we look back at economic history we can always when we talk about the power of free markets we can look at wajjermany and each Germany and North Korea and South Korea and talk about just see the difference you know the same society the same culture you split them up 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 of that as well I mean the Germany's have unified but you know you know for example the Germany's are unified but is East Germany a little bit darker than West Germany even today even a great question yeah okay and you can literally get the time series of the convergence of East Germany to West Germany yeah and how much of the convergence has been completed all these kinds of questions can be done yeah it's just or just imagine the line that has been cut into the heart of Bengal between East Bengal and West Bengal you're just trying to troll me right don't mess with the Bengali song you know I just want to do one last piece of poetry on the dream of measurement this is from my childhood friend Faisal asked me and many many years ago when I was a child these are sentences that he used that made me light up and I never forgot and what he said was that in the history of physics you always went to a new instrument okay Newton and Galileo got the first telescopes and suddenly you turned your eyes to the heavens and you saw phenomena and then you did phenomenological research on understanding those phenomena and that's the engine that's the entire energy of science one after another you create x-rays you create the photoelectric effect one after another you go in the lab you create a new instrument you find a new phenomenon you measure it and then you start explaining it and that to me is the dream of what we have to be doing in the social sciences that we have to be make sound measurement and we have to establish phenomena and then go after phenomenological research around causes and consequences. It's mind-blowing, it's such a beautiful thought and you know there's this book I had read a while back called Everybody Lies by Seth Stevens-Devido-Witts and it's again a book on a new counter-interred way of measurement. I think what he did was he got anonymized data from a bunch of search engines including Google and all because his thesis was 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 a person's character his interests his obsessions by his Google searches and then he looked at that anonymized data and came up with some great conclusions I'll link to his book and an essay wrote in the book but that also you know sounds like such a great way to you know maybe there are ways to look deeper inside human nature as well and maybe AI is an instrument which at some point 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 we are finally through all of your nine fields and sir I would actually propose that there could be a 10th field which could be the world of content creation you know so where are you now like what is the story that you tell yourself about your life now who are you and what do you do so I define my purpose as a journey of making knowledge and making community so my job is to think about the world and study the world and figure it out and try to obtain insight and that's not me alone it's always with collaborators I work with others I contribute to work done by others I don't crave authorship but to participate in a journey of knowledge to help build knowledge about the world and help build community that's my design of life that's my objective that is my Param Deham amazing and there's a question our friends we are sure me to ask you and so I don't want to forget and disappoint him which is about you know your experience being on the boards of companies you've been on the boards of many companies you know what is that like because from the outside to someone like me it seems to be on a board is an awesome thing you are getting a shit down on money you're meeting twice a year in five star hotels and it's like an awesome life but actually know it's it's a serious work it's a responsibility and it is actually like seriously important so tell me about you know how you how you how seriously you take being on a board of companies and you know we spoke about firms earlier in the importance of firms you've had many episodes on it you know what are sort of your insights like at one level there is isomorphic mimicry in public policy that will just tend to transplant policies from the West and use them here at another level 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 because Indian firms have simply not modernized their thinking to the same extent as the West has I think a bunch of things first most of my more than half of my board memberships have been unpaid activities so there was no shit ton of money involved those are NGOs yeah but that is my lens the second is that I am sensitive I am a team player 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 on what is a board and how it should work is not something that I should be a brusque and bring into a normal board more where you know one may have a significant say and a significant control then I feel I have a whole conceptual package on how to do boards and the role of a board but most of the time I don't do that I just blend into the landscape and participate and support in the ways that the culture of that board is working claim three India is actually right now in the last five 10 years at the cusp of a very big transition where one by one many large important corporations are arising where there is a lack of a clear promoter the corporate governance problem is really primarily about the world where there is a lack of a promoter so when the shareholders are dispersed and the managers are playing through it what do you do 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 so kind of think of it as a third generation thing that you know there is a person who builds a organization and essentially has 100 percent equity or as dominant share then after some years 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 of a firm in India now needs a new institutional culture of boards and this is almost entirely in the private sector meaning I don't think this is about government yes I know sebi and ministry of company affairs and companies act does a whole lot of coercion trying to will some boards to life and will them and coerce them and criminalize them and make them do certain things I think that's all second order what is really needed is the self interest of rational voluntary people saying look here we are there is this company 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 somebody is a manager they are managing optimizing for themselves they're not optimizing for me it's a very simple basic message of life so I feel that India is at a phase where there is a need 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 is good accounting culture meaning it's not just laws it's much more than that there are many many people all over the country and there are norms and there is respect and there are certain things that I just not done 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 including myself is that you make so much effort to understand the world but you don't spend enough effort understanding yourself and that's actually not true of you you have also treated yourself as a project and worked hard on yourself you're you know the way you think about health the way you think about personal finance their subjects I continually learn from you as we kind of go along and my question here is tell me your thoughts about longevity and therefore how our mindset should shift to accommodate that so first let's just treat the foundations that there will be longevity and not dementia okay so let's just spend along with life span so that there will be health span and there will be very bad things in the end game ideally euthanasia but let's focus on health span so health span is unprecedented and will get better year after year so I've no doubt I'm a pure optimist I know just yesterday there's a paper in nature that the annual rate of gain of longevity has stalled in the last five to ten years but I remain optimistic that you know we are at the beginning of the revolution of data genome sequencing and genetics and engineered viruses and implants and devices so I'm very optimistic that health span is going to go up tremendously I think rising health span is a profound challenge to human culture human culture is absolutely not ready for this human culture is built around the old concepts that you know you you grow up you go to work you do one career you fade away by 50 60 70 and then you'll rapidly die but in fact if there is health span of 80 years if there's health span of 100 years if there's health span 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 career our notions of flourishing our sense of purpose all these things need to change we're going to need way more inputs by way of purpose because it is very difficult to find reason to stay alive on these lifespans you know so if you give people trivial problem like make some money buy a house buy a car then you'll bloody get them in five ten 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 longtime horizons I see this as a profound challenge in every respect the nature of the modern economy will change at the person the the working of the labor market will change there be all kinds of wonderful older people with immense levels of capability but who are not willing to accept the regimentation of a simple nine to five job the firms and the labor 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 favor, 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 labor 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. So you know imagine if you were the same cricket writer that you were in Crick-in-4, 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 dread at the AI looking at the cricket match and writing a ball-by-ball commentary. So career paths, conventional notions of career of learning, of reinventing will need to change. All this I feel is relatively well understood, but I feel the hardest thing is going to be the sense of purpose. That why am I here? 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 and a way of life that will carry us through this immense elongation of health span. I'm actually incredibly optimistic about these. 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 if all of this happens because a young will be younger for much longer and the old will have time and energy to act on their wisdom. So everything kind of falls into place. Three final questions and my third last question is that supposing some philanthropist listening to this comes to you and says Ajay I've been following your work for many years. Your awesome I care deeply about India. I care deeply about your work. I'm going to give you one billion dollars. Right? You do with it. What do you want? No accountability. I'm going to give it to you and I'm going to disappear. Right. What will you do? I would go to the economic growth agenda. So the prime objective is a journey of economic growth and the context of political freedom. So you know some mixture of a freedom agenda on a political side and a freedom agenda on an economic side. And that translates into a whole range of practical implementation things. In fact land pressure and I've just been discussing this that if there was to be a growth agenda in philanthropy, what would that be? Can we write a paper about dreaming the design, the sketch of a growth agenda on philanthropy? But as you say, if there had to be a billion dollars that went into making the world a better place, I would equally prioritize a political agenda of freedom. A digressive question, not my second last but a digressive question of follow up to the third last question. That if somebody wants listening to this wants to contribute to XKDR or to the work that you do, what can they do? We would dearly like the involvement of people in all kinds of ways. Read our stuff, come be part of our events, talk to us and disagree with us and criticize us, potentially come collaborate with us, potentially come work for us, potentially come use our capabilities in various ways, connecting them into your world, potentially please donate money to help build the organization. Yeah, and only you would keep donate for the last year and anybody else a first thing they would say is this is a URL give, give, give. So, what I expected notive 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 which have dispersed, when you look at the Indian state, in the context of all the good that did happen and could happen between 91 and 2011 showing what was possible but also the fact that 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, what gives you hope and what gives you the spare. What gives me 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. Now, that said, we've come out of one mess before. 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 could have been gloomy standing in the 1969 to 1977 period 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 bring once. We could have just turned into an ordinary garden variety, third world dictatorship and actually we didn't. We came back from that. So, that's what, that's the scariest thing that has happened that the Indian state has declined at a to a capability to a level that I had never imagined would happen but it has. What gives me hope is the state of the intellectual community. I think that the state, 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 in India's history. So, when you put together your 50, 100 cool people in India today, the level of knowledge, the capability is just out of the world. I think we are truly at the beginning of learning to be a liberal democracy and a market economy. All these years, it was just basically fake. There was a colonial state, there was thuggishness, there was state coercion and there was nobody in the intellectual landscape who was standing up and saying freedom. For the first time, now we are starting with many, many people starting to get public choice theory, ask questions about government surveillance of telephones, mistrusting policemen, not ready to give unlimited powers to the Reserve Bank of India. So, the whole process, the journey of check-in balance and the public choice theory, a skeptical view of the state, rather than the naive and simplistic notion that the state is good, the state is a maibhap, it is people like Nairu and Gandhiji who are the state. That stuff is just such a big delusion. The development state, the development economics, the poverty, the redistribution, all that stuff was a dominant and the only game in town in previous decades. I think for the first time when we look around India, we see the seat corn of a new level of intellectual capability thinking hard-headedly about these things. So, I'm not saying we are done, we are not remotely done, but I see the seat corn today, the sprinkling of yeast on the door is visible. You know, what you just said about what gives you hope, give me a lot of despair, because if our intellectual community today is the best that it has ever been, which it probably is, but it tells you what a low bar that is. Then I despair, 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 and everything is everything episode on luxury beliefs as well. There is so much reflexively socialist and my Bob thinking from the past still corroding the airwaves, but having said that, you know, you also embody what I consider my mantra, which is, I forget who first uses 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. 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. Okay. Many countries have failed and it is not a given 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 generation after 1947, I feel a core mistake of theirs was that they took it for granted that, you know, once you have Tagore and Ramana and Gandhiji and Nero, 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 a 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 begin 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, I will say to you that it is so amazing that the door of the Republic of India today has a tiny sprinkling of yeast. No, I agree. And I often, sort of, you know, think of one of the purposes of the show as playing today at long term. Like my dream is that 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 all of these ideas and learned from these journeys. And that will make a difference. And it's a long game and one can never tell. But if there is any young person listening to this, though, 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 just to making money and building a good life. That shit will happen by itself eventually. But also think about purpose and not purpose, just 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 and from, you know, playing the long game 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 school with education. That's the heart of it. If you start thinking that my god, I attended IIT, I'm so cool, I have knowledge, I'm done. That is the biggest mistake you can make. And my second advice would be that don't be narrow and disciplinary, that this specialization is a trap it interferes with knowledge, that we've got to take interest in the world in a large hearted enthusiastic way. We have to just keep on building all kinds of knowledge because the world is infinitely complex, that of course there are there's a role for specialists that you want somebody to be a radiologist who will read an x-ray, but do you really want to be that person? I feel, you know, we each of us should dream of more. 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 kind of trap. 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. So don't mix up these meaning, you know, it may be wise and efficient for you as a life strategy to add some three little letters to your resume, but it should be seen as a cold calculation in terms of life and not as a problem of knowledge. The knowledge is a separate project. You're in charge, you're responsible, you have to build knowledge, you have to surround yourself by interesting people, 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 with one field where for some time you just get lost in a field and come out of it with just an extreme sense of absorption. You know, it is my confident belief that 20 years from now human radiologists will simply not exist and therefore I would say don't learn radiology, learn how to learn. So you can learn anything that you want to learn. This almost feels like a plug for our course life lessons, but it isn't 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, you've answered it in every single episode of everything is everything, but it's about recommendations for me and my listeners, recommend books, films, music and I know for you, it'll be mostly books and some music that mean a lot to you that mean a lot to you, not just in terms of oh, I learned more about this field through this book, but that adhere to you that you love so deeply that you want to share them with the whole world and you want to stand on a soap box and shout with a megaphone that reaches every corner of our planet, read this, read this, you must. I think we've done all my favorite books in everything is everything, so let me talk about music instead. Talk about books also. I'll still push you on naming at least five, because let's not assume that people watch the show though they should. So I think some books that you know, really should be read more and understood more, Milton Friedman's capitalism and freedom, James C. Scott, seeing like a state, James C. Scott against the grain, Jacob Brunowski, a cent of man, I feel these are like just some of the greatest books and they change the way you think about the world. Agreed, you know, of these music now. Music, so I think in the beginning I told you, I grew up with my parents music as all of us do and it is just something that is stuck in your mind, so I grew up with Indian classical music, Western classical music and the Hindi movie music of the 50s and the 60s and I think these are all great traditions and you know, everybody should know them a little more and partake of them. So if people haven't then you know, I just recommend these things. Then I went to IIT and I discovered Western rock music, so I grew up through the Beatles and Dio Straits and Pink Floyd and Pink Floyd and Pink Floyd. So it's like my entire life and IIT, I feel like every day one heard one album of Pink Floyd, it would be the oxide of the moon or wish you were here or the wall or final cart that was, I didn't have eyes for anything else, I couldn't, I couldn't pay attention to anything else. Then when I went to America, I started on Led Zepp, there's only six albums, but I feel like as a PhD student, basically I heard Led Zepp. So I had many many other things, but just the thing that sticks out from that period was understanding Led Zepp Lin 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 sort of I'd slightly known his stuff all along. I'd known what is considered as his more pop album, Born in the USA in 1984, where the LP was in my hostel, but only later I went back into time 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. So Ajay, thanks so much, I think. We spent a lot of time together, but recording this episode is the most time we've ever spent talking so well done. Two whole days. Well done. Thank you. If you enjoyed listening to this episode, check out the show notes, enter rabbit holes at will. Also, please check out the YouTube show Ajay and I do, called Everything is Everything. Please also consider signing up for our course Life Lessons. You can learn more about it at lifelessons.co.in and don't forget to head on over to your nearest bookstore, online or offline and pick up in service of the Republic, the art and science of economic policy by Vijay Kalkar and Ajay Shah. It's a masterpiece. You can follow Ajay on Twitter at Ajay_Shah. You can follow me on Twitter at Amitwarma, AMITVAR. You can browse past episodes of the scene and the unseen at seenanscene.in 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 the production of this show? You can go over to seenanscene.in/support and contribute any amount you like to keep this podcast alive and kicking. Thank you.