Fragility and Systemic Failure

When constrained systems, those hungry for natural disorder, collapse, as they are eventually bound to, since they are fragile, failure is never seen as the result of fragility. Rather, such failure is interpreted as the product of poor forecasting. As with a crumbling sand pile, it would be unintelligent to attribute the collapse of a fragile bridge to the last truck that crossed it, and even more foolish to try to predict in advance which truck might bring it down. Yet it is done all too often.

– Nassim Nicholas Taleb, Antifragile

Widening The Moat

Well, I send a letter to the managers and I talk to them about widening the moat. I say it isn’t the question of the earnings per share this quarter or anything like that. Any business that has a widening moat is gonna make a lot of money over time. They are guardians of the moat. I say a great business is like an economic castle. And if you have an economic castle in capitalism, there gonna be a bunch of people that are going to try and take it away from you. So I need a knight in that castle, the manager, who worries about protecting that castle all the time. And then I want this moat around it, and I want that moat to get wider. It may be service, it may be better product design, all kinds of things. It can be what’s in their mind about the product, a consumer product. But I want that moat to be widening. And I want people to toss sharks and piranha, octopus, everything into that moat to keep away those competitors because they’re gonna be coming and our managers are charged with that. I tell our managers, pretend that this is the only business that you and your family can own for the next hundred years, you can’t sell it and you’ve got to make this one work. And that means every day thinking about what’s going to make it a great business over a 100 years.

– Warren Buffett

Hindi Medium

English medium types like me read an Oscar Wilde short story called The Model Millionaire in school. The story is about how Hughie Erskine, despite being poor, gives away whatever little he has to somebody who he thinks is an old beggar.

Irrfan Khan-starrer Hindi Medium has elements of that story. The film portrays in stark contrast the nobility of a poor family against the pettiness of a rich couple. It conveys many truths about sections of India’s new (and old) urban elite.

The title of the film refers to the Hindi-language education of the two main characters in the story. One of them has an inferiority complex because of an inability to speak in “proper” English. Though they are wealthy, their educational and particularly non-English language background marks them as misfits in Delhi’s high society circles. Hindi Medium is about the social dynamics of being newly rich in a still-clubby urban India, and on the social challenges faced by the urban poor.

The film also shows how elite schools have become less about learning, and operate more like social clubs that have signaling value. It’s almost as if becoming a part of that club gives confidence – and connections – to an individual. Obviously, this is not what an educational institution should be about.

But the confidence factor matters. Believing it’s possible to succeed is the first step to actually being able to succeed. Developing that confidence, especially when you are an “outsider”, is not easy. The insanity of school admissions shown in the film is not exaggerated. It is particularly bad in cities like Delhi, and this is a problem created by bad regulations. The shortages are manufactured, as government clamps down on supply.

Government schools in a India are bad because teachers and administrators have no incentives to do any better. There is practically no accountability in the government school system. Consumers are choosing private schools because those schools deliver better learning outcomes for students. If they don’t deliver a good product, private schools will lose their customers. Unlike government schools, private schools go out of business, so they have a strong incentive to keep doing better.

The Union and state governments are doing the opposite of what they should do – rather than reducing entry barriers and making it easier for new schools to enter the marketplace, large numbers of existing private schools are being shut down across India. This hurts the poor the most, as they are forced to go back to the ineffective government schooling system they finally had the chance to escape.

The policy issues here are complex and multi-faceted, and this is where the film’s solution to the problem is wrong. Everybody sending their children to government schools will not improve those schools – for government schools to change, the incentives for those schools have to change. There needs to be accountability. There are very good reasons why the rich and poor alike wish to send their children to private schools. But I’m delighted somebody made a film like this, and that it is being watched and appreciated widely in India.

It is a movie with a great message, delivered in an entertaining way. These lines from a song in the film capture the spirit of India’s new generation and why the new India has achieved escape velocity:

इक जिन्दड़ी मेरी, सौ ख्वाहिशाँ

इक इक मैं पूरी कराँ

मुिश्कल हुमें रोकना !

Evolved To Be Random

It’s impossible for anything rational to successfully evolve because the byproduct of being optimally rational and efficient is that you’d be predictable. If you are completely predictable, you’d be dead. The military do not look for the most efficient route from A to B, because the most efficienct route would be the one that’s most heavily guarded. So there is a huge danger in looking at life as if it’s an optimization problem. At some point our psychology has to have evolved to be a bit weird and random and unpredictable, for the simple reason that someone who’s predictable would be deceased.

– Rory Sutherland

Inflection Point

When an industry goes through a strategic inflection point, the practitioners of the old art may have trouble. On the other hand, the new landscape provides an opportunity for people, some of whom may not even be participants in the industry in question, to join and become part of the action….Few of the top ten participants in the new horizontal computer industry rose from the ranks of the old vertical computer industry, bearing testimony to the observation that it is truly difficult for a successful industry participant to adapt to a completely different industry structure.

– Andy Grove

Page 1 of 212