Thinks 530

Wired on Shein; “The Chinese company has become a fast-fashion juggernaut by appealing to budget-conscious Gen Zers. But its ultralow prices are hiding unacceptable costs.”

John Maeda: “The simplest way to achieve simplicity is through thoughtful reduction. When in doubt, just remove. But be careful of what you remove. … When it is possible to reduce a system’s functionality without significant penalty, true simplification is realized.” [via Shane Parish]

A 2011 essay by Bill Gurley: All Revenue is Not Created Equal: The Keys to the 10X Revenue Club. In it, he discusses “some of the key business characteristics that would be used to separate high quality revenue companies from low quality revenue companies, and therefore are the distinguishing traits that warrant high price/revenue multiples.”

The India That Might Have Been (Part 2)

The Speech

As the congratulatory messages poured on for his third successive Lok Sabha win, the decade-old Indian Prime Minister was living through the past. He knew the one big action item that lay ahead; this would require all his legendary persuasion skills. Even as he prepared the speech that would make his work over the past two terms almost irreversible by any future government, his mind went back to a similar defining moment almost exactly ten years ago.

Shortly after his return from Singapore after meeting Lee Kuan Yew, he had convened a meeting of a few economists from all over the world to dig deeper into the question he had often wondered: Why had some nations become rich even as India stayed India poor? Only after a deeper understanding of the past could he work through the roadmap for the future. He needed to get the basics right. The handpicked economists walked him through the history of the divergence in wealth creation across the world over the past two centuries. The Industrial Revolution that had begun in Great Britain even as their East India Company set about conquering nations began to change some and then many lives. The theoretical foundations were laid with Adam Smith’s book “The Wealth of Nations” which was published in 1776. The practical implementation happened in a newly independent America with its Constitution in 1789. From an understanding of these developments in the late 18th century through to the works of economists and philosophers like Hayek, Buchanan, Friedman and Nozick, the mental models of freedom and prosperity started getting formed.

So it was that on an evening in early June 2014, he made his famous address to the people of India. He traced the economic history of the past 250 years in India – how the British Raj had impoverished Indians, and sadly, how successive Indian governments after Independence had kept the same rules for exploitation and extraction in place. The result was that even as the skin colour of the rulers changed, outcomes did not – because Indians were still not free. He explained how the development of nations depended on the extent and nature of the freedoms that people have. Cultural, social and economic development required individual, civic and economic freedoms.

He contrasted India with China. Just 35 years ago, both countries were equally poor. But now, the average Chinese earns five times as much as  the average Indian. For every extremely poor person in China, there are around 200 extremely poor Indians. How did that happen? How did China do that, and why is India not as successful in eradicating poverty? He answered: China succeeded because the Chinese gained economic freedom. India’s failure is because Indians don’t have economic freedom. And that is what he was going to do: make Indians free and rich.

Thinks 529

Atanu Dey: “Democracy is not all that it’s cracked up to be. In fact, I think it is seriously flawed and, although in certain limited contexts it is better than the alternatives, people who get ecstatic at the mention of the word democracy are seriously deluded and what’s worse, their delusion is not harmless. That delusion has pernicious effects, the most serious of which is its negative impact on individual freedom. Democracy, as practiced, is contrary and antagonistic to freedom, and therefore inconsistent with human flourishing.”

WSJ: “Anxiety…has nothing to do with present threats. Instead, it turns you into a mental time traveler, drawing your attention to what lies ahead. Will you succeed or fail in that interview for a job you desperately want? Anxiety prompts your mind and body into action. Your worries impel you to prepare meticulously for the interview, while your heart races and pumps blood to your brain so that you stay sharp and focused, primed to pursue your goals.”

Eamonn Butler: “International trade greatly widens the pool of talent involved in supplying products to markets. Such increased competition means domestic producers have to make their own activities more cost-effective, or risk losing business to outsiders. They have to control costs and cut waste. They must stay sharp in order to understand what customers want and how those wants can be satisfied, and to anticipate future trends on both fronts. They need to keep trying new things, to innovate and improve both their offer to customers and their own production processes. And this constant pressure to innovate and improve in turn drives progress.” [via CafeHayek]

The India That Might Have Been (Part 1)

A Victory and a Meeting

It was turning out to be another famous victory. He had delivered a third successive washout of the Opposition in the Lok Sabha elections. 2014, 2019, and now 2024. After ten years as India’s Prime Minister – or Prosperity Minister as he liked to call himself – he was now looking forward to the last unfinished business on his agenda. But even as the future beckoned, he looked back at the transformation of a nation.

May 16, 2014.  After a surprisingly easy campaign and a comprehensive win that delivered the first Lok Sabha majority for a single party in a quarter century, he remembered the euphoria. Change was in the air. But what type of change? Indians had been denied prosperity by successive governments. He did not want that to be his legacy. He had visited many nations as a party functionary and Chief Minister of his state. He had seen rising wealth in the US and the Western European nations. He had also seen how some countries in Asia had lifted large swathes of their population out of poverty in a few decades. He had campaigned on the theme of bringing prosperity to the poor. The question that now had to be answered: what should he do to make it happen? For the past few months, he had immersed himself in the campaign without worrying about the specifics. As the last votes were counted, it was time to think ahead. He needed to chart a new course for making Indians prosperous.

The very next day, he had received a call from a well-wisher who had selflessly campaigned for him over the past three years. He still remembered the words. “Meet Lee Kuan Yew. Ask him how he made Singaporeans rich. LKY also influenced Deng Xiaoping’s reforms in China. It was a pity that India’s then Prime Ministers did not learn from the Singapore Story. Let’s not make the same mistake again.”

And so it was that a week later, he visited Singapore to meet the man who had built a nation that had become the envy of the world. For two days, he learnt from the master. Question after question. Each one answered with the same precision that had defined LKY’s governance. LKY spoke extensively about the principles of prosperity, and detailed the models that had worked across Asia not just in Singapore, but also in Hong Kong, South Korea, China and Japan. LKY gave a candid assessment of India’s problems as he saw them from afar and his interactions with past Indian leaders. The student had absorbed and formulated his plan. And so it was that the broad contours of his policy agenda were laid.

Thinks 528

Neil Hoyne: “Companies seem to believe that data is the new oil and therefore the more they can capture, eventually they will be able to convert it to some type of value. And that leads to a dramatic underinvestment in the second part of the equation, which is, what do we do with all this data? And so generally you find these under-funded, under-led data scientists who are given this broad problem, ‘Go find this value,’ without leaders translating it to say, ‘What is the business goal? What is the business objective?’ They’re not seeing their data applied to anything and that’s because for most leaders that are asking that question, they’re not necessarily taking a step back and asking: What is it that you’re hoping to get out of that data? What are those business questions you’re trying to answer?”

Richard Ebeling: “The last 100 years have seen more than one instance in which it seemed that the ideas and institutions of the free-market society were heading for inescapable defeat, but each time the collectivist forces have failed to achieve their full objectives. True enough, they have regrouped and reorganized their next ideological and political assault on the remaining elements of a free society. But their failure to gain full victory has been due to the resistance of the surviving ideas of market liberalism that have endured. Our task is to do all in our power and ability to revive an understanding of and inspire a desire to preserve, restore, and extend the ideal and practice of the truly free society. But it will take a growing number of us to see the importance of the non-fatalistic willingness to “man the pumps” so the capitalist ship can not only stay afloat but also be philosophically and ideologically rebuilt even more firmly than it ever was before.”

Nathan Goodman on the ABCs of electoral politics: Asymmetric information, Bundling, Counterfactuals.

The Battle for 2024 (Part 4)

The Alternative

The opening against the BJP comes from the 60% NANVs (non-aligned and non-voters). Remember that the BJP core base is 25% while the non-BJP core is 15%. Of the rest, 30% are not voting and 30% are split between floaters and wasters. If half of the 60% NANVs unite, it could pose a challenge to the BJP. Of course, this has never happened before in Indian politics, so what follows is simply an intellectual exercise about what is possible but perhaps not probable. (I have written about these ideas in my writings about Nayi Disha and United Voters of India previously.)

The starting point has to be focused on the non-voters. Very little has been discussed about why people don’t vote, and what would make them vote. Of the 30% non-voters, my belief is that about 5-10% (a sixth to a third of the non-voters) do not exist; there are errors in the electoral rolls which have not been corrected. That still leaves a substantial 20-25% of the eligible voter base as consciously deciding not to vote. The question to ask is: what will persuade them to vote?

Another group not discussed is those in the 18-24 age category who have not registered to vote. This would be about 6-7% of the population. If they can be persuaded to register, the non-voters tally goes back to 30% or so.

So, the first two tasks for any challenger have to be:

  • Identify the non-voters and persuade them to turnout
  • Identify the non-registered young voters (who will vote for the first-time) and get them to vote

This aggregate is large enough to match the BJP core base, assuming all of them can be united and persuaded to vote as one. That then leaves the non-aligned voters. Wasters need to be persuaded that their vote can be more effective if they vote for this united coalition – because they are obviously not convinced by the BJP or the other parties. And the floaters will probably follow once they see that this new vote bank has the requisite strength to win since they are keen to be on the winning side.

So, numerically, it is possible. Can it be done in reality? I think a combination of a new political platform (not a party) organised as a bottom-up movement, the use of digital to spread the message and get the registrations, and a message around a better economic future (Nayi Disha’s economic agenda with Dhan Vapasi at its core) could perhaps be a people’s alternative in 2024. If there can be money without a bank (Bitcoin), can there be a Lok Sabha without the politicians and their parties? This is the startup opportunity for political entrepreneurs who seek a different future for India – one based on limited government, economic freedom, prosperity and an open society, rather than big government, extreme welfarism, perpetual poverty and social divisions.

Thinks 527

Atanu Dey on economic freedom: “I argue that India is poor because Indians have not realized that economic freedom matters, and therefore they have not ever desired economic freedom. Consequently, they have not enjoyed economic freedom. But all is not lost. Indians, like the rest of humanity, may be slow on the uptake at times but not eternally so. One of these days, Indians will wake up to realize that what they principally lack is freedom, and that they lack the primary freedom — economic freedom. I  argue that economic freedom trumps political freedom, and is only a part of civic and human freedom. The most necessary freedom is economic freedom, and every other variety of freedom — civic and political — is downstream of that. If one does not have property rights that is at the core of economic freedom, one does not have civic and political freedom.”

WSJ: “John Milton’s ‘Areopagitica’ (1644) failed in its original mission, but it is now widely regarded as the world’s first important essay in defense of freedom of expression…“Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties,” wrote Milton, in a line that has echoed across centuries. Another famous passage is engraved above the entrance to the reading room of the New York Public Library: “A good Booke is the pretious life-blood of a master spirit, imbalm’d and tresur’d up on purpose to a life beyond life.” That may sound like extravagant nonsense, but Milton was deadly serious. He equated censorship with murder: “Who kills a Man kills a reasonable creature, Gods Image; but hee who destroyes a good Booke, kills reason it selfe, kills the image of God.””

Arnold Kling on network-based education: “This white paper depicts an alternative form of higher education that will rely heavily on people who participate in and support the world of profit-seeking businesses. The goal is to displace the Ivy League. Success will mean that in five years, a survey will find that a majority of middle-class high school seniors and their parents will say that they are “seriously considering” an alternative to attending a four-year college, [and] in seven years, applications for admission to Ivy League colleges will be down 75 percent from what they are today.”

The Battle for 2024 (Part 3)

Strategies

If 65-70% of the electors are voting, a party/candidate will need 40-45% of those voting to be certain of victory. So, for the BJP, its core base combined with the floaters can put it on a path to victory. That is why creating the feeling that the BJP is the inevitable winner is very important to ensure a high success rate in its strong states. The path to victory is narrow. It needs to win 250+ in the 350-odd seats in these states. Even as the party is working to expand its footprint nationally, converting vote share to seats will take time.

So, the game plan for the BJP is straightforward:

  • Turnout the core base
  • Persuade the floaters
  • Maximise divisions among the non-BJP vote to lower the bar for victory

The first two require a good ground game to get the vote out and an air game to create the feeling that the BJP is the only party that is likely to win. Much of the focus in an election is focused on the air game, but a good ground operation is also important. The BJP tends to do much better than the other parties on both counts.

For the non-BJP parties, the challenge is much bigger. The Congress is not seen as a viable challenger. So even as it has a (diminishing) core base, that is not good enough to take it past the post to win. Any alternative to the Congress (as the AAP is attempting to do) will take time to emerge. In fact, it is possible in the near-term that the Congress and AAP both fight for the non-BJP vote and make the task of the BJP even easier.

For regional parties who have relied largely on caste calculus, it is not going to be easy. The SP has probably maxed out on what it can get in Uttar Pradesh, and unless the BSP vote swings towards it, winning enough seats to dent the BJP will not be easy. At this point, the regional parties remain perhaps the only formidable challenge for the BJP unless something dramatically changes in the mass perception towards the Congress. The best hope is still the 1:1 strategy – where the BJP is made to fight a single united Opposition candidate to ensure the non-BJP vote is not divided. This can make BJP’s task a bit harder, and if there is general distress, there could be an anti-BJP vote. But given the politics of faith and fear, and very little correlation between economic sentiment and voting behaviour, it is BJP’s game to lose.

Taken together, it does look like 2024 can be another walkover for the BJP. Which brings us to the third question. Is there any other possibility for a challenge to the BJP?

Thinks 526

Kevin Kelly: “Don’t ever work for someone you don’t want to become.”  Via Arnold Kling, who adds: “My most succinct advice is: Work for a profit. Young people assign high status to non-profits and low status to profit-seeking firms. The should do the opposite. Profit-seeking firms are generally more sociotropic (the opposite of sociopathic) in two senses. Externally, a profit means that the value of what you provide to consumers exceeds the cost of the inputs that you use to provide it. Almost by definition, profits indicate social betterment. Internally, profit-seeking provides an incentive for employees to be treated well. The business needs to satisfy customers. In order to do that, it needs employees to be well trained, well supported, and well led. When employees are empowered to succeed, customers are satisfied. The businesses that thrive are those that encourage employee success.”

Karen Vaughn: “Market economies are about learning and change, not about achieving some equilibrium state….Markets are indeed “discovery procedures.” Actors are driven by competition to learn and experiment with new ways to satisfy consumer demands. Profit and loss are indicators of whether they are successful, and thus whether the innovation will persist. Hence, economic discovery leads to the growth of market institutions that codify the results of market discovery.” [via CafeHayek]

Chris Arnade: “While (walking) is certainly not the most efficient way to see a city, it is the most pleasant, insightful, and human. I don’t think you can know a place unless you walk it, because it isn’t about distance, but about content.” [via Shane Parish]

The Battle for 2024 (Part 2)

Voter Analysis

The key takeaway from the 2019 analysis is this: If the BJP (or its ally) fought in a Hindi state or directly against the Congress, the win rate was 85-94%. This kind of electoral dominance is unprecedented in Indian politics. States like Tamil Nadu, Kerala, Andhra Pradesh, Telangana and Punjab just did not matter in the eventual outcome.

What this means is that for an alternative to the BJP, a new party needs to dent their fortress in Hindi states or where it is a direct BJP-Congress fight. This is the challenge that India’s Opposition faces in 2024.

So, the two questions to ask are: What is the risk the BJP has in 2024? What can the Opposition do? A third question we will cover later is on the possibility of a startup challenge in 2024.

Before we take up these questions, there is one more useful analysis that can help. This is about the BJP’s vote share as a percentage of population.

In the table above, column C shows the total number of seats in a state, while column E shows the seats won by BJP (and its 2019 allies). Column F shows the BJP+ vote share, column G shows the turnout, and column H derives the BJP vote share as a percentage of population.

To simplify: in the states where the BJP wins big, it typically gets 50-60% vote share and turnout is 60-70%, thus giving it a 30-40% share of the total voting base. This is a remarkably dominant position. But it also means that 60-70% of the electors are not voting for the BJP: they are either not voting or voting for an alternative. In other words, for every one person among the eligible voter base supporting the BJP, one is not voting and one is supporting someone else.

BJP’s 30-40% voting base as a percentage of population comprises two constituents: the core BJP base (I estimate this to be 20-30%), and the floating vote (about 10% additional). This non-aligned floater votes on the basis of the hawa, and thus it becomes very important to create the feeling that the BJP is winning because many of these voters like to go with the flow and vote for the winning party rather than waste their vote.

A better view of the electorate in the BJP strongholds can be seen as thus:

  • Core BJP base (who will vote and only vote for the BJP Lotus symbol; the candidate is irrelevant): 25%
  • Core non-BJP base: 15%
  • Non-voters (NV): 30%
  • Non-aligned voters (NA): 30%, of which
    • Floaters who will typically vote for the winning party: 15%
    • Wasters who will vote for small parties or Independents with no hope of winning: 15%

In short, BJP 25%, Opposition 15%, NANVs 60% (split equally between NA and NV).