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Tag: nonfiction

5 Specific Weaknesses that Have Prevented India from Realizing its Full Potential from ‘India: Still a Shackled Giant’

Posted on by Penguin India

India is one of the largest economies in the world today and it has been predicted that it would become the third largest economy by 2030. Yet, an average Indian is worse off than his counterpart in other developing nations like Algeria, Indonesia, Mongolia and Morocco. The tethers of corruption and fragility have prevented it from becoming an Asian Tiger.

In India: Still A Shackled Giant, Dev Kar, a former senior economist at the International Monetary Fund shines light on why India is still, even after 70 years of independence, unable to reach its full potential to join democratic giants like the United States, Germany, and Japan.

 

Fragility

Fragility is a state of affairs, consisting of many economic, social, demographic, political, environmental, and security-related pressure points that either strengthen or weaken a nation state. If fragility is left unchecked, the nation can slide towards civil war and break up. The overall fragile states index (FSI) is derived from twelve sub- indices which are: demographic pressures, economic inequality, economy, external intervention, factionalized elites, group grievance, human flight and brain drain, human rights, public services, security apparatus, state legitimacy, and refugees and internally displaced persons (IDPs). (page 15)

India’s overall fragility increased from the ninety-third rank in 2006 to the seventy-second rank in 2018. India’s slide by twenty-one ranks over this period was mainly driven by uneven development (such as rising income inequality), human flight and brain drain, state legitimacy, demographic pressures and security apparatus.

Dirty Politics

There is no doubt that the source of corruption in India is its rotten politics. If politicians can use black money to get elected, criminals can contest elections and win, and if they can all play vote bank politics, what kind of example do they set for the rest of the country? These days, it seems every political party needs criminals to intimidate the opposition, suppress dissent, and extract rent in order to ensure its hold over power. Under the circumstances, there can be neither raj (rule) nor neeti (ethics) left in rajneeti (politics).

Another way of looking at this sad state of affairs is that many voters perceive the criminal politicians to be more effective in delivering government services. I think, either way, from the supply of criminal politicians to the demand for them, they pose a huge problem for any democracy and its governance.

A Taxing Problem

Ever since Independence, India has had two main problems with taxation—a narrow tax base and significant tax evasion. A narrow tax base means only a small portion of India’s population is paying income taxes. Out of a population of some 1.3 billion people, only about 4 per cent file pay income taxes, which make up the largest part of direct taxes. (page 141)

A country trying to raise adequate tax revenues from a narrow base ends up running large fiscal deficits given increasing government expenditures to meet multiple development objectives. Fiscal deficits in turn hamper economic growth and lead to economic instability through rampant inflation, higher interest rates, or increasing foreign debt. It is the poor who suffer disproportionately.

According to the Centre for Monitoring Indian Economy (CMIE), nearly thirty-one million Indians are unemployed and looking for jobs. While economic growth has been humming along around 7–8 per cent per annum recently, the pace of job creation has been poor. While unemployment is naturally an emotive issue in a country of 1.3 billion people with a young workforce, the capacity to generate jobs is not in the hands of any politician, regardless of their promises. The bottom line is that for unemployment to come down during any period, the number of new jobs created must be greater than the number of people entering the labour market during that period. The problem of employment in India is twofold. First, India needs to invest in more education, vocational training and health. Second, there is a need to shrink the size of the informal sector by helping more workers to switch to jobs in the formal sector.

No Care about Healthcare

Healthcare in India still has a long way to go in terms of access to good facilities and reliable doctors, particularly in smaller towns and villages. While the rich in India can afford to get reasonable treatment at a price they can afford, the poor can’t. The quality of public hospitals is extremely poor and they pose serious risks to the life and well-being of patients. Moreover, the credentials of many doctors are suspect. To make matters worse, there are no independent regulatory bodies to accredit, monitor and disseminate reviews of medical providers.

Grab your copy of this book today to know learn about these barriers in detail and discover how India can find the road to redemption.

An Excerpt from Bibek Debroy’s Translation of ‘The Bhagavad Gita’

Posted on by Penguin India

As far as traditional Indian stories and lore go, The Bhagavad Gita is an enduring and nuanced reflection of the relationship between action and consequence, agency and choice. Bibek Debroy’s translation of the book is highly relevant and now accessible to a whole new generation of readers.

Here’s an excerpt that presents a glimpse into the insights this book has to offer!

 

‘Without performing action, man is not freed from the
bondage of action. And resorting to sannyasa does not
result in liberation.’

~

‘No one can ever exist, even for a short while, without
performing action. Because the qualities of nature force
everyone to perform action.’

~

‘The ignorant person who exists by controlling his organs of
action, while his mind remembers the senses, is said to be
deluded and is a hypocrite.’

~

‘O Arjuna! But he who restrains the senses through his mind
and starts the yoga of action with the organs of action, while
remaining unattached, he is superior.

~

‘Therefore, do the prescribed action. Because action is
superior to not performing action. And without action, even
survival of the body is not possible.’

~

‘O son of Kunti! All action other than that for sacrifices
shackles people to the bondage of action. Therefore, do
action for that purpose, without attachment.

~

‘Earlier, Prajapati created beings, accompanied by a
sacrifice and said, “With this, may you increase, and may
this grant you all objects you desire.’

~

‘Through this, cherish the gods and those gods will
cherish you. By cherishing each other, you will obtain that
which is most desired.’

~

‘Because, cherished by the sacrifice, the gods will give you all
desired objects. He who enjoys these without giving them
their share is certainly a thief.’

~

‘Righteous people who enjoy the leftovers  of sacrifices
are freed from all sins. But those sinners who cook only for
themselves live on sin.’

~

‘Beings are created from food and food is created from rain
clouds. Rain clouds are created from sacrifices and sacrifices
are created from action.’

Full of life-lessons and thought-provoking debates on morals, Bibek Debroy’s Bhagavad Gita is more relevant than ever.

Words of the Sage: Excerpt from ‘The Markandeya Purana’

Posted on by Penguin India

Celebrated author and scholar Bibek Debroy’s masterful translation allows a whole new generation of readers to discover Sage Markandeya’s wisdom. His narrative unfolds as a series of conversations with Markandeya that explore the deep, fundamental questions raised by the Mahabharata.

Join in the conversation through this excerpt:

“The Indra among men must not succumb to desire. The lord of the earth must first control himself, then the ministers, servants and citizens. It is only after he knows this has been done that he acts against the enemy. If a king tries to conquer the enemy without conquering these, he is conquered by advisers who have not conquered themselves. He is then bound down by arrays of the enemy. O son! Therefore, a lord of the earth must first conquer desire and the other vices. When he has conquered them, the king conquers. If he has not conquered them, he is destroyed. A wicked king is destroyed by enemies like desire, anger, avarice, insolence, pride and delight. It is remembered that Pandu was brought down because he was addicted to desire. Since he could not control his anger, Anuhlada killed his own son. Aila was killed because he was greedy. Because of his insolence, Vena was killed by brahmanas. The son of Anayusha was killed because of his pride. Puranjaya was destroyed because of delight. Having conquered these enemies, the great-souled Marutta  conquered everything. Remembering this, a lord of the earth must cast aside the six vices. A king must learn from the conduct of a crow, a cuckoo, a bee, a crane, a snake, a peacock, a swan, a cock and iron. Towards the enemy, a lord of men must behave like an owl. At the right time, the lord of the earth must act like an ant. His acts will be known as much as fire in kindling or seeds in silk-cotton. Like the sun and the moon, he must protect the earth through his policy. He must learn from a courtesan, a lotus, a sharabha, a shulika and a woman with heavy breasts. The lord of the earth must formulate policy on the basis of sama, dana, danda and bheda and protect the earth. Like a chandala woman, he must use his wisdom and serve. If he wishes to protect the earth, the lord of the earth must follow the conduct of the five—Shakra, Surya, Yama, Soma and Vayu. For four months, Indra sustains the earth through his showers. Like that, the lord of the earth must nurture the world through his generosity. For eight months, Surya draws up the water through his rays. In that way, the king must collect taxes through subtle means. When it is the right time, Yama acts against both friend and foe. Like that, the king must be impartial in his treatment of the virtuous and the wicked, regardless of whether he likes them or dislikes them. The sight of the full moon fills a man with delight. Like that, when all the subjects are satisfied, the king has followed auspicious conduct.”

Full of wit and enlightenment about life, Bibek Debroy’s The Markandeya Purana is a must-read for adults and children alike.

Story of Trauma and Survival: Excerpt from ‘First, They Erased Our Name’

Posted on by Penguin India

In First, They Erased Our Name, for the first time, a Rohingya speaks up to expose the truth behind a global humanitarian crisis. Through the eyes of a child, we learn about the historic persecution of the Rohingya people and witness the violence young Habiburahman endured throughout his life until he escaped the country in 2000.

The narrative is an intimate and personal portrayal of trauma that endures even today. Here is a glimpse into Habiburahman’s story of survival and his struggles to exist:

“The dictator U Ne Win has presided over a reign of terror in Burma for decades. In 1982, he has a new project. He is planning to redefine national identity and fabricate an enemy to fuel fear. A new law comes into force. Henceforth, to retain Burmese citizenship, you must belong to one of the 135 recognised ethnic groups, which form part of eight ‘national races’. The Rohingya are not among them. With a stroke of the pen, our ethnic group officially disappears. The announcement falls like a thunderbolt on more than a million Rohingya who live in Arakan State, our ancestral land in western Burma. The brainwashing starts. Rumours and alarm spread insidiously from village to village. From now on, the word ‘Rohingya’ is prohibited. It no longer exists. We no longer exist.

I am three years old and am effectively erased from existence. I become a foreigner to my neighbours: they believe that we are Bengali invaders who have entered their country illegally and now threaten to overrun it. They call us kalars, a pejorative term expressing scorn and disgust for dark-skinned ethnic groups. In a different time and place, under different circumstances, kalar would have meant wog or nigger. The word is like a slap in the face; it undermines us more with each passing day. An outlandish tale takes root by firesides in thatched huts across Burma. They say that because of our physical appearance we are evil ogres from a faraway land, more animal than human. This image persists, haunting the thoughts of adults and the nightmares of children.

I am three years old and will have to grow up with the hostility of others. I am already an outlaw in my own country, an outlaw in the world. I am three years old, and don’t yet know that I am stateless. A tyrant leant over my cradle and traced a destiny for me that will be hard to avoid: I will either be a fugitive or I won’t exist at all.”

Habiburahman’s First, They Erased Our Name is an urgent, moving memoir about what it feels like to be repressed in one’s own country and a refugee in others. It gives voice to the voiceless.

Important Facts about the Pakistan-Afghanistan Relationship We Can Learn from ‘The Battle for Pakistan’

Posted on by Penguin India

Located at a strategically important point on the map, Pakistan abuts Afghanistan, Central Asia, Russia, China, Iran, India and the Arabian Peninsula. But what sort of relationship does Pakistan share with its neighbors and the US?

The Battle for Pakistan by Shuja Nawaz sheds light on the same. Based on the author’s deep and first-hand knowledge of the regions and his numerous interactions with leading civil and military actors, coupled with his access to key documentation, this book helps understand the complex relationship Pakistan has shared with the USA and its neighbors, Afghanistan and India.

Read on to discover interesting facts about Pakistan’s relationship with Afghanistan.

 

Little trust between the countries.

There was also little communication or trust between Afghanistan and Pakistan.

As evident by the following event:

On 23 October 2017, President Ashraf Ghani of Afghanistan stated that the Afghanistan–Pakistan Transit Trade Agreement of 2010 is to end since Pakistan did not allow Afghan trucks to go into Pakistan, while Pakistani trucks could enter Afghanistan fully loaded. (milestones chapter)

~

Aid from the US.

(In fact these) two countries had never seen eye-to-eye since the birth of Pakistan in 1947, yet they pretended to go along in order to benefit from the massive US economic and military assistance that was expected to head their way….even as the unlikely alliance crumbled over time.

Pakistan ranked fourth in terms of overall foreign assistance from the US, at 3.4 per cent of total US aid, well behind Afghanistan, which received 26.1 per cent of aid. It was ranked fifth in economic assistance with 3.2 per cent of such aid, again well behind Afghanistan which accounted for 8.4 per cent of economic aid. It also ranked fifth behind Afghanistan in military aid at 3.8 per cent, with Afghanistan leading the pack at 57.5 percent.

This was ironic, since in the eyes of the vice-president of the United States, Joseph Biden, Pakistan ranked much higher on the value chain for the US.

 `

Pakistan’s cooperation with the US for the war in Afghanistan.

Afghanistan, a landlocked country, presented an obvious challenge to the amphibious assault forces, but Mattis brokered a secret agreement with the government (sic) of Pakistan to provide landing beaches and access to an airstrip. Task Force 58 was airlifted into Afghanistan in late November 2001 and was instrumental in the capture of Kandahār, a city regarded as the spiritual home of the Taliban.

 ~

Afghanistan’s relationship with India.

Kayani saw a direct linkage between the stability and future of Afghanistan and Pakistan. ‘It cannot, therefore, wish for Afghanistan anything other than what it wishes for itself.’ He stated firmly: ‘Pakistan has no right or desire to dictate Afghanistan’s relations with other countries. This includes relations with India.’ This must have been music to the Americans’ ears, but the reality on the ground was at a tangent from this statement of Pakistani policy; Pakistan wanted Afghanistan, at every step, to expunge India’s presence and influence.

~

Looking at the future.

Meanwhile, in Pakistan’s western border region, the potential for economic interaction with Afghanistan still remains more a hope than a reality. Decades of distrust and the underlying Indo-Pakistani rivalry inside Afghanistan will stand in the way of better integration, despite the aspirations of the new Afghan leadership to make Afghanistan a regional trade hub and a revived terminus of the Grand Trunk Road that links Kabul to Dhaka.

 ~

The book claims: The future of Afghanistan is inextricably linked to the future of its neighbor Pakistan. To discover more interesting facts about Pakistan’s relationship with Afghanistan and the US, grab your copy today!

How Social Media Manipulates You

Posted on by Penguin India

A Human’s Guide to Machine Intelligence by Kartik Hosanagar, is a relevant read in today’s world. Surrounded by technology in various devices, the book informs about how the algorithms and the artificial intelligence underlying such technologies robs us of our power to make decisions. From what we see in the form of news, to the products we purchase and where and what we eat, our daily life decisions and routines are now greatly influenced by the huge developments made in the technology sector. Thus, the author talks about many more potentially dangerous biases which could emerge and how we can keep it in check and control it.

Here are a few instances of how social media is slowly coming to dominate our real lives:

As various social media feeds and its layout are programmed on the basis of an algorithm, it is widely known to be a catalyst for encouraging fake news. This fake news then helps in propagating misinformation amongst people, making them move further away from real issues.

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Social media has become such an intrinsic part of our lives that it has now evolved to control and hinder our daily routines. App notifications and the phenomenon of gamification, takes advantage of the human need for immediate gratification and be socially accepted, hampering certain habits such as, sleeping early, impairing one’s judgment to use their time in a better way, etc.

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The algorithms operating in various social media also influence our choices. While purchasing an item, the recommendations provided are known to gently push a buyer into buying certain things.

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Many social media platforms have their algorithms programmed so that the content one sees on it is personalized and filtered. Studying the pattern of the content which a user generally prefers, the algorithm makes decisions on what is to be shown to the user and what is to be left out.

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Social media is also known to affect people’s moods and emotions. In a research conducted by Facebook in 2012, it was found that people posted more positive posts when they saw posts that had positive content on their feed, selected by their news-feed algorithm. The opposite is also true.

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Many dating and socializing applications control the way one networks with people, as their algorithms look for people with similar interests or simply recommend a person to another solely based on the mutual friends they might have in common. This does away with the scope of connecting two people with differing interests, who might get along quite well too.

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The capability of such media platforms to filter our preferences to such an extent of specification creates a “filter bubble” which leads to a high degree of polarization regarding aspects such as music or even political ideologies.

A Human’s Guide to Machine Intelligence is an entertaining and provocative look at one of the most important developments of our time

6 Reasons Why Digital Transformations Fail

Posted on by Penguin India

Digital technology frees workers from tedious tasks, allowing them the opportunity to migrate to higher value-added responsibilities. As with any new powerful technology, there is indeed the potential for destructive applications. As with the prior three industrial revolutions, individuals and societies will be affected significantly, and companies will either transform or die.

Here’s a list of reasons why digital transformations fail:

  1. “Part of the issue is terminology. Most people don’t realize that digital disruption is the Fourth Industrial Revolution. The term “digital” is very broad.”

  2. “Transformation during industrial revolutions demands a different game plan than innovation within the current business model.”

  3. “True transformation must include building capabilities to stay ahead of your competition long term.”

  4. “For an industrial revolution – driven transformation to take off, you need a different, disciplined, new business model game plan.”

  5. “The transformation is incomplete if the new business model cannot be built with an eye toward perpetual evolution.”

  6. “The underlying cause of why 70 percent of digital transformations fail is a lack of sufficient discipline. There’s insufficient rigor in both digital transformation takeoff as well as in staying ahead.”

Using dozens of case studies and his own considerable experience, Tony Saldanha in his book, Why Digital Transformations Fail ,  shows how digital transformation can be made routinely successful, and instead of representing an existential threat, it will become the opportunity of a lifetime.

7 Things to Add in Your Beauty Regime to Stay in Your A-Game

Posted on by Penguin India

Roots to Radiance by Nikita Upadhyay is an anthology of wholesome beauty solutions for everyone. It is a self-care Bible to good skin, hair, teeth, nails and most importantly good health. With numerous hacks to enhance one’s system inside and out, the book talks about a mix of traditional Indian recipes and home remedies. These tips and hacks will leave you with a radiant skin and a healthier lifestyle.

Here we give you a few tricks to keep up your A-game:

Mix the coffee grounds with coconut oil and gently massage your body to exfoliate dead skin and get smoother body texture. The coarseness of coffee grounds helps exfoliate and polish your body.

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Sapodilla, also known as chikoo, is such a humble fruit! It tastes yummy, but your face will love it too. Peel the chikoo and take the seeds out, crush the fruit and apply to your face to scrub and mask at the same time. This is quite a multitasker.

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If your face gets dehydrated quickly after you leave your house, pour some distilled water in a spray bottle and add rose petals (desi gulab) to it and carry it in your bag. Spray on your face every once in a while to hydrate your skin on the fly and on the go instantly.

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Apply kiwi peel to your face to cleanse and keep acne at bay. Kiwi is rich in Vitamin C and is great for rejuvenating the skin and keeping excess oil out of the picture.

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Just apply mashed avocado on your face and hydrate, reduce pigmentation, reduce puffiness around eyes and get even skin tone by doing this twice or thrice a week.

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Add cucumber slices, lemon juice and mint leaves to water and drink it every morning to detox and get clearer skin.

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Mix water and apple cider vinegar in a 1:1 ratio to come up with the easiest solution that’ll tone your skin in no time. Using this in the morning and at night before sleeping will energize your skin.

Discover more such secrets in Nikita Upadhyay’s Roots to Radiance

Know All about AI in ‘A Human’s Guide to Machine Intelligence’

Posted on by Penguin India

Kartik Hosanagar’s  A Human’s Guide to Machine Intelligence is a phenomenal book that notes how algorithms and artificial intelligence are shaping our lives, and what can one do to stay in control. As they are embedded in every popular tech platform and every web enabled device, these algorithms and artificial intelligence carry out a plethora of functions for us, from choosing what products we buy to how we find a job.

Kartik Hosanangar through his book tries to explain how and why we need to arm ourselves with a better, deeper and a more nuanced understanding of the phenomenon of algorithmic thinking. He examines various episodes of such algorithms going rogue and why one needs to be more cautious while using such technology.

 

Here are some facts about AI from the book!

Match.com, one of the most popular dating website in the United States was launched in 1995 and aimed at finding the perfect partner for people. However, in 2011, a Financial Times reporter exposed that although the company’s algorithm asked people to list the characteristics they would want in an ideal partner, these lists were ignored. Rather, the people that the website urged the users to reach out to, was based on the profiles the users had visited previously.

“The conventional narrative is that algorithms will make faster and better decisions for all of us, leaving us with more time for family and leisure. But the reality isn’t so simple.”

 

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The feature of autocomplete on Google, which was first introduced by Kevin Gibbs, is something that we now take for granted. There have been many instances where this feature has proved to reiterate the prejudices that are assumed regarding certain subjects.

“But it’s far more disturbing to ask if Google might have unintentionally led impressionable people who did not initially seek this information to webpages filled with biased and prejudiced commentaries, effectively delivering new audiences directly to hate-mongering sites.”

 

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The algorithms used by Netflix, Amazon, and other online firms through collaborative filtering produce a biased range of shows or products that are popular, rather than promoting obscure and niche items. This is primarily because the algorithms of these online firms tend to recommend things based on what others are consuming.

“We developed simulations of several commonly used recommendation algorithms to test the theory, and they indeed demonstrated that these algorithms can create a rich-get-richer effect for popular items.”

 

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Following the introduction of Google’s famously talked about ranking algorithm, which was made public in the year 1999, it resulted in various website owners creating “shadow” websites which would link back the users to their primary domain. Similarly, in the present age, Instagram and Twitter are working hard to minimise the presence of bot and spam accounts that are made to like and repost other accounts, thereby boosting the spammers’ rank on the platforms’ ranking algorithm.

 ∼

“And manipulability will only become an increasing concern as algorithms come to be used in other domains with more serious consequences. Suppose a fraudster knew exactly what rules credit card companies used to flag suspicious activity, or a terrorist knew exactly what TSA screening systems were looking for in their image-processing algorithms. With that knowledge, it would become easy to avoid detection.”

 

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Various social media websites such as Facebook, Twitter and also search engines such as Google have become a great source of information and news for people over a period of time. However, concerns over the use of personalization algorithms have come to grab the attention of many, as the algorithms of such tech companies access information about our preferences over time, creating a “filter bubble” which only shows things that relate to our preferences. This results in the barring of alternate perspectives.

“As we engineer our algorithmic systems, the algorithms themselves certainly deserve a high degree of scrutiny.”

A Human’s Guide to Machine Intelligence is an entertaining and provocative look at one of the most important developments of our time and is a practical user’s guide to this first wave of practical artificial intelligence.

 

 

 

 

 

 

Master these Five Rules of Risk and Transform your Life!

Posted on by Penguin India

Allison Schrager is an economist and award-winning journalist who has spent her career examining how people manage risk in their lives and careers. Stepping away from the stock market and other financial institutions, Schrager shares the real life (an often unusual) places she learned about risk;

Whether we realize it or not, we all take risks large and small every day. What most of us don’t know is how to measure those risks and maximize the chances of getting what we want out of life.

In An Economist Walks into a Brothel, Schrager equips readers with five principles for dealing with risk, principles used by some of the world’s most interesting risk takers.

Here are five essential rules from the book, to follow when undertaking any sort of major risk!

Rule 1- No Risk No Reward

 

‘Risking loss is the price we pay for the chances of getting more. But there are ways to maximize your chance of success. The biggest mistake people make when they take a risk is not having a well-defined goal. It may seem counterintuitive but the best way to define a risky reward is to start by defining the opposite of risk, whatever is risk free.’

 

Incredible Risk Taker

Kat Cole, COO of Focus Brands who own Cinnabon and Auntie Anne’s made a name for herself by popularising the Minibon and driving up sales exponentially. As sales of the full-sized cinnamon roll dropped owing to increasingly health-conscious consumers, the executive team became too focused on launching an-artificially sweetened option that just wasn’t yummy enough! Kat succeeded as she identified the goal clearly— ‘increase sales in a changing market’ rather than fixate on a low-calorie option and hit upon the lowest-risk option by expanding the small-size roll in all franchises!

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Rule 2- I am irrational and I know it

 

‘We want to think we are rational beings. And for the most part we are. But perhaps the most obvious place to witness our irrationality at work is when we make a risky decision. Our feelings about loss vs, gains can lead us to make decisions economists think are irrational. By knowing yourself, how to gauge risk, and your natural response to potentially losing , you can make better risky decisions.’

Incredible Risk Taker

Professional poker champion, Phil Hellmuth has ADHD and is highly emotional, generally not helpful qualities for a poker player. However he is considered one of the world’s best players, has won a record number of World Series of Poker gold bracelets and is worth $20 million. Hellmuth realized early on he had to overcome his own behavioural quirks, ‘I guess what it all meant was that I needed to have the discipline of a monk if I was to succeed in poker. I need to exercise patience relentlessly and to allow no negative emotions to affect my mood.’

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Rule 3-Get the biggest bang for your risk buck

 

‘Risk is the price we pay to get more, and just like anything else in life, there is no need to pay more for something than you have to. Financial economists consider unnecessary risk inefficient. They argue you can achieve more efficiency through diversification. The result is the same, or greater, reward for less risk—a bargain indeed in risk terms.’

Incredible Risk Taker

Harry Markowitz, an economics doctoral student set off a revolution in financial thinking, shifting the focus from return to risk in the financial market. He discovered that people often end up taking unnecessary risk when we try to pick only winners.. Markowitz argued that diversification—owning lots of stocks of different risk characteristics that offset each other was how investors could create efficient portfolios.

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Rule 4-Be the master of your domain

 

‘Risk management is how we can stack the odds in our favour. We can do this in two different ways-hedging and insurance. When we hedge we give up some of our potential gains in exchange for reducing the chance of loss; in statistical terms it cuts off the upper and lower tails of risk. With insurance, we pay someone else a fixed amount to take on our downside and we still keep the upside.’

Incredible Risk Taker

David Bowie is both a brilliant musician and a risk tactician.  In his 50s, advised by David Pullman he made a deal with EMI to re-release his catalog, between 1969 and 1990 valued at $100 million, and was guaranteed more than 24 per cent of the royalties on wholesale sales in the US.

They then securitized these royalties through the Bowie Bond! Prudential paid $55 million for 7.9 per cent payment on their principal for fifteen years. These interest payments were financed from the income generated by Bowie’s pre-1990 albums. This was a hedge because Bowie took $55 million to forgo his payments for fifteen years, but successfully managed his risk in a changing music industry.

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Rule 5-Uncertainty Happens

 

‘We might make calculated choices based on data based probability measures, it’s the best we can do 90 percent of the time. But how do we deal with the other 10 other cent or the Knightian uncertainty, which is the risk we can’t predict. But it is possible to plan for the unplannable. It often comes down to managing the risk you can imagine and retaining just the right amount of flexibility for the unexpected.’

Incredible Risk Taker

Captain H.R. Mc Master, who led the Eagle Troop in the decisive battle of 73 Easting in the 1991 Gulf War says that centralizing command shows an overconfidence in certainty. Preparing for uncertainty needs extensive training and practice so that soldiers have the confidence to make decisions on the fly and think creatively in stressful situations.  This kind of flexibility may come at a cost but is the most effective way of dealing with uncertainty.

Read An Economist Walks Into a Brothel to understand the principle of risk-taking in everyday life!

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