The emigration of India's Jews: the diaspora becomes a diaspora once again

A Keralite King Receives Jewish Refugees 

The Jews came to India in 70AD.

They came in their most forsaken hour, when Jerusalem had fallen to Emperor Vespasian’s son Titus, when their Second Temple had been destroyed and desecrated, when God’s chosen people were being slaughtered in the streets by merciless Roman legions, they came to India.

In India, they found a new home. The Jews lived here in peace and prosperity, worshipped their chosen God, retained their distinctive customs and identity, won honour from the local kings (the Mattancheri synagogue in Cochin shares a wall with the Maharaja’s palace).

And then they left. 

After two thousand years on these shores, the Jews started going “home” to the land of their forefathers when Israel was created in 1948. Today, there aren't enough young Jews who still live in Cochin for its storied synagogue to conduct religious services.

These Jews had a choice. Their hand was not forced, they faced no famines, no pogroms, no trains filled with mutilated corpses, no extreme conditions. They obviously had no lived experience of their ancient homeland. Yet, almost all of them chose to leave. Unlike the Goans who were presented with a similar choice and chose to stay.

Why? The simplest answer is money. Israel has always been a richer country than Portugal, but that answer feels incomplete. The income gap between Portugal and Israel (see chart below) doesn’t feel big enough to explain a difference in emigration rates of ~15% vs. ~100%.

The ideal of Israel - a brotherhood of the devout, dedicating their lives to their sacred motherland, working shoulder to shoulder to make the desert bloom (I was brought up on Leon Uris’ Exodus) – may have offered something more uplifting than the Salazar dictatorship.

But the longer I think about it the more drawn to the circular logic of emigration (or for that matter, most human behaviour). 

More Indian Jews emigrated because many Indian Jews had already emigrated. There was nothing to stay for, nothing left to be a part of. Fewer Goans emigrated because only a few Goans had emigrated. Goa still felt like home.

What next? The Indian diaspora in Israel aren’t coming home to India anytime soon. But do they still feel a connection with India? Is there a kernel of goodwill, understanding and respect for us over in Israel? Maybe there is.

I was cheered up inordinately by this picture (downloaded from the BBC). It shows Israeli Jews of Indian origin wearing whites, sporting the Indian cricket team's ODI colours.

Members of the Indian diaspora in Israel
Wearing the colours of the Indian cricket team

Next stop for the IPL: CSK fan club events in Tel Aviv and Haifa?

Whistle Podu, Israel!

Do Goans really want to become Portuguese citizens?

Mario Miranda's Goa

Suppose people from a poor third world country were given the option of being citizens of a rich first world country. Would they take it? Or leave it?

As a rule, people from poor third world countries don’t have the option of acquiring first world citizenship, so this remains a mostly theoretical question. Goa is an exception to this rule.

Goans who were Portuguese subjects before 1961, when India liberated Goa from the Salazar dictatorship, can choose to take a Portuguese passport. Their children and grandchildren can make the same choice. In effect, Goans who can trace their roots to colonial times can choose to be EU citizens.

How many of them have taken the option? My best estimate is about 15%.

I did a small poll of friends and family to guess this number among people I thought had enough context to hazard a guess. The range of guesstimates ranged from <1% to >80%. People like us don’t have an intuitive sense for a natural emigration rate.

My 15% estimate is a “soft” number because (surprisingly) there doesn’t seem to be any authoritative public data on this process. Google doesn’t throw up any crisp, credible results. Here is how I pieced together the estimate:

The most frequently quoted number in the press is that there are about 70,000 Goan-origin Portuguese citizens resident in Portugal, another 30,000 in the UK (as EU citizens before Brexit), and about 50,000 living in India (presumably on OCI visas). Adding these numbers up, it seems that about 150,000 Goans have opted for Portuguese citizenship.

How many Goans had the option?

Goa is tiny. Its population today is only about 1.5 million. This number includes migrants from the rest of India who settled in Goa after 1961, who are not eligible for a Portuguese passport.

The population of Goa in 1961 was just under 600,000. If that eligible population grew at a rate of ~1% per annum, about a 1 million would be eligible.

Taken together, it seems about 15% of eligible Goans chose EU citizenship. Or, 85% of those who could have moved from the third world to the first world chose to stay! My own guess was that at least 30% eligible Goans would have taken the EU passport because of the size-of-the-prize.

What is the size-of-the-prize these Goans are choosing not to take?

The chart below shows that trajectory of India and Portugal’s per capita GDP in today’s USD from 1961 onwards (sourced from the World Bank…btw, I love this online data visualization tool!).

At the time the Salazar dictatorship was thrown out of India, emigrating to Portugal was not that attractive. Portugal's per capita GDP was at USD 360 in today’s money. Portugal was basically just another third world dictatorship that happened to be in Europe.

However, after democracy was established in 1974, after Portugal joined the EU in 1986, income skyrocketed. Today Portuguese incomes are about USD 23,000 compared to Indian incomes of about USD 2,000.

Looking at the average Indian's income may be misleading. Goa is much more prosperous than the rest of India. Goa's per capita income is about USD 6000. After adjusting for purchasing power parity, that might mean emigration doubles real income rather than increasing it 10X. 

In general, demand for emigration vs. income follows an S shaped curve (first S shaped curve in the diagram). The promise of doubling income, off a relatively high base, clearly isn't enough to prompt a mass migration of the comfortably-off.

Migration is all about S shaped curves

Culture must also be a factor. Goans are stereotypically laid-back. They might care less about the extra income than other Indians. Most Goans don’t speak Portuguese. I can imagine that the psychic cost of learning a new language to gain a foothold in a new home must be daunting.

Perhaps the biggest factor limiting emigration is that many Goans have chosen to stay home.

This is certainly the most emotionally resonant factor for me, as a Tam Bram from Mylapore, Madras. I’d attended a school reunion in Chennai (nee Madras) a few years ago when only 2 out of the 75 science students from my class showed up. The rest were abroad. The large concentrations were in California, Texas and New Jersey. Another Tam Bram friend I was discussing this phenomenon with told me about his classmates from IIT-Roorkee. He is the only one, out of about fifty, who is still in India.

These people are not emigrating because of economic necessity. The quality of life they would have experienced in India was always going to be okay. A big part of the reason they emigrate is because others like them are also emigrating (this is the second S shaped curve on the diagram).

I guess that if enough people-like-us leave home, home doesn’t quite feel like home anymore. I guess its good that enough Goans are staying at home for Goa to still feel like Goa.

Paul Fernandes' Goa

Satya Nadella: The Rorschach Ink Blot CEO

Satya Nadella, Microsoft CEO

Since Satya Nadella’s appointment as Microsoft's CEO, my Facebook news feed and email inbox have been chock-a-block with stories about what Mr Nadella's success means.

Some think Satya Nadella’s success is a triumph for “Indian values, like empathy, patience and humility”. Others think it is “a slap in the face for the Indian system” (because Mr Nadella felt the need to emigrate to the USA); that it reflects the “failure of the IITs” (because such a prestigious tech job went to a guy from lowly Manipal University); that it is a triumph for the game of cricket  (because Satya learnt about leadership and teamwork as a cricket playing schoolboy in Hyderabad); that it reflects the greatness of Amercia (because you don’t have to be Bill Gates’ son to become CEO of Microsoft); that it reflects the failure of America (because homegrown talent lags so far behind educated, motivated immigrants); that it reflects the skills Mr. Nadella learnt at his family dinner table (his father was a senior IAS officer who served on India’s Planning Commission); etc. etc.

All these interpretations are have some basis in fact. But having absorbed all these interpretations, my conclusion is that Satya Nadella's success is a contemporary Rorschach Ink Blot test. Any observer’s interpretation tells you a lot about the observer's state of mind. It tells you little or nothing about the meaning of Mr Nadella’s success, because Mr. Nadella’s success doesn’t actually mean anything, beyond the very specific context of Microsoft’s executive team.

The human brain is amazingly good at seeing patterns, even when there aren’t any patterns to see.

The Boston Marathon bombings - terrorism, Islamophobia, or something even scarier?

Bomb at the Boston Marathon

A couple of twisted young men kill innocent people at the Boston marathon, and it’s called terrorism. Other twisted young men kill innocent people - at a Batman movie premier in Aurora, Colorado, or at a political rally in Tuscon, Arizona, or at a primary school in Sandy Hook, Connecticut - and there is no mention of terrorism.

What’s the difference? The Boston murderers were Muslims of Chechen origin, the other murderers were “regular” Americans. It’s easy to believe the different coverage is down to xenophobia or Islamo-phobia, and I don’t doubt there is plenty of that going on.

But there may be something deeper going on as well, which is about the way the brain processes information, something that is much harder to correct than xenophobia.

Apparently, new information coming to the brain is not absorbed directly. The brain makes sense of new information by referencing it to old or familiar information. Familiar information becomes a benchmark or a norm. New information is compared and contrasted to this familiar norm. Distinctive features of the new information are made sense of, are explained, by the attributes in which they most obviously differ from the norm. 

For instance, in the corporate world I inhabit, the "norm" is that powerful people are white men. So when a woman exhibits a particular behaviour, say domineering or bullying behaviour, the mind finds an explanation for that behaviour, in her gender. The mind thinks "She's being domineering because she is a woman. Maybe she is over-compensating, trying to get ahead in a man's world." Equally, when a woman is self effacing, the mind thinks "She's being self-effacing because she is a woman, she is the product of generations of gender stereo-typing." The same behaviour observed in a white male might be explained by his biography or personality, but not by his gender.

Critically, this habit of the mind is involuntary. Research shows that it affects passionate liberals as much as bigots, even when the passionate liberals are fully aware of this unreasonable pattern of thought. 

The same mental mechanism looks for an explanation for what happened, a cause, in the bombers' Chechen background - "they did what they did because of what happened in Chechnya". That is less stupid than jumping to the conclusion that the bombings were a part of an Islamist terrorist plot. That doesn't make it true. 

The reality is that it is almost impossible to know why what happened happened.  The mind doesn't accept this vacuum, it fills it up with a plausible story. "Islamist plot", "right wing bigotry", "misunderstood immigrants", whatever - any story will do. The stories don't have to be true. They just need to protect us from accepting that God plays dice with the universe.

God's dice

Jan Morris' Fourth World: In Praise of Idleness

Ox Travels has been resident on my bedside table for several months now. This is a collection of stories by travel writers, each story based on a meeting or encounter that happened while on the road. The stories are evocative, charming, and at about ten pages per piece, are not too demanding - ideal for a dip into another world before drifting off to sleep.

One story I just read in this collection is The Fourth World, by Jan Morris. The Fourth World is Morris' term for the virtual nation of kind people around the world, who together should be a powerful force for the good:

"My own experience, after seventy odd years of the meandering life, is that there exists a kind of vast supranational community whose citizens are essentially kind.

...the qualities of this virtual nation of mine can be elusive...But I know them by now, and I recognize them in all their myriad guises. I have recognized the signs in statesmen as in housewives, in taxi-drivers as in actresses and tycoons - a look in the eye, a smile, a gurgle of laughter is often enough. I knew I was in the presence of an initiate when, one day in the high Himalayas, alone in the high snows, I met a wandering holy man with whom I shared not a word or even a gesture, just an instinct.

...over the years I have come to realize that these people constitute a vast and powerful freemasonry...

I think of them one and all of constituting a Fourth World of their own...an association as wide and varied as my Grand Diaspora, bound only by decency and humour, would surely be unconquerable..."

Morris proceeds to give an Edinburgh barmaid an impassioned spiel about the latent force of the Fourth World, which is the "encounter" in the story. Regardless, I found this notion of the Fourth World seductive. My experience is also that most people, everywhere, are basically kind. I went to sleep thinking that, surely, basic human decency, kindness, the latent power of the Fourth World, will be harnessed one day to make the world a better place.

When I woke up, however, I remembered a paper I read in B-School which shows why it is so hard to engage the power of the Fourth World. Basically, people are kind when they have time on their hands. The same people stop being kind when they get busy.

The paper in question is "From Jerusalem to Jericho: A study of Situational and Dispositional Variables in Helping Behaviour", by Darley and Batson (thank you Google). This study looks at whether or not people stop to help a man slumped in an alleyway, moaning with pain; whether or not people behave like the Good Samaritan in the biblical parable. It found that people with time on their hands stopped to help. Those who were under time pressure, including those who were bustling off to give a lecture on the Parable of the Good Samaritan, did not help. This wasn't a small effect, it was observed in almost all the subjects of this study. People with time were kind, people who were in a hurry were not.

Looked at this way, Fourth World citizenship is situational. It increases when people are feeling time-rich. Perhaps the best thing organized religion did to promote kindness was to enforce the sabbath, to give people the experience of being time-rich, to create a space where time is in our hands, where we're not in the hands of time.

Idleness serves a deep moral purpose, as citizens of the Fourth World and bloggers know...

Is Mark Zuckerberg richer than Mr Darcy?

This picture of Mark Zuckerberg’s wedding with Priscilla Chan was one of the few truly heart warming images from the last few weeks. This picture was so heart-warming because I learnt something new: I didn’t know Zuckerberg’s girlfriend was Asian. This knowledge re-framed the Zuckerberg wedding for me, as a fellow Asian. This isn’t just another wedding photo any more. It is now the picture of every Tiger Mom’s most fervent dream coming true. Dennis and Yvonne Chan, ex-refugee immigrants who ran a Chinese takeaway in Boston, must be so happy with their multi-billionaire son-in-law. How nice for them!

As my heart warmed to the Chan family’s good fortune, I started slipping into an authentic Tiger Mom mindset, and some more tough-minded thoughts took shape. A good Tiger Mom would do some rigorous competitive benchmarking. She would ask herself, “Mark Zuckerberg is a nice boy, but is he really rich enough for Priscilla? Is he as rich as Mrs. Bennet's son-in-law, Mr. Darcy? You know, the one they want to marry Elizabeth off to?”

It turns out Mrs Chan need not have worried, her son-in-law compares very well with Mrs Bennet’s son-in-law. Jane Austen tells us that Mr Darcy had an income of ten thousand pounds per year, in 1810, in England. Converted into today’s money, that is about $600,000 per year. That is a tidy income, but feels distinctly imaginable, more affluent-professional than masters-of-the-universe, certainly not the kind of money that animates the Occupy Wall Street movement. A self respecting Tiger Mom would wish more for her children.

So, is that game, set and match to Mrs Chan? Was Mr Darcy really no better off than assorted corporate vice presidents? Mr Darcy owned half of Derbyshire and employed a vast domestic staff, but he couldn’t buy an asprin, or watch the World Cup finals on HDTV. Can one really compare his situation to ours? To whatever extent comparisons are possible, it seems like our living standards have improved so much that millions of upper middle class professionals enjoy a quality of life that is equivalent to that of the most privileged landed aristocrats just two hundred years ago, which is a comforting thought in these troubled times.

Mrs. Bennet’s partisans might argue that relative income matters more than absolute income. This is reasonable. Behavioural economics and evolutionary biology suggest that people care more about status than about absolute living standards. Mr Darcy was high status, certainly higher status than the armies of contemporary upper middle class professionals who share his living standards. But how does his relative income or status compare with Mark Zuckerberg?

The American academic James Heldman tells us that Mr Darcy’s income of 10,000 pounds per year was 300 times the per capita income in his day. The per capita income in today’s America is $48,000, so a contemporary Mr Darcy would make approximately $15 million per annum, which is starting to feel appropriately rarified. Mark Zuckerberg’s fortune is at least $10 billion. If that earns risk free returns of 2% p.a., that is an income of $200 million, which is an order of magnitude more than what our contemporary Mr Darcy makes.

James Heldman also refers to the economic historian G.E. Mingay, who estimates that there were only 400 families among the landed gentry of England with an income in the range of 5,000 to 50,000 pounds per annum, with the average being about 10,000. To keep things simple, lets say that puts Mr Darcy in at about the 200th richest man in his England. Mark Zuckerberg is the 14th richest person in his America, trumping Mr Darcy once again, without any fiddly adjustments for the larger population in today’s America. However one looks at the numbers, our contemporary Tiger Mom Mrs. Chan has outperformed the proto-Tiger Mom Mrs. Bennet.

At this point, the top performing Tiger Mom in the jungle would need to pause, offer the other Tiger Moms a cup of tea, and initiate a conversation about how money doesn’t really matter, that there are many qualitative things like character and compatiability that make a marriage successful. This blog would like to join the Tiger Moms in drinking a cup of tea. This blog would also like to wish all happiness to the newlyweds Mark and Priscilla. May they play many Limca Cuts.

"Let us take what the terrain gives"

"Follow your dream" is advice I have frequently received. This is also advice I have given multiple times. However, in most circumstances, this advice is worse than useless. I need to make choices about my career as a business executive in the here and now. Reminding myself of my childhood dream, to open the batting for the Indian cricket team, doesn't in any way help me make better life choices.

I discussed this in an earlier blog post, titled "Follow your dream, not". More recently, I came across the words "let us take what the terrain gives", which make the same point more elegantly, more positively.

These words were spoken by Daniel Kahneman back in 1996, at a graveside eulogy for his lifelong research partner Amos Tversky. Apparently, "let us take what the terrain gives" was the maxim Amos Tversky lived by. Kahneman went on to win the Nobel prize in 2002, his partner Tversky tragically missed out because he died so young. "Let us take what the terrain gives" is clearly not a case for embracing mediocrity, but it does recognize that "the other side of freedom is the ability to find joy in what one does".

BTW...I loved these pictures of Tversky on holiday in Switzerland in 1972...

Tiger Mothers and OPEC

Amy Chua's fifteen minutes of fame are almost over. The Tiger Mother story has played itself out as a news item. Yet, after having read the Economist, Elizabeth Kolbert in the New Yorker, David Brooks in the NYT, Larry Summers in the WSJ, The Guardian, Slate and probably a dozen other stories about The Battle Hymn of the Tiger Mother, I feel like the mainstream media are missing the central point, the reason why Tiger Mothers are both so heartening and so scary.

By now, most blog readers probably know the outlines of Ms Chua's story. Her book, Battle Hymn of the Tiger Mother, is supposedly a memoir about raising children on a strict regimen of no TV, no video games, no play dates and no sleepovers. The time that was freed up was reinvested in music practice and homework. Her regimen worked. Her daughters, now 18 and 15, grew into music prodigies with straight A grades.

Amy Chua spiced up this unsurprising story with the provocative claim that Chinese mothers are superior to Western ones; that her experience is evidence of this superiority. By mischievously framing the question in racial, or geopolitical, terms, she twanged a bunch of recessionary anxieties about Western decline and the rise of China. She has been rewarded for this cynicism with a firestorm of media commentary, and a place on both Amazon and New York Times bestseller lists. The racial and geopolitical sub-text is so deliciously juicy that it has drawn most of the media attention.

However, to me, the Chinese angle is irrelevant. I grew up among the Tamil Brahmins of Mylapore, a culture which is chock-a-block with Tiger Mothers. This also kills the theory that Tiger Mothers are somehow products of the immigrant experience.

This isn't about Asian values either. Slackistan, a new movie I'm itching to watch, should illustrate this point. It is about the indolent lassitude of privileged young Pakistanis; Asian setting, no Tiger Moms in sight.

American Jews are pushy parents, according to stereotype. In this, they are no different from other Western families who want to provide well for their children. Spotting Western Tiger Parents from a wide range of cultures is as easy as watching tennis on TV. Venus and Serena Williams' dad Richard, or Andy Murray's mom Judy, or Martina Hingis' mom Melanie - Tiger Parents all. Every race, religion and ethnicity can and does embrace the Protestant work ethic, in the right circumstances.

Those right circumstances are defined by incentives. Tiger parenting happens when parents respond to incentives. If good grades open up a credible path to a better life, parents will push their children to get good grades. The bigger the gap between the parent's life and the promised life for the children, in terms of either tangible income or status, the harder the parent will push the children.

Slightly less obvious, the same dynamic works with parents further up the food chain. These are parents in high-status positions, who are not wealthy enough to pass the same status on to the next generation. Senior civil servants, army officers or tenured university professors like Amy Chua, who are rich in status but not in wealth, might push their children even harder than the aspiring middle class. One of the clearest results in behavioural economics is that the pain of losing something is far greater than the joy of gaining the same thing.

On the other hand, Bertram Wilberforce Wooster and members of the Drones Club were so completely secure in their privilege that swotting to better one's life made no sense. Ditto for George W Bush. Ditto also for Jawaharlal Nehru, who was never more than an average student through his Harrow and Cambridge years. Similarly, coal miners who can only imagine that their sons will also be coalminers are unlikely to become Tiger Dads who push their sons to straight As.

Looked at this way, Tiger Parents, and the middle-class bourgeois values they reflect, are fundamentally good. They inhabit worlds with social mobility. They inject even more mobility these worlds with their energy, ambition and enterprise. They make democracy and capitalism possible; if this feels like an over-claim please read Fareed Zakaria's The Future of Freedom, a book I loved and wholeheartedly endorse.

So ambition and hard work are good. But how much is too much?

The scary thing about Amy Chua is not her ambition, or her Chinese-ness (she is a second generation American, married to a Jew, whose parents emigrated from the Philippines). Her problem is extent. No TV or video games until homework and music practice are done? Fine. No dinner unless the "The Little White Donkey" is played perfectly? No way. But that, apparently, is what Amy Chua does.

I find the most intuitive way to understand this is with another Econ 101 concept: cartels.

Consider OPEC, the cartel of twelve countries which controls most of the world's crude oil. It is in the best interests of the group as a whole to maintain a high price for crude oil. Their oil ministers meet, agree on production quotas, limit supply, and drive up crude oil prices to profit-maximizing levels. However, it is in the best interests of each individual country to renege on the agreement, and produce more than the agreed quota of crude. The higher the price of crude, the stronger the individual country's incentive to renege (especially if it is a democracy heading into an election year). As more countries renege on their production quotas, the price of crude drops, and ideally the cartel breaks down in a flurry of bitterness, finger-pointing and name calling.

Cartels can also do good. Everybody benefits from low trade barriers. Each country has an incentive to "cheat" and raise protectionist walls for local political gains. Supra-national arrangements, like the WTO or the EEC, are all about making it harder for individual countries to cheat, and therefore making everyone better off. In general, cartels work if they have fewer participants, if cheating is easy to spot, and if punishments for cheating are severe.

The supply of homework hours is analogous to the supply of crude oil. All families would be better off if there were limits on pushy parenting; say, children have at least an hour of unstructured time every day. The problem is with enforcing a cartel to limit the supply of homework time. Lots of suppliers, no way to monitor cheating, no punishments for being caught... this cartel would break down in a flash. Tiger parents will immediately turn that hour of free time to homework, to get ahead of the competition.

One of the few things I love about Amy Chua's story is that for fifteen years she never told her peers how hard she pushed her kids. She fabricated medical reasons why her daughters couldn't go on play dates or sleepovers. Her peers had no way to know she was "cheating", and couldn't punish her with social ostracism. A lot of the vitriol being directed at her now is the finger-pointing and name-calling that happens when a cartel breaks. I'm sure a lot of the finger-pointers and name-callers are secretly vowing to double-down and push their children even harder. I don't think there is a happy and harmonious resolution to having Tiger Mothers in our midst.

Sport as a metaphor for life might work here. A sportsman needs to focus, play hard, and play to win, even when the opponent isn't playing the right way. Say the umpire doesn't call a chucker at cricket. As a batsman, you just mark your guard again and bat on. Say your opponent is calling your shots long at a club tennis match. You stop going for the lines and find another way to win. Playing their game is not an option. Letting them win is also not an option. I guess that is one way to deal with Tiger Parents, because for better and for worse, they are here to stay.

Wimbledon, the World Cup, and the price of petrol

Having spent much of the last week vegging out watching Wimbledon and the World Cup, I am struck by the contrast between the slick appeals system at Wimbledon, and the complete absence of a similar system, or even calls for a similar system, at the World Cup. This is despite the fact that bad refereeing decisions have a bigger impact in football, where one goal often is decisive, than in tennis, where hundreds of points are played every match.

For instance, when Italy was down 1-2 against Slovenia, Fabio Quagliarella appeared to have equalized. The goal was disallowed because of an offside call. Replays showed that Quagliarella was onside. If Italy had referred that decision to a third umpire, the goal would have been allowed, with potentially huge consequences. I thought the USA were also robbed of a glorious win against Slovenia, when their goal to go up 3-2 was disallowed. Yet, none of the players, managers or talking heads on TV were outraged at this injustice, or were calling for third umpires. The technology clearly exists. There just doesn’t seem to be any underlying or latent demand for referrals in football. How come?

Dan Ariely, an always entertaining economist, might have a clue. Here, he talks about why we are much more sensitive to the price of petrol than, say, to the price of milk. He thinks it is because:

“For the several minutes that I stand at the pump, all I do is stare at the growing total on the meter — there is nothing else to do. And I have time to remember how much it cost a year ago, two years ago and even six years ago.

I suspect that if I stood next to the yogurt case in the supermarket for five minutes every week with nothing to do but stare at the price, I would also know how much it has gone up — and I might become outraged when yogurt passed the $2 mark.”

The point is, there is a natural break in the rhythm of our activity when we buy petrol, which is not there when we walk down super market aisles sticking stuff into a trolley. That break changes the way we absorb and respond to information.

With tennis, there is a natural break in the activity after every point. That break makes it easier to work up a rage at bad umpiring calls (remember McEnroe?). That break also makes it easy to insert a referral into the game. Ditto for cricket.

With football or basketball, the ball is back in play immediately. The clock is ticking down. There is less opportunity to work up a rage about a bad decision. Players and fans can't dwell on the past because the future is already playing. Inserting a referral into the game breaks up the tempo of the game in an unnatural, annoying way.

While it is disappointing that Italy crashed out (in the interests of full disclosure, I had a bet on Italy winning the World Cup at 18/1), maybe this is good for the game. A sport with no referrals teaches us to suck up the referee’s calls, shut up, and get on with the game. Maybe, in that way, football builds character.

Thierry Henry's Handball and the Philosophy of Sport

See the player in the blue t-shirt? She is Dr Emily Ryall, Senior Lecturer in the Philosophy of Sport at the University of Gloucestershire. She is a committed, competitive sportsperson and a University lecturer, thus embodying the Corinthian ideal of amateurism. As a girl with a Ph.D. who plays rugby, she is reshaping the myths of womanhood. Discovering Dr Ryall, and that there are entire University departments dedicated to the Philosophy of Sport, are some of the few good things to have come out of the Thierry Henry handball incident.

BBC Radio 4 had a story last week on Henry's handball. It featured Simon Barnes, the chief sports columnist for the Times, and Dr. Ryall. Both of them let Thierry Henry off pretty lightly. Neither of them focused on the thirty seconds immediately after the goal, when the Irish players were animatedly appealing to the referee, when Thierry Henry had ample opportunity to 'fess up.



Simon Barnes thinks "sport is no longer about building character, it reveals character"; so Henry's handball was a part of the great spectacle of sport because it gives us an insight into Henry's flawed genius. Dr. Ryall thinks intent matters: the fact that Henry did not intend to cheat makes a difference to her. Which is a very interesting moral argument. For instance, the business leaders who destroyed Enron (or Lehman Brothers for that matter) surely did not intend to do so. Unlike Henry, it is not at all clear that anyone at Enron cheated. But does positive intent absolve them of blame? Things are certainly not working out that way, certainly not in the court of public opinion.

Personally, I find the lack of censure for Thierry Henry, in the court of public opinion, more shocking than the handball itself. People, in all walks of life, will always have opportunities to cheat. Some people will always take the opportunity and cheat. But overall, people will cheat less if they are constantly reminded that cheating is bad, and that honour matters.

Dan Ariely, the behavioural economist, demonstrated this in a neat experiment. One group of students took a test, and were paid according to the number of correct answers they self-reported. Another bunch of students took the same test after having sworn not to cheat. The bunch who swore not to cheat consistently gave themselves lower and more accurate scores than the "control", despite having exactly the same incentives and exactly the same opportunities to cheat.

Many people describe Henry's handball as "understandable", which is true, it was understandable. But in being understanding of Henry's understandable behaviour, we, collectively, are diluting the social norm that cheating is bad.

Blogger or banker?

Here's the theory on people who work for a bank and blog for fun. Do they think of themselves as bankers or bloggers?

It boils down to their Ginis. You see, some people have magic lamps inhabited by blue-suited banker Ginis, some people's magic lamps have sailor-suited Ginis... :)

Actually, a Gini coefficient is a measure of statistical dispersion, and is a standard measure of income inequality in a society. My take is that people from more unequal societies are more likely to define their identities in terms of who they are at work.

Why?

Imagine a relatively well-off person living in an obviously unequal country. He needs to make peace with the fact that he lives a comfortable life, but the people from the slum/ favela/ ghetto/ council estate/ inner city live obviously miserable, abysmal lives. The sheer presence of that abyss, the unspoken fear and guilt that that abyss evokes, pulls at the psyche of the comfortably-off like gravity. The psyche protects itself from that pull by believing that privilege and comfort are deserved, earned, by hard work, by education, by qualifications, by seriousness.

In this unequal context, it is hard to think of oneself in purely frivolous terms. It feels like being the surfer on the beach in Apocalypse Now. Its the reason why cricket in India or football in Mexico are not just silly games played for fun, they are about the redemption of national pride.

So what do I expect to observe in the data? I expect people from more unequal societies to wrap their identity ever more tightly around their professional selves.

Here are Ginis for some of the OECD-30. Their rankings are:

1. Mexico: .474
2. Turkey: .430
4. USA: .381
7. Great Britain: .335
8. New Zealand: .335
12. Canada: 0.317

The two most unequal OECD members are Mexico and Turkey. Fortunately, I have friends from Mexico and Turkey who tell me their compatriots unambiguously define who they are in terms of who they are at work.

Also, to my earlier observation, Britain's Gini is the same as New Zealand, and is a lot lower than the USA. Canada is even further away from the USA than is Britain. So if the theory holds, Canadians should be a less likely to derive their identity from work than either Americans or Britons, despite Canada's stereotypical cultural location somewhere in-between the USA and Britain.

India is not in the OECD. So I looked up the World Bank's Ginis metrics, which show that India is better (i.e. more equal) than the USA.

While that is flattering, and says something important about the world's only superpower, the World Bank might be systematically underestimating South Asian inequality. Pakistan looks really good on the same metrics, more equal than the Netherlands, Canada, France or Switzerland. That doesn't ring true. My hunch is that India really is in the mid - 40s pack, along with Mexico, China, Jamaica and Turkey.

A more classical theory, which involves no melodrama about the gravitational pull of the abyss, is the impact of marginal tax rates on labour supply. More equal societies have higher marginal tax rates. People therefore have less reason to work hard to earn money. They therefore invest more of their time, and identity, in leisure rather than labour.

I buy into the conventional theory, but it doesn't quite feel complete. Maybe that is because I remember an India with high marginal tax rates, in Indira Gandhi's time, when people still wrapped their identities around their work, even if they didn't work especially hard. The ways in which people construct their identities change more slowly than tax policy.

Rules that are meant to be broken, and Broken Windows

I had gone with my children and their cousins for a swim at the Madras Club. My 14 month old nephew was swimming for the first time. I was glad that this rite of passage happened at the Madras Club. My generation of cousins have spent many hours swimming here, accompanied by my father or grandfather. I thoroughly enjoyed the moment, and took a few pictures to remember the occasion by.

By some obscure club by-law taking photos at the poolside is not allowed. I knew about the rule; it’s not a bad rule per se in the age of the internet. I ignored the rule. Nobody objected. A sense of proportion, common sense, prevailed over rigid bureaucracy. Good call.

Except...I have long been a fan of the broken windows theory. This theory maintains that small rule-breaks send out a signal that nobody is in charge, and lead to progressively more severe rule-breaks. For instance, if a window in a building is broken and is left unrepaired, the rest of the windows will soon be broken. A building with many broken windows left unrepaired will soon be looted, and so on. I was delighted to read about experimental evidence confirming this theory.

A sense of proportion and broken windows, do the two thoughts sit together? Apart from the profound truth that rules are great as long as they don’t inconvenience this blogger.

Maybe context matters. My (self-indulgent) interpretation is that in small, personal, closed homogenous groups, when the shadow of the future is a real force, when the stakes are low, broken windows is overkill. At an extreme, broken windows within a family would be pathological. At the other extreme, a sense of proportion is not going to manage millions of fleeting, anonymous interactions on the streets of a city, or in any marketplace. Simple, explicit, rigidly enforced rules are necessary in this context. A private privileged member’s club in my hometown is a lot closer to the family end of that scale.

Bodyline is still so resonant in cricket because that was the point at which the balance tipped. Before bodyline, cricket defined, and was defined by, an implicit gentleman’s code. Douglas Jardine was the man who declared that the game was now too big to be contained within a gentleman’s code.

Shaping the beast

Where does culture come from?

I found myself arguing on my blog that culture is a given. More specifically, that corporate cultures are deterministically shaped by underlying economics. Companies, great companies, get good at the stuff that sits in their economic core and build rich cultures that celebrate and enhance that core. Even great companies remain mediocre at pretty much everything else, and have weak, transactional cultures in non-core areas.

I have also found myself passionately arguing on my friend Vishnu Vasudev’s blog that culture is malleable. The music lovers of Madras can be trained to sit in their seats until the concert is over. There is nothing about Madras or its culture that prevents this basic courtesy from taking hold.

Do I really believe both ideas? When is culture malleable? When is it diamantine?

Rattled the options around in my head over pints of Grolsch at Canal House last evening. Came up with a list of three culture-shapers. Economics and leadership were the usual suspects. The surprise candidate, the one I like most, was design.

Incentives shaping culture is obvious, to the point of being anodyne. It probably is the one thing Marxists and Chicago school liberals will agree on. The point worth remembering is that soft incentives - prestige, tribal membership, reinforcement of identity, shame, inertia - these are often more powerful incentives than explicit money.

So, incentives work. What else? Leadership? On no other topic have have more words been expended to say less. Naw, please. Lets not bring that cheezy, nutritionally-deficient, management jargon into this blog :)

More seriously, leadership can be transformational. Authentic leadership is rare, and can be an amazing experience for both the leader and led. I'm a huge fan of what Saurav Ganguly did for the self-belief of the ~20 Indian cricketers who played under him. Saurav and John Wright really did change the culture of the Indian cricket team. Dhoni (more than Kumble or Dravid) carries the torch Saurav lit.

But, unfortunately, authentic leadership depends on personal chemistry, which doesn't scale.

In larger organizations, leaders tend to reflect cultures more than they shape them. Strong cultures are very good at self-selecting clones. At best, change-leadership in large organizations (or even nations) is about sensing the shift in the tectonic plates the organization stands on, and preparing the organization to positively respond to that shift. Those tectonic plates are mostly economic.

So incentives work on both a large and small scale. And personal leadership works, but on a small scale. What else is out there?

Design. Architecture. Physical organization. Much more interesting.

An Agile team - with business customers, systems analysts, testers, developers and the copier boy all crammed into a messy conference room - creates a culture, a vibe, which is 10x more effective than the same people with the same incentives sitting at their desks and pinging emails at each other.

A suite of offices organized around a service hub - fully equipped with printers, sofas, steaming coffee, and streaming sports coverage on a plasma screen - creates a more social and collaborative work place than a bunch of closed doors along a long corridor.

Offices with glass doors and/or big windows opening on to the corridor takes that a step further, and also reduce the risk of corruption.

Facebook's instant messenger works on the same general principle of manufacturing chance meetings. I wind up chatting with friends I was not specifically planning to call. A laptop in the kitchen means the net gets used a lot more than when a desktop sat upstairs in the study.

My first job was at Procter and Gamble in India. While I was there, P&G formalized the dress code (made ties mandatory) as part of an effort to make the culture more formal, accountable and better at completing projects in time, within budget and up to specs. The broader effort worked. The dress code change was not irrelevant.

A petting zoo under the stands at Twenty20 cricket matches makes it easier to take kids along. I was glad to have this facility at hand at Trent Bridge earlier this summer. Changes the mix of fans in the stands.

The famous broken windows theory maintains that smartening up a neighbourhood can actually reduce crime in that neighbourhood. Policing inspired by this theory is credited with a part of reduction in urban crime in America, in very serious circles.

A lot of this can, of course, be interpreted economically. A laptop in the kitchen is less costly to use, in terms of effort. Accepting a bribe in a glass office is more costly, in terms of embarrassment or risk. The dress code change sends a "signal" about what the organization now values.

But it is more fun, and perhaps more useful while planning culture change, to think about these changes as design rather than incentives changes.

Science or religious war?

Are neo-classical and behavioural economics truly irreconcilable? Are the foundations of one of our great sciences crumbling before our eyes? Or, is behavioural economics a useful elaboration on the neo-classical tradition, that enriches rather than wrecks the great neo-classical insights?

My chips are on the enriching rather than wrecking side of the argument. Right here, right now, I clearly am in the minority. The sloppy-thinking chat tends to pit one tradition against the other.

Here is Elizabeth Kolbert, writing in the New Yorker.

"Rational calculators are supposed to consider their options, then pick the one that maximizes the benefit to them. Yet actual economic life, as opposed to the theoretical version, is full of miscalculations, from the gallon jar of mayonnaise purchased at spectacular savings to the billions of dollars Americans will spend this year to service their credit-card debt. The real mystery, it could be argued, isn’t why we make so many poor economic choices but why we persist in accepting economic theory."

Notice the condescension. "The real mystery...why we persist in accepting economic theory." She illustrates this self evident truth - that the assumption of rational economic behaviour is so broken that it is pitiful - with a personal anecdote.

Ms Kolbert was buying a book on Amazon for her work when a message popped up on her screen "add $7.00 to your order to qualify for FREE Shipping". She hesitated. Her nine-year-old twins wanted a Tintin book. She clicked it into the shopping cart and checked out, saving The New Yorker $3.99 and spending $12.91 of her own money.

Then comes the sucker-punch. "From the perspective of neoclassical economics, self-punishing decisions (such as this purchase of a Tintin comic) are difficult to explain." Really?

Neo-classical economics is very comfortable thinking about the Tintin comic as a bundle of information (about prices), services (delivery) and physical product (the comic book itself). Remember complements and substitutes from Econ 101? Amazon reduced the price of that bundle by flashing a free shipping advert on Ms Kolbert's screen, which reduced her tacit search costs, and by waiving the delivery charges. This prompted a purchase which otherwise wouldn't have happened. Lower price, more sales. This is the demand curve from Econ 101. There is no more unsurprising result in neo-classical economics.

Notice that the neo-classical theory makes no claims about the mechanism by which people maximize utility. In the neo-classical view people maximize utility the way a dog catches a frisbee. The calculations a dog needs to make to catch a frisbee are way beyond the scope of what a dog, or human, can consciously perform. Yet, dogs and humans successfully catch millions of frisbees every day.

This is where behavioural economics comes in. It sheds more light on the heuristics that people actually use while maximizing utility. This might prompt governments or businesses to use those heuristic mechanisms. For example, tax collections in America increased when taxes were collected at source. Once the money is in my bank account I am much more reluctant to give it to the government. Brilliant behavioural insight. By Milton Friedman, the godfather of neo-classical economics.

None of this challenges the one thought central to all of neo-classical economics: people respond to incentives. The way in which different people respond to different incentives is infinitely varied, which is why economic life is fascinating to observe.

Betfair on Perth

Established behavioural economics finding: people are willing to pay more for insurance against death caused by an airplane accident than for insurance against death by any cause. Clearly death caused by an airplane accident is a subset of death by any cause. But when thought of a dramatic cause of death like an airplane accident is planted in the mind, the imagination takes over and makes that cause feel more real, tangible and likely than it actually is.

I have a hunch the same cognitive bias is happening on Betfair in assessing the odds of an Australian victory at Perth. Betfair thinks the likelihood that Australia will win is ~30%.

The point is: it is easy to imagine the Australian batsmen playing out of their skins to steal a memorable win. I remember Ponting's innings in the 2003 World Cup final, Gilcrist's innings in the 2007 World Cup final, Symond's innings in the first innings at Sydney...it's easy to imagine something like that happening again. The sheer ease of imagining another breathtaking, match winning performance from Australia might make the market over-estimate the odds of an Australian win.

What is critical is that India channel their imaginations into just putting the ball in the right areas and holding their catches. Think about nothing else. That's the action which will make the odds on India shorten.

BTW...writing this post hasn't quite given me the courage to go and bet on India. Not yet, anyway.

Homo Sapiens evolved to be fair? Part 2

We know that people tend to reject deals which they see as grossly unfair. This is most apparent in the classic economic experiment of the ultimatum game.

In this game, two players are given a pot of money to share. One player is randomly chosen. She can propose any a split for herself and for the other player. The second player can then reject the deal outright, in which case both players get nothing, or can accept the deal, in which case both players get what the first player proposed. Critically, there is no second deal. There is no Shadow of the Future notion of reciprocity of retribution. This game has been played thousands of times, across cultures. The consistent finding is that deals where the second player gets less than 20% of the pot are consistently rejected...although the second player is worse off in rejecting the deal outright.

The common interpretation of this game is that this dents the neo-classical notion of homo economicus. This is just wrong. The Economist article makes this error, quite surprising because the Economist is usually sympathetic to neo-classical notions. Neo-classical utility maximization theory easily accommodates this behaviour. The theory is framed in terms of maximizing utility rather than income for a very good reason. All you need to believe is that utility is a function of relative income as well as absolute income. The second player in the ultimatum game is maximizing utility, not income. He is happier saying no to a deal which feels wrong.

Under this interpretation the great neo-classical results, like Ronald Coase's insight into free agents negotiating their way to a Pareto-optimal outcomes, are totally valid. The ultimatum game does not create a case for governmental/ authoritarian meddling in people lives or in the economy generally.

What the ultimatum game does offer a really useful insight into is not economics, but politics. Why does income distribution so dominate political discourse? Why is unequal income distribution even though of as "unfair"? It seems to be a pattern of thought that is hard-wired into us as a species.

This is not a normative point; more equal outcomes in a society is not better or worse in a moral sense. My own take is that equality is simply irrelevant from a moral or normative viewpoint. This is just a positivist point. Privilege is naturally resented in every social group: cricket team, company or nation state. More so if it is seen as unearned, inaccessible or both. Finding ways to address or harness that resentment in a creative way is a necessary part of any polity. This is a managerial task...not a moral task.

There are some interesting puzzles that this view might help answer.

For instance, why to the janitors employed by Goldman Sachs earn more than the janitors employed by the municipal government? Both sets of janitors are equally skilled and productive. This is a commonly observed phenomenon. Most companies that pay well do so across job families or skill levels. Are companies trying to address that political problem thrown into sharp relief by the ultimatum game? I can just hear the Goldman janitor cribbing to his mates at the pub "I work for Goldman. The guy with a funny nose also works for Goldman. Why does he make 100 times what I make? How is that fair?". The guy with the funny nose might have a Ph.D. or an ivy league degree...but that sense of grievance is going to be out there anyway.

This may be the reason outsourcing often reduces costs even when working within the same labour pool. Changing the badge on the janitor's uniform breaks that limbic sense of connection between the janitor and the Ph.D. guy with the funny nose. Breaking that limbic connection makes the inequality easier to swallow.

A much more speculative and flaky line of argument...but what the hell...I've been drinking some Chardonnay from Burgundy...

This view might also talk to why third world countries find it hard to trade with the first world. As an Indian, I find it weirdly easy to understand the emotional heft of this argument.

India has done spectacularly well since opening up to the world economy in 1991. Yet, despite this success, political commitment to trade or free-market principles is really thin. Why? Because an Indian negotiating with an American is still talking to someone about 25 times richer than him. He is likely to come away from that negotiation feeling screwed, regardless of the objective outcome of the negotiation. I grew up in Indira Gandhi's India when we were trying to promote South-South co-operation. Meaning...we liked dealing with other poor countries more than we liked dealing with rich countries. This is self-destructive. India still badly needs the income that trade brings and the gains from trade are greater between dissimilar countries or agents. But at some visceral level, this all makes sense.

Homo Sapiens evolved to be fair?

Another fraught moral question. Does distribution matter? Is it really OK if the winners win really big if the losers are also a little bit better off.

Both evolotionart biology and behavioural experiments suggest that this does matter. People consistently refuse deals which feels unfair, even if they are obviously better off taking the unfair deal. This is a very well established result in behavioural economics. It's called the ultimatum game.

The surprising new learning is that chimps will accept unfair deals. This notion of fairness seems to be unique to our species. We probably evolved with this sense. It probably plays a key role in our success as a species, in making possible more complex social organization.

http://www.economist.com/science/displaystory.cfm?story_id=9898270

When is gossip good? When is gossip bad?

Lovely piece from the NYT on a moral dilemma I face all the time.

Is gossip good? Gossip it makes cooperation easier. Gossip makes the gossipers feel emotionally closer. And gossip gives people a game-theoretic reason to be nice to each other. People who are not very nice tend to be the wrong end of negative gossip.

Or is gossip bad? People find it easier to believe the gossip rather than the hard facts, even when hard facts are easily accessible. People get hurt for no fault of their's because of gossip. That feels terribly unfair.

There seems to be truth on both sides of the argument. One thing both sides agree on is that gossip is something evolution hard-wired us to do. We're human. We can't live with gossip, can't live without gossip.

This article reports on some really elegant behavioural experimentation about gossip.

http://www.nytimes.com/2007/10/16/science/16tier.html?ex=1350878400&en=51649aec31cb2ecc&ei=5124&partner=permalink&exprod=permalink

He’s Happier, She’s Less So

Nice article on the NYT on how happy women and men are.

http://www.nytimes.com/2007/09/26/business/26leonhardt.html?ex=1348545600&en=594e67d014f6dc88&ei=5124&partner=permalink&exprod=permalink

Today's women have many more choices than their mothers or grandmothers. This is good.
However, choice in itself does not make people more happy. People with more choices are more responsible for their own destiny. This responsibility can, and does, feel onerous.

"All women in my society are housewives, therefore, I am a housewife" is a very comfortable position. "I am a smart, educated woman who chose to walk away from a lucrative, satisfying career to be a housewife" is a much less comfortable position. It's totally unsurprising that women in this position report being less happy.

What the research misses is that these less happy women are better off than their mothers and grandmothers who never had the option of having a career.

This is a serious argument worth making. Serious and influential people, including Professor Richard Thaler of the University of Chicago, have argued that reducing the choices available to individuals is good because it makes people more happy. This is just wrong-headed. Freedom, liberty, the ability to influence one's destiny...these are greater ends than the sort of experienced happiness that gets reported in surveys.

The happy people living in the Matrix were victimes.