# 22 The Power of Mistakes, That Recovery

The Power of Mistakes

In the late 1970s, I played the badla market on Bombay’s Dalal Street. For a couple of months, I made easy money riding the price of Century Textiles, then one of the most actively traded stocks. Inevitably, the market moved against me, but I doubled down on my bet. The slide continued, and by the time I finally got out, I had lost more money than I was worth. The stock-broker was patient, and I was able to arrange a loan against my salary. 

A friend remarked, “Markets can move both ways.” That was a lesson for life, and in 2007-08, I made serious money betting that equity markets would crash as a result of the housing credit bubble in the US (I wrote about the crash in NL# 10). Two other significant lessons I learned then are core to my investing today - size your investments, so that no one wrong bet can upset your fortunes; and, when the market turns against you, limit your losses. There’s always another day, another bet to make.

The broader lesson is common to all learning, namely that we all make mistakes. Admitting them, analysing them, is essential to our progress. Paul Graham, angel investor, and founder of Y Combinator, recently tweeted, 

“The punishment for not admitting you're mistaken is to carry the mistake for the rest of your life.”

One of my favourite song-writers, Leonard Cohen, sang of how sacred he holds mistakes, “But I swear by this song, and by all that I have done wrong….”

In the realm of public policy, detailed analysis of past practice is critical to progress. But when a regime is built on the image of a Vishwaguru, it is heresy to even consider that any policy could have been a mistake. The Make in India campaign was the first major economic thrust launched by the BJP government, in September 2014. The program, personally flagged off by the PM,  promised to raise the share of manufacturing in India’s GDP from 15% to 25%, by 2022. The target year was later shifted to 2025, but it won’t make a difference - manufacturing has been bleeding jobs, and its share in Indian GDP is down to 13%.

There must be a hundred lessons to learn from a detailed analysis of why Make in India failed. I can hazard a few guesses- the quality of education; the cost of power; over-priced rail freight costs, due to passenger subsidies; road infrastructure; port delays; Inspector Raj… I’m sure you can add to the list. But rather than the speculation of armchair scholars, this is precisely the remit of a government think tank. A confident and progressive Niti Ayog would have launched a major, rigorous study of why Make in India failed, which would have become an invaluable policy text for decades.  But that means first admitting that Make in India failed. And this is not something we have heard from the government. Let’s ignore it, wish we had never announced it, and hope that the stigma fades. Never mind that the failure to learn from those mistakes will have a deep and lasting impact on the future of employment in our nation.

My data points on manufacturing are drawn from the World Bank database, which is easy to navigate, and an authoritative source for economic data from across the globe. Another global institution, the World Health Organisation (WHO), is now finalising the release of major data points relating to the COVID pandemic. Amruta Byatnal, writing for the DEVEX news service, reported one of the WHO task force members as saying, “that the Indian government had asked for the estimates to be published ‘10 years later.’”

It’s easy to guess why this might be the case. The Indian government had claimed global praise for its handling of the pandemic, and a mortality number that shows how savagely the data was suppressed will show up this claim as patently fake. India officially logged half a million deaths from COVID, but the New York Times suggests that “the W.H.O. will show the country’s toll is at least four million.. the highest tally in the world.”

Earlier studies have pointed at a similar order of under-estimation. One, published in the ‘Science’ magazine, was conducted at the University of Toronto, and quoted in Parliament by the opposition. Amruta Byatnal wrote, “In response, the Indian minister of health dismissed the study as “speculative”.

The Lancet also published a study with an Indian death toll of 4.07 million. “The claims of the study were also refuted by the Indian government, which released a statement calling it ‘speculative and misinformed’”.

It might be more difficult to dismiss a WHO report as being ‘speculative’, hence the effort to suppress it. However, it currently appears as if WHO is determined to publish the report; if the organisation doesn’t, individual members of the task force have threatened to do so on their own. 

Prabhat Jha, who led the University of Toronto study, said to Devex, “ Without data, you’re flying blind. That’s often lost in a political environment [that says] ‘don’t criticise us.’ That is my concern going forward - that the lessons learned about counting the dead should not be forgotten.” 

From industry to public health, India has a myriad lessons to learn. But this bumps up against the political compulsion to strut the national stage posing as a global thought leader. This is a tragedy for a nation which now hosts the largest population on earth, and has a tradition of rational enquiry and a scientific temper. 

I’ll close with the second part of Paul Graham’s tweet, “ Carrying a mistake is easier when you share the burden with others, which is why mistaken beliefs tend to lead to tribalism.”

ABOUT THAT RECOVERY

On Thursday, Indians took to the skies as never in the last two years. 398,000 departing passengers were recorded at our airports, close to pre-pandemic levels, despite elevated fares. Shimla’s roads were clogged with the arrival of 15,000 cars, and the newly opened Marriott and Taj hotels in Dehradun sold room nights at 21,000 rupees a pop.

At the same time, employment is at a new low. That faithful chronicler of the Indian jobs scene, Mahesh Vyas, wrote on April 11th that “the labour market statistics of March 2022 show…India’s biggest sign of economic distress. Millions left the labour market — they even stopped looking for employment…in the belief that there were no jobs available.”

The break-up of these job losses is cause for even greater concern: industry shed 7.6 million jobs in March, of which 4.1 million were in manufacturing. Nor was the construction sector able to recover to pre-pandemic levels. In aggregate, non-agricultural job losses were almost 17 million. This was largely made up by jobs in agriculture, at 15 million plus, but Mr. Vyas suspects that a great deal of this is disguised unemployment, a widely observed phenomenon in developing nations.

It will take a while to understand the seeming inconsistency between a booming market for high-end consumption and distress at the base of the pyramid. Some studies have noted a surge in income for the top 20% of Indian earners, which goes hand in hand with the sense that the Indian economy is formalising. Many commentators view this with a sense of  triumphalism, supported by the new highs in GST collections. But even the most resilient and resourceful large corporations need customers. When smaller competitors shut down, larger companies gain market share at first. But every job lost is a drop in income and spending power. If unemployment is not stemmed, even the most resourceful and innovative of marketing giants will run out of customers.