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Should you be a customer or an active shaper of the system?

3 Nov

My friend Jason, who did Decision Sciences with me at the LSE, wrote an interesting note today about the complexities of various forms of governance. One of the themes was the need to manage the balance between giving some actors the authority to govern but at the same time preventing them from misusing this power for personal benefits. It exposed many problems the world still faces despite having spent thousands of years trying to figure out the best configuration. Being an Iranian who grew up in Canada he could approach the topic from many perspectives.

One of the questions I am asking myself a lot in this context is what should be the level and direction of my involvement.

Should we on one extreme take the system as something external and interact with it only as a ‘customer’ where and when necessary or try to actively shape it for others given the privilege of our education and background?

This is a question everybody should be asking himself/herself. I believe it is our responsibility to be the shapers. Our impact can range from small every day actions to engineering wide systemic reforms.

When I asked Jason this question, he offered a great reply. I like it so much in fact, that I am sharing it here with you here to read in full.

I think that’s one of the most important questions a conscious individual in any point in time has to think about. I’m going to link this with my original post, in that your decision if we simplify your problem in being dichotomous, can be clarified if you think of yourself as an individual given the individual freedoms democratic systems are posited to provide, and that there is a marketplace of ideas existent empowered by the fundamental right of freedom of speech and the right to disseminate information.

I think it’s important not to take anything as a given and simply look at the system as something external, because the system in itself is born out of and is bettered (or made worst) because of each individual agent’s interaction with it. What I can tell you is this, from a normative position, you have ideas on how to better your world around you and in turn the system for your compatriots. Since, individual sovereignty allows you freedom of speech and others to listen to you and make choices on whether they agree or disagree with you, you should as a ‘privileged’ individual place your idea into a marketplace of ideas. Once again, consumer sovereignty then (with uninhibited freedom of speech), allows others to understand your propositions and make choices. Then, people would rally around you and you can gain the momentum you need to make that choice.

In the real world, this is extremely difficult. What I would tell you is this. I think you should use your ‘privileged position’ and interact with the system to understand it first, then you should gain the necessary power and influence through interaction with key agents in putting your idea at the forefront. Then you hold the key to gaining the momentum you need for real change. Unfortunately, the system doesn’t quite work like that and its mainly because of a phenomenon called the ‘capture hypothesis’.

Many like you, began wanting to make things better and proactively change distortions and divergence from a truly democratic and economically free system, observed the system and learned of how to gain access (rights?) to make changes, but having reached that position been captured, simply because their self-interest becomes overwhelming. You spend time with those with power and influence to change things, so much so that you begin to see eye to eye with them.

I think the important thing to realize is finding that balance between self-interest and public interest first and developing a set of principles for yourself to such an extent that you’re sure you won’t fall prey to the capture hypothesis, then go on the journey of trying to gain the position and implement changes. The cynic in me tells me that self-interest always wins and since self-interest is the bedrock of democratic systems and its economic sub-systems, the whole issue becomes a catch 22. Something to think about though. I think effort should be allocated to limiting divergence from the system fundamentals and not necessarily making large changes. No one, until today, has experienced the full power of democratic rule and free market enterprise.


How people really learn

30 Jul

The Anxiety of Learning is the title of a Harvard Business Review article offering a very interesting perspective on what motivates people to learn new things. The authors argue that unless they feel threatened, people are unwilling to learn. This blog post explores the idea further.

It is a well known fact that people are resistant to change. We find comfort in status quo because even though it might not be the best thing possible, we at least know what we can expect from it and we have learnt how to operate in such system. It is the same case with learning – there is cost attached to it and this generates anxiety. As the authors point out, sources of this anxiety can be fear of looking silly when trying new things, the actual effort it takes us to learn something new, reluctance to part with our old habits or potential loss of the status we enjoy in the current system. All this contributes to our implicit unwillingness to learn new things.

Anxiety to survive

Yet you might argue that people still do learn and organizations or nations do change. You are of course right. Our society and its individuals have made huge progress over time. The authors attribute this to the other type of anxiety associated with learning; the fear of our survival. They go on to propose that people are willing to learn only when the ‘survival anxiety’ is greater than the ‘learning anxiety’. Consequently, one can motivate people to learn and change either by decreasing their learning anxiety or by increasing their survival anxiety.

I think this is a really powerful idea which explains a lot of real life phenomena. Take for example the proverb ‘being thrown into the deep end’. People might be reluctant to learn to swim for whatever reason but once in deep water, they finally try. The same goes for learning a new language. Some people might be afraid to speak it because they think they will make a lot of mistakes. Once alone abroad however, they suddenly have to and realize that their command of the language is not so bad after all. This makes us think how we can engineer situations which would incentivise us or others to learn.

Take for example organizational change which the authors mention as well. I was reading up on the topic when I was the president of AIESEC UK, a youth charity with over 600 members, and one of the key notions was activating the organization by making it plainly aware of the threads it is facing before taking it through a change process. It indeed was only when people fully realized the scale of challenges and got the right sense of urgency, that we could get on properly with creating strategies to improve the organization.

I would like to end on a more optimistic note however. What learning ultimately boils down to is a cost benefit analysis. The view presented so far has been that learning happens when the cost of not learning is greater than the cost of learning. Rather than just playing with costs, we can also focus more on the benefits. Be them tangible, like specific (monetary) rewards, or intangible, like a feeling of contribution and satisfaction, I believe these can be good complements to our more deeply engrained sense of survival. The main take away for me is that we can actively influence how much we or people around us learn by structuring the environment in which the learning happens, our communication and the incentives we put in place. Give it a though next time you need to implement some change.

Source: Diane L. Coutu, The Anxiety of Learning, Harvard Business Review, March 2002

Why the West had it so good

22 Jun

People in the West, be it general public or politicians, have huge expectations from future economic development. Our living standards in the West have hugely increased over the past five decades due to unprecedented economic growth. People think this trend will continue – they take on more and more debt and have expectations of ever increasing living standards. Stephen King, HSBC’s group chief economist, gave a talk at the LSE about his new book this week – When the Money Runs Out: The End of Western Affluence. This blog post is about why we had it so good over the last 50 years and why the future might be different to what we think.

Stephen pointed out at the beginning that growth in the West is slowing. In each of the previous five decades, the UK grew at approximately 30%, 13% (this was the 70’s oil crisis), 27%, over 30% and only 4% respectively, 4% being the growth in the last decade from 2003 to 2013. Yes there was the 2008 financial crisis, but for example the 70’s had their fair share of crises as well. Chinese and Indian economy grew at 130% and 80% respectively over the same last decade.

He identifies three main drivers of why the West grew so much from the 1960’s to 2000’s and why the growth is slowing now. One thing to note about the drivers is that they are unlikely to happen again.

The first one was opening of world trade driven by OECD agreements. This was trade mainly between western countries and also Japan. Growth in trade has slowed down considerably in the last decade and any further global growth comes mainly from South-South trade between emerging countries. The only European country which was able to capitalise on the growth of China in a meaningful way is Germany, the others did not really see any major increases in exports. There do not seem to any similar markets about to open up as we saw 50 years ago.

The second one was integration of woman into the workforce. Huge new pool of educated workers became suddenly available and was a big impulse for the economy. Quite obviously, there is no third gender to integrate.

The third reason was the growth in consumer credit. It allowed many families in the West to smooth their consumption patterns over time by getting access to credit to buy fridges, washing machines, TVs or homes. The household are unlikely to be able to take on much more debt.

Some might say that growth is not so important. Stephen argued that it is important indeed, because if new wealth is not created but destroyed, our economy becomes in fact a zero sum game. One has to lose out if other is to gain. With the rise of technology and globalization, it is ever easier for smart people to engage with the economy and to benefit from trading in it while the need to employ unskilled workforce in the process is lower and lower. It is therefore the very people who tend to disagree with the need to grow the most that should be its most vocal supporters.

This was just a brief introduction to the book which covers a lot more. I bought it so I will write another post once I have read it. The main takeaway at this point is that the West should realise how fortunate it was in the 50 years preceding this millennium when living standards of 99% of people dramatically increased. This is however not something everybody should take for granted moving forward. People and governments alike should understand that some of them are living beyond their means by relying on debt too much. They need to readjust their expectations from the future and became more realistic in terms of how much their living standards are likely to increase and how much debt they will be able to service. Another interesting point is that most of the developing countries still have the three dividends mentioned above ahead of them.

Keeping mice out of the LSE library

4 Dec

Let me ask you a question at the beginning (do not scroll down to the picture yet). What is the best way of preventing students from eating in a library?

I would imagine there is a range of possible approaches. A simple polite notice saying ‘Please do not eat in the library’ might be one of them. If that one fails, one might add a statement that a £30 fine will be levied on anyone breaching the rule. They can also ban offending students from entering the library for a period of time or kick them out of the school all together. Or they can do a night-club style security check upon entering the library, confiscating any food found in bags.

While some of these are ineffective (such as the first one), others are too strict or too expensive to implement given the relatively low risk/increase in costs resulting from this undesirable behaviour to the LSE community.

So how about creating an environment in which the students would police themselves? Firstly, one needs to come up with a reason why would anyone bother telling somebody next to them to stop eating here. Things like increase in cleaning costs/increased noise levels/making books dirty are not on their own strong enough to spring people into action. We need something that resonates deep into all of us. Well, even if it only gets half of us going, it would be enough. What are girls really afraid of? Mice!! There you go!

Let’s tell the girls that food dramatically increases the number of MICE in the library and nudge them towards not only not eating food themselves while there but also towards telling all their male friends to bloody stop eating here as there are going to be lots of mice otherwise.

Somebody is yet to carry out a study if the poster worked or not but it is a great example of using behavioural science to influences people’s daily actions in a cost effective way.

The only thing on my mind now is, if it will not backfire and boys will not start leaving lots of food around the library in order to support the mice and therefore keep girls out of the space so that consequently they can easily find a free table to study…

Timeless advices?

30 Sep

We are confronted every day with tips, advices, rules and expectations in all aspects of our lives. We often understand them only superficially, yet we treat them as some kind of eternal truth and guide our behaviours accordingly. But how relevant are they in nowadays world and what were they really aiming to achieve when they were first formulated? I came across two such rules recently which made me think about the topic further.

Pre-marriage sex

Having travelled and lived in Asia, I came to accept the concept of no sex before marriage as something ingrained in parts of the society and as one of those timeless cultural habits you do not question. My friend of Chinese origin pointed to me last week however, the absurdity of trying to fit a centuries old rule to these times. Historically, people lived 30 to 40 years on average. They got married as soon as they could have babies or even earlier, in order to survive and manage to bring up new generations before they die. This corresponds to age of 12 – 15 for girls. Put simply, they did not have much time to get naughty. Also, women were dependent on man for survival and stood no chances of being able to bring up kids on their own. A lot has changed since.

Many people get married nowadays at the age when our ancestors used to die yet people are still expected to have no pre-marriage sex. That is ten to fifteen years of waiting people did not have to endure before coupled with widespread availability of contraceptive methods and economic opportunities for woman to be single mothers should they want to do so. How relevant is the rule nowadays when times are so different?

Drinking red wine at room temperature

Couple days later, I was having some red wine with my grandfather. I know that we chill white wine and drink the red one at a room temperature. I was therefore surprised that he put it in a fridge in between pouring it into our glasses. What I learned is that the idea of ‘room temperature’ comes from medieval times when there was one fireplace in a huge room and consequently the temperature there was about 14°C. A lot less than the 20°C we have in our homes these days and what we now understand as room temperature. It tasted great.

So next time somebody tells you a moral, take it with a pinch of salt. Chances are, circumstances under which it was first formulated have changed a lot making in either irrelevant or deceiving if taken on its face value.

Bakala scholarship application essay on education vs. knowledge

19 Jun

I sent in my application last week to the Zdenek Bakala Foundation to fund my masters studies next year. The topic was a quote by B.F. Skinner Education is what survives when what has been learned has been forgotten. Here is my essay:

In one TED talk from 2009, Simon Sinek in his speech How Great Leaders Inspire Action introduced a concept of three golden circles. He argues that whatever we do, we should always start with the Why – why do we do it, what is the inner force driving us? Then he moves onto the How – how do we do it, what is special about us? Only at the end he moves to the What – what we do, what is the end product? For the purpose of this essay, I will define education, the process of acquiring knowledge, as the Why and the How of our lives and knowledge, the product of education, as the What. I will agree with Mr. Skinner’s stance that education is what transcends knowledge over time and give examples discussing this opinion.

It is important to start by saying however, that at level of a society, forgetting all that has been learned is a highly theoretical scenario. Knowledge can be compared to building bricks on which our society stands and which act as a foundation for its further advancement.  Any society and its institutions have strong interests in preserving their knowledge. These range from banks knowing how much individuals and organizations have deposited with them, through power plant operators being able to produce electricity, to parliaments having records on how many votes each party has. In a short term, knowledge is critical to stability of any society and as such will be carefully guarded.

Knowledge also creates an environment for education to take place in. Institutions such as universities collect and disseminate knowledge to allow the current generation to firstly acquire it and subsequently to expand it by building on theories proved by their predecessors. At an institutional level, knowledge is nowadays therefore an important precondition for education to take place. Had it all been forgotten, learning activities of societies would be pure experiments rather than education as we understand it today.

This essay will nevertheless that the liberty of thinking about education and knowledge at a level of individuals and will understand knowledge not in its absolute term such as for example knowledge to walk but rather treat it as resource, the What, acquired through a process of education. It will also treat it separately from education itself, which can be better described as a capability, the Why and the How.

In philosophy, an ability to ask a good question is valued more highly than knowing its answer. The same can be argued for life. People can forget with time what they studied at school but the ability to learn new things stays with them. This has important consequences throughout their whole life as the following two examples will demonstrate.

Firstly, let us look at two societies, one where young people receive lot of education and another one where they receive only little or none at all. People who were faced with big unknowns before and managed to overcome them gain self confidence to do so again even if they have already forgotten what they have originally learned. It becomes a habit for them to face obstacles, to think hard how to crack them and eventually to succeed in removing them.

When this author was working in Colombia for Grameen Creative Lab, a part of the Grameen Bank group, he spent a weekend with a poor rural family. When he asked the father what is his life dream, the father replied that he would love to see an ocean at least once in his life. Despite the fact that the ocean was only five hours away from the nearest town, he would probably never see it. He is not used to venturing into the unknown and as nobody else from his village has ever done it either, he does not have the self belief that he would be able to learn how to do it. When working with waste pickers in the slums of Delhi, this author experienced a similar pattern of behaviour. Unlike in developed countries where people are used to learning new things again and again, poor people in the developing world are unable to improve their lives because they lack this crucial ability.

Secondly, let us consider two societies with distinctly different styles of education. The United Kingdom, where this author did his undergraduate degree, can serve us one example and China, where this author is working right now, as another. While in the UK, students are encouraged to think critically about what teachers are telling them, in China there is a thousand years old cult of teacher as the ultimate master of knowledge and one that should not be disagreed with. It can be assumed that 20 years after graduation, both British and Chinese students will remember about the same amount of knowledge from their school years, which in most cases is not much. Yet the way they were educated translates into a very flat, low power distance society in the UK and a very hierarchical, high power distance society in China. This example again shows that despite not holding on much of what people learned at school, the What, they way they interact with each other has not been forgotten (the Why and the How).

On balance, this essay argues that while at an institutional level, knowledge is critical and if it is forgotten, not even education would survive for it would have nothing to build on, on an individual level, knowledge is less important than education and can transcend it in time. It has shown on the examples of an educated and an uneducated society and a low and high power distance society that even many years after schooling, what it can be safely assumed that most of the knowledge acquired at that time is either forgotten or irrelevant due to scientific progress, education still has a significant impact on people’s lives.


Ancient Greek solution for debt crisis

7 Jun

Just saw an interesting article at applying teachings of old Greek philosophers to solving Greece’s current problems. What would they say if they lived now?

My favourite one is from Archimedes: ‘Finding the solution to a knotty problem requires hard thinking, but the answer often comes only when you switch off – and take a bath’.

You can read the article here!

What makes a society successful?

31 May

I started travelling around the world nine months ago and had many questions on my mind at the time. While I got answers to some, many are still waiting to be resolved. One of the biggest ones is what makes a society succeed? For this purpose, I define success as above average living conditions and stable social and economic environment. Why did Europe colonise Africa and Latin America and not vice versa? Why did US manage to liberate themselves from the British rule already in the 18th century and went on to become a global superpower while Latin America got independence in the 19th century and Africa only in the 20th century and neither continent is particularly successful today (may be with the exception of couple countries in the southern Latin America). Why are living standards better in China than they are in India?

I am still far away from understanding these phenomena but based on what I have seen, the conversations I have had with many people around the world and what I have read, here is my first attempt to shed some light on the matter. I believe there are three broad elements which when present, make a society more successful.  These are 1) working habits defined mainly by agricultural tradition, 2) nature of society’s leadership and its ability to make decisions and 3) society’s ability to define and stay true to its core values but to embrace openness and innovation in everything else.

Working habits

One my Colombian friend who studied history and economics in the US told me that you cannot understand a society until you stay with them for at least one whole agricultural cycle. Since agriculture used to be the main source of livelihood for people for thousands of years and at the same time its nature is very different across geographical locations, it should have some influence on working habits of societies. Malcom Gladwell gives an interesting example in his book Outliers: The Story of Success where he argues that East Asian people are very hard working because of their tradition of cultivating rice fields which require high labour input all year round. Compare this to for example Europe where people work on fields only half a year and the other half a year are free, or to a life in tropical areas where worst comes to worst, one can always pick up a banana or some kind of root from the ground at any time of year. I think these traditions have a significant impact on how hard people work nowadays.

The other influence comes through climate. Especially in the northern parts of Europe and US, people have only a limited window of opportunity to grow their food, often having only one harvest. This forces them to plan for that one harvest in advance and to make sure it happens. They have to build a house to survive the winter and they cannot be in war at the time of planting. It also teaches them to understand the concept of deferred consumption – they cannot eat all the potatoes in autumn because they would starve during the winter; actually, they must learn to resist the temptation of eating all their potatoes even during the times of hunger because otherwise they would not have any seeds to grow new ones from the next year. Again, compare this to a society which can grow its crops at any time of year (it does not have to plan) or can eat wildly growing plants (it does not need to get used to deferred consumption) and can sleep outside without freezing to death at night (it does not have to build sophisticated communities). Successful societies possess all these qualities and I believe that agricultural tradition has had a big influence on how well they have mastered them.

Leadership and decision making

There are three important conditions for this element to be present and impactful. Firstly, it is a tradition of centralized leadership, good or bad, giving the society a tradition of cohesion, order and some level of certainty about the future. I think that the Roman Catholic Church played a crucial role in this aspect in Europe, acting as a central institution for dissemination of knowledge and order. China has a similar thousands year old tradition of ruling dynasties with one emperor at helm. On the other hand Africa is to date fragmented into hundreds of tribes with poorly developed relationships between them and a lack of a central authority (current states trying to assume this role are failing or only moderately succeeding in most cases as we could see for example in Kenya, one of the most developed African states, during its 2007 post election violence fuelled by arguments between the Kikuyu and Lou tribes. This was still a hotly debated issue when I was visiting Kenya four years later.) The indigenous Americans and SE Asians have not had any central authority for most of their histories either.

Secondly it is an ability of society’s leaders, its central authority, to make decisions. United Stated have had for most of their history only two main political parties, the Republicans and the Democrats. The winners enjoy a majority in the Congress for at least first half of the presidential term, giving them a chance to pass important legislation. China is another good example with the Communist Party being the ultimate decision maker capable of making sweeping changes to the society. What a stark difference to for example India’s system where the wining party usually has to enter into a collation with lots of small regional or caste specific parties which are often interested only in protecting interests of its niche electoral group rather than those of the nation as a whole, leading to decision making vacuum and paralysis.

Finally, it is important how the society selects its leaders. In Africa or India, where most of the voting population is uneducated, tribe or caste play much more important role than policies. My Kenyan friend explained me that most people vote representatives of their tribe. This leads to either people with wrong policies being voted in or to inconsistencies at the top as there are no traditional (consistent) political parties. With the exception of the Congress Party and to some extend the BJP, a Hindu party, the same holds true also for India, just swap tribe with region or caste. Looking at China, we can see a big change in how it is choosing its leaders and what progress this brings to the society. At the beginning of the Communist rule, intelligent people were being persecuted and killed en mass and uneducated peasants and workers guided by Mao Zedong were put in charge of China, resulting in a disaster during which 30 million people died of famine and millions of others were killed for political reasons. After Mao’s death however, the Party started transforming itself, and under the leadership of Deng Xiaoping evolved into an elite club of some of the country’s smartest people. While still not a democracy, China has nowadays a surprisingly meritocratic way of selecting its leaders. Its recent economic success and increases in living conditions are a world away from the life under Chairman Mao.

It is crucial for a country to have a system able to eliminate narrow minded populists from gaining positions and put educated people in charge of its development. If the system than holds them accountable to development of the society, be it through educated electorate as in the case of the US, or a thread of revolt as in the case of China (see my previous post), this condition is my opinion more important  to society’s development than whether its leaders are democratically elected or not.

Coexistence of tradition and progress

I borrowed this concept from Jim Collins’ recent book Great by Choice where he observes that some of the most successful companies were able to define a set of core values (or value propositions) which they did not change throughout their existence but were willing to evolve everything else around them. The same holds true in my opinion to societies well. Turning to the example of USA or China, a democracy at the core and an authoritarian communist country respectively, both are staying true to their values while are embracing innovation and openness in all other aspects. China’s leaders have correctly understood that for the society to prosper, they have to allow private enterprise and to open the country to FDI.

My Chinese friends go shopping to Wal-Mart, have furniture from IKEA at home and meet up in Starbucks. On the other hand India has traditionally been a closed country and even though its 1991 reforms by then finance minister, now PM, Mohammad Sing opened up the country a bit, it still remains hidden behind a wall of protectionism.  It is frequently reported that over one third of Indian food rots before it reaches consumers yet when the government voted last year to allow FDI in multi-brand retail which would bring much needed investment into its food supply channels thus eliminating some of this wastage, it was met with fierce resistance from small merchants and dealers benefiting from the current inefficient system of small corner shops. Its coalition partners forced it to reverse this decision at the time and even though it earlier this year passed a law allowing FDI in this sector, it attached so many strings that it will be difficult for investors to enter, thus depriving its people of so much needed development and affordable fresh groceries.

These are my first thoughts on the topic of what makes societies successful. They are by no means exhaustive. I am sure there are many more reasons, which I am looking forward to exploring in the future. In the meantime, I would love to hear your opinions!

The latest model of opium

23 May

I was reading last week a book called Red Dust by Ma Jian where the main protagonist, an artist with his day job as a journalist in the foreign propaganda office in Beijing of early 1990’s, is travelling across China, looking to understand his country and its people. At one point he is visiting an institute for drug addicts and afterwards reflects on his experience:


‘I always associated drugs with the Opium War, imperial decadence and foreign exploitation. What place do they have in today’s society? Perhaps when people have no ideals, money can only buy oblivion, not freedom.’ (p. 180)


Opium used to be a very important trade article between the British and Chinese in the early 19th century. Produced in India and sold to China by the East Indian Company and later on through a network of smugglers, the Chinese were embracing it to a point when the Emperor had to act to stop wide spread addictions. Court’s attempts to stop the trade lead to two Opium Wars fought between the British and Chinese, both of which the Chinese lost, starting therefore a so called Century of Humiliation. This period culminated in the early 20th century with defeats by the Japanese in both world wars and finished with a civil war and the establishment of People’s Republic of China.


A contemporary parallel immediately struck me with what my Chinese friend was telling me over dinner earlier that day. He was telling me that China has experienced a great progress in economic development over the past couple decades but little or no progress in political development. Lack of development in the latter has been tolerated because of progress in the former he continued. Busy playing Angry Birds on their iPhones and moving into new apartments, fighting for democracy is not on the agenda for many.


As with most drugs, their effects wear off after some time and larger and larger doses are required to achieve a desired level of satisfaction. Likewise, when addicted people get their drug taken away, they start to be stressed, rebel and use any means possible to get what they want again. My friend was wondering what will happen when the party will not be able to maintain the rapid economic development China has been experiencing lately. With their eyes currently hazed by consumption, more and more Chinese people might start voicing their discontent with the government in the future. Let’s see what will happen.


I can highly recommend reading the book Red Dust to get a vivid picture of what China used to be like in the early 1990′s, with poverty and widespread political persecution still looming. You can buy it here.



Notes on: Billions of Entrepreneurs: How China and India Are Reshaping Their Futures-And Yours

14 May

An insightful book by Tarun Khanna, an Indian born HBS professor, comparing the development of India and China from their early histories to their current emerging superpower statuses. It covers a wealth of issues but I am selecting here just a few of the most interesting ones and coupling them with my experiences of having lived in both countries.

Great leaps forward

I am now based in Suzhou Industrial Park, a brand new, super modern suburb of the city of Suzhou, housing some 1.2 mil people (the whole city has a population of over 10 mil). Where several years back were only farms and fields, the new Chinese middle class is now riding their new BMWs or Volkswagens to French bakeries for fresh croissants.  On the other hand when I was staying in South Mumbai with my Indian friends, I could see centuries old fishing village right next to some of the most expensive property in the world. How is that possible?

My Chinese host family took to visit their relatives living in dark winding streets of old Suzhou countryside and told me that in two years, everybody will be moved out and there will be factories standing here. When the Communist Party decides to do something, nothing can stop them from executing the idea. On the other hand my Indian friends told me that if the Indian government would try moving the fishing families against their consent, the government would fall the next day. So while China makes great leaps forward, Indian state muddles forward with little progress. The author notes that ‘China’s GDP per capita rose from $673 in 1978 to $5,878 in 2005. Further, the number of people living in absolute poverty dropped from roughly 250 million in 1978 to estimated 26 million in 2004.’ In India, ‘as many as 290 million people live in grinding poverty, a number that rises to 390 million if poverty is measured … as existing on less than $1 a day’. Is freedom of speech and free elections worth widespread extreme poverty and poorer living conditions? I am yet to make up my mind on that.

Soft vs. Hard power

India exerts its influence on the world mainly through soft power such as exporting Buddhism to China nearly two thousand years ago or yoga to the west over the last century. It has never attacked any other country and followed a policy on non-alignment during the cold war. On the other hand China was not reluctant to integrate Tibet by force or to attack India in the 1962 Indo Sino war. Nowadays, it is busy doing business with the world’s dodgy regimes such as Iran, Venezuela or several African dictatorships that other countries including India put sanctions on. To China’s merit, it also engages with many other mainly African countries where it trades natural resources for infrastructural development.

Long terms affairs

Almost all Western companies who have managed to succeed in China or India were in it for the long run. Especially in China, the Communist Party often expects the company to make contributions towards the development of Chinese society, be it through forming joint ventures with local companies to facilitate technology transfers, subcontracting to local companies in as far as possible (this often includes giving direct support to those companies to get quality of their production up to scratch as was the case for example with GE Medical and Bharat  Electronics Limited in India), supporting R&D activities of local universities or focusing on reaching out to the countryside. By engaging with local society, companies win over local politicians and regulators to their side, a crucial step towards company’s success in the country.

In India, businesses thrive mainly in industries untouched by the government where regulation is not so strict or where necessary infrastructure can be provided by private companies as opposed to the dysfunctional state. A prime example is India’s software industry. In China, the author points out that companies have three routes to success. Either they wear a ‘small hat’ and stay private, under the radar of the Party, or they wear a ‘red hat’, that is cooperating closely with the local party representatives mostly by letting government bodies have a stake in the company and its people on the board or thirdly, by wearing a ‘foreign hat’ and forming a partnership with a non-Chinese company.