America: Thinking Fast or Thinking Slow

(By the author of the book: 'Sculpting Angels: Parenting Lessons to Foster Creativity in Children' which is on a different subject).

There have been two significant events in the United States of America which are surprising and hence merit serious consideration.

One is the results of the presidential elections. Pre-poll estimates put Clinton clearly ahead of Trump for a win. But the results proved these predictions wrong. Today Analytics, Computing power, Information Technology, Sampling methods, and Communication science have all developed to make accurate and highly reliable predictions. But these predictions were proved grossly wrong.

The other significant event is the unprecedented protests chanting ‘Not my president’ with swarms of protesters before Trump’s inauguration as the President. The country’s majority had voted for Trump. Why then these protests against the view of a majority in a democracy?

We believe that forecasting election results was carried out by engaging scientific methods and that the elections were held by fair means. Further we will assume that the statisticians who predicted a win for Clinton were not biased but were skilled in the science of forecasting. Of course those who came out in large numbers to protest against Trump were from the minority who obviously did not vote for Trump. However, these anti-Trump campaigners were by far more vociferous than the pro-Trump supporters.

Having established these observations, we need to turn to Daniel Kahneman who earned a Nobel Prize in Economics for his research in the field of cognitive psychology and behavioural economics. His researched conclusions draw from two types of thinking namely ‘Thinking fast’ and ‘Thinking slow’. (The two types of thinking was categorised as System 1 thinking and System 2 thinking by Keith E Stanovich and Richard F West who had already summarised extant research distinguishing two types of thinking. In this article ‘Thinking fast’ is used interchangeably with ‘System 1 thinking’ and ‘Thinking slow’ interchangeably with ‘System 2 thinking’.)

Among the various differences between these two types of thinking, System 1 thinking is fast, automatic, effortless, emotional and sub-conscious. System 1 thinking is based on a primitive brain system. This thinking is what leads to a ‘Reactive response’ as can be seen in Stephen Covey’s book ‘7 Habits of Highly Effective People’.

System 2 thinking on the other hand is slow, effortful, logical, analytical, calculating and conscious. This thinking is based on the modern developed human brain system. This thinking is what leads to a ‘Proactive response’, Habit No 1 outlined in Stephen Covey’s best seller.

It is easy to see that when one has a view or makes a decision based on System 2 thinking she is proud about her view and therefore is transparent and communicates quite openly the view or the decision. On the other hand, when one has a view or makes a decision based on System 1 thinking, he or she will tend to be secretive and shy of expressing openly the decision.

In other words, someone who wishes to vote for Trump based on System 1 thinking (say based on racial inequality) is not proud to declare that this campaign has appealed to him. Therefore he does not voice his true view. He or she therefore is inclined to mislead a survey sampling, seeking views on support for Trump and support for racial inequality.

Little wonder therefore that the statisticians and other analysts were mislead and went wrong in their prediction of a win for Clinton.

This inference is reinforced by the other significant and unprecedented event namely the protest against the President elect. These protests were from those who did not vote for Trump. Apparently their decision not to vote for Trump was based on System 2 thinking, the deliberate, well analysed thinking. Voters who had thought through System 2, are more transparent and are not shy to express their views in the open and hence turned out in large numbers to protest.

Daniel Kahneman has been careful not do advocate any supremacy of the System 2 thinking over System 1 thinking, though some cognitive psychologists have not been so kind. The two surprising phenomenon in the presidential elections however informs that people tend to hide and suppress views based on System 1 thinking while people flaunt views based on System 2 thinking. This however lends evidence to the supremacy of the System 2 thinking over System 1 thinking.

In a democracy, it is the opinion of the electorate that matters and not whether the opinion was the result of Thinking fast or Thinking slow. In the interest of being non-judgmental, academics strive not to establish the supremacy of System 2 thinking over System 1 thinking. However, violence of any form has by and large been the result of System 1 thinking while creative contributions to human progress have come through System 2 thinking. Further, all democracies are governed by shrewd politicians who were successfully elected to an office by their appeal to System 1 thinking. Nevertheless, behavioural and social scientists consider it impolite and unfair, if any supremacy is attached to one form of thinking over another.

The presidential elections in the United States of America has thrown open a question. Is it time now to advocate the supremacy of ‘Thinking slow’ over ‘Thinking fast’?

Angel Sculptors By Dr. Jeyakar Vedamanickam: Never Say I Can't

Angel Sculptors By Dr. Jeyakar Vedamanickam: Never Say I Can't: Never Say ‘I Can’t’ By Jeyakar Vedamanickam Two frogs fell into a farmer’s vat...

Never Say I Can't

Never Say ‘I Can’t’

By Jeyakar Vedamanickam

Two frogs fell into a farmer’s vat

Filled with cream, milk and fat.

One licked some cream and hoarsely croaked,

“Tastes good, but what we need’s, ‘to stay afloat’”

The other one gave up with a shout,

“We are stout, we can’t get out.”

Cried he, “I can’t, I can’t”.

Bade adieu and breathed his last.

The lone stout frog, to himself, he croaked,

“To stay afloat, I’ll need a boat.

“Till then I’ll kick and beat about

To keep my breath from flaming out”;

But never will say, “I can’t, I can’t’

As was my now dead, companion’s wont”.

The kicking went on for hours – four,

Stirring the rich fat milky store;

This churned a ball of butter afloat.

Seeing the ball the frog now croaked,

“Here it is; my boat, my boat”.

Hugged his boat and stayed afloat.

Awhile the twain they lobbed and bobbed,

Till he breathed easy; not his last;

The hug had squeezed the butter dry and hard,

Into a launching pad, a pad of lard;

So he hopped aboard, crouched on all four,

And out he sprang, from the milky store.

Said he, “I am glad, I never ever chant,

This deadly phrase, ‘I can’t’, ‘I can’t’”.

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The above poem is taken from the book: 'Sculpting Angels : Parenting Lessons for Fostering Creativity in Children' by Jeyakar Vedamanickam. The book has 33 chapters. Each chapter explains a value/thought/skill that facilitates creative growth followed by an activity for the family which helps imbibe/hone the value/skill. 

Sculpting Angels: Parenting Lessons to Foster Creativity in Children

Last week the book authored by me 'Sculpting Angels: Parenting Lessons to Foster Creativity in Children' was released and is available in Amazon. Why is the book titled as 'Sculpting Angels'?

I borrow the idea ‘Sculpting Angels’, from Michelangelo; a great artist and a great sculptor. Interestingly, the idea does not come from his sculptures but a sonnet that he wrote:

The best of artists hath no art to show

Which the rough stone in its superfluous shell

Doth not include:

To break the marble spell

Is all the hand that serves the brain can do.

In simple terms, the poem informs that the beautiful sculpture had always existed in the uncut marble block. The sculpture existed even before the sculpting started, even before one parted the marble block from the larger rock.

This beautiful sculpture, yet unseen, is a rough stone, waiting to be free of the unwanted part of the rough stone. Along with the unseen sculpture, there is extra marble, which is not part of the sculpture. The sculptor chips away all unwanted marble from the uncut block, and the beautiful sculpture, which is inside the uncut marble block, emerges. The sculptor does not add anything to the sculpture. He only subtracts and removes what is unwanted from the uncut stone.

An artist, when he paints, on the contrary, adds and creates. He starts with a plain canvas. He adds colours, oil and paint to the canvas to create a picture that was never there before. The picture was not part of the canvas when he started out. The picture was in the artist’s mind, gradually transferred into the canvas as a painting.

A child is not a canvas waiting to become a picture. A child is a miracle, a beautiful sculpture already present, in an uncut marble block, waiting to emerge. Parents play the role as sculptors, for the beautiful sculpture to emerge. Firstly, the parent must be able to see the miracle, the beautiful sculpture, in the as yet, uncut stone. Will the sculpture be a ballerina or a warrior? How outspread will her arms be? How broad will his shoulders be? The sculptor needs to see all this, and more, within the uncut stone. The possibilities as to how beautiful a sculpture one may sculpt from a given stone are endless; limited only by his imagination, matching ability, and love for his work of art.

Next, the parent having seen the beautiful sculpture in her mind’s eye must be careful, while on the task of sculpting, engaging the chisel and hammer. The parent must not chip away part of the beautiful sculpture. Having seen a beautiful ballerina in the uncut stone, the sculptor, if he chips away a part of the marble that should have been the left forefinger of the ballerina, the sculpture can never be the same beautiful ballerina that it was meant to be. It would perhaps take shape as a smaller, shorter ballerina, a ballerina with a different hand posture, or a handicapped ballerina. Parents, like a sculptor, would therefore need to be careful while chipping away the stone, in the emergence of the sculpture. Every little work on the marble is critical to the emergence of the sculpture.

A parent fostering creativity in a child is thus similar to a sculptor sculpting a sculpture. However, a sculpture is an inanimate object, and a sculptor aspires in his work of art, an inanimate beauty. A parent on the other hand aspires for the child to blossom into someone who would personify love, peace and joy, and partner with our Creator, in shaping our world to be a better place to live in. That, in short, is to aspire for the child to grow into an angel. This explains the choice of the title for this book, ‘Sculpting Angels’.

Do you believe that parenting is like sculpting or like painting? What other imagery would be appropriate for painting. Please give your views and comments. 

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You may order for a copy of the book from the following links (one for India and another for outside India customers) in Amazon:

http://www.amazon.in/SCULPTING-Angels-Jeyakar-Vedamanickam/dp/1482883732/ref=sr_1_1?s=books&ie=UTF8&qid=1481095610&sr=1-1&keywords=Sculpting+Angels

https://www.amazon.com/SCULPTING-Angels-Jeyakar-Vedamanickam/dp/1482883732/ref=sr_1_1?s=books&ie=UTF8&qid=1481095610&sr=1-1&keywords=Sculpting+Angels

Gresham’s Law in the Face of Demonetisation

Gresham’s Law in economics is simple –‘Bad money drives out good.’ Sir Thomas Gresham after whom this law is named was the financial advisor to Queen Elizabeth I in the Sixteenth Century, when he observed that the newly minted coins (good money) were not found to circulate and the old coins (bad money) which were intended to be replaced continued to be in circulation. Where did the new coins go? The newly minted coins were being hoarded.

You would have observed that when you need to pay by currency notes, you choose to give those notes which are soiled and worn out (bad money) in preference to the crispier newly minted notes (good money). You probably had also arranged the notes in your purse with the crumpled and dirty notes at the outer side ready to be picked up for paying and the newer notes at the other end. By a similar reasoning, you receive soiled notes in return as change when you pay by a higher denomination currency, which you try and dispose at the earliest opportunity. Thus what circulates is bad money while the good money stays on in your purse and in effect is driven out from circulation. This is a true but harmless manifestation of Gresham’s law.

To get a feel of Gresham’s law at work in the context of the demonetisation, just take a peek into your purse and perhaps into the purse of others in your family. Now count the number of 100 Rupee notes that you hold. Just how many did you hold before demonetisation? You probably held four, five or may be six of that good currency on a typical day before demonetisation. Today, between you and your wife, you probably will count about thirty of the good 100 Rupee notes. Some may have a few less and some others have several more.

Before demonetisation, you did not think twice about parting with a couple of 100 Rupee notes to pay for a routine meal in a restaurant even if they were among the last few in your purse. But today, you tend to retain these in your purse and pay for that by your credit card. People have switched to alternate means to pay, such as by credit card, debit card, Paytm and their ilk. The 100 Rupee bills that one holds have turned out to be more precious than what they until recently were.

So how long did a 100 Rupee note remain in your purse before demonetisation? May be it was for just two or three days, since there weren’t many of them then in your purse anyway. But now, a typical 100 Rupee bill, particularly a crispy new one, will remain for a good many days before it is used in exchange for a good or a service. In other words, these 100 Rupee bills are driven out of circulation and become what a production engineer would call a non-moving inventory.

In the context of Gresham’s law, the good money is the 100 Rupee bill. These are good money, because these can be exchanged for a good or a service anywhere and everywhere. You can tender these notes, to buy a loaf of bread and a dozen eggs from the small grocery store in your neighbourhood or to pay for your haircut; not just in supermarkets. On demonetisation these notes have become far more precious than what they once were; and so remain undisposed for a longer period.

Contrary to what you perhaps expected, the bad money in this context is not the demonetised 500 and 1000 Rupee notes. The bad money is the substitute for the 100 Rupee notes, namely electronic money such as credit card and debit card. It includes the 2000 Rupee notes as well. The 2000 Rupee note cannot pay to the small-time grocer and the neighbourhood vegetable vendor. These will also remain in your purse unused for long, not because you wish to hoard them (as an honest tax paying citizen), but because they are not in demand. If you tender a 2000 Rupee note for a purchase that cost Rs. 1100, the vendor will need to return to you nine precious 100 Rupee notes (good money) which he is reluctant to part with, even though he has that many, and more such bills in his cash box. He may even offer to take the 2000 Rupee note if you will accept a lesser number of 100 Rupee bills than what is due to you after your purchase. So your new 2000 Rupee note is bad money and less valuable for circulation. The 2000 Rupee note of course will pay for high value purchases such as consumer durables, where alternate bad money payment options by credit card etc. are also available. The new 500 Rupee notes, are perhaps neutral and are in between good money and bad money.

What is the net result? The 100 Rupee bills get hoarded because they are more precious. The 100 Rupee bills do not get circulated, but get snugly ensconced in ladies’ purses, because these notes are precious and a lady’s purse is spacious to hold them.

One consequence of Gresham’s law at work is substitution of e-money transactions for currency transactions. But these are transactions between the ‘haves’ and the ‘haves’; between those who own credit cards and those who can receive payments by credit cards. Unfortunately though, India comprises predominantly of the ‘have-nots’ who neither pay by credit/debit card nor receive payments by credit/debit cards. The demonetisation is a bad consequence for the small-time grocer and the neighbourhood vegetable vendor who lose their business for shortage of good money for their business transactions.

By demonetisation, about 86% by value of currency notes which were in the form of 500 Rupee and 1000 Rupee bills has been invalidated. These are very gradually being replaced by the new 500 Rupee and 2000 Rupee bills. Of these, the 2000 Rupee bill is bad money for the informal sector and thus is not much help.

This could trigger a vicious circle, where 100 Rupee notes become precious and so people hoard them. This makes these notes scarce. Therefore the notes become more precious leading to more hoarding. These hoarders are not the few indulging in real estate who were hoarding the 1000 Rupee notes to evade tax or for unaccounted payments, but the billion people like you and me who hoard a little each to meet day to day expenses without inconvenience; for instance, to pay for a can of clean water. Similarly, a small vendor to keep his business going when one waves bad money namely 2000 Rupee note, he needs to have a stock of 100 Rupee notes. Thus, the 100 Rupee notes good money become even more precious.

The vicious circle causing spiralling of demand has not yet been triggered. This is due to a transient effect of the demonetisation brought about by the illegal exchange of the demonetised 500 Rupee and 1000 Rupee notes for four 100 Rupee notes and eight 100 Rupee notes respectively. These illegal transactions are taking place due to the various loopholes in the system. This has released for circulation 100 Rupee notes from the available stock of 100 Rupee bills and also reissue of 100 Rupee notes which were withdrawn against RBI’s clean note policy. But this is a transient phenomenon. Once these loopholes are effectively plugged or when the very limited currently hoarded 100 Rupee bills (by homemakers etc.) dry up; whichever is earlier, the Gresham’s law effect could grip the system and virtually paralyse the informal sector.

On demonetisation 1,658 crore 500 Rupee notes and 668 crores of 1000 Rupee notes became invalid. The augmented printing capacity to meet the demand for 500 Rupee notes, is between 100 crore and 200 crore pieces a month. At this rate, it would be about eight months from now, say by June 2017 when there would be a reasonable number of 500 Rupee notes in circulation. To replace the 1000 Rupee notes with 2000 Rupee notes needs only a couple of months. However this is not much help as this is still bad money. Nevertheless the misplaced focus has been to rapidly replace the demonetised 1000 Rupee notes with newly printed 2000 Rupee notes, with the object of putting into the system a significant part of the 86% of money value that was demonetised. In effect the focus has been on replacing the currency notes in circulation with bad money, not helpful for informal business.

India has been enjoying a high GDP growth rate even in the face of worldwide recession, proudly upping its thumb on China recently. Different estimates inform that the demonetisation will reduce the GDP growth rate by 0.7 to 3.0 percent. The Sensex has been constantly moving down.

These estimates and indications have not factored-in Gresham’s law phenomenon. Considering that India is an economy of small businesses where the informal sector accounts for 45% of our GDP and 80% of employment and that the Gresham’s law phenomenon primarily affects the informal sector, the demonetisation effect on the GDP growth rate is expected to be far more pessimistic.

Since 80% of employment in India is through informal business, the impact is on the morale of those employed in these businesses. The morale that will be affected over the several months will have a long term effect on the GDP. In the face of the badly hit morale, loans available at reduced interest rates, is hardly any incentive to revamp informal businesses. Thus the predictions, that there will be long-term growth rate of GDP for the current pains, are unrealistic.

Queues which were a common phenomenon in the USSR prior to Gorbachev’s Perestroika have become a common phenomenon in India after demonetisation.

There is much discussion and monitoring of the printing and distribution of 500 Rupee bills and 2000 Rupee bills which will replace more effectively the value of demonetised currency. There is very little attention being paid to the printing and distribution of good money namely 100 Rupee bills.

In order that the drop in GDP growth rate does not come to stay, the printing and distribution of good money in the form of 100 Rupee notes will need to be taken on a war footing. If not, the by-product of demonetisation namely Gresham’s law phenomenon would result in robbing the ‘have-nots’ to pay the ‘haves’ in the country and cripple informal business.

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