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Financial Risk Taking in the

Indian Context

Presentation by: Adeesh


Made for HSS 602: Science and Technology in
India

A success frequently, is as robust as the foundation of


failures it is built upon

The two pillars of Science:

Money

Education

What is Risk?
- Attribute of an action which has probable
good and bad payoffs
Key words
- Uncertainty
- Unpredictability
- Decision Making
- Perceived Risk
- Reward
- Insurance
Types of Risks
Financial/Economic, Health, Security,
Technological, etc.; may frequently overlap

SCIENCE is Risky

Education, is Risky
- A stable matching for ability vs education is an
unsolved problem
- In the modern time, the monetary cost of a good
education is very high as well
- Even with matching capability to education, the job
markets are very non-linear, so education doesn't
necessarily translate to success and/or satisfaction
- The primary assumption of risk of educating by
parents isn't guaranteed
to be paid off. This means,
an education risk involves
probability of cascading
failure

SCIENCE is Risky

Markets, are Risky


- The implicit cost of pushing the frontiers of science
and technology is enormous
- Reward vs Penalty
The modern economy is deeply rooted in dealing with
risk. This is important because funding modern
science is deeply rooted in economic interests.
Frequently, the greatest drivers of innovation are war,
profiteering (or both combined)
and social causes championed
by the rich 1%
(Basically, trust is risky)

So who can Assume Risk?

Governments: Best poised to assume risk in


developing and underdeveloped economies, where
the scientific and economic foundation is still being
built
Public Entities (eg. Banks): Very complex entities that
can assume mostly deterministic risks
Private Individuals and Entities as Investors: Most
commonly assume risk purely for high profit margin
and shareholder value maximizing
Private Individuals and Entities as non-Investors: For
example we talked about the parents of a student
who attempts high education

Perception of Risk in India

Indigenous Science, Knowledge and Scientific method


was a holistic project. No proper conceptualization of
risk, risk assessment, management etc. Risk taking
primarily associated with trading, exploration and
profiteering, military and conquest; not scientific or
technological advancement
Pre imperial vs Post imperial knowledge systems
- Disharmony between both. Misappropriation by the
western educated elites
- Post imperial knowledge chiefly designed by Britain
to inculcate repeatability and uniformity. Not
conducive to a modern world beyond the third
industrial revolution
Industry dedicated chiefly towards sustenance

Managing Risk is Important

Clearly, high scientific and technological development


requires assumption of risk. If the society is risk
averse, competition at global scale not possible. It's
an either/or choice
Nehruvian India followed the socialist principles in the
chase for rapid industrialization
Caveat: ok in initial developmental stages of nation,
not ok for chasing the envelope
Why not ok?
- No accountability
- Designed for large infrastructure projects
- Involves public consent, this is a complicated issue
- Not enough feedback to learn from failure

[...]We built great big things, made ungodly


technological advances, explored the universe, cured
diseases, and we cultivated the world's greatest artists
and the world's greatest economy. We reached for the
stars, acted like men. We aspired to intelligence, we
didn't belittle it, it didn't make us feel inferior. We
didn't identify ourselves by who we voted for in our
last election, and we didn't ... we didn't scare so
easy.[...]
-Will McAvoy; Newsroom (Episode 1)

Development needs to be Antifragile

Risk is a double edged sword. Innovation can and


should be antifragile
How? Learn from failures of innovation in financial
instrumentation
- Distribution of risk: Encourage entrepreneurship
- Embracing Rapid Application Development (RAD)
philosophy in design on innovation itself
- Overhauling education systems (Self Learning,
Sugata Mitra: School in Cloud, etc.)
Silicon Valley craze already causing structural
changes in financial risk taking
Urgent need for education of risk assessment and
management at all levels in all industries

Sadly, Indian entrepreneurs are more risk averse


than VCs and Investors
- Anonymous

References

Binswanger, Hans. Attitudes towards risk: Experimental


Measurement in Rural India. American Journal of Agricultural
Economics; 1980
Gupta, et. al. Institutional Environment for Entrepreneurship in
REME. International Entrepreneurship Management Journal; 2014
Mitra, Sugata: Can Kids Teach Themselves?.
https://www.youtube.com/watch?v=xRb7_ffl2D0 . 2009
Taleb, Nassim. Antifragile: Things That Gain From Disorder. New
York: Random House, 2012
Narlikar, Jayant V. The Scientific Edge: The Indian Scientist from
Vedic to Modern Times. New Delhi: Penguin Books, 2003. Print.