Happy weekend! Here are some links to things I've been reading (or recording) that you might also enjoy:
1. My new podcast conversation, with GMU economist Shruti Rajagopalan. Great fun to record, and I learnt a lot. Shruti also runs Emergent Ventures India and hosts a podcast called Ideas of India. Many highlights (see my Twitter for an abundance of video clips). Nine of my favourite excerpts at the bottom of this email.
2. 'My techno-optimism', a recent blog post by Vitalik Buterin.
3. 'Reassessing China’s Rural Reforms: The View from Outer Space', a job market paper by Joel Ferguson and Oliver Kim.
4. '5 questions for Scott Aaronson', a recent POLITICO interview.
6. 'The origins of the steam engine', a new and interactive essay by Anton Howes and Matt Brown.
Have a great weekend,
Excerpts from my podcast with Shruti Rajagopalan
1. Shruti's elevator pitch on why Indian classic music is one of humanity's great artistic achievements
WALKER: Can you sell me on the claim that Indian classical music is one of the great cultural achievements of humankind?
WALKER: What would be your elevator pitch?
RAJAGOPALAN: It is spontaneous order where the bad stuff has been weeded out and the good stuff has been elevated, over a millennia. So what exists now is great. Maybe there was other stuff that existed before which was good and got lost or we tossed it or something like that. But what exists now is never bad, because it would have been weeded out. Against the false positive, false negative thing, right?
2. Shruti tells me where in India I should visit next
JOSEPH WALKER: If I've already been to Delhi, Bangalore and Chennai, where should I go on my next trip?
SHRUTI RAJAGOPALAN: What are you optimising for?
WALKER: I guess just learning about India broadly, which I realise is kind of vague, but I'm at the point where I don't have more specific goals than that with respect to travel.
RAJAGOPALAN: I think it's useful to go to places like Banaras (or Varanasi). It's in Uttar Pradesh, which is one of the poorest states, but it's also the holiest city for Indians. So there's a lot to see in terms of exotic culture, or what seems exotic, even to me, actually. And there are beautiful temples. It's literally on the banks of the Ganges. But on the other hand, you will also see a startling amount of poverty and just how far behind some Indians are relative to the others that you have met probably in big cities or the Indian diaspora that you've met in the United States and Australia. So I think that might be an interesting experience, sort of to see the other side, to see what schools they go to, how they live, what their problems are, what their aspirations are.
A trip to the mountains. They're my favourite place. I encourage everyone to go up north.
WALKER: To the Himalayas.
RAJAGOPALAN: Absolutely. And, I mean, pick your spot. But I really like Ladakh. It's the desert side of the mountain. It's sort of in what used to be the state of Jammu and Kashmir. Now Ladakh is a separate territory. And there's a big Buddhist influence there, so there are lots of monasteries. Most of the parts of Ladakh that I find interesting are at about 8,000 to 10,000 feet above sea level. So it makes it interesting, it makes it hard to breathe. It's just like a completely different experience.
I love the coastal towns. I love Kerala. I love anywhere in Kerala. I would go to Mumbai if you haven't been. It's chaotic and it's vibrant. And to me, because I've lived in New York City for a long time, I love New York, I love Hong Kong. And Bombay – or Mumbai now – has the same vibe as the others. So it's just a lot of people and a lot of talent and a lot of entrepreneurship and a lot of people doing their own thing, all jammed into a tiny space, which makes it fun. It's also home for me. My husband's from there, my in-laws still live there, so I'm there all the time. (My parents live now in one of the suburbs of Delhi.) So, yeah, it just feels familiar. Really cool place.
3. The best development economics book for understanding India?
WALKER: What's a good development economics book – it doesn't have to be about India per se, could be any development economics book, but one that would help me understand India?
RAJAGOPALAN: Well, I think the best development economics book, even today, is An Inquiry into the Natura and Causes of the Wealth of Nations that Adam Smith wrote.
RAJAGOPALAN: Does that help us understand India? I think it does. I think it helps us understand everything.
A development economics book that'll help us understand India better? I need to think a little bit more about that. I'm trying to think about stuff that was written specifically for India and I think that may be a bad idea.
WALKER: Why so?
RAJAGOPALAN: Because most development economics that's been written for India in the last few decades is all about redistributing and randomised controlled trials or something else that has nothing to do with development, that has to do with measurement and redistribution and things like that. When I think of development, I think of how can South Korea go from being sort of the third-poorest economy in the ‘50s to, I don't know, GDP per capita that's 60% of United States in 2023. That's an extraordinary miracle. So what is the book that explains that, I think is the book that explains everything. And I think a lot of books on trade explain that very well. And I think all the classic books, like The Wealth of Nations, would explain that very well.
4. The persistence of caste
WALKER: To what extent is the question “What is this person's caste?” lingering in the back of the mind of even an attendee at an Emergent Ventures India unconference? And how does that factor into your thinking as a conference organiser? Is it something that you care about? Is it something you want to mitigate? Something you're indifferent to?
RAJAGOPALAN: So let me tell you, on a very practical level, people care about other people's caste, even if it's not explicit, because in any situation where you have to share food, different castes have quite different eating practices, and this is obviously more of a concern for those who are in the upper caste and who are vegetarian. So oftentimes, at least the ostensible explanation that I have been given by my friends and cousins in India is “It's not that we're interested in someone's caste, it's that we don't want a situation where we offend someone or we are offended because we are in a situation where we're eating something that makes us uncomfortable and so on.” So that's the very pragmatic reason where it comes in, where it's sort of in everyone's minds, either explicitly or implicitly. And it is a question of: if we're going to be breaking bread together, are we really doing this or are we not doing this? How are we doing this?
But I think it's also a marker of social status. Typically, the upper caste have gained the most in the last 75 years. They were the group that were lettered, right? The Dalits weren't allowed to learn how to read and write. So when you come to a situation where a colonial administration says, okay, we're going to train a new generation of Indians in the ways of administrating a colonial setup, the people who were obvious contenders for that were those who had already had some education. So usually they spoke multiple native tongues, and then they also started learning English. There's actually a word for this. In the 18th and 19th century, it was called “Dubashi”: someone who speaks multiple languages.
And then that goes further down. So my great-grandfathers spoke English and their native tongue. As did my grandfathers, as did my parents and so on. So that's the group that ends up gaining the most from liberalisation, ends up gaining the most from foreign direct investment, ends up gaining the most from World Bank hiring in India, and any such thing. So I think that is something that became a marker for status. So we knew that the upper caste members are also the most educated. They happen to have the main opportunities both in India and abroad. And therefore, that's the group we must associate with. And anyone who doesn't sound or look like that, they must not be very good or they must not be of that much use to my plans. So here, caste is very much in the background. No one's actually discriminating on it. But you've met 20-something entrepreneurs. When they're in a room, they care about “What can I get out of this social connection? Are they going to be an input into my work? Are they going to help me raise funding? Are they actually going to help me build a better product?”
And everyone does it to some extent, except in India all those questions, if you keep peeling the layers, the final back spine of that, the explanation will be buried in caste.
5. Dynastic Indian sagas: A Fine Balance and A Suitable Boy
WALKER: So I know this because you responded to a tweet of mine earlier this year in which I solicited Indian book recommendations, but two of your favourite Indian fiction books are Rohinton Mistry’s A Fine Balance and Vikram Seth's A Suitable Boy. I read A Fine Balance many years ago, back in high school, and I absolutely adored it.
RAJAGOPALAN: Adore is not a word I use for that. It broke my heart, just so many times. But I know what you mean. It’s beautifully written, but it's heartbreaking.
WALKER: It’s tragic, yeah. Poignant. So what did you like about each of those books?
RAJAGOPALAN: I think the thing I like about both books is they're this intergenerational saga, which is how the Indian epics are told. So if you've read Indian epics, they're like intergenerational large families, lots of different characters coming and going, and they are very good at describing a milieu. And I think both books do that very well.
WALKER: They're both very long.
RAJAGOPALAN: They're both very long. They are multi-generational. And I think Vikram Seth's A Suitable Boy has a lot more characters than A Fine Balance. So that's one thing I like about it.
The second is I think both are about a time period from… I wasn't born in that time, but I know a lot about it because my parents were around and my grandparents were around, and we all lived in the same home. So I've heard a lot about it, but I never heard it in this sort of modern EnglIsh literature sort of language. It was just the stuff that they told me. But to read it in this novel form, the way we read Russian literature or English literature, that I think… Because you know how these colonial education systems are, right? You grow up reading literature that is not from your time and space. So to find something that is familiar to you but is written in that language, I think is very interesting.
So I love both books. I love these crazy sagas across generations. I'm a sucker for it. My husband likes to kid that he hates reading any book where there's a family tree that you have to keep going back to. And I love books like that. So I love One Hundred Years of Solitude. I love A Suitable Boy – first two pages are a family tree and then there's an appendix.
WALKER: What excites you about that?
RAJAGOPALAN: I think just the story has to be told from multiple points of view. I think that's the exciting thing. If a story which is of that breadth had to be told from just one person's point of view, that would be really hard.
6. Would Shruti prefer the Indian Constitution's flexibility over the Australian Constitution's rigidity?
WALKER: So if Australia's Constitution is frozen in time, and India's Constitution, or at least specific parts of it, are altered too readily, which problem would you rather have? If I offered you the choice to swap your problem for ours, would you take it?
RAJAGOPALAN: Unclear. Because I don't think the Australian Constitution is frozen in time, except in text. I think constitutions like Australia, constitutions like the United States Constitution, textual changes are very difficult, but they're being rewritten every day by the judiciary, right? So much has been changed by judicial interpretation. So, basically, what happens is, if you make it very difficult to amend the Constitution through a particular procedure in a particular fora, then people will go to a different fora. And now you see, in the United States, look at questions like Second Amendment rights, which are now entirely being debated in courts, because it's a non-starter to actually go back and change the text of the Constitution. So when they happen in courts, suddenly you start worrying about who's on the bench, and then you start worrying about which political party is supporting whom.
In no other country do you see a major question for presidential candidates about their choice of justices that they would like to elevate to the bench. The kind of power that's given to a Supreme Court justice in the United States is extraordinary. And it's not because that's inbuilt into the American system, and it's not because they have lifetime appointments. It's because the formal Constitution is very difficult to change, so you have to do it by interpretation. So it's going to happen one way or another.
So this is a very vague and Hayekian and answer, but it'll come down to culture, and it will come down to political norms and political culture. And I think no matter how good the procedural rules in India, unless we fix that problem, I don't see the story ending particularly well.
7. How growing up in a rapidly developing country engenders optimism
WALKER: We were talking about the massive smartphone uptake in India. So two thirds of Indians have access to a smartphone. And that's going to increase to 95% by 2040.
RAJAGOPALAN: Yes. That's the expectation.
WALKER: That's the expectation. So when you compare that widespread adoption today with your experience trying to make long distance telephone calls as a child... So you have, for context, you have this really funny Substack post on what it was like trying to make those landline calls in the past in India and how that was sort of represented through Bollywood and Hollywood. Reflecting on examples of such rapid progress like that, at a personal level, how does that affect your perspective on life? Because for me, I probably haven't experienced such progress in my life, living in a developed country like Australia. Do you feel you're more of an optimist, you're more positive-sum?
RAJAGOPALAN: Oh yeah. Absolutely. I am such an optimist when it comes to these things. These sort of things, they still thrill me. When I go to India and I see like 500 horrible cable TV channels, I wouldn't watch any of them, but it thrills me that they exist. Walking into a big retail store with lots of different kinds of chocolate. I grew up the first eight, nine years of my life with two kinds of chocolate. I remember the first time I held a Kit Kat. I remember the first time I held a Pepsi. So that stuff just thrills me no end. I still think it's magical that all that exists in India, that there's so much digital stuff for everyone to consume, so much of it is free. And so much of the consumer goods revolution has been reaching high quality, latest technology stuff in the hands of people who, relatively speaking, don't have that high income. So that just thrills me. It makes me an optimist. I'm a techno-optimist in that sense. I am a market optimist in that sense. I'm just thrilled by it. Yeah.
And I'm a big believer in progress. The fact that we have a vaccine within, I don't know, a few days, the blueprint for a vaccine within a few days of the pandemic spreading – even before it had spread globally, we had the blueprint for a vaccine – that stuff just thrills me to no end. The fact that my dad and I chatted for an hour about the malaria vaccine being a possibility.
WALKER: That’s so exciting.
RAJAGOPALAN: Yeah. Because he grew up in a time when he knows people who've died from malaria. So it's just extraordinary that that stuff is happening. It just thrills me no end.
8. What do most Western VCs get wrong about investing in India?
WALKER: You mentioned earlier that there can be blind spots on the part of venture capitalists with respect to India around things like air quality. But thinking at a more general level, what do most Western venture capitalists get wrong when investing in companies in India?
RAJAGOPALAN: They overestimate the size of the market, I think. So the way India's digital revolution has taken place is very upside down. So the digital revolution happened in the developed world after they had reached a certain GDP per capita, and then everyone could afford phones and then you could afford, like, large-scale laying out the fibre cables for the internet and all the things that got built on top of it. In India, Uttar Pradesh when you go to Varanasi and when you go to the poorest parts of Uttar Pradesh and Bihar, you'll have excellent internet. You may not have water. But you'll have [internet]. So the numbers that are constantly thrown around are that India has 860 million people plugged into the digital space through smartphones – at least one in each household. And India has the largest number of young people. So an edtech company has a potential market size of, I don't know, 300 million or something like that.
I think that's a huge overestimate, because the number of people who have the internet in India the way we think of comparably in the US, is only about 25, 30 million. Only they have the same kind of disposable income. They are the people who watch Netflix, who will get an Amazon subscription and so on. So I think Sajith Pai had a lovely report on this recently. It's called the Indus Valley Report, like Silicon Valley, but for India. So that's the spin on it. And I think he estimates that it's about the size of Taiwan: India A, as he calls it. And the group that does quite a bit of spending on the internet is about 200 million, maybe even slightly lesser. And then the next billion are not really spending that much money on these things. So doing another DoorDash and doing another Uber for India – that's what the VCs are looking at, because they think: “We have Uber here. California is 40 million people. India is 860 million people with smartphones.” That is not a one-on-one translation.
WALKER: “Total addressable market: huge.” Actually, they're just investing in the Taiwan that lives in India.
RAJAGOPALAN: Yes. And even the Taiwan that lives in India, that's smaller than California, right? And poorer than California. So now we really need to think about that question. So I would say that's one thing they get wrong.
So what's been happening in the US is we take all the public goods as given, right? I mean, maybe not anymore in California, but largely the fact that there will be clean water, there will be a sidewalk to walk on, there will be basic law enforcement, there will be some efforts to mitigate air pollution, so on and so forth. There's not, like, crazy shooting on the street. You have some basic situation under control. That's taken for granted. And then it's about the private sector supplying all those other things, and within that, there's a digital space where the private sector really comes in. In India, it's kind of flipped over. The private sector still needs to build a lot of hardware design solutions which are just taken for granted in the United States. So those things don't get picked up. So when I say, what are VCs getting wrong, I have to tell you both what they fail or misunderstand, but also what they're not picking. And I think they're not picking enough hardware solution space. And it's probably because when it comes to software, there's virtually no product risk, right? It's like a few young developers who get together for a few weeks, drink Red Bull, eat pizza, they come up with a software solution. So the real risk you have is market risk. You don't have much product risk. Whereas when it comes to hardware stuff, like this air pollution device and so on, they think that you have product risk and you have market risk, whereas I think there's very little market risk there. You've been seeing multiple air pollution ads for products when you just read the morning paper. But the product risk is quite high and they don't know how to understand that, because the VC world is so plugged into digital goods and not physical big manufacturing related goods.
So I think there's a mismatch there, and I hope they catch up soon because these are like $20 bills lying on the table. By the way, even Indian VCs don't capture it. So it's not just the American VCs getting it wrong. The Indian VCs mimic American VCs. The people who really fund those solutions are the angels in India. The angels have their brains switched on. They have built these things before. They know how to pool their money, they know how to de-risk product development, they know how to think about it. Whereas the VCs are only thinking about product-market fit, which is a very vicey influence on VCs more generally. Not that they got it wrong, they've done it splendidly well. But it may not have a one-on-one fit for India where you only worry about market risk and you think we'll only fund things where there's no real product risk.
9. When Tyler Cowen told Shruti that her failure rate as a talent scout seemed too low
WALKER: So as someone who's a relatively new talent selector and hasn't for all of her bets seen – or many of her bets seen – a full cycle, how do you know whether you're taking the right amount of risk?
RAJAGOPALAN: This is a funny question. So very early on, maybe like first six, seven months that I was picking EV India winners, Tyler came and asked me and he said, “Your India winners are great. They're all succeeding. Are you taking enough risk? Where's the failure rate?” And I thought about it really carefully. So I went back. And that's a very Tyler question to ask. No one else would ask that question, right? If things are going well, usually they leave it alone. So I went back and actually looked at all the people that I didn't give the grant to and said, why didn't I give it to them? Was it because they were too risky and they were too out there, or was there something else that was problematic?
And oddly enough, when I had done the assessment that time, none of the rejections had to do with riskiness of the project. It had to do with just the person not having a very fleshed out idea. And most of the times, actually, it was because it wasn't a risky enough project. It was just too cookie cutter boring do we really need one more of this in the world kind of rejection? And then I was like, okay, I'm comfortable with the risk I'm taking.
But I would say to a new talent scout, it's useful to keep doing that exercise every six months. I keep going back and looking at my rejections and then looking at, was that the right call? And why did I do that? And do I still feel that way six months later, having done more grants and so on and so forth?
So I don't stand by all my winners, necessarily, because with time, you know, which ones didn't work. But I do stand by all my rejections. Not because they weren't talented, actually; even the rejections for Emergent Ventures is an incredibly talented group of people. It's usually they're not working on moonshot ideas. They're working on something quite basic and boring, likely to be funded by something, someone else. And oftentimes it's like, oh, just another boring paper on topic X that is already boring and overloaded with nonsense.