Yes, it’s a fascinating story. I will be telling it at the end of this post, saving the best for last. Till then, I beg you to resist the temptation to scroll down. Instead let us consider this:
Do monkeys understand physics? Let us do an experiment. Take 9 bananas and a permanent marker. On the first banana write
On the second, write E=2mc^2, on the third write E=3mc^2 and so on until you write E=9mc^2 on the ninth banana.
Now shuffle these 9 bananas and throw them to a monkey. Ask the monkey to pick out the correct formula. See which banana the monkey picks first.
Here is a bold prediction of mine: approximately 11% of all monkeys know Einstein’s famous formula. Go check it.
Anyways, let us come back to the case of the great Raghuram Rajan, immortalized by his famous prediction:
In the last 27 years, the world has seen three great economic crises: the S&L crisis of the early 90s, the dotcom bust and then the 2008 crisis. This means about one crisis every 9 years. But please note that I am by no means saying that randomly picking one year out of any 9 years gives a reasonable chance of picking a correct recession year….
I am only saying that perhaps we should also consider whether this year’s winner of Euromillions jackpot lottery could be our next RBI governor. After all, the jackpot winner managed to pick the correct winning ticket out of literally lakhs of ticket numbers, whereas the great Raghuram Rajan had a much better 1 in 9 chance of succeeding.
The jackpot winner’s feat seems even greater when I looked up Rajan’s famous paper : “Has financial development made the world riskier”?
If you consider the fact that Rajan didn’t actually predict the year of the recession, just that one would happen eventually, you begin to see just how amazing the Euromillions jackpot winner’s predictions are… Let me make another bold prediction about those monkeys and the 9 bananas. EVENTUALLY, nearly 100% of monkeys will pick the correct formula E=mc^2 .
Raghuram Rajan ended his historic paper by making three brilliant recommendations:
Market participants have a success rate <100% ? Amazing! Rajan’s presentation must have been quite a sensation considering that everyone else at the meeting was proposing “Dumb regulation” instead of “Smart regulation” and was batting heavily in favor of lesser innovation….
No no, I am in no way saying that we should ask ourselves if we are getting carried away because some person may or may not have hinted at a crisis coming at an unknown point in the future and presented platitudes such as “more innovation” to get out of it…
By the way, you guys should check out my latest plan to cure cancer through “more innovation”… I am awesome that way, I know…
Also, I am by no means saying that we should try to have a meaningful dialogue about the tenure of Raghuram Rajan as RBI Governor and try to compare and contrast his tenure with those of his predecessors while debating whether he deserves a job renewal.
I am by no means saying that instead of focusing on the success of one prediction, we should try to look at the entire track record of predictions and look at the success rate. Predictions are magical thing actually, because people tend to forgive and forget when bad things are predicted but don’t come true. However, when bad stuff is predicted and sh*t actually happens, we tend to remember. As such, the optimal strategy is to keep predicting that bad stuff is gonna happen, and since bad stuff always happens eventually, you can eventually always be a hero. In between, people will tend to forget all the times when your doomsday predictions didn’t come true. Better still, they might come to respect you even more as a well wisher who was just sounding a note of caution.
Try this, from Sept 2013:
Or this, about 11 months after the Sept, 2013 prediction:
Or this, a further approx 11 months after the Aug 2014 prediction:
Since its already June 2016, going by his past schedule, it seems the great man is a little behind on his announcement for this year. Here’s another prediction: any day now, Mr. Rajan will be announcing a warning that a Great Depression is coming.
Ok, I promised you that I had saved the best for last. Here’s my personal encounter with Raghuram Rajan. In early 2016, I was on a hospital bed suffering from the last stages of cancer, likely to die within 3 days. Doctors gave up all hope and asked my family to pray …to Raghuram Rajan of course. Raghuram Rajan appeared in a dream, looked directly into my eyes and said : “There’s going to be a financial crisis”. The thrill of that moment healed me instantly. I got up from my bed, walked out of the hospital a healthy recovered man… Thanks, Raghuram…!
Friends, please stay connected with this blog on the FB page: