Weekend Reads from India: Social Choices, Intolerance, and Buybacks

Elections are never easy. Unlike with economic decisions, the social choices they involve multiply the complexity of individual behavioral biases.

Voting is an amalgamation of individual biases. Time and again, election results that run counter to popular sentiment exemplify the irrationality involved in voting-based collective decisions.

Nobel laureate Kenneth Arrow’s impossibility theorem demonstrates how social choice mechanisms almost always lead to imperfect outcomes. Yet democracy has been a persistent guiding light across the globe and the most successful political system to date for achieving peace as well as prosperity.

Democratic values and elections are special in India. Consider this: One of India’s 29 states conducts as many as 5,800 elections every year. The sheer volume of voting opportunities spread out over the year provides the sort of robust pluralism that is critical for a successful democracy.

Not that there aren’t any misgivings. Just this week, the president of a globally acclaimed financial newspaper raised an interesting question: What is India’s religious future?

Religion in itself rarely interferes with financial market mechanisms. This holds not only for India, but also for many parts of the developing and developed world.

But what role does intolerance play?

Intolerance motivates extreme beliefs and springs from deep emotional and cognitive flaws. Today there is a growing concern as to how far the tolerance needle has swung in many parts of the developed world.

Whether in the United States, France, Hungary, the Netherlands, or Australia, leaders are embracing more closed-world policies.

The restrictions on H-1B visas instituted by the US have had direct consequences for India’s information technology (IT) sector. Simply put, some of India’s information technology firms have been making money through an arbitrage on labor costs. A potential H-1B visa restriction is expected to have a direct impact on the earnings of these companies. Through January, India’s technology stocks wiped out about $7.5 billion in market capitalization.

There are a couple of silver linings, however. Some believe this could be an opportunity for India’s IT companies to reinvent themselves and to focus on long-term and sustainable products and services.

The other saving grace for shareholders of IT stock is the ensuing wave of buybacks. TCS, India’s biggest technology company, announced a buyback of $2.4 billion, the highest by any Indian company. But as Aswath Damodaran points out, buybacks may increase a company’s value, but they are never a magic bullet.

Here are some of the links that I found interesting. Happy reading and enjoy the weekend.

Finance and Markets

• Hedge funds disappoint again. (Financial Times)
• Snap and the changing nature of governance. (Financial Times)
• The fall in Taurus Mutual: Is it a cause for worry? (Livemint)
• “How to Raise Oil Prices Without Really Cutting” (Bloomberg)
• “Look beyond Tata and Infosys” (Livemint)

Investing

• Does Buffett need a new investing recipe? (Financial Times)
•  Asset managers push back on UK rule change. (Reuters)
• An overreliance on machinable inputs? (Financial Times)
• India’s start-up valuation tables. (Livemint)
• Aswath Damodaran offers his take on stock buybacks. (Musings on Markets)

Religion and Social Choice Theory

• Amartya Sen and Kenneth Arrow on the irrationality of politics. (Stanford Political Journal)
• Arrow’s impossibility theorem explained. (The Indian Express)
• What’s the outlook for India’s elections? (Bangalore Mirror)
• “Le Pen, Trump and the Atlantic Counter-Revolution” (Financial Times)

Fun Stuff

• Journalists and US presidents. (The Times of India)
• “Fear of Losing Top Spot at Work will Hinder You” (Financial Times)
• The need for a new Milton Friedman. (Bloomberg)
• “Health and Algo-Treating: Doctors Now Using Code to Deal with Human Body” (Financial Express)

If you liked this post, don’t forget to subscribe to the Enterprising Investor.

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©iStockphoto.com/temmuzcan