blinded rationality

In the journey of life, individuals often find themselves at a point where they have to choose a path among many unpleasant paths that are presented to them. Once they choose a particular path, the other paths are automatically closed and will never be available to them in their life. Individuals think that their chosen path is better than other paths and begin to believe that it is the right path for them. However, in reality, there is a possibility that one of the other paths may have been better. The irony is that the other way cannot be seen or experienced unless chosen. This other path can only be visualized or imagined and individuals visualize the other path as less favorable than the chosen path. I call this situation ‘blind rationality’ because your choice is rational but blinded by the limitation explained above.

Understanding this concept is important because we, as individuals, organizations or institutions, make decisions for ourselves, for a group or for the public to achieve a certain goal. Even the chosen path has inherent problems and opportunities. Each chosen path has multiple lanes and each lane leads us to different destinations. We arrive at different destinations depending on how we manage our problems and opportunities. For example, what might the state of the US economy have been if they had elected some ‘X’ as their president instead of President Trump? What might have been the state of the economies of other countries or regions? It could have been better or worse, but we would never be able to see that. The world under ‘X’ would have been different with its inherent problems and opportunities. Those problems and opportunities could have been handled with different political decisions. Consequently, it could have led us to a different destination, a destination that can only be imagined or visualized. Nobody can prove that. It may be better only in our minds or on paper.

Another example scenario is the Indian stock market. India’s growth rate was around 8% between 2014 and 2016. Since then, it has never seen the previous level, although it is growing at or above the Indian growth rate. However, the Indian stock market has risen to its all-time high recently. The trading community was jubilant and celebrated the achievement. Skeptics questioned in the media why the stock market is rising while India has recorded a lower growth rate in the last 2 years. Let’s take a look at the BSE Sensex from 2014-2020. The highest Sensex numbers from 2014 to 2020 are 27739, 28044, 27714, 32683, 37128, 38460 and 40478 respectively. In the first 3 years, the index has not grown. It has stagnated, although India has been posting a growth rate of 8%. The Sensex has grown by more than 15%, although India’s growth rate was less than 8%. The following year, the Sensex grew by around 15% again, although India recorded a lower growth rate than the previous year. In the last 2 years, Sensex registered less than 5%, although the Indian economy registered a growth rate of more than 5%. The recent peak was actually delayed. If we do a little math by multiplying 27,739 with the growth rate of India in that period, we almost reach the 40,000 level. This peak is normal according to the growth rate of India. However, people look at this figure differently. Some think it is irrational exuberance. Others think that the Sensex should have reached 45000 if the growth rate of the last 3 years had been around 8% or more. What is real is 40,000 because of our chosen path. The 45,000 or 50,000 is only in our minds or on paper because the other paths are closed because a path was chosen with a bit of rational thought. However, 45,000 or 50,000 was not unlikely. We can’t test that simply due to human limitation. We cannot see different worlds simultaneously.