In the journey of life, individuals often happen to be at a point from where they have to choose a path from among many paths laid before them. Once they choose a particular path, the other paths are automatically closed and never be available to them in their life. The individuals think that their chosen path is better than other paths and start believing that is the right path for them. However, in reality, there is a chance that one of the other paths could have been a better one. The irony is the other path cannot be seen or experienced unless it is chosen. This other path can only be visualized or imagined and the individuals visualize the other path as less favorable than the chosen path. I call this situation ‘blinded rationality’ because their choice is rational but blinded by the limitation explained above.
Understanding this concept is important because we as individuals, organization, or institution take decisions for self or group or for 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 reach different destinations depending upon how we manage our problems and opportunities. For example, what could have been the state of the U.S. economy had they chosen some ‘X’ as their President instead of President Trump? What could 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 might have been managed with different policy decisions. Consequently, it might have led us to a different destination, a destination that can only be imagined or visualized. No one can prove that. It can best be only in our mind or in a paper.
Another setting example is the Indian stock market. India’s growth rate was around 8% from 2014-2016. Since then it has never seen the previous level though it is growing at or above the Hindu rate of growth. However, the Indian stock market has climbed to its historical peak recently. The stock market community was in jubilation and celebrated the achievement. Skeptics questioned in the media why the stock market is climbing while India has been registering less growth rate in the last 2 years. Let us see 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 been stagnant though India has been registering 8% growth rate. The Sensex has grown more than 15% though India’s growth rate was less than 8%. In the following year, the Sensex has again grown around 15% though India registered a growth rate less than the previous year. In the last 2 years, the Sensex registered less than 5% though Indian economy registered more than 5% growth rate. The recent peak was actually overdue. If we do a bit of math multiplying 27739 with India’s growth rate in the said period, we almost reach 40000 level. This peak is normal in accordance with India’s growth rate. However, people look at this figure differently. Some think that it is irrational exuberance. Some others think that the Sensex should have reached 45000 had the growth rate for the last 3 years been around 8% or more. What is real is 40000 due to our chosen path. The 45000 or 50000 is only in our mind or in paper because the other paths are closed as a path was chosen with some rational thinking. However, 45000 or 50000 was not improbable. We cannot just prove that because of human limitation. We cannot see simultaneously different worlds.
