Aswath Krishnan

I was debating with friends about whether GDP should be the North Star for a country. What is GDP and why it matters GDP measures the total exchange of goods and services in a country, capturing the scale of economic activity and trade. It’s an effective shorthand for material prosperity. Historically, countries with high GDPs tend to offer better living standards, infrastructure, and public services. When economies grow, people generally gain access to better healthcare, education, and opportunities. At a personal level, I align with Kanye’s philosophy: “Having money isn’t everything, but not having it is.” This captures the duality of wealth: it’s foundational for security and opportunity but insufficient as the ultimate life goal. Without it, basic survival becomes a struggle. But once those needs are met, the returns diminish, and other values, like social connections, health, or fulfillment, emerge. The Limits of GDP GDP has significant blind spots. It doesn’t measure inequality, ...

Many people lament about Elon Musk's outspoken views on government inefficiency and his plans for DOGE. They point to how government programs and regulations are helpful, and how his estimates for cost savings are overblown. They are technically right , but Elon is directionally right . It's more likely than not that the government has lots of wasteful spending and unnecessary bureaucracy. In closed systems — predictable and well-understood environments — being technically correct can lead to optimal outcomes. Precision matters when variables are limited and controllable, and the consequences are dire. Engineers designing a bridge, for example, must calculate loads and stresses with exactness to ensure safety. But most of the world is not a closed or critical system. It is an open, infinite, and inherently chaotic environment. Variables are countless, and conditions change rapidly and unpredictably. In such a world, you find answers and progress by doing stuff . Consider how su...

We had a fun time playing Monopoly with friends this weekend. As with every game of Monopoly, it got competitive, but we are all still friends :)  Monopoly was invented by Elizabeth Magie in 1908 to demonstrate the evils of Capitalism (which has ironically sustained and grown over the years thanks to a capitalistic engine).   Teaching through games is such a clever and effective idea. It's fun, hands-on, experiential, and demonstrates a variety of scenarios. It helps you develop an instinct for the concept in a way that reading books or doing projects rarely do.  The game is indeed illustrative of many aspects of Capitalism. I have listed some of them in no particular order below -   1. The first couple of rounds start out as a mix of mostly luck and some skill. If you are fortunate with good die rolls and happen to land on unowned properties, you get to buy them at a great price.  2. But quickly wealth concentrates among a few, and the rest are squeez...

This is a period of high economic turbulence. Inflation is rising, a war and energy crisis are escalating, and supply chains are still wonky. Fed is responding with interest rate hikes, governments are changing policies, and the market is responding with valuation cuts, tightening the belts, and layoffs.  Times are uncertain, and that increases uncertainty for each of us too. That means we can get laid off, not find a job, our investments may tank, and we may not be able to afford or get what we need or want. No one can give us guarantees, and we are ultimately responsible for how we and our close ones will fare.  This is how I'd advise people to prepare:  1. Personal resilience:  Just like businesses do, make sure you have a robust runway by increasing savings (in low-risk, liquid assets) and reducing spending. Try to save for a few months of expenses to prepare for the eventuality of a layoff and a tough job market. If you want to take it up a notch, you can get in...

  Each of us are a part of many systems. We are born into some systems, like family or government, and we opt into others like jobs, partnerships, friends or neighborhoods.  Systems generally give us something (increase survival, convenience, or joy) and place obligations (like taxes or rules) on us in return. Systems can have significant consequences on our lives. For example, taxes to governments are the largest spend for many of us and we give the government permission to imprison us and take away our freedom if we don't abide by its rules.  The fundamental requirement of healthy systems is that they should benefit all members in them - i.e. belonging to the system should be better than going solo.  Individuals forced to be in a system that doesn't improve their well being is oppression.  Living in healthy systems can be better than going solo for many reasons - many things are more efficient at scale, specialization+cooperation increases productivity, and gr...

As consumers and business managers, we often confuse price, cost and value.  Price is what customers pay for a product or service.  Cost is what it costs to make or offer.  Value, the most abstract of the three, is what customers "get out of it".  Value is a harder concept because it is subjective for every customer depending on their life, needs, moods and perceptions. An avid art collector may significantly value owning an original Picasso, whereas for it may not mean anything for a regular person. Value also changes over time as the customer and environment changes.  As consumers, deciding if a product or service is worth $X is a hard question because we need to compare a tangible price to an abstract and unquantifiable "value". So we tend to make mistakes - like passing up on a good purchase because they seem cheap to make (food at a restaurant) or because the value is hard to quantify (hiring a career coach for $100/hour), or by purchasing cheap but wo...

I watched  Robert Reich's Inequality for All on Netflix. He talks about how capitalism has created extreme inequality in the US, even though other economic measures are improving. (One stat that stood out to me is that the richest 400 people have more wealth than the bottom half -150 million people!)  I tried to understand his explanation better with this simplistic example of an economy with 4 stick people - Mr. Blue, Mr. Yellow, Mr. Green and Mr. Red. They all produce the same product - the Back Box-- and earn something for what they produce. But Mr.Blue is more entrepreneurial (and luckier) than the rest.  See how that unfolds over 3 decades: 

Today's Congressional hearing with CEOs of large tech companies made me think about question of why and how companies should be regulated.  Goal of an economic system Firstly, the economic and legal system of a society is merely a tool to serve the goals of the society. So in order to judge an economic system or to recommend an improvement, we'll have to start with an understanding or definition of the goals of the society.  The goal of a society, just like the goal of individual life, is philosophical, with no absolute right or wrong answers. There is typically a starting definition of a society's collective philosophy that the founders have agreed on, but over time and generations, the situations and philosophies tend to evolve and diverge. The philosophy I currently hold is that the goal of a society is to improve the long-term welfare and freedom of all its citizens and future generations . There are other equally valid (or invalid) philosophies.  In capitalism, ...

Most Likely Things go back to normal in six to twelve months if the stay-home orders only last for a couple of months. This situation is similar to a computer being shut down and turned on again - most programs will reopen and function as-is (unlike in 2009 where there was a software error and we had to delete and rewrite programs). Likely Acceleration in the "physical to digital" conversion that was already happening. Movie theaters to streaming, restaurants to food deliveries and cloud kitchens, shops to online grocery and regular shopping. Companies that enable this switch or can adapt quickly will benefit. Less discretionary spending, travel, home/vehicle purchases, and more savings due to unemployment,  recession, and fear of travel and going outside. More remote work as companies encourage work from home whenever employees are sick and during the regular flu season.  New wave of young entrepreneurs and digitization of small business that will replace ...

What you measure is what you get. So it's important that we pick the right metrics, especially for something as important as measuring welfare of a country. The most commonly used measurement of welfare and progress is GDP - the sum total of goods and services produced in your country. But it is flawed on several counts - not all goods produced and sold are good for people, the benefits of the production aren't evenly distributed, someone can be unhappy but still be productive, it doesn't take negative externalities and non-monetary activities into account etc. This is a hard problem and I definitely don't have an answer :).  But here's an idea. Welfare is subjective i.e. someone is doing well if they think they are. So maybe we should just ask people. I wonder if a simple survey with questions like these can give us a measure of welfare and progress. How do you feel about the quality of your life? 1-10 How is the quality of your life compared to last year?...