Multi-Disciplinary Reading - Book Reviews

The book on the taboo against knowing who you are, Alan Watts, 1966 - The book in the author’s own words, explores the conspiracy to ignore who, or what, we really are. It is a cross-fertilisation of ideas from western science and insights from Vedanta (Somewhat like a easier version of “The Tao of physics”). The book, unlike a religious book, doesn’t have any sermons, no shouldn’ts or oughts with the belief that genuine love comes from knowledge, not from a sense of duty of guilt

My notes -

  • Modern logical philosophers like Wittgenstein suppressed questions like “Why this universe?” or “Where is this universe?” as a kind of intellectual neurosis, a misuse of words that sound sensible but are actually meaningless (like looking for morning news in the dictionary)

  • Inner revolution of the mind is confined to few isolated individuals and historically hasn’t been common to entire communities or societies as its often thought to be too dangerous

  • Humanity is evolving one-sidedly with growth in technical prowess without comparable growth in moral integrity because of our hallucination of “I myself” as living separately inside, and bounded by our physical body (hence we are hostile to everything outside of us in our need to conquer nature, space, mountains and microbes)

  • We do not “come into” this world; we come out of it, as leaves from a tree. Every individual as an expression of the whole realm of matter

  • Religions are divisive and quarrelsome form of one-upmanship, separating the “saved” from the “damned”, the believers from the heretics and the in-group from the out-group (even religious liberals play the “we-are-more-tolerant-than-you” game)

  • All belief is fervent hope, thus a cover-up for doubt and uncertainty. Religions provide this through conversion to remove the nagging insecurity and uncertainty about our position (so beautifully put)

  • Irrevocable commitment to any religion is intellectual suicide and closes the mind to any new vision of the world

  • Our sense of self is a hoax - a temporary role we are playing with our own tacit consent. The sensation of “I” as a lonely isolated centre of being is fundamental to our modes of speech and thought (without it, we dont have a “Theory of mind”)

  • “I” am immeasurably old and my forms are infinite and their comings and goings are simply the eternal flow of energy. Conceptual thinking cannot grasp this - its as if the eyes were trying to look at themselves directly or trying to tell the color of a mirror based on what’s reflected on it. So we resort to what it is like as distinct from what is is. (qualia)

  • The ultimate ground of being is “You”. Not the everyday one you are assuming and pretending to be but the self that escapes inspection because its always the inspector

  • Sophisticated Hindus do not think of God as ruling them from above, like a King, but as being “underneath” rather than “above” everything, playing the world from the inside. No Hindu can realise he is God from the inside without at the same time realising the same as true of everyone and everything else (author attributes the idea to Upanishads)

  • The less I preach, the more I am likely to be heard

  • Conscious attention is narrowed perception (and hence ignore-ance). Its a way of looking at life bit by bit, using memory to string the bits together - like watching the world through a narrow slit and perceiving the cat’s tail and head incorrectly to be separate from each other, as cause and effect (and we give names to these collection of bits of things and events and concepts)

  • We tend to drive a car without focusing our mental spotlight on the road, the other cars or the traffic light while having a conversation (you saw, but didn’t look)

  • We notice what we classify with words and symbols. Eskimos have 5 words for snow while Aztecs have 1 word for snow, rain and hail. We borrow words from foreign languages because its hard to notice things for which we have no language available to us (notice how you switch to English next time while discussing tech or finance)

  • Animals do not live in constant anxiety about sickness and death as we do because they live in the present. Nevertheless, they will fight when in hunger or when attacked

  • Imagination cannot grasp simple nothingness and must therefore fill the void with fantasies (like heaven and hell)

  • Death is a great event (no less great than birth). It is the time to cling less to the illusion and to let go of oneself completely. But the physician is to put off death at all costs - including the life savings of the patients and his family.

  • You don’t die because you were never born. You had just forgotten who you are.

  • “Person” comes from latin “persona” which rose from mask through (per) which the sound (sonus) came.

  • An individual with a colossal external nervous system reaching out and out into infinity and this external nervous system will be so interconnected that all individuals plugged into it will tend to share the same thoughts, same feelings and same experiences (Author pretty much conceptualised internet and social media in 1966)

  • When the outcome of a game is certain, we call it quits and begin another (when we can predict the future to any accuracy, it seizes to be)

  • The colossal connected electronic mind wouldn’t be very different from what the individual is - an organisation for cells while compose our bodies

  • In a whirlpool or a river - no same water stays in it which is what gives it its form. Every person is a similar stream - of water, milk, bread, steak and fruit and vegetables - each of which is their own stream. A constant like a university has constants like students, faculty, admin - but they all come and go giving the uni, its form

  • Technological progress brings delights and happiness at the moment of change - first few uses of radio, television, air travel, miracle drug or calculating machine. But these contrivances are soon taken for granted and the delight vanishes but the oppression persists

  • Our model of the world divides, counts, sorts and classifies (don’t mistake map for territory)

  • Problems that remain persistently insoluble are mostly questions asked in the wrong way (like the chicken-and-egg problem of cause and effect)

  • Matter, meter and material alike are derived from the sanskrit root “matr” (”to measure”) - standing for a world that is measured or measurable

  • Today scientists are realising that the definition of a thing and event must include definition of its environment (referring to quantum physics)

  • Dread of death is learned from the anxieties about sickness and from attitudes to funerals and corpses. Society being our extended mind and body tends to influence us thus

  • Arthashastra doesnt fail to warn the tyrant that he can never win. More absolute his power, the more he is hated and the more he is a prisoner of his own trap. Through enslaving others, he becomes most miserable of slaves (he cannot wander in leisure and listen to the sound of waves)

  • Nothing fails like success (a pre-conceived target) because forcing things to happen which are acceptable only when they happen without force is a contradiction

  • Your education prepares you for your future but not for you to be alive now

  • Our pleasures are not material pleasures but symbols of pleasure - attractively packaged but inferior in content. Products made by people who don’t enjoy making them, as owners or workers, by enterprises run to cut costs and hoodwink the buyer by colorful packaging chicanery to project otherwise. Only exceptions are aircrafts, computers, rockets, scientific instruments and so forth. Its a vicious cycle for when you have made money, what will you buy with it?

  • Most languages are arranged so that actions (verbs) are set in motion by things (nouns) - but rules of grammar needn’t be rules of nature (An organism is not different from its actions)

  • For eternally and always there is only now, one and the same now; the present is the only thing that has no end - Schrodinger (Its amazing the number of quantum physicists who were deeply spiritual - be it Heisenberg, Bohm, Oppenheimer or Schrodinger)

  • The more we try to behave without greed or fear, the more we realize that we are doing this for greedy or fearful reasons

  • Whoever doesn’t put up a fight has no self. A community gets stronger identity through an external enemy to support social unity. Larger societies require larger enemies

  • If the devil does not exist, it would be necessary to invent him - Voltaire

  • Your attainment of any height is apparent to yourself and to others only by contrast to someone else’s depth of failure. This is the worst of all double-binds

  • When line between me and myself dissolves, there is no ego left even as a passive witness. What happens isn’t automatic or arbitrary but just does - like when you first learnt the knack of riding a bicycle or to to swim - as if you are a leaf blown by the wind, except you both the leaf and the wind…

  • …your body is no longer a corpse which the ego has to animate and lug around. The ground holds you up, the hills lift you up as you climb them. Air breathes itself in and out of your lungs. All space becomes your mind. Time carries you along, like a river, but never flows out of the present - you never have to fight or kill it

  • When purpose has been used to achieve purposelessness, the thing has been grasped - when farms begin to look like gardens (Chinese philosophical belief)

  • Knowing and being, rather than seeking and becoming

  • Awareness of own existence is so superficial and so narrow that simply being to us is boring. We don’t remember what we saw, smelled, heard, tasted or touched yesterday - with nothing worth remembering, our present is so bare that its no surprise that our longing for a better future is insatiable (Its not how long you live, but how well)

  • True humour is laughter at oneself, true humanity is knowledge of oneself

  • Nothing eludes conscious inspection like consciousness - that’s why root of consciousness is paradoxically called the “unconscious”

  • The unity, or inseparability of the one and many is referred in Vedanta philosophy as non-duality (advaita). Walking the thin-line (the razor’s edge) is the hardest balancing act (appears to be from katha upanishad)

  • Idolatory isn’t just worshiping of idols but mistaking ideas and abstractions with representative images - it is as insidious as bronze idols

The 60s were perhaps considerably helped by mind-altering drugs and counter-culture in the west that so much eastern influence and spirituality seeped into popular culture there that even scientists in the cutting edge of tech were tremendously influenced. We have since then taken a hard turn back to Newtonian and Pythagorean approach of straight-edge and certainty in science and culture burying the open-minded approach of Kantian philosophy, relativistic physics and quantum theory, Godel’s incompleteness theorems which kept uncertainty and doubt brimming. I found the book very relatable but it may not be the case for everyone. 9/10

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Alan Watts is the gem of a writer. Have read one of his book called The Way of Zen

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For the benefit of everybody,here are all the books rated 10 or 11 by phreakv06

• Thinking, fast and slow
• Poor Charlie’s almanac
• The selfish gene
• Fooled by randomness
• On the shortness of life
• Deep simplicity
• Reminiscences of a stock operator
• More money than God
• Tao te Ching, Stephen Mitchell
• God’s debris
• Ubiquity
• Against the Gods
• The theory of investment value
• How to create a mind
• Stocks for the long run
• Lords of Finance
• A search in secret India
• Confessions of an Advertising Man
• The Master Algorithm
• Romancing the Balance Sheet
• The idea factory
• The Origin of Consciousness in the Breakdown of the Bicameral Mind
• How to fail at almost everything and still win big
• The book of why
• Between Parent and Child
• Essays in love
• A matter of degrees
• Fortune’s Formula
• The model thinker
• Early Indians
• Algorithms to live by
• The order of time
• Euclid’s window
• Prisoners of Geography
• The joy of x
• The Drunkard’s Walk
• Deep medicine
• Physics and Philosophy
• How to change your mind
• Thinking in system
• Loonshots
• The basics of Bitcoins and Blockchains
• The Beginning of Infinity
• The Lessons from History
• Red Roulette
• Finite and Infinite Games
• The world for sale
• Auth n capture
• Putin’s people
• Value migration
• Breath
• 17 equations that changed the world
• Subliminal
• The fish that ate the whale
• Alex in Numberland
• The Biology of Belief
• The shipping man
• The little book of valuation
• The dorito effect
• Exit, Voice & Loyalty
• The price of time
• The (Mis)behavior of markets
• The silk road
• The attention merchant
• The Tao of physics
• The ten drugs
• Greentech
• Arriving today

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On lighter Note, We should combined it all in single PDF and we Should publish one books though REPRO…

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Excellent, This is how I had compiled some of the top rated books and their snapshots as posted by @phreakv6. Not good at editing photo, ignore anomalies. Will delete this as may not add much value to this amazing thread.


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Great compilation Shubham. If this can be sorted by topics and hyperlinked to specific book reviews will be really useful.

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I was doing the same with ChatGPT yesterday. Did some tweaking, so some books have been removed but this is the final reading plan that I got.


Phase 1: Foundational Thinking & Core Concepts

  1. Thinking, Fast and Slow - Daniel Kahneman
  2. On the Shortness of Life - Seneca
  3. The Selfish Gene - Richard Dawkins
  4. Reminiscences of a Stock Operator - Edwin Lefèvre
  5. Algorithms to Live By - Brian Christian and Tom Griffiths

Phase 2: Philosophy, Society & Human Behaviour

  1. Tao Te Ching - Stephen Mitchell
  2. Fooled by Randomness - Nassim Nicholas Taleb
  3. Between Parent and Child - Haim Ginott
  4. Romancing the Balance Sheet - Anil Lamba
  5. Finite and Infinite Games - James P. Carse

Phase 3: Science, Technology, & Complexity

  1. Deep Simplicity - John Gribbin
  2. The Joy of x - Steven Strogatz
  3. The Master Algorithm - Pedro Domingos
  4. Thinking in Systems - Donella Meadows
  5. Deep Medicine - Eric Topol

Phase 4: Investing, Economics, & History

  1. Poor Charlie’s Almanack - Charles T. Munger
  2. More Money Than God - Sebastian Mallaby
  3. Prisoners of Geography - Tim Marshall
  4. Lords of Finance - Liaquat Ahamed
  5. Fortune’s Formula - William Poundstone

Phase 5: Advanced & Specialized Topics

  1. The Idea Factory - Jon Gertner
  2. The Order of Time - Carlo Rovelli
  3. The Book of Why - Judea Pearl
  4. Early Indians - Tony Joseph
  5. The Beginning of Infinity - David Deutsch

Phase 6: Business, Creativity, & Decision Making

  1. Confessions of an Advertising Man - David Ogilvy
  2. Loonshots - Safi Bahcall
  3. Subliminal - Leonard Mlodinow

Phase 7: Cultural Perspectives & Broader Insights

  1. Red Roulette - Desmond Shum
  2. The Lessons from History - Will Durant
  3. Physics and Philosophy - Werner Heisenberg
  4. The Silk Roads - Peter Frankopan

Phase 8: Deeper Exploration & Final Thoughts

  1. The Attention Merchants - Tim Wu
  2. Breath - James Nestor
  3. How to Create a Mind - Ray Kurzweil

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@Shubham_Dixit - Nice work on doing the hard work of looking through whole thread to pick the 10s and the 11s. Really appreciate it man. Thanks! The categorisation I feel is way off though. Here’s a broad categorisation I came up with on my own. I still think some of these still fall into more than one category despite the broadness - thats the beauty of books that cross the borders across disciplines

Behavioural Economics
• Thinking, fast and slow
• The Drunkard’s Walk
• Subliminal
• Fortune’s Formula
• The (Mis)behaviour of markets

Health & Fitness
• Breath
• The Dorito effect
• Why we sleep
• The obesity code
• Exercised

Investing, Business & Finance
• Poor Charlie’s almanac
• Fooled by randomness
• Reminiscences of a stock operator
• More money than God
• Against the Gods
• The theory of investment value
• Stocks for the long run
• Lords of Finance
• Romancing the Balance Sheet
• Value migration
• The little book of valuation
• The price of time
• Loonshots
• The idea factory

Science, Math & Rationality
• The selfish gene
• Algorithms to live by
• The model thinker
• The book of why
• A matter of degrees
• Exit, Voice & Loyalty
• 17 equations that changed the world
• The joy of x
• The Beginning of Infinity
• The Origin of Consciousness in the Breakdown of the Bicameral Mind
• Alex in Numberland
• Deep simplicity
• Ubiquity
• God’s debris
• The order of time
• Physics and Philosophy
• Euclid’s window
• Thinking in systems
• The Tao of physics

Philosophy & Spirituality
• A search in secret India
• On the shortness of life
• How to change your mind
• The Biology of Belief
• Finite and Infinite Games
• How to fail at almost everything and still win big
• Tao te Ching, Stephen Mitchell
• Between Parent and Child
• Essays in love

History & Geopolitics
• Red Roulette
• Putin’s people
• Prisoners of Geography
• The world for sale
• The silk road
• Early Indians
• The Lessons from History

AI
• The Master Algorithm
• How to create a mind
• Deep medicine

Sectors
• The shipping man (Shipping)
• Genentech (Biotech)
• Arriving today (Logistics)
• The attention merchants (Media)
• The ten drugs (Pharma)
• Auth n capture (Payments)
• The fish that ate the whale (Fruit)
• The basics of Bitcoins and Blockchains (Cryptos)
• Confessions of an Advertising Man (Advertising)

While its nice to classify and categorize, I would still recommend reading across categories for a balance.

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How music got free, Stephen Witt, 2015 - This was a trip down memory lane for me as music is very dear to me and I have seen this transition of IRC channels and Winamp/xmms on PC/mp3 players to iPod to BitTorrent and ThePirateBay to Apple Music in my music listening journey. Having also worked on a mpeg decoder back in the day, the psychoacoustic bit and huffman coding and filter bank and AAC were nostalgia. The book also talks about the origin of piracy through two colourful characters Dockery and Glover working at Polygram plant that enabled almost all pirated music we enjoyed in the 2000s. Most interesting of course is the business transformation of the creation and distribution of music over the last 3 decades along with the plethora of value migration that happened.

My notes -

  • Psychoacoustic - the scientific study of the way humans perceive sound. Psychoacoustic masking illusions show how the sound we hear is fiction (anatomical imperfections + our brain approximating it)

  • Psychoacoustic experiments (by Zwicker) showed that it might be possible to record high-fidelity music with possibly small amounts of data, without losing much detail (compression). Most of the data on a compact disc could thus be discarded as our ears were already doing it.

  • CD audio used 1.4 million bits to store a single second of stereo sound. Early pioneers of compression (Brandenburg/Seitzer) wanted to do it in 128k - 12:1 compression (128 kbps mp3 if you remember the 2000s)

  • Zwicker’s 4 psychoacoustic tricks - 1. human hearing is best at certain range of pitch frequencies. you can assign fewer bits outside this range 2. Tones closer in pitch tended to cancel each other out (lower overrides the higher) 3. Auditory system cancels noise after a loud sound - like post a cymbal crash, fewer bits can be used 4. Auditory system also canceled out sounds prior to a loud click (weirdest) - this is because it took the ear few milliseconds to process and during that time it could be interrupted and drop what it was processing by a loud crash - so fewer bits before loud sounds

  • You could do multiple passes using the 4 tricks above and each time audio will be compressed further but also progressively losing more information

  • Huffman coding - on some tracks, there’s nowhere to hide (like a violin solo) and the psychoacoustic tricks dont work as well. So another algorithm was needed to compress repeating patterns using information theory. This is referred to as huffman codin. Combination of psychoacoustic tricks + huffman coding gives best compression

  • Brandenburg’s compression could be used to stream and store music

  • CD manufacturing - a digital master tape transported from studio under heavy security and cloned in a clean room and then replicated on virgin discs with bit-perfect copies

  • The debut of MTV in 1981 marked the end of album-oriented rock and the resurgence of single-oriented pop

  • NHL was the first to use mp3 compression for streaming. The codec was custom tuned for it to save thousands of dollars on satellite transmission costs

  • Commercial usage of the codec for transmission was still a small market. The breakthrough for mp3 came when pentium chips were powerful enough to run the mp3 decoder (L3Enc) without stalling. Level 3 encoder (L3Enc) was distributed on the internet for free by Brandenburg to help its adoption (biggest turning point in music piracy)

  • First mp3 player was conceived in 1995 with decoding chips that could be used for portable personal music consumption while PC was used for home consumption with floppy disks for distribution

  • Brandenburg’s version of the codec without using MUSICAM’s filter bank (AAC codec) was adopted by Sony, AT&T and Dolby (there was a tussle with Philips’s mp2). The naming scheme of mp3 implied it was succesor of mp2 which was unintentional

  • Piracy of music originated first on IRC (Internet Relay Chat) alongside other “warez”. The L3Enc was used to encode stolen CDs from manufacturing facilities of PolyGram. “Until it Sleeps” by Metallica was the first officially pirated mp3 (fondly remember hanging out on Undernet partaking in said deeds back in 2001 :-))

  • Late 1990s the recording industry enjoyed record profits. Cost of production of a disc was less than a dollar and was retailing for $16.98. Economy was in boom and Americans were spending record sums on music

  • Seagram purchased PolyGram records from Philips for $10b at the peak of the boom after selling Tropicana division to Pepsi. The home CD burner, broadband and piracy pretty much destroyed this capital allocation decision as freshmen in college filled their harddrives to the brim with pirated mp3s.

  • Macromedia licensed mp3 for Flash player, Microsoft for Windows media player and WorldSpace for its satellite radio broadcast. The format just took off

  • For studio guys and musicians sound was described in “tone” and “warmth” but for acoustic researcher it was a physical property of the universe. When acoustic researcher argued with a record producer, the debate wasn’t even in the same language

  • Shawn Fanning’s Napster in ‘99 took piracy mainstream from IRC channels into more accessible territory for the layman. Within few months Napster had 20 million users and 14000 songs were being downloaded every minute. Napster wasn’t just a file-sharing service - it was an infinite digital jukebox, and it was free. It was thievery at an unprecedented scale

  • Recoding industry sued to mp3 device makers and Napster for copyright infringement even as Napster peaked at 60 million users

  • AOL-Time Warner merger is perhaps the stupidest transaction in history of organised capitalism. Time warner valued AOL at 200x earnings and got paid in inflated AOL stock

  • The number of Limp Bizkit albums Universal could sell one year would vary a lot from the next year. It had to keep inventing new products unlike say orange juice which would sell consistently. But the back catalog, say of Led Zeppelin would sell consistently year after year and made up 30% of its revenue stream

  • In RIAA vs Diamond lawsuit, RIAA won against Napster (shutdown in July 2001) but lost against Diamond (The mp3 player company). The music industry perhaps won the wrong lawsuit because the files that people already had pirated on their drives could still be played - and on better mp3 players - like the iPod!

  • Windows media audio (.wma) was introduced by Microsoft to counter Fraunhofer’s mp3 format but it was too late (first mover advantage). Fraunhofer was paid millions in royalty from mp3 player manufactured and Microsoft for licensing mp3

  • Steve Jobs pushed for adoption of AAC (the version of mp3 without the filter bank) so aggressively that people that Apple invested AAC :slightly_smiling_face:

  • Jobs wanted to buy Universal for its back catalog (after CD sales plunged 30% from its peak due to piracy) and wanted to sell songs for 99 cents apiece through iTunes store. Jobs wanted AAC to diminish the portability of existing base on pirated mp3s onto the iPod. But he ended up introducing iPod with both codecs and iPod acted like a money laundering system washing pirated mp3 to the legitimacy of the iPod

  • Universal signed up with Apple at 70cents out of 99 cents per song in 2003. The iTunes store was an instant hit with sales of over 70 million songs in the first year

  • Bram Cohen’s BitTorrent protocol enabled better peer-to-peer file sharing which was completely decentralised in sharing (but not the discovery, which is where sites like thepiratebay came in)

  • Payola scandal - where DJs in radio stations were tempted with few hundred bucks of merchandise for creating demand for a song (or through “astraturfing” where people hired by the company would request songs creating artificial demand for it, making it sound like a “hit” song)

  • Album oriented rock died in the 80s (victim of MTV and Walkman) and music became a hits-first business. A hit song and bunch of fillers made up albums and naturally people didn’t want to buy entire albums (making the case for iTunes)

  • By 2007, CD sales had dropped 50% from their 2000s peak

  • On Vevo, music videos saw resurgence after decades as it did initially with MTV. These become economic assets of their own in some cases earning more than even the complete albums did (became YouTube’s most popular channel)

  • Fans who saved money on pirating music now spent more on concerts - many musicians earned more by touring than recording

  • With the money made from Thriller, Jackson had snatched the Beatles catalog rights for $47m. Over next 25 yrs, this would appreciate 20x to be worth more than $1b

  • Jobs wanted to start iTunes music label that would pay artists an unprecedented 50% royalty but with zero advance (Studios paid generous advances but smaller royalty). Apple took less risk and broadened the platform for publishing. In a world of digital abundance, it would become hard to earn a profit

  • Spotify didn’t use mp3, it used Ogg (better quality open-source format)

  • 2011 for first time, Americans spent more money on live music than recorded for first time since the phonograph. In 2012, sales of digital music surpassed CDs for the first time (value migration!)

  • New Spotify customers and Vevo users (5 billion views a month and growing 50% in 2013) almost completely stopped pirating music and also stopped buying albums

Fundamentally lot of things have changed even since the book was written. Music has become very cheap with Spotify/Apple Music subscription but it has also eroded the quality of music as users get lot more choice and artists barely get anything. Music production as well has become cheaper with DACs and DAWs and home production setups and even worse, with AI. This also means the back catalogs of The Beatles, Led Zeppelin, Pink Floyd etc. are worth a lot more now. As we mindlessly listen to music chosen by the algorithm, the platforms prioritise what’s on bulk discount and also push AI generated music to the unsuspecting. Its one of those classic cases where capitalism and our own greed has destroyed art but I am digressing. The book is worth a read if you like music and technology and business. 9/10

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I have read two books by Scott Adams.Reframe your brain and How to fail at almost everything and still win big.I would rate both the books 10/10.

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Summary of The Almanack of Naval Ravikant
It can be downloaded free form: https://www.navalmanack.com

Naval Ravikant is an American entrepreneur, investor and philosopher. Some of his mental model is useful in investing, like…

Earn with your mind, not your time.

As you make money, you just want even more· You make money to solve your money and material problems. I think the best way to stay away from this constant love of money is to not upgrade your lifestyle as you make money.

The more desire I have for something to work out a certain way, the less likely I am to see the truth.

Any belief you took in a package (ex. Democrat, Catholic, American) is suspect and should be re-evaluated from base principles.

Almost all biases are time-saving heuristics (mind takes shortcut). For important decisions, discard memory and identity, and focus on the problem.

IF YOU CAN’T DECIDE, THE ANSWER IS NO.

The three big ones in life are wealth, health, and happiness.
We pursue them in that order, but their importance is reverse.

Set up systems, not goals

Courage isn’t charging into a machine gun nest. Courage is not caring what other people think.

Value your time. It is all you have. It’s more important than your money. It’s more important than your friends. It is more important than anything. Your time is all you have. Do not waste your time. Don’t spend your time making other people happy. Other people being happy is their problem.

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Same as Ever, Morgan Housel, 2023 - I really enjoyed “The psychology of money” from the author and have read and enjoyed a few blog posts from the Collaborative fund blog, so buying this book was a nobrainer. “Hanging by a thread”, the first chapter with the ski accident is perhaps my favourite and I had read it earlier in this post. The book adds more to it by switching contexts to emphasize same point on risk, luck and randomness.

My notes -

  • Instead of worrying about what’s going to change in 10 years, its better to think about what’s not going to change in 10 years.

  • For Amazon, Bezos would say its impossible to imagine a future where Customers dont want low prices and fast shipping - so its a nobrainer to start investing aggressively on this

  • While its impossible to imagine a world 50 yrs from now, predicting that people will respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations and social persuasion is something you can certainly bet on

  • Invest in preparedness, not prediction - Taleb

  • In a world that tends to get better most of the time, its an important lifeskill to not to move the goalpost often

  • People don’t want to just be happy, they want to be happier than their neighbour and there in lies the problem

  • Money buys happiness in the same way drugs buy pleasure - incredible if done right but dangerous if used to mask a weakness and disastrous if no amount is sufficient

  • Today’s economy is good at generating wealth, ability to show-off wealth and generate envy for other people’s wealth

  • You think you want progress for yourself and the world but thats not what you want. What you want is a great gap between expectations and reality (importance of keeping expectations grounded)

  • Doctrine becomes dogma if you don’t challenge assumptions

  • People don’t want accuracy, they want certainty

  • Probability is about nuance and gradation but people pay attention only to black-and-white results and right/wrong outcomes since it requires the least effort

  • Not the best idea, not even the right idea or the most rational idea but the one that catches people’sattention - the best story wins. If you have the right answer and you’re a good storyteller, you will get ahead. Even within a good story, a powerful phrase or sentence can do most of the work (Harari or Bill Bryson’s work as an eg.)

  • The valuation of every company in the stock market is simply a number from today multiplied by a story about tomorrow

  • Humor is a way to show you’re smart, without bragging (Twain)

  • When a topic is complex, stories are like leverage

  • Who has the right answer but I ignore, because they’re inarticulate? What do I believe is true but is actually just good marketing?

  • Logic is an invention of man and may be ignored by the universe (Durant)

  • When anecdotes and data disagree, the anecdotes are usually right (Bezos)

  • Economic value - whatever someone wants has value, regardless of reason (if any)

  • Stability is destabilising (Minsky). Lack of recessions plant seeds for the next recession.

  • Enantiodromia - excess of something gives rise to the opposite (Jung)

  • At your highest moment, be careful. Thats when the devil comes for you (Washington)

  • There’s an optimum size for all businesses. Push past it and revenue might scale but disappointed customers scale faster (Schultz on Starbucks)

  • Radar, atomic energy, internet, microprocessors, jets, rockets, antibiotics, highways, helicopters, GPS, digital photography, microwave oven, synthetic rubber - all came from military as a consequence of wars

  • Save like a pessimist and invest like an optimist

  • Body size is like leverage in investing. Evolution encourages you to be bigger but then punishes you for being big (T-Rex).

  • In investing, law and medicine - when “do nothing” is the best answer, “do something” is the career incentive

  • What you need to identify are the 3-12 core principles that govern any field (John Reed in book “Succeeding”). The million other things are just various combination of the core principles. Paying attention to a few variables while ignoring a lot of others can make you seem ignorant but that’s what you need to do

  • Disagreement has less to do with what people know and more to do with what they have experienced

The book is mostly a rehash of what’s already in his earlier book but its not necessarily a bad thing. Most of my fav parts (~50%) are actually quotes by others but Housel has a way of bringing in the best to substantiate a point. It is enjoyable to read but the book is more like an extended blog post, than a book. 8/10

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I have way too many books read but not reviewed, so this is the only way in which I can reduce the pile. Mass burial :slight_smile:

The Fund, Rob Copeland, 2023 - I had heard of the mismanagement and scandals at Dalio’s Bridgewater in some long-form posts I came across last year. This book is the 10x version of the same. Dalio needs no introduction - we know him from “How the economic machine works” video (honestly, thats the first time I came across him) and for books like “Big debt crises” and of course, his “Principles” which looks not so subtly, like the Bible, in black with a red bookmarking ribbon. I enjoyed “Big debt crises” and hated “Principles” which I flung across the room once out of sheer confusion (Never completed it, thats why there’s no review here). Turns out all these were marketing efforts by Dalio to become respected like Buffett, who he was obsessed with.

The gist of the book is that Dalio had a Steve Jobs obsession (stopped just short of wearing turtleneck like Elizabeth Holmes of Theranos) to the extent that he wanted Walter Isaacson to do his biography like he did Jobs’. Dalio was originally Dalalio (renamed himself to Dalio) and was from a poor family and married into serious wealth but his Bridgewater did do wonderfully well for his clients until 2005 or so but has underperformed since. Most of the underperformance perhaps stems from Dalio’s obsession with transparency and God complex, of having people adhere to his “principles” - to the extent that he wanted to build a AI modelled with his principles (with Scarlett Johansson’s voice) that would replace him.

Employees at Bridgewater were rated on a baseball card format (dot collector) and this was open for everyone’s view. Dalio encouraged, or rather enforced negative views out in the open, almost to a fault. Every activity at the company was taped (not before being edited) - The transparency library at Bridgewater had videos of mundane trials with Dalio as judge, jury and executioner (he seems to have relished aggressively putting people down) for things as mild as stains on the carpet or doughnuts at the cafeteria. What was surprising for me was the little to nothing on financial markets in a book about a hedge fund - apparently this is par for the course at Dalio’s Bridgewater. Most people employed there had nothing to do with financial markets in the first place which was the strangest thing for me. 7/10

The Language of Food, Dan Jurafsky, 2015 - The book combines history with linguistic analysis to trace the roots of foods we commonly know, like ketchup, mint julep, toast, macaroons, turkey, ice creams, fortune cookies and so on. Some of them are very interesting like how ketchup which was originally based out of fish sauce 500+ years ago in China traveled to Europe, lost the fish and was replaced with tomatoes and the traveled to the states and acquired sugar, or how fish and chips originally originated in Persia as Sikbaj or how macaroons too originated in Persia (lot of European food seems to have originated in Persia).

The book started off really promising with the hilarious “how to read a menu” chapter which dissects the linguistic choices made in menus in expensive vs cheap restaurants for the same foods. The expensive ones add random french words, pay lot of attention to the origin of ingredients, signalling high status and how longer the words used to describe the food, higher the $$$ charged. The book traces the reason why Entree in US means main while in Europe, it might mean appetiser and the origin of the multi-course meal.

I especially liked the creativity that went into figuring out that front-vowels in many languages refer to small, light things while back vowels refer to big, fat, heavy things (back vowels are consequently used more in flavours of ice creams while front vowels are used in crackers). The reason is the way our senses react to each other (synesthesia) - how sound affects taste and so on. Overall the book was an entertaining, light read that would open up your mind to look for the origin and history of the foods that you eat. 8/10

Odyssey of Courage, Habil Khorakhiwala, 2017 - Its an autobiography so what’s in the book needs to be taken with a pinch of salt. The book covers his early life, the early days of Wockhardt (Wockhardt is short for Worli Chemicals - but with a MNC sounding twist) but what’s covered in great depth is the research part of business which is why I found this book informative - right from the reason for entering antibiotics (because other serious players were leaving) and hiring of its first employee in Mahesh Patel and others players in the space like global MNCs Pfizer, Glaxo, Merck. There’s a great primer on some of the blockbuster antibiotics (levofloxacin, tazobactam, caftaroline, clarithromycin, cefepime etc.) and their history and performance.

He understood early on the financial ability required to fund research and the timelines but was willing to play the long game. As players left the space to pursue chronic ailments with predictable cash-flows, the number of antibiotic approvals also flagged. There’s a great primer on zidebactam as well alongside some of the other molecules Wockahardt has been working on. It doesn’t shy away from the most critical time in its history - which was the financial crisis it faced with the currency swaps and forward contracts that almost took the entire company down in 2008 that led them to sell 10/17 hospitals, animal healthcare business, nutrition business to Danone. He however brushes over the FDA issues though he mentions sales dropping from $500m in US in 2013 to $150m in 2017 post regulatory issues. There’s not an iota of acknowledgement of the FDA issues uncovered. Even the financial issues from 2008 are partially blamed on the then CFO.

It covers extensively his family, mainly his children and the roles they play in the company and how they were groomed for it. A lot of this stuff might be not be so useful for most people. What I see if I try to be balanced is a person who is an extreme risk taker and invariably every decade something has blown up which has destroyed value. But I have to give it to the man for backing his instinct and going all out on the research which no one else was willing to do. If it does pay off, he will be hailed as a visionary in retrospect as history books pay a lot of respect to the outcome and he might just be able to pull that off. 7/10

Disc: I am invested in Wockhardt since Nov ‘23 and might be biased

Bottle of Lies, Katherine Eban, 2019 - Covers the dark side of Indian pharma in terms of its poor compliance record. The book’s main focus is Ranbaxy but you also see other Indian businesses like Wockhardt, Vimta, Dr. Reddy’s Labs, RPG, Glenmark etc mentioned. The only Indian company the book has anything nice to say about is Cipla and has a glowing respect for its founder Yusuf Hamied. The crux of the book is based on Ranbaxy whistleblower Dinesh Thakur (has his own book “The Truth Pill” about drug regulation in India) and also interviews with FDA officials and others.

While there are some companies which are named, it is safe to assume the practice was more widespread as the market on which everyone was competing on is same and compliance cost is huge (imagine discarding 30% of your product because of quality issues and how it will impact margins). There were FDA inspectors like Murali Gavini (Mike Gavini mentioned in the book) who preferred to audit Hyderabad based pharma companies and were known to be extremely lenient (lot of examples mentioned in the book). So a clean track record around this time should also be taken with a pinch of salt.

This was one of the first books on the pharma sector I read so learned quite a bit of the basics as well like what is a para IV certification, FTF and 6 month exclusivity, patent challenges and how prior to Hatch-Waxman, even generic companies had to do extensive trials for generics and how ANDA changed all that, what a Form 483 is and what NAI (No action indicated - best outcome), VAI (some defeciences to be corrected) and OAI (the most serious with major violation uncovered) meant and how the FDA came about etc. You will also gain a very clear idea of what transpired at Ranbaxy and how devious were the Singh brothers - the issue here with Ranbaxy is not just restricted to compliance but to outright financial fraud as well with the way their misled Daiichi Sankyo.

I am however, a little divided on books like these (same like a book like Putin’s people) because there are certain nuances we need to be aware of. There is definite truth to the allegations and they have in fact been proven and are also very believable - we simply don’t have high focus on quality and have seen it across industries (in IT, bugs are fixed without serious consequence). What we must look at though is the motivation behind a book like this - the runaway profits post Hatch-Waxman act (that allowed generics) of Indian and Chinese businesses irked the innovators. The regulator (FDA) was understaffed and didn’t have funds to oversee the global supply chains. Capitalism insists on lower costs and when there’s no oversight, it is inevitable that the costs impact quality - we have seen this time and again across industries as well. The FDA came out all guns blazing post 2010 just as the brazen data manipulation (for FDA if process is compromised, so is the product), poor quality control, blatant disregard to good manufacturing practices were at their peak and the result is there for all the see. To blame it all on Indian pharma (China RX talks about how similar audits were not even possible in China) is what I have a slight problem with while ignoring the ecosystem that enabled and ignored all this. 9/10

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The book 'ZERO to ONE’ is authored by Peter Thiel. Peter Thiel is an entrepreneur and investor. He co-founded PayPal and Palantir, made the first outside investment in Facebook, funded companies like SpaceX and LinkedIn.

Few of my takeaways from this book are:

A great business is defined by its ability to generate cash flows in the future. Numbers alone won’t tell you the answer instead you must think critically about those qualitative characteristics of your business.

Brand, scale, network effects and technology in some combination define a Monopoly, but to get them to work, you need to choose your market carefully and expand deliberately.

It was much easier to reach a few people who really needed our product then to try to compete for attention of large scattered individuals. The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.

Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets. Amazon shows how it can be done. Jeff Bezos’s founding vision was to dominate all of online retail, but he very deliberately started with books.

Sequencing markets correctly is underrated and it takes discipline to expand gradually. The most successful companies make the core progression - to first dominate a specific niche and then scale to adjacent markets -a part of their founding narrative.

It’s much better to be the last mover - that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits. The way to do that is to dominate a small niche and scale up from there, towards your ambitious long- term vision.

A business with a good definite plan will always be underrated in a world where people see the future as random. You should focus relentlessly on something you are good at doing, but before that you must think hard about whether it will be valuable in the future.

An entrepreneur makes a major investment just by spending his time working on a startup. Therefore, every entrepreneur must think about whether his company is going to succeed and become valuable. When you choose a career, you act on your belief that the kind of work you do will be valuable decades from now.

The business version of a contrarian question: what valuable company is nobody building? Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable. If there are many secrets left, there are probably many great companies yet to be started.

The best place to look for secrets is where no one else is looking. If you find a secret, your face a choice: Do you tell anyone? Or do you keep it to yourself? Answer is: whoever you need to, and no more. In practice, there’s always a golden mean between telling nobody and telling everybody- and that’s a company. The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside.

Startups don’t need to pay high salaries because they can offer something better: part ownership of the company itself. Equity is the one form of compensation that can effectively Orient people towards creating value in future. Early investors usually get the most equity because they take more risk, but some later strategic investors might be even more crucial to a venture’s success.

Talented people don’t need to work for you; they have plenty of options. You should ask yourself a more pointed version of the question: why would someone join your company? They might be attracted by equity stakes or high-profile responsibilities.

You will attract the strategic investor you need if you can explain why your mission is compelling: not why it’s important in general, but why you are doing something important that no one else is going to get done. You should be able to explain why your company is unique match for them.

The most valuable kind of company maintains an openness to invention that is most characteristic of beginnings. If you get the founding moment right, you can do more than create a valuable company: you can steer its distant future towards the creation of new thing instead of the stewardship of inherited success.

Good enterprise sales strategy starts small, as it must: a new customer might agree to become your biggest customer, but they will rarely be comfortable signing a deal completely out of scale with what you have sold before. Once you have a pool of reference customers who are successfully using your product, then you can begin the long and methodical work of hustling toward ever bigger deals.

All happy companies are different each one earns a Monopoly by solving a unique problem. All failed companies are the same, they fail to escape competition. Creative Monopoly means new products that benefit everybody and sustainable profits for the creator. Competition means no profit for anybody, no meaningful differentiation and a struggle for survival.

Monopolies drive progress because the promise of years or even decades of monopoly profits provide a powerful incentive to innovate. Then monopolies can keep in innovating because profits enable them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.

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Hi all, i have recently studied the above book related to SME stocks. It pictures the entire SME details starting from its inception (from 2012) to till july 2024. The author put his utmost effort to consolidate the complete details and its present status.

The author segregates the topic in five parts as

  1. Initial Years (2012-2015)
  2. Middle Years I (2016 -2018)
  3. Middle Years II (2019 -2022)
  4. Euphoria (2023)
  5. Mania (Till July 2024)

According to me, the clear separation itself shows how keenly he is watching the sme segments.

The author points an important metric on how to access an SME stock.

Any person who are keen to invest in SME can refer and get some valuable insights about the SME segment.

This book is available on amazon also

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The Great Indian Fraud: Serious Frauds Which Shook the Economy by Smarak Swain (2020)

I loved this book! It’s written by an IRS officer who has likely witnessed and investigated many serious financial frauds first-hand. The book covers all major flavors of fraud that happen in India (from loan frauds to stock market frauds to GST frauds and so on). The author has covered multiple in-depth examples for each type of fraud, as well as discussed, the modus operandi of the fraudsters in a lot of detail. While I kind of knew a bit about most of the cases discussed in the book, but reading the book dispelled my illusion of explanatory depth. Also, there were some major frauds that I didn’t know much about like Bhushan Steel, PACL, Ricoh India, Anubhav Plantations etc. I will highly recommend this book to any serious investor.

Below are some notes I took which in no way substitute a reading the book itself:

1/ The Perfect Bank Heist: Loan Fraud

  • Per Deloitte, 10 per cent of all bank frauds are a result of overvaluation or non-existence of collaterals. About 9 per cent bank frauds are due to siphoning off or diversion of funds and 15 per cent frauds are attributed to fraudulent documentation. A typical loan fraud is usually a combination of these three.

  • Common modus operandi used for siphoning funds: intangible assets such as software, patent, technical design, brand, etc., are preferred over tangible assets as it is difficult to ascertain the legitimate valuation of intangibles.

  • Company committing fraud does purchase some physical assets, but at a highly inflated price. The company may purchase a building or land from a relative of the promoter. The valuation is boosted by getting a report from a certified valuation engineer. The bank remains under the perception that the land is worth the amount paid for it.

  • Shadow banks (NBFCs and HFCs) advance loans to infrastructure projects, real estate developers, logistics projects and retail consumers. In India, NBFCs have funded ~57% of commercial vehicle purchases, 30% passenger car purchases and nearly 65% of two-wheelers.

  • Before the IL&FS scandal, ~27% of NBFCs’ funding would come from mutual funds. Mutual funds would buy commercial papers from NBFCs for short periods (90–120 days) and then used them to roll over the advance. This helped the NBFCs to obtain short-term loans and allowed them to roll over the loans upon maturity. They used these loans to give long-term advances to their customers. Real estate companies were getting money largely from the NBFCs because they were not getting any lending from the banks.

  • Finally, the shadow bank defaulted in September 2018 and set off a ‘shadow bank crisis’, wherein mutual funds stopped renewing their loans to other shadow banks. Shadow banks had to pull out their advances from the market to payback. This crippled the auto and real estate industries.

  • Before 2016, two primary channels available with bankers to recover stressed assets were the Debt Recovery Tribunal (DRT) and Asset Reconstruction Companies (ARCs). The DRTs were set up in 1993, with the aim to help bankers recover debts. The average rate of recovery for DRTs between 2002 and 2009 was 37%

  • The ARCs, which started operating in 2002, specialise in sale, purchase and recovery of NPAs. Banks can sell their stressed assets to ARCs at a discount and avoid the lengthy process of civil suits. Between 2002 and 2009, banks have had an average rate of recovery of 39% through the ARC route.

  • The increasing NPA problems in India since 2009 convinced policymakers that a more comprehensive reform to handle the NPAs was required. Thus, the Insolvency and Bankruptcy Code (IBC) was duly introduced. The IBC achieved substantial success in faster recovery of bad loans. The average rate of recovery for banks and other financial creditors through the IBC route has been 43 per cent.

2/ Securities Fraud

  • There are two broad types of stock manipulation: price manipulation and volume manipulation. While manipulations can take many forms, ‘pump and dump’ is the basic price manipulation technique and ‘wash sales’ is the basic volume manipulation technique.

  • Haridas Mundhra is widely acknowledged as one of the first and a leading scamster of modern India. His was the first major financial fraud of Independent India. While he is infamous for the LIC scam, but, in addition, he was a sophisticated gamer of stock markets.

  • Loan Against Shares (LAS) is an age-old instrument used by entrepreneurs to raise loans for business. Haridas Mundhra misused LAS by taking loans against artificially-priced shares. He used the loan to artificially jack up prices so that he could get more LAS. Ketan Parekh’s scam was quite similar.

  • Parekh’s strategy was to pump the prices of select scrips and then engage in wash sales to stabilise the prices at artificially high levels. Then he used the artificially priced shares as collateral to take loans from banks and siphon off loan money. And then he used the loan money to pump the price further. As a broker, he drove the narrative that technology and entertainment companies were underpriced and that they had a strong future.

3/ EXIM Fraud – Nirav Modi

  • Nirav Modi’s fraud was being presented as a loan fraud, while it was actually an export-import fraud. This fraud was basically a trade-based money laundering.

  • The dominant narrative in the media was that two employees in PNB were issuing Letters of Undertaking (LoU), kind of a bank guarantee, to foreign banks vouching for Modi’s firms. Modi’s firms took short-term loans from foreign banks against the bank guarantees. PNB was issuing the bank guarantees without taking any collateral and refused to issue fresh bank guarantees. As a result, Modi’s firms defaulted on their old loans and the foreign firms invoked the guarantees, asking PNB to pay up.

  • This fraud was basically a trade-based money laundering. It was evident from the facts marshalled by both the CBI and the ED in their charge sheets. Most experts who attempted to understand the fraud looked at it as a loan default.

  • Post this fraud the RBI banned the use of LoU as a financial instrument.

  • Valuations for diamonds are very fuzzy, more so for rough diamonds. As a result, diamonds are ideal products for under-invoicing and over-invoicing manipulations. Complex money laundering can also be committed using under invoicing or over invoicing.

  • LoUs, bank guarantees and LCs interchangeably are conceptually similar instruments. However, they differ significantly in their contractual terms. The advantage of LoU as a financial instrument is that once it is produced in an overseas bank, the entire onus of creditworthiness shifts from the importer to the domestic bank issuing the LoU. In case of LC and bank guarantees, importers have to prove their creditworthiness to the overseas bank.

4/ Most serious EXIM fraud – country of origin (COO) fraud

  • The import of stainless steel from Indonesia into India had grown from about 8,000 tonnes in FY 2017–18 to 67,000 tonnes in 2018–19. A country does not suddenly develop the capacity to manufacture stainless steel at this pace.

  • ISSDA’s investigation concluded that these imports were of Chinese origin, but routed through Indonesia because China has an FTA with the Association of Southeast Asian Nations (ASEAN), of which Indonesia is a member and ASEAN has an FTA with India. By the virtue of its FTA with ASEAN, Chinese exporters could export to Indonesia without incurring any duty. These exports were then re-exported to India duty free because of the FTA between ASEAN and India.

  • The FTA between India and ASEAN stipulates that preferential duty rate could be claimed by an exporter to India only if the country of origin is in ASEAN. FTA benefits can be denied by India if the value addition in ASEAN region is less than 35 per cent.

  • Chinese exporters route their goods through Indonesia with cosmetic value addition in Indonesia, but manage to get origin certificates from Indonesia, thus hoodwinking Indian customs officials. This is called origin fraud or country of origin (COO) fraud.

  • Logistics costs in China are one of the lowest in Asia and much lower than India. The Chinese cost of logistics is 1% of their business. In India, it calculates to 3%. Similarly, the effective cost of electricity in India is anywhere between 12 and 14 rupees, which is higher in comparison to China. India suffers cost competitiveness by almost 9% to their competition with China on account of energy, finance and logistics.

  • Before 2018, India did not have a coordinated strategy for defending its economic borders from predatory exporters: Anti-dumping duties were imposed by the Directorate General of Anti-dumping and Allied Duties (DGAD). The Directorate of Safeguards (DoS), in the Department of Revenue under the Ministry of Finance, took safeguard measures. The Directorate General of Foreign Trade (DGFT) imposed Quantitative Restrictions (QRs).

  • Finally, the DGTR was constituted on 7 May 2018. All powers of imposing anti-dumping duties, safeguards and QRs now vest with this single authority.

  • Origin fraud works as a cheat code to circumvent the defences laid out by the DGTR. There are broadly two types of origin fraud through which circumvention of trade defences happens: transhipment and assembly operations.

  • Under transhipment, goods from the country of origin are sent to the destination country, but certificates of origin are obtained from a conduit country. Under assembly operations, parts are sent from country of origin to conduit country; they are then assembled in the conduit country and shipped to the destination country.

5/ GST Frauds

  • The problem of fake exports has become even more acute with the advent of the GST.

  • If the output GST liability is lower than the ITC (input tax credit), the government has to refund the difference amount to the firm. Refunds arise whenever there is an inverted duty structure. That is, when the GST rate on sales is lower than the GST rate on purchases.

  • For instance, the GST on non-woven fabric is 12 per cent, but the GST on fabric bags is 5 per cent. A boutique purchases non-woven fabric at ₹100, weaves it into a bag and sells the bag at ₹200. Its output GST liability is 5 per cent of ₹200, which works out to ₹10. Its ITC is 12 per cent of ₹100, which works out to ₹12. Since GST credit is more than GST liability, the boutique can claim the difference (₹12 – ₹10) as a refund from the government.

  • This is where an arbitrage opens up for scammers. The scammers incorporate a shell company, draw a fake invoice for purchasing fabric raw materials from a benami supplier and a fake invoice for selling fabric bags to a benami shopkeeper. And then they can claim a refund from the government.

  • Although GST refund fraud can happen wherever there is an inverted duty structure, large refund frauds happen in connection with the export of goods. Whenever goods or services are exported, the end consumer is located outside the country. The country does not have the right to tax an end consumer living outside its borders. Hence, no output GST is levied on exports.

  • A Delhi-based syndicates exporting tobacco through Kandla SEZ, it was found that although low quality tobacco was purchased in cash from local markets at ₹150–₹350 per kg, fake purchase invoice was drawn at ₹5,000–₹9,000 per kg. The DGGI found that fake invoices were issued by 25 different suppliers in Assam, Bihar, Delhi, Haryana, MP and UP. By the time DGGI acted against the syndicate, it had claimed refund of ₹400 crore on fake invoices worth ₹1,000 crore.

  • Sin goods attract GST at a rate of 93 per cent. By drawing fake purchase invoices, the exporters got input tax credit of 93 per cent of the purchase price. After making fake exports, they claimed the entire ITC as a refund from the government.

6/ Accounting Fraud

  • The Satyam scandal prompted lawmakers to relook at audit norms and introduce better control and supervision, a process that culminated in a complete overhaul of the corporate laws of India in 2013.

  • Accounting frauds are criminal offences under the new Companies Act of 2013. The new Act has bestowed enforcement powers to the SFIO. It has also proposed setting up an independent regulator for auditors, called the National Financial Reporting Authority (NFRA) which now exercises regulatory and penal powers over errant auditors.

  • There are now six different authorities regulating the function of auditors:

    • Ministry of Corporate Affairs (MCA) regulates auditors of all companies
    • The SFIO undertakes criminal proceedings against errant auditors
    • The NFRA imposes penal action for audit lapses
    • The ICAI undertakes disciplinary proceedings against auditors
    • SEBI regulates auditors of listed companies
    • The RBI regulates auditors of banks and NBFCs
  • It is relatively easier to influence small audit firms than the large ones: there are only 15 audit firms that audit 10 or more listed companies. Whereas, as many as 654 audit firms have just one listed company as their client.

  • One typical model that creates a stable fraud cycle is the equity-to-profit scheme. In this scheme, a company fraudulently shows high profits, indicating that the company is doing well. This pushes up the company’s valuation. The company then lures investors to buy its equity at a high valuation. Investors pump capital into the company. The company then converts the same capital into profits. (Ricoh India is a case in point)

  • Related party transactions (RPT) are an important innovation in the history of accounting frauds. Most related party transactions are benign and rather help genuine businesses prosper.

  • All major fraud investigations by the SFIO and other agencies in the last decade, including that of Satyam Computer Services, IL&FS, Vijay Mallya group, and Bhushan Steel group, have revealed questionable related party transactions.

  • Related parties are important to equity-to-profit schemes because they facilitate conversion of capital into profits in the books of a company.

7/ Ponzi schemes

  • The largest online ponzi scheme that has been detected so far is China’s Ezubao. It projected itself as a start-up running peer- to-peer lending and collected massive funds from Chinese residents, promising them huge returns from peer-to-peer lending.

  • Amit Bhardwaj, infamously known as the Bitcoin Ponzi King, ran a scheme that promised high returns to anyone who invested in Bitcoins through his website www.gainbitcoin.com.

  • Modus operandi of large ponzi schemes is they run front businesses such as real estate, jewellery retail, pharmaceuticals, etc., to hoodwink SEBI and other regulators. By running multiple and diversified front businesses, they create a perception that they are big conglomerates.

8/ Tax havens

  • As per Tax Justice Network (TJN) the top 5 tax havens (in terms of their attractiveness): British Virgin Islands (BVI), Bermuda, Cayman Islands, The Netherlands, Switzerland

  • Switzerland’s bank secrecy laws are famous, primarily because the country got into the business quite early on. It was a haven of peace in the middle of a turbulent Europe in the 17th and 18th centuries.

  • Another country with stringent banking secrecy laws is Dubai. It stubbornly maintains opacity of its banking transactions despite pressure from the FATF.

  • Dubai has also succeeded in becoming the world’s hawala capital. Hawala trade developed as a by-product of the smuggling racket run from Dubai.

  • Tax havens have four types of offerings: personal bank accounts, mailbox companies, foundation and trust.

9/ Trusts

  • Foundations and trusts are more popular than companies when it comes to protecting wealth. A trust has no owner since it is not a legal entity. It is merely a legal arrangement (like a contract).

  • A typical trust is a three-way arrangement. The original owner (the ‘settlor’) transfers his wealth into a trust and asks a ‘trustee’ (or trustees) to manage the wealth, for the benefit of ‘beneficiaries’. The beneficiaries are usually family members of the settlor.

  • Trusts convert assets with clear ownership into ownerless assets. They slice and dice up the concept of “ownership” into different rights and duties.

  • From a legal perspective, the settlor no longer owns the assets. He has transferred the assets into a trust. The beneficiaries don’t own the assets either. They benefit from the trust, but they do not own it. The trustees are required to manage the assets under precise instructions of the settlor. Hence, the trustees do not own the assets.

  • Trusts manipulate ownership rights so that individuals can control and enjoy trust assets while legally distancing themselves far enough from them, so that the assets cannot be reached or even known about by creditors, tax authorities, law enforcement, or public scrutiny. These legal barriers can become impenetrable secrecy barriers shielding those people who enjoy and control the assets from scrutiny.

10/ Foundations

  • Foundations perform functions similar to trusts but there are key differences between them. A foundation is a legal entity upon registration. It can, therefore, open bank accounts. It can enter into agreements or contracts and can legally undertake business activity. The founder of a foundation (akin to the ‘settlor’ of a trust) transfers his assets to the foundation for a specific purpose. The assets are managed by a council (akin to the ‘trustees’ of a trust) in favour of specified beneficiaries.

  • If a person merely wants to park his/her wealth, trust is his instrument of choice. If the person wants to run a business activity without revealing his ownership, foundation is his instrument of choice.

11/ Shell companies in India

  • Running shell companies used to be big business in India until a few years back, with major hubs in and around Chowringhee area in Kolkata, Kalbadevi in Mumbai and Patparganj in New Delhi. People who operate shell companies are called ‘entry operators’ because they provide accommodation entries to their clients’ accounts.

  • The story runs in three phases: pre-2010 period, 2010–2015 period and post-2015 period. The industry running shell companies prospered until 2010. They were run by entry operators, who had a sound pedagogy in accountancy and taxation. Entry operators usually have CA inter or CA/CS qualification.

  • Organised clampdown on entry operators began in 2010. A new section, Section 56 (2) (viia), was introduced in the Income Tax Act. The new law brought down the entire industry in a matter of months.

  • The second phase started in 2010 where entry operators sprouted in a decentralised manner all over the country. This new breed of entry operators helped match parties. For instance, if a customer wanted to convert white money into black and another customer wanted to convert black money into white, the entry operator would bring the two together by matching their requirements.

  • Entry operators acquired NBFCs which they then freely used these firms to give accommodation entries. These NBFCs became the new highways through which money flowed from the formal economy to the parallel economy and vice versa.

  • Post-2015, various government agencies coordinated their attack on shell companies. The MCA prepared a list of companies that do not have significant operations and struck off many of these companies. The MCA struck off as many as 2.25 lakh shell companies in the FY 2017–18 and another 2.25 lakh in FY 2018–19.

  • A stringent Benami Transactions (Prohibition) Act was introduced in 2015, which effectively termed shell companies as benami conduits.

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Recycling - Finn Arne Jorgensen

MIT Press has this ‘Essential Knowledge’ series which offers a good overview on topical subjects. I have been reading a bunch of these in parallel and found them to be as dry as textbooks but certainly more accessible. Written by an expert in the respective field, these provide an excellent starting point.

Here are my notes from the one on ‘Recycling’. The most shocking stat I learnt was that 97% of planetary waste is industrial and only 3% is household.

1/ Preface

  • Recycling is not one single thing; it is a broad and sometimes amorphous set of activities that target many different problems, and both problems and solutions change over time and space. The global consequences of recycling are unevenly distributed and are becoming increasingly so.

  • Recycling as a conscientious action gained steam with the rise of the environmentalist movement of the 1960s. People wanted to do something for the environment, and recycling was a small-scale and locally oriented solution. Anyone could do it, without necessarily radically changing the rest of their way of life. The green aura that recycling got in the 1970s is fading away.

  • Recycling had more to do with alleviating guilt among consumers who wanted to do something for the environment; recycling became atonement rather than effective environmental action.

  • As recycling has become integrated into technological systems through professionalization and institutionalization, it gradually made waste somebody else’s problem, a problem that no longer belonged to the individual consumer that generated the waste but instead to some form of systematic waste management infrastructures.

  • In many parts of the world, we have come to expect our waste management infrastructures to be invisible, like any other service, such as electricity. It should just work. The whole world outside the household becomes a black box that provides products and services and takes care of any waste generated. The political scientist Jennifer Class has described this phenomenon as “distancing,” a process that is both geographical and mental. Consumers often don’t know what happens with their waste after it leaves the household.

  • Leaving recycling entirely to the market and its assessment of value is certainly garbage. As we know from countless examples, the market excels at generating economic value through externalizing costs, and many solutions that look cheaper or more profitable may only be so because of that. It may be cheaper to make virgin glass, but only because we don’t include the environmental costs of mining sand and producing new glass.

2/ Recycling as Symbol and as Process

  • Recycling is simultaneously highly symbolic and deeply material, and cannot be meaningfully reduced to either. Mirroring the waste stream it aims to extract value from, recycling is a blend of matter, politics, culture, and economics, among other things. Recycling tries to maintain a balance between hopefulness and cynicism, between environmental and economic considerations. It uncomfortably straddles the individual and the infrastructural.

  • There has been considerable debate about the value of recycling in both economic and ideological terms. Some would argue that postconsumer recycling is also a largely symbolic activity, and not an actual solution to whatever problems it is intended to solve.

  • In the view of many critics, recycling is fundamentally flawed and a distraction launched by an industry that depends on disposability.

  • Environmental attention is too often centered on actions with high symbolic effect and little actual impact: if we don’t combine recycling with dramatic lifestyle changes, we are basically hypocrites.

  • Each waste type is unique in both upstream consumption and downstream technical processes that lead to recycled material. Recycling is more than just a technical issue. It is deeply embedded in culture, social structure, and economic systems.

3/ Paper

  • Wood which is the main source for paper manufacturing is about 50 percent cellulose and requires significant treatment in order to be usable for paper. Discovered by the French chemist Anselme Payen in 1838, cellulose became more common in papermaking from the mid-1800s compared to other sources like straw. This led to the rise of the modern paper industry.

  • While paper can theoretically be recycled up to nine times, the presence of inks, clays, and glues in practice reduces that number to four times in the twenty-first century. As a result of this steady degradation, recycled paper products are often associated with lower quality.

  • While commonly seen as an environmentally beneficial practice, paper recycling is not unproblematic from an environmental point of view.

  • The recycling process creates toxic and hard-to-dispose-of sludge and requires massive amounts of water. While it requires less water than virgin papermaking, one should not forget that virgin papermaking is “one of the most environmentally harmful industries on earth”. Using less paper in the first place would be more environmentally friendly than any paper-making process.

4/ Keep America Beautiful

  • Keep America Beautiful, was a movement established by a group of glass, aluminum, paper, and steel container manufacturers in 1953 to shift the burden of waste from producer to consumer.

  • Through this nonprofit public-education organization, beverage bottlers came out in favor of recycling. They also argued, however, that the responsibility for recycling rested with the consumers, not the producers of packaging, as demonstrated by the famous Keep America Beautiful slogan “People Start Pollution. People Can Stop It.”

5/ Aluminum

  • Aluminum cans replaced steel cans in the late 1960s. These were lighter and meant lower transportation costs for the beverage companies. Aluminum beverage cans are now the most-recycled consumer product in the United States.

  • Aluminum is a poster child for recycling, since it doesn’t degrade and the value remains high.

  • In 2017, about 27 percent of the total American aluminum production came from recycled discarded aluminum products. More than half of this recycled aluminum comes from beer and soft drink cans.

  • China is the largest producer of aluminum in the world, and the massive energy requirements have been one of the drivers for China’s many dam projects. Each of these has long-reaching environmental consequences.

6/ Plastic Futures

  • Plastics exist in deep time. They come from dinosaurs and plant matter from eons past. They will live long after us. No longer the material of tomorrow, it is the waste of forever.

  • The plastic bottle symbolizes the main issue with recycling. On its own, it is insignificant. In the billions, it does matter. A million plastic bottles are bought every minute around the world.

  • The challenge with plastics recycling is that technically, there is no such thing as plastic. There are instead many different plastics, each with different material qualities.

  • Technically, plastics are synthetic or partially synthetic polymers, usually derived from petrochemicals, although some bioplastics are made with other organic materials. Each type of plastic requires different processing for recycling.

  • Coca-Cola moved toward plastic bottles because the company “believed recycling systems would allow the company to reclaim much of the plastic it used.” Coca-Cola began shifting to plastic containers in the late 1960s, and fully committed to it in the mid-1970s.

  • Coca-Cola first attempted to use Lopac bottles, a type of plastic, but these were banned by the FDA for being carcinogenic. When Coca-Cola and Pepsi switched to plastic PET bottles in the late 1970s, plastic bottles started filling up waste sites and landfills.

  • Single-use PET bottles may be technically recyclable, but they are often not recycled – only a small percentage of bottles make it into effective recycling facilities.

  • A recent study argued that as little as only 9 percent of all plastic had been recycled. Twelve percent had been incinerated, and the rest has ended up in landfills or in the natural environment.

7/ Mining E-Waste

  • E-waste is currently the fastest-growing waste category in the world. The generation of e-waste is so tied to global production and wealth distribution patterns that any significant mitigation strategies will have far-reaching implications.

  • Many of the measures that are currently taken to manage e-waste are system-preserving rather than system-challenging.

  • While we are encouraged to recycle obsolete electronic products, people are rarely encouraged to question the underlying system or production and consumption.

  • E-waste is even more unruly than the other waste categories. Because of the labor-intensive recycling requirements and the high environmental cost of recycling, much e-waste from industrialized countries with strict measures for what to do with e-waste has flowed globally to places with little enforced legal regulation of recycling.

  • The Basel Convention, which took effect in 1989, aims to restrict and control the movement of hazardous waste across national borders, in other words limiting the trade of e-waste. Fifty-three countries have signed the convention; the United States is the only developed country that has not ratified this treaty, depending instead on a voluntary certification for meeting recycling standards.

  • When China in 2018 announced that it would no longer import e-waste, many countries had to rethink their e-waste management strategies.

  • China’s scrap recycling industry has evolved into a “critical supplier of raw materials to respected manufacturers of iPhones, PCs, automobile engines, and other precision manufactured high-tech products.”

  • Other countries such as Thailand and Vietnam are now considering following China’s example, most likely as a response to increased volume of imports after China’s ban.

  • Disposing of e-waste without recycling raises concerns about toxic health—discarded electronics contribute approximately 70 percent of heavy metals and 40 percent of lead in US landfills.

8/ Recycling Beyond the Household

  • Industrial waste by far outweighs consumer waste—and some argue against even considering consumer recycling as an effective form of environmental management.

  • Extreme amounts of matter are generated or moved around as part of the vast range of industrial processes undertaken on the Earth. Some estimates say that 97 percent of the total planetary waste stream is industrial waste, whereas only 3 percent is household waste.

9/ Shipbreaking

  • The scrap ship trade represents one major form of recycling metal in bulk. A modern steel ship can be a massive structure, up to 400 meters.

  • Ships have a lifespan of 26 years and at the end of their productive lives they can be recycled.

  • Dry cargo ships come in sizes from the small Handysize at 20,000 to 28,000 DWT (deadweight tons) up to the gigantic Chinamax-size carriers that can be 380,000 to 400,000 DWT.

  • Shipbreaking is one way of reclaiming or recycling materials from the ship. It’s a highly polluting industry, as the process of dismantling old ships often releases large amounts of hazardous materials like asbestos, oil, heavy metals, and toxic paints into the environment.

  • Gujarat has been one of the world’s centers for shipbreaking since the 1980s, thanks to geography, history, and cheap labor. Town of Alang is most important in this region, with up to 140 companies involved in shipbreaking. The work that takes place here is incredibly labor intensive and highly cost dependent.

  • Until the 1970s, shipbreaking was not uncommon in Europe, but the introduction of more stringent health and safety laws and environmental regulations drove cost up too high.

  • The Chinese yards on the Yangtze river are still relatively competitive with the Indian subcontinent processers.

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Plastics (MIT Essential Knowledge Series) by Imari Walker-Franklin;Jenna Jambeck

This book covers plastics production & use, plastic waste generation & management, and environmental & societal impacts of plastic debris.

  • The feedstock for most plastics today is fossil fuels, oil, and gas, but the invention of plastics came from a raw plant material, cellulose.

  • Cellulose is the most prevalent organic compound on earth, as it is found in wood and cotton. It is composed of a chain of sugar molecules and makes up green plant cell walls.

  • Plastic, as the name of the material we now know, literally exploded onto the marketplace when humans were looking for a replacement for natural materials like ivory.

  • Plastics, as a new material, were quickly taken up for use by the military, especially in World War II when parachutes, helmet parts, gun pieces and housings, aircraft components etc. were all made of new plastic materials.

  • Plastics come from feedstocks like natural gas and oil, refined into components like propane and ethane. High heat applied to this feedstock will form the monomers propylene and ethylene, two common olefins used to produce plastics and chemicals.

  • Olefins are produced by fluid-­catalytic cracking (oil) or by steam-­cracking natural gas. The olefins ethylene and propylene are the building blocks of polymers and other chemicals and, after polymerization but before extrusion, will be in granular form. An extruder combines additives and the polymer, compounding and pelletizing the plastics for use to then manufacture their final plastic products.

  • While there are now over 5,300 polymer formulations commercially available, some of the most common polymers are polyethylene, polypropylene, polyvinyl chloride, polyethylene terephthalate, polyurethane, and polystyrene.

  • Fossil-­fuel-­based plastics dominate the industry. Biobased plastics use alternate feedstocks such as wood pulp, sugars, crops, or fungi instead of oil or natural gas. Although biobased plastics make up less than 1% of the market, their demand is expected to increase.

  • The packaging sector uses 40.5% of plastic produced (by mass). Building and construction is the subsequent highest use at 20.4%, followed by automotive use at 8.8%.

  • Although it seems like every electronic device contains plastic**, only 6.2% of plastic is used in the electrical and electronics sector**.

  • Some cultures do not recognize the concept of waste. For e.g., the word “waste”—­and its related concepts, like landfill or trash bin—­does not even exist in the Tongan language.

  • Since the 1950s, more than 6B MT of plastic has become waste around the globally; this number will reach 26B MT by 2050

  • Globally we have only recycled about 9% of all plastic ever made. Although Japan reports an 84% recycle rate for plastics, 67% of that is combusted for energy recovery instead of being mechanically recycled.

  • In general, plastic is often “downcycled” rather than “recycled” meaning it is recycled into items that do not have the same use as the polymer’s initial use. Plastic bottles typically become new shoes or athleisure wear. Grocery bags and other film plastic sometimes get recycled into outdoor decking materials.

  • Chemical and thermal recycling are currently expensive and energy-­intensive processes that have not been able to be scaled. Thermal recycling uses heat, with or without oxygen, in processes of gasification or pyrolysis to transform the polymers into gasses and oils that could potentially be utilized for fuels. Chemical recycling breaks the bonds of the polymer to recover the monomers that can again be repolymerized.

  • The energy consumption required makes these processes expensive. While development continues, chemical and thermal recycling technologies remain unproven.

  • In chemical commerce, there are roughly 350,000 substances registered globally. Many chemicals are used for agriculture, automotive, personal care products, and other uses. However, approximately 10,000 are used to make both synthetic and biobased plastics. In comparison to similar materials, the number of entities associated with plastic takes up a sizable portion of chemical commerce: paper (5%) > plastics (3%) > wood (1%) > textiles (0.3%).

  • 22% of the 820 million tons of global chemical demand per year is used for monomers of plastics.

  • Plastic additives are used to improve plastic by taking on specific roles for the polymer. The prominent families are fillers, stabilizers, plasticizers, flame retardants, colorants, antistatic agents, and foaming agents.

  • Fillers strengthen the material; flame retardants offer fire resistance; stabilizers like antioxidants prevent aging and yellowing on the surface of the plastic; colorants dye the material, plasticizers increase flexibility; and antistatic agents reduce the potential for static electricity from contact with the item.

  • Loggerhead seaturtles, often mistake plastic bags for jellyfish. Birds target plastics due to the variety of colors they display, such as their attraction to bottle caps. Additionally, chemicals released from plastics can impact sensory signals and lead to the increased appeal of an organism to plastic. Hermit crabs and sea anemones have been observed to consume plastic like chewing gum until the “flavor” wears out.

  • BPA (Bisphenol A) has been proven to be able to be released from plastic into various environmental matrices and is exacerbated by the degradation of plastic products like food and beverage containers. BPA has been detected in wastewater, marine and freshwaters, agricultural biosolids, landfill leachates, soils, and the atmosphere.

  • Animal studies found that high concentrations of BPA impacted sexual and neural development in mammals, birds, amphibians, aquatic reptiles, and fish. Some other effects of BPA includes depletion in attraction to the opposite sex mate, sex reversal of males to females, and declined sperm quality. Because of these many findings and public concern, many products have removed BPA from the plastic used in their products and include the label “BPA free.”

  • As of today 68 of the 906 chemicals used in plastic packaging are listed as environmental hazards, and 34 of the 906 chemicals as known or potential endocrine-­disrupting chemicals.

  • Extracts of even bioplastics have been shown to contain complex mixtures of chemicals that can cause oxidative stress, baseline toxicity, antiandrogenicity, and estrogenicity.

  • Plastic disposed of in the environment and allowed to fragment into microplastics can cover the ocean’s surface and affects phytoplankton’s ability to complete photosynthesis, which can alter the ocean’s ability to store carbon.

  • The top company products that are most littered around the world by rank, 1) Coca-­Cola, 2) PepsiCo, 3) Unilever, 4) Nestle, and 5) Proctor and Gamble (as of 2021)

  • Very few technologies exist to clean up microplastics in the environment. The Hula One is a vacuum that relies on the buoyancy of plastics to remove microplastics from sand, but it’s time-intensive and not very efficient. Water treatment facilities do remove a majority of microplastics from wastewater, but then they end up in the sludge that remains. In the case of nanoplastics, there is currently no feasible technology to remove them from the environment.

  • Compostable plastics, like polylactic acid (PLA), will not biodegrade if mismanaged. However, there are now polymers that will biodegrade in soils and your home compost, like Polyhydroxyalkanoate (PHA).

  • Biodegradability in ocean environments is still challenging since the microbial activity there can be limited or significantly different from the microbes in soils.

  • Products perceived as more “environmentally friendly” get used more than they would otherwise, resulting in overconsumption instead of reducing the use of an unnecessary product. This is known as Javon’s paradox, which found that people would drive more with an electric car that they felt was better for the environment while they avoided driving or combined trips, etc., with a gas car.

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Ketamine (MIT Essential Knowledge Series) - by Bita Moghaddam

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1/ The Molecule Ketamine

  • In March 2019, the USFDA approved ketamine for treatment of depression. This approval was touted as “the biggest advance for depression in years.” The rush to approval was also unusual given the lack of strength of the scientific evidence.

  • The FDA assigned a “black box” warning to ketamine, which is the most serious safety warning assigned to a drug by the agency. There are virtually no studies that have examined long-term effects of ketamine on the human brain.

  • This apparent haste reflects the stagnant state of biomedical research and the pharmaceutical industry in developing and marketing novel treatments for symptoms of brain illnesses such as depression and PTSD. The incidence of these conditions has been skyrocketing, whereas our drug treatment approaches have not improved for decades.

  • Ketamine works differently than old antidepressant drugs like Prozac, which remain the standard way of treating depression. It acts on different brain proteins and has a rapid onset of effect.

  • Ketamine is not a new molecule, it was discovered in 1960s and was primarily used as a combat anesthetic (during Vietnam war), and also as a club drug during 80s. Ketamine’s parent compound is the hallucinogen phencyclidine (PCP, aka angel dust).

  • Nearly all of our current psychiatric drugs, including the most commonly used drugs to treat symptoms such as anxiety, depression, and psychosis, are the same as or me-too versions of drugs synthesized in the 1960s.

2/ Uses of Ketamine

  • Low doses of ketamine have been used extensively for acute and chronic pain management. This is a common off-label use of ketamine—that is, use for conditions not approved by the FDA.

  • Ketamine has remained an ideal anesthetic for emergency surgeries in field conditions, including in multiple military conflicts and war zones.

  • Ketamine remains in use as a pediatric anesthetic, especially for minor surgical procedures, because it does not require intubation or other invasive procedures that may cause distress and complications in children.

  • Ketamine is commonly used for starting and maintaining anesthesia in veterinary medicine especially in small animals, including cats and dogs. It is a popular anesthetic in this context because it is safe, effective, and has a rapid onset.

  • It has been used as a recreational drug to alter one’s state of consciousness starting late 1970s. It became a popular club drug in the 1980s and continues to be abused under the street name “vitamin K”

  • At lower doses, ketamine produces a dissociative and depersonalization state. This state is characterized by a sense of detachment from the physical body and external realities. Higher doses are associated with amnesia, more intense dissociations, paranoia, and hallucinations.

3/ History of Treating Depression

  • Depression is not a new malady. What is new is the alarming trend in increased rates of suicide that are associated with depression. According to the US Centers for Disease Control and Prevention (CDC), rates of suicide in the US have increased by 33 percent in the last ten years. It is currently the second leading cause of death for adolescents to thirty-four-year-olds.

  • Multiple classes of antidepressant medications such as Prozac are used currently to treat general depression and other MDD (Major depressive disorder). But while some patients respond effectively to them, about 30 percent do not.

  • The condition of melancholy had been used in medical textbooks for centuries to describe patients who were a fixture of asylums, with symptoms similar to major or psychotic depression. The first drug to be used for treatment of depression is most likely opium.

  • The profound addictive properties of opiates clearly did not make them a sustainable approach to treat depression. But then came the introduction of electric shock therapy, later named electroconvulsive therapy (ECT), in the 1940s. Despite the side effect of varying degrees of memory loss, ECT became a staple for treatment of severely depressed patients in the 1950s.

  • How ECT works to rapidly alleviate symptoms of depression remains an enigma. Multiple theories have been proposed, however, and no studies to date have shown a clear mechanistic relationship between passing a jolt of current through the skull and immediate alleviation of depressive symptoms.

  • Use of ECT in the 1950s happened against the backdrop of increased clinical use of newly discovered psychoactive drugs. These included the first modern antipsychotic, chlorpromazine for patients with schizophrenia.

  • At the same time, another class of drugs with sedative or tranquilizing effects became popular. These drugs were dubbed minor tranquilizers and were used to treat neurosis, later called anxiety. First in this class of drugs was meprobamate. Soon after meprobamate was introduced to the market, it became the bestselling drug in the history of the United States.

  • This area became even more successful in the 1960s with development and marketing of Valium by Hoffmann-La Roche.

4/ Emergence of Present-Day Antidepressant Drugs

  • The drugs isoniazid and iproniazid were developed soon after the world war II for treatment of tuberculosis (TB) from leftover German rocket fuel (nitrazine). Doctors treating patients with TB noted euphoria and improvement of mood in some of them. This observation prompted these doctors to consider the potential usefulness of these drugs as psychic energizers.

  • About the same time, another drug, an antihistamine (imipramine), was accidently discovered to have antidepressant properties.

  • Imipramine remains in use as one of the tricyclic antidepressants, so named because the chemical structure of this class of drugs includes three fused carbon rings.

  • The mechanism of action of tricyclics remains unclear to this day. They act on multiple sites in the brain, including receptors for the neurotransmitters noradrenaline, serotonin, dopamine, acetylcholine, and histamine.

  • Tricyclics remain some of the most efficacious of antidepressant drugs but generally are not well tolerated.

  • Despite the serendipitous discovery of tricyclic antidepressants, the next generation of antidepressants entered the market somewhat by design. Basic research into the mechanism of existing antidepressants in the 1960s was beginning to suggest that increasing serotonin neurotransmission may be a unifying pathway for the clinical effects of these drugs.

  • Serotonin is a prevalent neurotransmitter in the brain that helps regulate mood and happiness. Low serotonin levels may contribute to depression, anxiety, and other mood disorders

  • Discovered in 1971 of zimelidine became the first selective serotonin reuptake inhibitor (SSRI) for treating depression. SSRIs work by increasing the amount of serotonin in the brain by inhibiting their reabsorption in the brain cells.

  • Prozac (an SSRI) became a sensation and highly profitable for Eli Lilly. In 2001 alone, it generated three billion dollars in sales. This success led other drug companies to develop and introduce to the market equally popular SSRIs (e.g., Zoloft, Paxil, and Celexa).

  • Despite the popularity of Prozac and other SSRIs, they were not better than the older drugs. Just that they have fewer side effects.

  • While Prozac and other existing antidepressant drugs have made a tremendous difference in the lives of many who suffer from depression, about 30 percent of patients do not respond to the current medications or cannot tolerate the side effects. This has led to continued efforts in the last fifty years to develop better drugs that target novel sites in the brain.

  • The antidepressant drug development field essentially remained stagnant after the introduction of SSRIs until the reports of the antidepressant effects of ketamine.

5/ Why did fifty years of research fail to develop novel targets for depression?

  • One key reason is rodent (mice & rats) models used to study depression in basic research contexts are not adequate. These involve arbitrary approaches of inducing a state of helplessness and aversion in the animal. Classic tests included housing rodents with aggressive cage mates, prolonged swim sessions, or repeated exposure to various stressful contexts. While these paradigms are relevant to a general state of distress, clinical signs of depression are far broader than feeling stressed or unhappy about your environment. Depression is a uniquely human illness!

  • Because all existing antidepressants increase levels of serotonin and/or noradrenaline, the prevalent theory became that there is reduced serotonin and/or noradrenaline neurotransmission during depression that is corrected by these drugs. While there may be some validity to this simple model, there were several inconsistencies. The most glaring one is that these drugs increase serotonin levels robustly a few minutes after a single dose, whereas the antidepressant effects often do not take effect until several weeks of repeated treatment.

  • Often in medicine, the relationship between symptom alleviation and disease etiology are unrelated. For example, while opiates may alleviate the pain symptoms of tooth decay, the decay is caused by an infection, not insufficient stimulation of opiate receptors. Similarly, years of focusing on how antidepressants work has not put us any closer to understanding the causes of depression.

6/ Making Ketamine Profitable

  • Ketamine is an old drug. Its use patent expired years ago, and many generic versions commonly used as an anesthetic are available for literally a few dollars.

  • Key to making ketamine profitable was to use the nasal spray preparation and to shift from ketamine to one of its stereoisomers S-ketamine (esketamine) and get it patented (by Johnson & Johnson).

7/ How Does Ketamine Produce Antidepressant Effects?

  • Older antidepressants act primarily on proteins that influence the function of neuromodulators such as serotonin and noradrenaline.

  • Ketamine is being touted as different because it could be acting on an entirely different neurotransmitter system (glutamate) and protein (NMDA receptors) to produce its antidepressant properties.

8/ Spravato

  • The relatively speedy approval of ketamine (Spravato) by the FDA for treatment of depression raised a number of concerns, primary being that the clinical efficacy of the drug was weak.

  • Janssen pharma strategically applied for approval under disease label treatment-resistant depression (TRD) instead of major depressive disorder (MDD) which allowed them to obtain the FDA’s fast tracking or breakthrough therapy designation.

  • One dose of Spravato is currently $590 to $885, with three doses per week recommended to sustain the effect. J&J has been projected to profit over $200 million.

9/ What Is Next? The Future of Fast-Acting Antidepressants

  • The term Seige cycle to describe the dynamic phases of the career of psychiatric drugs. The term was named after Max Seige, a German psychiatrist who was the first to propose the concept that psychotropic drugs have a cyclical livelihood. The three phases of the Seige cycle are “initial enthusiasm and therapeutic optimism; subsequent negative appraisal; and finally, limited use.”

  • The fact that a single dose of ketamine can treat symptoms of depression within hours of being administered has turned antidepressant-focused laboratory research upside down.

  • Before this discovery, it was an accepted assumption that antidepressants take several weeks to work. Accordingly, the focus of laboratory-based research, mostly performed in rats and mice, was on studying how several weeks of exposure to an antidepressant can change the brain.

  • The awareness that symptoms of depression can be alleviated quickly is making researchers rethink animal models and other approaches to design better antidepressant medications.

  • Recent studies using other old psychoactive drugs such as ecstasy and psychedelics like LSD and psilocybin (the active ingredient of magic mushrooms) are indicating that, similar to ketamine, a single dose of these drugs may help alleviate symptoms of depression for much longer than by ketamine.

  • US FDA and the European Medicines Agency (EMA) have approved a multicenter, multicountry trial of psilocybin, supported by the UK-based pharmaceutical company COMPASS Pathways.

  • Depression is a major cause of disability worldwide. According to the US Centers for Disease Control and Prevention, about one in ten adults suffer from mood disorders, including depression.

  • Because ketamine works differently than traditional antidepressants, both by working quickly and by acting on potentially different brain mechanisms, it is fundamentally changing how clinicians think about treating depression and how laboratories study depression.

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