A Mathematical Idea for Improvement

Once there was a rich man who had a very big and beautiful house. He was living a luxurious life. Despite having enormous wealth, he wanted to acquire even more wealth. He had an unquenchable thirst for wealth. His desire for making more money made him restless. He started living a very distressed life. One day a monk visited a place where he was living. The rich man offered him shelter and served delicious food to him. When the monk was about to leave, the rich man uttered his problem to him. Out of compassion, he handed over four lamps to him to solve the problem. The direction and a number were written on each lamp. Whenever you need money, light the lamp and start going in the direction written on the lamp. Start digging the place where the lamp was extinguished and you will find enormous wealth. He advised him not to light the fourth lamp. The monk left the palace after giving the instructions. Desperate for money, he immediately lights the first lamp and starts moving in the direction written on the lamp. The lamp extinguished in the deep forest. He started digging the place and found a pot full of gold and silver coins. He became very happy. He repeated the same with the second and the third lamp. He found even more wealth in those places as directed by the monk. He thought the fourth lamp paved the way for even more wealth but the monk wanted to keep that wealth for himself. He lit the fourth lamp and started moving in the direction written on the lamp. The lamp extinguished at the isolated and deserted place. He dug up the place and found the stairs giving way to an entrance gate. He went down the stairs and opened the gate. His eyes were delighted by seeing the breathtaking palace full of magnificent items. The palace contained many rooms. As he opened the first room, he found that the room is full of diamond jewelry. He started dancing in joy. Suddenly, he heard a strange voice emanating from one of the rooms. When he opened the room, he found an old man grinding the mill. "What are you doing?", told the rich man to an old man. The old man replied, "Please come here and grind it. I need some rest." The rich man started grinding the mill. The old man laughed loudly. "Why are you laughing like a mad man", asked the rich man to an old man. He replied, "Now I am a free man. I came here due to the fourth lamp handed over to me by an old monk." The rich man became terrified and stopped grinding the mill. The old man instructed him not to do this otherwise the palace will collapse and he will be buried under it. You have to keep grinding the mill until a greedy man like you comes here and takes your place.

The story has many useful insights.

1. Always listen to the elders especially to your parents to avoid the mistakes they did earlier in their life. Spend more time in their company. Their mistakes become your source of wisdom to navigate the unknown territory of life. The presence of white hairs on their head indicates their wisdom. The deep experiences of their life have enriched their soul. Learn from them.

2. While pursuing a goal, know when to stop. One must have the wisdom to discern when to back off. Otherwise, one keeps on moving in circles and goes nowhere.

3. Avoid bad qualities like greed, lust, anger, close-mindedness, etc. to live a serene and blissful life. No matter how good we are in others of life. Unless we work in these areas, we remain unsuccessful in our personal as well as professional lives.

4. Avoid situations in life where the impact of one thing going wrong will wipe you out of the equation of life. Avoid the single point of failure. It gives rise to a mental model known as multiplying by zero. The events that will massively impact life are called black swan events. Stay away from the negative black swan events like debt, a bad marriage, a flamboyant lifestyle, etc.

Multiplying by zero is a useful tool for system thinking. A system is composed of various components which are interacting with each other. The strength of any system depends upon its weakest link. When the consequences are high, appropriate measures need to be taken to avoid failures. These parts are interacting with each other to determine the quality of the life. The multiplication describes the properties of the numbers. For example, 2*3 means the addition of 2 three times(2+2+2) or the addition of 3 two times(3+3). Similarly, 0*3 means the addition of 0 three times(0+0+0) or the addition of 3 zero times. It doesn't matter how big the numbers are, if multiplied by zero, they nullify everything.

To understand it clearly, let's consider the example of life. Life is a system that is composed of components like health, wealth, spirituality, relationships, and professional work that earns bread and butter. Good health helps us to appreciate the things we have, wealth gives a freedom to pursue whatever we like, spirituality makes us silent, peaceful, and blissful, good relationships increase the sense of worth and belonging, and are one of the key components of happiness, Professional work and the unique skill sets we possess makes us financially independent. If any of the above components are missing from life, it reduces the value of life to 0.

Systems thinking is a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing ‘patterns of change’ rather than ‘static snapshots. Peter Senge

Extending the idea of multiplying by zero to other areas gives us better insights. Consider the case of a restaurant that is located in an amazing place that has outstanding aesthetics full of dim lights, romantic music with a wonderful ambiance, and humble waiters to greet you but if the cuisine they are serving is not good will nullify the effect of the rest of the components. Bad food cannot be compensated for the other factors. However, other factors like slow service can be compensated for good food. Identify the most critical component in the system and try to increase its value as much as possible.

A company that has good branding, useful product, and outstanding service but if the CEO made a racist remark will bring down everything. Similarly, in a competitive team if any one of the team members is constantly complaining will bring down the morale of the rest of the team members. The two key ideas to keep in mind while applying the mental model of multiplying by zero to any system is:

1. Identify the critical component in the system that is acting as zero for the entire system.

2. Find out a way to convert the value of a component from zero to one.

History teaches us a lot. The study of history makes us smarter by learning from the mistakes of others. An East German theft is an excellent example that demonstrates the idea of multiplying by zero. After the cold war, East Germany wanted to be at the top of cutting-edge technology. They wanted to build an indigenous computer. The computer was a critical technology that give them an edge over their competitors. Despite their best intentions, they created a culture within their country that suppresses innovation and creativity.

They squandered a large amount of money to import the embargoed goods from other countries. They even sent their spies to other countries to steal information necessary for building indigenous computers. They were not letting their scientists attend conferences happening in other countries due to security reasons. Their scientists were not getting enough exposure to build the niche technology. Even if they imported the embargoed components from other countries, they don't know how to troubleshoot them in case of failures.

The East Germans knew how to operate the components but didn't know the basic principles that make them work. They were not thinking from the first principles. They were dependent on clone technology. They weren't building anything on their own. No industry can become a leader by relying on cloned technology. Research happened in a collaborative environment. The East German system to build a computer has multiple components like sending spies to steal information from enemy countries, spending huge amounts of money to buy embargoed products, and providing support to their scientists. Despite all their efforts, they won't be able to build the indigenous computer.

They missed the important component known as innovation in their system. They spent enormous effort on improving the other components but overlooked the innovation. Innovation can't happen out of thin air. History has shown that people fail dozen times before becoming successful. One must have the historical knowledge to test their own hypothesis and keep on refining it unless one becomes successful. They need the necessary expertise to rely upon if anything goes wrong. If they collaborated with others, they might be able to successfully build the computer.

Learning and Innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow. William Pollard

Crop diversity is the variety and variability of crops and plants used in agriculture including their genetic and phenotypic characteristics. In Ireland, people were dependent on potatoes for their survival. It became a staple food for them. The potatoes which were planted in Ireland lacked genetic variation. Along with that, they were from the same species. All the potatoes were clones of each other. In 1845, a fungus affecting potato plants spread across the country. Since the plants lacked variability, the entire crops got destroyed. The majority of the population lacked their main source of food for up to five years.

Never put all the eggs in one basket. The food equation of Irish people consists of only potatoes. The failure in the production of potatoes put the lives of the Irish people at risk. The better approach is to put multiple crops in their food equation. It changes the multiplicative equation into an additive equation. If one of the crops get extinct, they can rely on other crops for their survival. Diversity in skills is the mantra for survival.

You must be diversified enough to survive bad times or bad luck so that skill and good processes can have the chance to pay off over the long term. Joel Greenblatt

Sometimes we are so engrossed in improving one part of the system that we fail to take into consideration the whole picture. For example, fragile health is the weakest component of a person. He started doing exercise to improve his health. The intensity of an exercise varies from person to person. If he expends too much energy on exercise then less energy is available to carry out the other tasks which will bring the entire equation down. Sustainable development is the motto to perform optimally. Once the weakest link is identified then make incremental progress to overcome the weakness. Don't hurt yourself by doing too much.

In some cases, the components aren't putting the entire system down but reduce the efficiency of a system. These are known as bottlenecks. As the neck of the bottle puts a limit on the amount of water that can flow through it. Similarly, the bottleneck in the system limits the delivery of output. If the CEO of a company is not delegating the power of decision-making to others then most of the resources in an organization will remain idle until the command is given to them. Bottlenecks are those people that make other people wait.

The entire bottleneck concept is not geared to decrease operating expenses, it’s focused on increasing throughput. Eliyahu M. Goldratt

A bottleneck can also be a part of the system that is under the maximum strain. Improving the areas other than bottleneck is not going to improve the efficiency of a system. The way to deal with the bottleneck is to allocate additional resources to balance the load. Sometimes we need to rethink the whole system in a new way to make it better and more efficient.

A constraint is the fundamental limitation of a system whereas a bottleneck is a part of a system that can be alleviated. A day has twenty-four hours is an example of a constraint whereas a machine that keeps on breaking is an example of a bottleneck. When improvement is made upon the worst part of the system then some other part of the system will become the new bottleneck. No matter what one does, there will always be a bottleneck present in the system. Always make an effort to shift the bottleneck to the less disruptive state.

While solving the problem of bottlenecks one has to ensure that the worst problems will not be created in the future. Be vigilant about the situations that will solve the short-term problems but create long-term problems down the line. Once a company was not meeting its required production quota. The company's manager went to the production line to find the root cause of the problem. His keen eye found that cheaper thread kept on breaking while sewing. To save 30 cents on the thread, the company was losing 300 dollars per hour. The degradation in the quality of the product will move problems in the future. Cure the disease rather than the symptoms. Strike on the root cause to improve the efficiency of a system.

The human brain evolved to protect its energy. Humans have a weird habit of not changing themselves unless no change becomes the least comfortable option. Humans resist change because it takes enormous energy to overcome inertia. New ideas came to our minds when we are faced with challenges. Thus, bottlenecks foster innovation.

Most of the products we are using these days are invented during wartime. Initially, America was dependent on Japan for the production of silk. Silk was used as a parachute fabric, Army combat helmet, artillery gunpowder bags, etc. When tension broke out between the two nations, America was forced to think about the substitute that led to the discovery of Nylon. Nylon is known as artificial silk whose properties are far better than natural silk.

Rubber is considered an essential war material because it is used in making tires for aircraft, tanks, and other vehicles. Initially, America was relying on Asia for the production of rubber. Due to the rising tensions, America was forced to think about substitutes which led to the discovery of synthetic rubber known as Ameripol. It is more cost-effective than natural rubber.

The impediment to an action always advances an action. Marcus Aurelius

In world war 1, many people were malnourished due to food rationing. Inadequate nutrients led to the development of rickets in soldiers and children. Rickets causes soft bones due to a lack of Vitamin D in the body. Doctors were forced to find out the solution to a problem. The German pediatrician Kurt Huldschinsky discovered that patients suffering from rickets when exposed to ultraviolet lamps recovered from the disease. The ultraviolet lamp simulates sunlight which prompts the body to produce Vitamin D thereby curing rickets. Now ultraviolet lamp is used to cure various skin diseases.

The best way to avoid system failure is to incorporate redundancy for the critical components in the system. Mother nature teaches us a lot about redundancy. Humans have two eyes, two ears, two lungs, and two kidneys to ensure that if one of them will fail then the other one can take over and the human will still survive. Some organisms give birth to millions of offspring in the hope that some of them will survive and pass on their genes to the next generation.

Redundancy is well-known in the field of engineering. Aircraft has multiple engines so that the other one will take over in case of failure. Big companies like Google, Amazon, Facebook, etc. have multiple data centers spread across the continents so that the damage is recoverable in case of any disaster. Redundancy plays an important role in the financial world. Always keep six to eight months of expenses in liquid amount or in terms of fixed deposit to deal with an emergency. Avoid debt because it not only makes you fragile but also hampers your ability to deal with unexpected storms.

Adding additional components to the system increases complexity. Most of the time, additional components remain idle and consume resources. For naive persons, redundancy seems like a waste of resources. Sometimes redundancy outweighs the risks compared to the benefits. In 1996, a safety device in the fermi reactor broke off which blocked the pipe that carries the coolant to the reactor core. Luckily, the reactor was not active at that time.

Redundancy or Safety measures can backfire sometimes. Multilane highways are designed by the government to prevent accidents. Seat belts, Airbags, Anti-Lock Breaking systems, etc. are the recent technologies introduced inside vehicles to prevent accidents. The increase in safety measures prompts the driver to drive more rashly which makes him more prone to accidents.

Conclusion: Systems are everywhere. Find the critical components or the bottleneck that is bringing the entire system down. Take appropriate measures to reduce the impact of the bottleneck or convert the zero component to one. Diversify your skills to avoid a single point of failure. As the old proverb says, "Never put all the eggs in one basket."

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A Basic Need

Once there was a boy who was born into a middle-class family. He was very cute. His eyes were like rabbits. People around him call him a chocolate boy. He had a loving mother, a caring father, and a supportive sister. His academic performance was outstanding. The hard work and dedication of a boy towards his studies helped him to crack an entrance exam to get enrolled in a prestigious college. He graduated from college with flying colors. He continued his journey of hard work that paved the way for him to become a gazetted officer. His family was very happy for him. The boy has everything at his disposal. He has a big house, sufficient money to cater to his day-to-day needs, prestige, etc. Suddenly, he started feeling a void within him. He becomes sad and depressed. He has everything yet he is sad. His wise mother instructed him to go to a spiritual master living nearby his home. He followed her advice and went to meet him. He saw that the man is very old. He has a long white beard with alluring eyes. The wise man listened to his problem and smiled at his innocence. He told him that he is lacking spiritual depth within himself. Initially, you are busy fulfilling your desires of the outer world. You don't have the time to look at your inner world. Your inner world as well as your outer world are not nurtured to the fullest. There exists harmony in both worlds. Therefore, you were at ease. Now the demands of the outer world are fulfilled. The inner world is still poor in spirituality. Spirituality means that you haven't yet attained the being. The disparity between the outer and inner world caused restlessness within you. Unless you work on your inner self, you will remain in misery. You have to self-actualize your potential to become silent, peaceful, and blissful. Self-actualization is your basic need. The boy understood the root cause of his suffering. He bowed to the wise man, took his blessings, and return to the home with more wisdom.

The gist of the story is it's not the lack of materialistic things that prevent us from achieving a blissful life. Instead, it's the lack of inner growth that is the root cause of misery. Self-actualization is the basic need of a human being. You might be thinking about ...

What is self-actualization?

Self-actualization is a term popularized by Abraham Maslow. It means a person has to become what he was to become. A man is born with potential. He has the freedom of choice. He becomes what he chooses. He can either actualize his potential or remain wherever he is. Potential doesn't imply outer growth. It is related to inner flowering. Buddha, Krishna, Mahavira, etc. are self-actualized persons. They have attained the highest peak.

The achievements of the outer world like money, power, prestige, etc. give a temporary high for a short period of time. A man is still sad due to his lack of inner growth. The fulfillment of one desire breeds ten more desires. The victories of the outer world can't be substituted for inner flowering. One has to understand the impermanence of things. Unless a man becomes aware of the vicious cycle, he will remain trapped in the web of desires.

“The purpose of life is to know yourself, create yourself, experience yourself as Who You Really Are. There is no other reason to do anything.” Neale Donald Walsch

Usually, an ordinary person is not too tense. He is always grounded. He doesn't have a glimpse of God-like qualities within him. His wings are not yet developed enough to take him to the sky. Artists like musicians, painters, writers, etc. are very tense. They are no longer grounded when they are in act of creating their art. They surrender to the inner source of their power which takes them higher in the sky. They have tasted the nectar of God-like qualities within them. Once the act of creation ends, they are thrown back to the Earth. Now they can't experience divine-like qualities because they have lost contact with their inner wisdom. The split of personalities causes resentment because the gap between the earth(normal human beings) and the sky(People like Buddha) is unbridgeable. The seed of the flower within the artist hasn't fully blossomed yet.

Great poets, great writers, or great men don't mean that they are self-actualized persons. They have grown great in only one dimension of their life. The rest of the dimensions are still undeveloped. They are not total human beings. Buddha, Krishna, Mahavira, etc. are total human beings. They have lived their life in totality. When Buddha attained enlightenment, he went to Kashi to share his insights with them. The king of Kashi came for a visit and was astonished by his aura. He told him that you have nothing other than a begging bowl and still, you look like a king. I have all the materialistic things within my reach and still, I look like a beggar compared to you. "What is the source of your power?", asked the king.

Buddha replied that the power is within you. You have lost contact with your inner being while pursuing materialistic things. Dive deep within yourself and reclaim your power. The sign of a spiritually enlightened person is he carries a flame of light within himself. Wherever he goes, he will ignite the light within others. You start feeling good when you are around them. You will be mesmerized by the bliss emanating from them.

Does the question arise in your mind of how to become a self-actualized person?

A self-actualized person is always centered. He is aware of the center and makes it a permanent abode. Some people think that the center is in their heads, for others it is in their hearts. According to me, a center is an energy that keeps our body alive and connects us with others. It makes us feel that we are not separate entities but a part of one whole. A center is an energy that observes my thoughts as if I am looking at a person from a distance.

Every wheel has a center that keeps it moving. A center can exist without a wheel but a wheel can't exist without a center. Similarly, a soul can exist without a body but a body can't be alive without it. Living in the present moment is the most arduous thing in the universe. A person who is centered is living in the moment. He is aware of all the thoughts that are crossing his mind. He is not in a reactive state. He is looking at the thoughts without any judgment.

Self-actualization is the oxygen for the soul. Brian Johnson

The mood of a person fluctuates with the qualities of the thoughts. The thoughts arise in the mind with respect to a stimulus like external events. A person who is centered moves beyond his thoughts. He is a passive watcher of thoughts. He becomes more than his thoughts. External events have no influence over him. He becomes blissful, peaceful, and silent.

A self-actualized person lives a balanced life. It's easy to live at the extremes. Normally, we can either do too much or do nothing at all. Buddha preached the middle way for his entire life. A balanced person knows the right amount for him. Moderation is the key to a happy life. It can be understood through an example of sleep. Sleeping only for two hours will make a person insane within a few months. Sleeping for twelve hours a day will make a person lazy. Sleep of eight hours a day is an average value for a normal human being. It's not the quantity but the quality that is important. A balanced person stays around the normal value.

In the modern world, majority of the people are struggling with sleep. Even if everything is working fine, still they are not getting quality sleep. Having a good sleep during the night will increase productivity many times the following day. Moon breathing is a technique that will help you to get a night of quality sleep. It consists of breathing through the left nostrils for three to ten minutes before going to sleep.

The main steps of moon breathing are:

1. Relax and sit comfortably with your back straight. Rest your palm on your left knee.

2. Close your right nostril with the help of your right thumb and take a deep breath through the left nostril.

3. Hold your breath and close your left nostril with the help of a right ring finger. Take a small pause. Release the right thumb and exhale gently through the right nostril.

4. After complete exhalation, again close your right nostril with the right thumb while releasing the right ring finger from the left nostril.

Repeat the above steps for three to ten minutes before going to sleep. It will help you to get a night of quality sleep. Research has shown that inhaling through the left nostril leads to the activation of the parasympathetic nervous system(PNS). It regulates the automatic body functions such as heart rate, metabolism, and body temperature.

The sympathetic nervous system activates the fight and flight mode whereas the parasympathetic system activates the rest and digest mode which keeps you calm and stress-free. When you lie down on a bed after a stressful and tiring day. Left nostril breathing will activate the parasympathetic nervous system that helps you to fall asleep faster and better.

Go toward self-actualization rather than self-image actualization… Search within… for honest self- expression. Bruce Lee

A person who is centered and lives a balanced life will always be at ease. He receives everything with a blissful attitude. He becomes soft, polite, calm, and blissful. His mind has a feminine quality. The masculine and the feminine are the two qualities of the mind. A female can have a masculine mind whereas a male can have a feminine mind. A masculine mind is very dominant, aggressive, and full of anger. A feminine mind is very soft, receptive, caring, patient, and full of love.

Goodhart's law says that when the measure becomes a target then it ceases to be a good measure. Don't force yourself to become soft, polite, and receptive. Feminine qualities are the byproduct of centered and a balanced life. Be more centered and live a balanced life. The divinity will descend over you. You become like a Buddha. You have a potentiality that can be made actual.

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How do we affect others?

Gautama Buddha was staying in a village for a short duration of time. People from far-flung areas came to acquire wisdom from him. A rich businessman was a devotee of the Buddha who lived in the same village where Buddha was staying. He was grappling with a problem and hadn't met him for a very long time. He was reluctant to tell his problem to the Buddha. The cause of the reluctance was to admit his mistake in front of him. He tried everything and was unable to find the solution to the problem. Finally, one day he asked Buddha, "Oh! wise one please help me. I am in a terrible dilemma." Buddha replied softly, "My dear, What happen? Why are you looking so worried?" "I am a businessman. I am losing money while trading. My trade partners are using and taking advantage of me. They are winning at my expense.", answered the businessman. Buddha understood the problem and smiled at him. He told him to wait for at least three days before taking any big financial decision. Be patient and don't let your emotions overpower you. When you give a piece of bread to a dog, he won't eat it immediately. Dog smell it to make sure that it was safe and then eat it. The dog used the power of smell before making the decision. Similarly, use your wisdom before making any big decision in life. Never be in a hurry and don't act impulsively. Finally, Buddha looked into the eyes of the businessman and understood that the lesson becomes imprinted on his consciousness.

The story is full of wisdom and contains many insights. Patience is a virtue. The best way to inculcate patience is through fasting. Fasting kills cancerous cells and has many other health benefits. Another insight is not to react impulsively in any situation. There exists a gap between a thought and a response. In between that space, one can either make or break his life. A span of three days will help the businessman to look at the problem objectively and from various angles. A high Intelligent Quotient(IQ) will help a person to crack difficult exams and to solve the complex problems of life. A high emotional quotient(EQ) will make a person mature and helps him to forge healthy relations with others.

Gautama Buddha was a king who renounced his kingdom to understand the mystery of life. He wandered from place to place and enriched himself with many experiences. Finally, he became enlightened. Another insight from the above story is that the teachings of Buddha are helping contemporary men to live a peaceful, silent, and blissful life. His actions are acting as a positive externality to people who wants to become spiritual in their life.

Success is an outcome of the right actions at the right time. Humans are bound by their actions. They can't achieve anything without actions. According to the first law of ecology, "Everything is connected to everything else." Actions follow the law of cause and effect. They have intended or untended consequences. Everybody wants to do actions whose consequences won't come back to bite them. At the surface level, it seems impossible to predict the unintended consequences. As one digs deeper, he can observe that all unintended consequences follow a similar pattern. The awareness of those patterns will help us to avoid them.

When we try to pick out anything by itself, we find it hitched to everything else in the Universe. John Muir

An externality is a commonly used term in economics. This model will serve you to make optimal decisions in life. An externality is a cost incurred or benefit received by a third party who doesn't have direct control over the factors that cause it. People like Elon Musk, Steve Jobs, Gautama Buddha, etc. pursued their dreams(life's calling) to live a happy and contended life. Their actions act as a positive externality to the people like us. Their audacious steps encourage others to endure harsh conditions and not to give up under any circumstance. They taught us to keep hammering the stone(complex life problems) with an axe(wisdom) until it breaks(solved).

Externalities are of three types:

1. Positive Externality

2. Negative Externality

3. Positional Externality

Positive Externality: The idea of the positive externality is the benefits received by the people who haven't participated in the transaction. The aesthetic exterior and alluring garden of a house create a sense of joy in the hearts of neighbors and passers-by is an example of a positive externality. Externality produces spillover effects. It occurs when the effects of an event spill over the core interaction of an activity. The employee of the industry gets medical training to help others during an accident. The employee can utilize those skills to help others when an accident occurs outside the industry. The sharing of information and skills acquired at the training with the members of other teams helps them to achieve their goals like a promotion at a faster pace.

The government holds vaccination programs to prevent the outbreak of deadly diseases like polio, measles, smallpox, etc. Vaccination generates antibodies within people to fight against fatal viruses. The government wants to achieve herd immunity among its population. Herd immunity is a term used in the medical domain which describes that the majority of the population has developed immunity against a particular disease.

Diseases can spread if they have an eligible host to infect. Vaccination increases the antibodies in the environment. Some people can't be vaccinated due to their suppressed immune systems. If you have taken the vaccination then you are not only protecting yourself but your action acts as a positive externality to those who can't be vaccinated.

The publication of research papers exhibits positive externalities to those who use their applications well beyond their initial scope. Their time is not wasted on reinventing the wheel. In fact, they are standing on their shoulders to see the wider horizon. The discovery of probability is an example of a positive externality. It was initially used to solve gambling disputes. Later on, it is used in other disciplines like calculus, finance, Artificial Intelligence, etc. Now it becomes an intrinsic part of us to make optimal decisions. Patents and Copyrights are issued by the government to protect the intellectual property of researchers. It helps them to earn money before their ideas become streamlined. We all benefit and researchers have the incentive to continue their work.

The positive externality comes at a cost. It poses the free-riding problem. A person who enjoys the benefit without paying the cost tends not to value it. The common resource being exploited causes the tragedy of the common problem. A citizen who cheats while paying taxes is free-riding on the services provided by the government. An employee who is not doing any substantiative work is free-riding on the rest of the project.

Negative Externality: People who bear the cost of a transaction without their participation in it. Suppose a person came home at the night from the office on Friday. He was feeling exhausted and crashed into bed after eating dinner. People living nearby were in a party mood. The loud music was disturbing his sleep. He was bearing the cost without his consent. Another example of a negative externality is of a person who smokes a cigarette affects the health of the people standing nearby him. A person reclines his seat on an airplane. He enjoys more space at the expense of a person who is sitting behind him.

Some people chose not to get vaccinated due to the fear of the harmful effects of vaccination. Their actions are preventing them to achieve herd immunity. Along with that, they are acting as a negative externality to those who can't be vaccinated due to their suppressed immune system. People living near the airport and industries suffer from nose and air pollution bearing the cost without getting any compensation for it.

Positional Externality: It occurs when the decisions change the perception of future value. It takes into account the second-order effects. Suppose a person stays late and leaves the office around 7 pm. His colleagues left the office at 5:30 pm. He wants to remain in the good books of his boss. He thought that it might help him to climb the ladder of ranks. Parkinson's law states that the work expands to fill the time allocated to it. He is not adding extra value to the organization. Those who leave early will be presumed lazy. They will also start staying late in the office. Now staying late in the office becomes a new norm creating a lose-lose situation for everybody.

Veblen goods are also an example of a positional externality. The items like diamonds, Lamborghinis, tailor-made suits, etc are considered Veblen goods. They have very high value due to scarcity. People signal high status by owning them. The ubiquitousness of such items will remove them from the category of Veblen goods. The purchase of Veblen goods causes the positional externality on those who already own them. The utility derived from consuming any good is relative to its average value in society. The value of a new shiny car increases exponentially if people living nearby are driving old wrecked cars.

The cost of an externality can't be measured directly. They can be addressed by using internalization. It is an act of imposing a massive cost on an entity that causes a negative externality. The price imposed tries to maximally cover the cost of dealing with the consequences of the activity. Internalization also tries to create incentives that prevent the happening of a negative externality. The government imposes high taxes on cigarettes. The high insurance premium is offered to smokers as compared to non-smokers.

The construction of tolls to reduce traffic congestion on highways. The high tolls forced the citizens to use public vehicles. It also helps in reducing pollution. The government sets the limit for industries for the emission of air pollutants by issuing carbon quotas to them. The tax credit will be given to industries that use green technology. When unethical behavior is left unchecked and upon crossing a certain threshold becomes the new norm. Therefore, professional codes will be implemented by the government to prohibit immoral conduct.

The Coase theorem is also very helpful in dealing with a negative externality. It was given by Ronald Coase who won the Nobel prize for it in the year 1991. It states that an externality can be internalized efficiently without further need for intervention(either by the government or by an entity regulating the externality) if the following conditions are met:

1. Well-defined property rights.

2. Rational actors.

3. Low transaction cost.

Suppose an industry is releasing waste material in the nearby river. The residents of the area where the industry is established visit the river in the evening to see a beautiful sunset. The release of waste products by the industry makes their experience very unpleasant. The industry acts as a negative externality for the visitors. The river is a public good that is neither owned by the resident nor by the industry. The residents have two options.

1. File a legal case against an industry.

2. By using the Coase theorem.

Filing a case costs millions of dollars and takes a lot of time and effort. The Coase theorem will be of immense help in such situations. The government will issue a permit for the industry to release the pollutants into the river. It poses a limit on the industry to release waste products into the river. Along with that people have to pay a minimal cost to see the dazzling beauty of the river. The profit will go to the industry. It meets the criteria of well-defined property rights. The industry as well as residents are rational actors. The industry will try to maximize profit by using green technology. It will also take care of the river to make it a beautiful tourist spot. The more people visit the river, the more profit for the industry. Coase's theorem has created a win-win situation for both parties for a low transaction cost.

Conclusion: Our actions have the potential to change the trajectory of our lives. They generate positive, negative, and positional externalities. Try your best to generate the maximum number of positive externalities. Counter the effect of the negative externality of others with your positive externality. It creates more positive light in the universe. Align your actions that will bring a smile to the face of your loved ones.

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