Importantly, quantum physics vie-wed the world not as certainties but probabilities. In fact, it states that the very act of an experiment actually influences the outcome. In essence, the more you know, the less you know you know. This fundamental inability of science to fully explain our world took a long while to get used to-it is intellectually unsatisfying, especially to a world used to a diet of the supremacy of scientific rationalism.

What does all this have to do with the financial markets?

The elaborate cloak of the rules and rigour of efficient markets seduces us into believing in an “objective” process of price determination and equilibrium setting. The reality is that these principles are even less reliable than classical physics, given that economics and financial theories are attempting to explain social phenomena—i.e., the actions of people—not planets and stars or electrons and protons. The events of the past year have exposed the discontinuities in such theories, and the damage that can result from placing too much faith in them. We are also learning that market behaviour is actually built on a foundation of shared values and trust.

The Satyam scandal is a painful and scorching lesson on the failings of the market. There isn’t a single business conversation today in India that doesn’t begin with a discussion on the Satyam fiasco. At one level, the debates are about the mechanics of the debacle: how did they pull this off, who were the culpable parties and accomplices to the crime, how could all the checks and balances fail, what does this mean for corporate governance, auditors, independent directors, and so on.

But there is a deeper and more unsettling angst. This has to do with ethics and values. Our actions come from our convictions. Our convictions are born of our values. In this sense, values are the fountainhead. At the end of the day, all the discounted cash flows and efficiency frontiers are valid only up to a point, beyond which we still have to deal with the soft touchy-feely stuff of human values. Much like classical physics not being able to explain sub-atomic behaviour, all the elaborate principles of markets cannot account for human actions. And very much like the experimenter affecting the experiment in quantum mechanics, we see that embracing the principles of the market itself influences individual behaviour and ends up destroying the very foundation of trust and values that the market is predicated upon.

The Satyam episode marks an important threshold for India, how we are getting influenced by globalization and what is happening to our collective value systems. India is bootstrapping itself into the 21st century with an incredibly complex bag of values, which include centuries-old beliefs in asceticism, renunciation, the role of the karma yogi, the universality in each of us, the work of our sufi saints, and so on.

Over the coming decades, we are going to see pitched battles being fought in our minds, and enormous churn in our value systems, as we make space for material benchmarks. With this will come economic success, and hopefully the rising tide of prosperity carrying people out of poverty. This is all good. But it will also come with outrageous examples of extreme materialism. And also instances such as Satyam, where an ambitious business family gets onto a tiger it doesn’t quite know how to dismount. The tragedy of the Raju bro-thers is that they are also victims of our society’s evolving value system, as we worship the gods of material success.

Satyam reminds us that models for the market are like classical physics— they can reasonably explain most of the phenomena we witness. But their explanatory power to describe behaviour at the smallest unit is very limited. In fact, unless we come up with a more evolved framework, we risk forsaking a lot to acquire the limited good that the markets offer us.

MANISH SINGH