- February 13, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Context- This year’s Budget and Economic Survey used terms like Barbell Strategy, Agile Response, and Bayesian updating of information to tell how the government has improved its decision-making in response to Covid-19.
- The barbell strategy is an approach to uncertainty (risk) that uses two extremes – like weights on the opposite ends of a barbell – to avoid ruin and simultaneously expose yourself to a speculative upside.
- On one end of the barbell is extreme risk aversion (safety). On the other end is extreme risk loving (speculation).
- What you avoid is the “middle” of the barbell – a moderate risk attitude that is highly prone to error.
- It is a method that consists of taking both a defensive attitude and an excessively aggressive one at the same time, by protecting assets from all sources of uncertainty while allocating a small portion for high-risk strategies.(a financial market concept)
- g. A retail investor secures 80 per cent of his capital by investing in FDs and invests the remaining in speculative stocks or crypto-currencies. If Bitcoin goes to zero, investor loses just 20 per cent of the money. But a few lucky ones saw the Bitcoin returns up by hundred times. The idea is to focus on extreme ends and avoid medium-risk strategies.
- Agile approach is based on feed-back loops, real-time monitoring of actual outcomes, flexible responses, safety-net buffers and so on.
- It was developed in 2001 and is based on 12 principles, which include customer satisfaction, collaboration, adapting to change, feed- back loops and breaking project silos.
- the “Agile framework: is particularly relevant today because of the explosion of real-time data that allows for constant monitoring.
- The flexibility of Agile improves responsiveness and aids evolution, but it does not attempt to predict future outcomes. This is why the other leg of the Barbell strategy is also needed. It cushions for unpredictable negative outcomes by providing safety nets.
What was the framework that India followed earlier?
- India and most countries across the world typically follow the Waterfall Approach. This involves analysis of the issue, detailed planning and meticulous implementation.
- India’s earlier five-year plans were based on this.
- Waterfall Framework is linear and is developed systematically from phase to phase. This approach works best for projects with concrete timelines, well-deﬁned deliverables and little uncertainties.