Logical (Critical) Reasoning Questions for CLAT | QB Set 81

A new year article warrants reflection. Political and economic commentators have concurred that 2025 has been a convulsive year dominated by US President Donald Trump. He tore up the international rule book, weaponised tariffs, cocked a snook at traditional allies, ignored constitutional checks and balances and made his liking for the descriptor “the Imperial Presidency” quite clear.

My own reflections have a different starting point. I look back through the lens of a former business executive with one foot still in this domain as an independent non-executive director and ask: Has “disruptive” technological innovation around AI and AGI altered the principles underlying business success? I believe not.

Klaus Schwab, founder of the World Economic Forum, wrote a few years ago that the world was in the midst of the Fourth Industrial Revolution. The defining features of this revolution, which began around 2010, were machine learning, AI, big data, quantum computing and the blurring of the lines differentiating the physical, digital and biological worlds. Schwab contrasted this with the Third Industrial Revolution that started in the 1970s around the internet, robotics and IT. It shifted production processes from analog to digital and catalysed the growth of the service and knowledge economy.

The second revolution, a century earlier, was triggered by electricity, the internal combustion engine, telegraph and telephone, and assembly line production, breakthroughs that transformed communication and transportation systems and catalysed the rise of multinational companies. The first Industrial Revolution started with the invention of the steam engine in 1776, laying the foundations for industrial mechanisation.

The thread linking these four revolutions is technological innovation. It created new tools for managing business, but it did not alter the fundamentals underlying corporate growth and profitability. I identify four factors that have driven business success in the past and which, I believe, will remain pivotal for its success in the future.

First, cost management. One equation I learnt in first-year economics was that prices tend towards marginal costs. In other words, the price of products falls in line with the declining cost of producing an extra unit of output. Companies with a high average cost structure therefore face increasing pressure to generate a decent return on investment, especially when they finance expenditure through debt. Henry Ford succeeded in putting “America on Wheels” with the Ford Model T because of a relentless focus on cost efficiency. China’s position today as a global manufacturing hub rests on combining scale with operational efficiency to produce world-class products at the lowest unit costs. Companies that take their eye off costs will always struggle through business cycles.

Second, access to competitively priced factors of production and control over the supply chain. The robber barons of the 19th and early 20th centuries used monopolistic tactics to secure such access. In the modern era, the Chinese government ensured affordable access to land, capital, power, water and transport infrastructure, giving its manufacturers a decisive advantage. In contrast, Indian companies face difficulties acquiring land, shallow capital markets, high utility costs and inadequate transport infrastructure. Even world-class firms therefore struggle to compete globally. Supply-chain competitiveness, resilience and control remain central to business success.

Third, regulatory alignment. In 1911, the US government broke up Standard Oil for illegal monopolisation. Since then, regulatory oversight has waxed and waned, from deregulation under Ronald Reagan and Margaret Thatcher to today’s revival of industrial policy. Yet one constant remains: corporations need the implicit, if not explicit, support of the state to sustain growth and profitability. Technological innovation has not given businesses the power to bypass regulators, and this reality will endure.

Finally, human judgment. Would templated reasoning have led James Watt to experiment with steam power? Would Henry Ford have raised wages and vendor prices to create demand for his cars if he had relied purely on linear analysis? Did Steve Jobs redefine design based on algorithms alone? Is China’s dominance in renewable energy the result of natural advantage or strategic judgment by its leaders? These transformative decisions were not driven solely by data. They reflected intuition, insight and leadership.

In time, artificial general intelligence may surpass human cognitive intelligence. But if human judgment is supplanted or subverted, the pillar on which four industrial revolutions were built would be weakened. Friedrich Hegel warned that we often fail to learn from history. In an era of rapid change, business leaders would do well to remember this lesson.

[Source: Indian Express | Author: Vikram S Mehta]

Question 1

What is the author’s primary argument regarding the impact of AI and AGI on business success?

A. AI has completely transformed the principles governing corporate growth.
B. Technological revolutions eliminate the need for human leadership in business.
C. AI-driven innovation has weakened traditional cost and supply chain models.
D. Despite AI-driven disruption, the fundamental principles of business success remain unchanged.

Correct Answer: D

Question 2

According to the passage, which common feature links all four industrial revolutions?

A. Expansion of multinational corporations
B. Replacement of human labour with machines
C. Technological innovation creating new business tools
D. Government-led industrial planning

Correct Answer: C

Question 3

Why does the author cite China’s manufacturing dominance?

A. To argue that political ideology determines industrial success
B. To demonstrate the importance of cost efficiency and supply chain control
C. To show that technological innovation alone ensures global competitiveness
D. To highlight the role of natural resources in industrial growth

Correct Answer: B

Question 4

What conclusion does the author draw about regulatory oversight and business success?

A. Regulatory alignment is an enduring requirement for sustained corporate growth
B. Technological advancement allows companies to bypass state regulation
C. Deregulation has permanently replaced state support for businesses
D. Regulatory intervention consistently hampers innovation

Correct Answer: A

Question 5

Why does the author emphasise human judgment despite advances in artificial intelligence?

A. Human judgment is faster than algorithmic decision-making
B. Data-driven decisions are inherently unreliable
C. Transformative business decisions require intuition and leadership beyond data
D. AI systems cannot function without human supervision

Correct Answer: C