LONG INTRODUCTION, BUT AN INTERESTING STORY
On May 4th, 1915, Chinese students and citizens started a protest against economically stronger Japan and decided to boycott all Japanese products as a protest against Japanese aggression against China. The boycott lasted for weeks. In 2006, the Great American Boycott was conceived by immigrants in the USA to boycott products made in America. From Thai to Russain, history is filled with examples of emotion led boycotts, but all of them dissipate within a few weeks and in some rare cases (Ukraine-Russia) a few months. Because Economics doesn’t necessarily (or ever) follow emotions, nor does it care much about it
Emotion is a strong driver. It was the emotion post World War II that drove the Japan we know today. But while emotion might be a necessary ingredient it is certainly not a sufficient one. And nowhere does it stand out as strongly as in the most viral campaign of the year Project Atmanirbhar. The economic policies of Import Substitution and Ricardo’s Comparative Advantage don’t take emotion into the equation, and the larger problem is sometimes emotion takes out rationality. China sells more to us than we to them is not the question. We are responsible for just 2% of China’s exports. We import raw pharmaceutical ingredients from China so that we can make generic drugs and export it to the world and threaten to cut off supply. Do we stop that? Do you boycott Chinese handphones manufactured in India or do you boycott Indian brands made in China. And what to do about the roughly $ 4 Billion invested by the Chinese in Indian startups.
Which brings me to the theme of this Week borrowed from one of my favourite books. Irrational Exuberance. Today we delve into 5 stories that happened this week of different companies and industries and ask ourselves whether the exuberance for the future is rational or irrational ? Is it backed by data, or a utopian future expectation? And do we lose sight of facts and signs when are irrationally exuberant. I give my opinion on whether it is rational or irrational and would be happy to know if your understanding differs from mine.
1. The European Union never really became as strong as China or the USA because it never had a single central body for financial regulation as compared to the People’s Bank of China or the Federal Reserve. Ironically, the decision to centralise the banks was supposed to be taken by the national banks which would then be irrelevant. As another article subtly put it :Turkey’s don’t vote for Christmas. But what happens if you don’t have a central regulator. Sometimes 1.9 billion euros go “missing“. The first article of the week covers the rise and fall of Wirecard. The dramatic rise and fall with many signs of irregularities is the perfect example of irrational exuberance. If you would be interested do read about Mark Braun. I don’t have a profile for the week, but in the shadows, an enigmatic and distant CEO could also become the profile of the week. Already Proved: Irrational
2. “Parda hai Parda” from a 70’s Hindi movie was one of my favorite songs, still is actually. But now I am sure Flipkart also would have it on the organisational playlist. Parda was one of the top 3 searches on flipkart when searching for Curtains. Very often we miss the difference between “Change is coming” and “Change is here”. Bain and Flipkart just released their new report on “How India shops online” and the role of vernacular and voice jumps out as a winner of the future. India has reached what other countries have already seen in e-commerce. The Massficiation stage and I can imagine to leverage it strategies need to be truly “bharatiya”. In my opinion: Rational
3. A few years back, I extensively worked to figure out where a particular product should be stocked in the supermarket in Indonesia. Armed with eye tracking glasses and measuring eye movements and brain waves, we tried to figure where consumers would look (or not). The Supermarket is supposed to have these magical powers of making you stay longer and buy more. 70% of the time spent in supermarkets is spent on ineffective wandering. Comparisons with casinos and black magic have been drawn often. But do you think the supermarkets will survive the coronavirus? In the third article of the week, I leave it upto you to decide whether the exuberance is real or just irrational. Also if you need to read one article on the history, strategy, and future of supermarkets, read this one. It will last you for a year or more.
4. What makes international supply chains irreplaceable? Why can’t the President of the USA shake the dragon? If you can make plastic toys and the world’s most sophisticated micro chips, then you are sort of there. But how do thousands of traders and manufacturers sell without trade fairs and meetings? Welcome to the Biggest spectacle of the digital COVID world. It is the most fascinating story of Chinese manufacturing and marketing. Also it outlines the economic and not the emotional way as to how manufacturing could shift out of China. My opinion of China losing out in manufacturing: Rational in the long term (10 years), extremely irrational in the short term (0-5 years)
5. Never waste a crisis is a saying Stewart Butterfield lives by. For a company rather unaffected by COVID or rather positively affected, what I love about this article is the rational view of the CEO of Slack on the future of team management and digital engagement tools. In another beautiful article I read this week, Slack is no longer a project management, team management tool but rather the corporate social media. A beautifully written article on what to expect in the future and what Slack did to emerge stronger from the pandemic while raising $750 million on a debt offering. My exuberance on Slack: Irrationally high 🙂
Thanks for reading the long version! Hope you had fun reading.