luxuries – Pertinent Observations

Ranji nostalgia

It was the winter of 1991-92. I had just got introduced to this wonderful game called cricket, and about a month earlier had seen my first ever full one day international (on TV, of course). India had thrashed Australia at Perth. Ravi Shastri had taken 5-15 but still the man of the match award went to Srikkanth who made 60. This was two days after I had turned nine.

India was touring Australia and cricket craze hit me. It hit me so bad I couldn’t have enough of cricket. In a few days’ time I’d pulled out all the newspapers in my house and rummaged through them for cricket scorecards and stories. I remember getting fascinated reading about the England-West Indies series of 1991. And while going through the newspapers I saw that there was a Ranji trophy match on, and it was being broadcast live on radio. Out came my grandfather’s ancient pocket transistor.

The game was being played at Kolar Gold Fields (an ironic choice considering the Cauvery riots were on – the reason I had holidays from school and could indulge in luxuries like listening to Ranji commentary). On the first day, Karnataka had bowled Goa out cheaply, with Anil Kumble (i think) doing most damage. Goa had this left arm spinner in their line-up called Arun Shetty, and on the second day, he was spinning webs around the Karnataka batsmen. He took a 5-for that day, most of them bowled. Only one man was able to resist him. That also happened to be the day Rahul Dravid made his first first-class century.

Karnataka duly won the game by 10 wickets, with Dravid’s 100 being the difference between the teams in the first innings. Karnataka would go on to massacre Kerala and Andhra, while they drew Hyderabad after conceding a large first innings lead. Tamil Nadu were beaten by one wicket, but some silly points system in the Ranji meant that Karnataka, with four wins and a draw didn’t go through while Hyderabad and TN, with three wins each made it to the knockouts.

Unfortunately I don’t think I followed any other Ranji season as closely as that one, until cricinfo came along that is. Forget international matches (India’s tour of Australia, world cup, etc.), I would know the scorecards of most Ranji matches. At the ripe age of ten, I was able to provide insightful commentary on domestic cricket, on Indian team selections, and so forth. Sadly, I would never play the game.

Nowadays occasionally when I’m trying to take a break from work, I pick a random Ranji season from the 1990s and start looking up the scorecards. First the scorecards of all the South Zone matches (remember that Ranji was zonal in those days)., and then the knockouts. I remember that in one of the seasons in the early 90s, there were no draws at all in the knockouts (or maybe there were one or two here and there) – a far cry from nowadays when hardly one innings gets completed. And then I go on to look at the Duleep Trophy scorecards from the season – and these are the most interesting since I’m likely to know more players there.

It’s an awesomely good feeling to find a scorecard of a match that I remember, and I don’t know why but each time this happens I’m reminded of that game at KGF, the first one I followed, when Rahul Dravid made his first first-class century.

Loos in America

Ok I’ve spent quite a few (>1) blog posts after coming here on input so let me write one on output. In fact for a long time I’ve intended to write a post on loos in India but have never got the time. Hopefully I’ll sit down to write it some day. Today, you’ll have to make do with American shyte.

The last time I found facilities in a loo for washing the arse (or thoLyin the thika) was at the Dubai airport on my way here where there was a health faucet. As has been well documented Islamic cultures place a lot of emphasis of keeping the arse clean and hence the ubiquity of this contraption in all Islamic countries (and of late in India also). As has also been well documented, western cultures prefer to keep the loos clean and hence use paper to wipe the arse after the process.

In my serviced apartment I’ve been doing one of the usual Indian things – I’ve kept a drinking glass in the bathroom and use it as a mug. Yeah its volume is quite low but that’s the best I can manage. Thankfully the taps aren’t too far away so I can manage. My biggest fear, however, is that I’ll drop this glass in the bathroom and might injure my feet. Office, however, offers no such luxuries so I’ve to make do with paper. When in Amreeka, do your ass like the Amreekans do.

My apartment and my office have two contrasting flushing systems, both of which seem superior to the system we have in India (the flush in my apartment in Bangalore is especially inefficient, especially when I download large volumes). At home, water starts swirling around in the WC as soon as I pull the trigger, slowly and steadily. Soon the pace picks up and the water level starts going down, pulling the crap along with it. And in a few seconds the pot is clean, and new water comes in so the level of water in the pot is restored. Actually I’ve noticed that the normal level of water in the pot in my apartment is much higher than it normally is in western loos. I think it’s similar to a football defence playing with a high offside line!

Office is a new building so has even more sophisticated loo. First of all the flush is automated – as soon as you get up and start buttoning up your pants the thing goes, though there’s a button which you can push in case the automatic thing fails. This is the first time ever that I’ve seen automatic flush in a pottystation. I’d earlier seen it only in urinals.

So the flush operates with a vacuum mechanism, much like the flushes on flights. So some pump gets into operation and sucks in all the shit and the paper and everything else in one smooth motion. And then there is a water jet to clean up any remnants, and that gets sucked in too. Finally, there is some fresh water ready to take shit.

The best thing I’ve found about my office loo, however, is the seat paper. So in this special compartment in the potty station you get paper that’s shaped in the plan of the commode (plan as in top view; I hope you can picturize). So when you go in, you pull out one such paper and put it on to the seat, and then take your seat and do your business. And once business is done, send this paper also packing into the WC!

Excellent idea, I think, because the biggest crib that people have about commodes is that they have to rest bare arse on the same space that hosted some other bare arse and this may not be healthy. Providing this facility allows you to take insurance about that, and you need not put your ass-to-risk*. I hope this starts getting implemented soon enough in India also, especially in public facilities.

Some links:

1. Vikram Doctor’s excellent take on toilets
2. One earlier time when I had blogged about toilets at work
3. An earlier post of mine, on washing your arse in the Thames
4. A post on loos and sacred threads. One of those one-liner posts I stopped posting after I started tweeting. This post would become significant later in my life in a most unusual manner

The impact of Rs. 2/kg rice

In the supplement of yesterday’s The New Indian Express (one of the six articles is here: http://epaper.expressbuzz.com/NE/NE/2009/07/12/ArticleHtmls/12_07_2009_412_002.shtml?Mode=1), it was argued about how the combination of NREGS and cheap rice (most states provide or promise to provide 25 kg of rice per month per poor family at Rs. 2 per kg) is destroying the rural economy.

One day of work under the NREGS gives a person Rs. 100. Half of that will go into buying rice for his family for the ENTIRE MONTH. Extending this argument, twelve days of work under the NREGS will feed his family for the whole year. Given that the staple is taken care of,, there is little incentive for the villager to work to earn more. And so there is a severe shortage of farm labourers, other rural workers, etc.

When the NREGS came about, some people applauded it saying that it would ensure that minimum wage laws would now be met. Given that people were now assured of a certain sum (say Rs. 100 per day) for doing meaningless stuff like digging and filling holes, they would go to do other harder and more meaningful work only if they were paid more (and you need to take into account that “real work” takes more discipline, hard work, etc. than it takes to wrok for a welfare program – so the NREGS actually pushed up the minimum wage for farm labour to much higher than Rs. 100).

Now, with various states coming up with cheap rice schemes, the whole thing has gone topsy turvy. Given the subsidized rice, it is now possible for the worker to earn enough for his staple food by just doing a few days of work under the NREGS! The only need for him to work elsewhere, and possibly harder, is to pay for his “luxuries” (considering the price of subsidized rice, requirements and NREGS pay, it can be shown that 100 days of NREGS work can pay for all the essentials).

Given that the essentials are taken care of by the combination of NREGS and cheap rice, the only reason that the worker will need to do actual (i.e. non-NREGS) is to help him save, or for “luxuries”. Yes, some workers will have special needs for money at different points of time because of which they will take on the extra work, but if you aggregate the supply of work, you will realize that the ‘hurdle daily rate’ for the worker to accept “real work” becomes really high.

Since the worker doesn’t absolutely need the money, he can now become the price-setter in the job market rather than being a price-taker. So what this effectively does is to push the “minimum non-NREGS wage” really high indeed (I can’t intuitively put a number on it, but it could be as much as Rs. 200). My bet is that a lot of rural-economy-produced goods will turn out to be really expensive next year since a lot of producers might choose not to produce them given the high cost of labour.

Quite a few commentators have said that the NREGS is a noble scheme for empowering the poor, and given that most of the ‘work’ done is meaningless, it can be replaced by simple cash transfers. The problem is that if that is combined with yet another welfare measure such as cheap rice, it can create severe distortions in the market.

The moral of the story is that if you want to help the poor, please go ahead and do so. What you shouldn’t do is to help them twice over – that can result in severe market distortions like the one that the express article talks about. What is needed is greater coordination between the centre and the states in the welfare measures.

Tranche of wallet

One of the buzzwords in marketing in the last few years has been “share of wallet”. “We don’t aim for market share in any particular segment”, they say. “What we are aiming for is a larger portion of the customer’s share of wallet”. Basically what marketers try to do is to design their products such that a larger portion of customers’ spending comes to them rather than go to competitors (again – they claim they have no direct competitors and everyone else who competes for the customer’s spending is a competitor).

So far so good. But the problem with looking at things from a “share of wallet” pespective is that it assumes that the wallet is homogeneous. That each part of the wallet is similar to the other, and spending for different items comes uniformly from all parts of the wallet. This isn’t usually very well recognized, but what matters more than “share of wallet” (of course that matters) is the “tranche of wallet” that this particular product sits in.

I don’t think I need to give a rigorous proof for this – but some spending is more equal than others. For example, if you are dirt poor and have only ten rupees left in your pocket, you would rather buy a loaf of bread than buy a tube of lipstick. Some goods are more important than the others. “Necessities” they call them. The rest become “luxuries”. Even the “luxuries” are not homogeneous – there are various tranches in that.

So the aim for the product manager should be to get into the deeper tranches of the customer’s wallet (assuming that the top tranche is the “equity tranche” – the one that takes the first hit when spending has to be cut). Targeting the top tranche may be a good business in good times, but when things go even slightly bad, spending on this product is likely to take a hit and thus the “share of wallet” falls dramatically. Getting into a deeper tranche means more insurance, so to say.

In the world of CDOs (from where I borrow this tranche, equity, etc. terminology), people who take on the equity tranche and other more risky tranches do so only in exchange for a premium – basically that you need to be paid a premium amount (compared to lower tranches) during good times so that it compensates for lack of income in the bad times. So this means that if you are trying to target the most disposable part of the wallet (i.e. the part of wallet that takes the first hit when spending has to be cut), you better be a premium player and make enough money during good times.

So the basic insight is that. The more disposable spending on your product is for your customer, the more the premium that you have to charge. Some products such as high end fashion accessories seem to have got it right. Extremely disposable spending, which leads to volatility of income; balanced by extremely high margins which make good money in good times.

Certain other products, however, don’t seem to have got it right. One example that comes to mind is Indian IT. Some of the offerings of Indian IT companies come near the disposable end of their customers’ wallets. However, to compensate for this, they don’t seem to charge enough of a premium. So they make “normal” profits during good times, and sub-normal profits during bad times – leading to an average of sub-par performance.

So before you enter a business, see which part of your customer’s wallet you are targeting. See if the returns that you will get out of this business in good times will be enough to tide you over during bad times. And only then invest. Of course, before the 2007-present downturn happened, people had no idea what bad times were, and thus entered into risky businesses without enough of a risk premium.