Some food for thought
"My dear friend, clear your mind of cant."
—Samuel Johnson (English writer, 1709-1784)
Word for the day
Cant (n)
Hypocritical and sanctimonious talk, typically of a moral, religious, or political nature.
First random thought this morning
Three popular business models have caught my fancy in past
two decades.
First is the most popular Google model. In this model, the
business uses the classical cross subsidization model to build a captive and totally
addicted (enslaved if you like that better) customer base, and then exploit
these captivated customers at will.
Google first offered an amazing bouquet of free services to all.
Once a critical mass of captivated free users was attained, Google started
subsidizing the cost of free services through advertisement revenue it earned
from businesses who wanted to sell their goods and services to the captivated
audience. Now having gained access to the eyes, ears, homes (including
bedrooms) pockets and minds of over a billion users, Google is offering a host
of services to this enslaved audience.
Second model is the Chinese trade model. In this model, the
vendor first engineers a shift in the supply source to itself. The task is achieved
by a variety of means, like compromising the interest of environment & sustainability,
exploiting labor, evading taxes, offering and manipulating the exchange rates.
In the second leg, the vendor engineers the demand for its product by offering
lowest prices and easiest credit terms to the buyers.
China first engineered the shift of factories to its land from
all over the developed world. Then it copiously funded the fiscal deficit of the
governments of its top consumers, helping sustenance of easy monetary policies
and abundant credit to consumers. It then flooded their markets with cheapest
priced goods to the leveraged customers.
The third model is the most interesting model. It relates to the
business of politics. I am not a well read person. With my limited knowledge, I
believe that this model has been developed by Mrs. Sonia Gandhi, the former
president of the Indian national Congress. Under this model, the leader of the
enterprise enjoys all the authority and remains beyond any accountability. All
the accountability is owned by the foot soldiers, well trained and conditioned never
to challenge the authority of the leader.
All these models, which have defined our economic, social and
political behavior in past 10-15years, are facing serious sustainability challenges
in recent times.
The voices of concern over Google's hegemony are rising louder
in west.
President Trump is seeking to demolish the Chinese trade model
completely.
Prime Minister Narendra Modi is held accountable for everything
happening or not happening in India, including instances of drains chocking in
rains, electricity transformer breakdowns, loss of BJP in JNU elections, etc.
It would be interesting to see how our future generations would be
able to cop without free Google, Social Media, Voice Calling and cheap Chinese
manufacturing. Greater accountability and less powers may also change the
political narrative completely.
Nurturing Raktabīja
The eighth chapter of "Durga Saptashati", one
of the most sacred Hindu religious scriptures, is about the annihilation of a
mighty demon called Raktabīja by the Mother Supreme.
Raktabīja, a very strong demon, had a boon that whenever a drop
of his blood would fall on earth, a clone of his would be born at that spot.
Each such clone will be equally powerful and demonic in character. So it was
almost impossible for anyone to defeat this demon in a fight. Eventually, the
Mother Supreme, along with her many divine manifestations, was able to
annihilate the demon, but not before he had caused immense damage to the forces
of gods.
I will come to why I am reminded of this story this morning, in
a moment.
As per a latest research reports, "India's air conditioner
market is poised for solid growth with a CAGR of over 17% over the next five years." (See here)
International Energy Agency (IEA) in a recent report highlighted
that "The growing use of air conditioners in homes and offices around the
world will be one of the top drivers of global electricity demand over the next
three decades." (See
here)
According to a recent IEA report The Future of Cooling, , "global
energy demand from air conditioners is expected to triple by 2050, requiring
new electricity capacity the equivalent to the combined electricity capacity of
the United States, the EU and Japan today. The global stock of air conditioners
in buildings will grow to 5.6 billion by 2050, up from 1.6 billion today –
which amounts to 10 new ACs sold every second for the next 30 years."
Growth in the India’s air conditioner market is anticipated on
account of rising demand for air conditioners from residential as well as
industrial sectors, extreme climatic changes and emergence of latest
technologies in air conditioners, such as inverter technology and smart air
conditioners, according to a TechSci Research report.
As per some estimates, Indian electronics market is expected to
grow at 41% CAGR between FY14-FY20 to reach US$400bn. Consumer electronics
exports from India is also growing gradually, and is already in excess of
US$250mn.
Some of the key drivers cited for the likely non-linear rise in
the consumer durable in general, and air conditioners in particular, are as
follows:
(a) Change in weather
patterns. Longer and intense summers, even in some hilly areas and traditional
cooler cities like Bengaluru.
(b) Greater and more
predictable electricity supply.
(c) Rise in
affordability, as income levels of middle class households rise.
(d) Change in
air-conditioning technology, motivating replacement demand in favor of modern
energy saving air conditioners.
(e) Changes in trade
and consumption patterns. For example, rise in (a) organized retail formats,
(b) processed food consumption, (c) office space for ITeS industry and modern
manufacturing; etc.
(f) Modernization of
public transport, etc.
The listing of couple of white label electronic goods
manufacturers in past one year has enhanced the market interest in this sector
significantly; even though the consumer durable market has been witnessing good
growth for past few years.
As an "Investor", I am faced with a serious dilemma
here.
I can clearly see, that consumer durable market, especially
air-conditioning market, is going to grow exponentially in next few years; just
like the way motor cycles, mobile phones and single family apartment markets
have grown at various point in past 25years.
The dilemma before me is that I see air conditioner as a product
which is similar to the mythical demon Raktabīja. For, every few ACs
sold may be generating demand for another AC.
No, I am not talking about the vanity issues or household
rivalries here. I am trying to highlight a serious sustainability issue.
Each air conditioner installed in a house, mall or factory,
generates tremendous amount of heat outside the premises it is cooling. That
heat goes on to raise the outside temperature and thus forcing demand for more
air conditioners. It is a vicious cycle that shall go on endlessly.
Of course other factors such as rising vehicle population,
deforestation, etc. are equally responsible for rising temperature, but I find
air conditioners to be more demonic, as I do not yet see anyone highlighting
this as a serious concern.
In recent exercise to rationalize the GST rates, the GST council
reduced the tax rate for air conditioners. It is for the first time, the
government has recognized air conditioners as a non-luxury item. We may
therefore see more incentives for the industry, enabling it to grow even
faster.
No denying that at this given point in time, air conditioner is
becoming an essential household appliance, just like refrigerator or cooking
gas.
But the point to ponder is how did it become an essential item,
and how would we ever get rid of this!
In the meantime I am wondering "Should I shun AC
manufacturers and sellers, just the way I do with the tobacco sellers!" or
"Should I seize this opportunity to invest in these firms and make some
money so that I can install some air conditioning in my toilet too!"
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