The Oxymoronic Disruptions
Why are local Social Media influencers making more bucks than celebrities?
Why businesses are borrowing less when interest rates are rock bottom?
What makes humans, businesses, societies, survive & thrive through centuries?
“Sometimes even to live is an act of courage”
Lucius Annaeus Seneca, the Roman stoic philosopher, once said the statement seeing severity, challenging, and struggling situation which people less privileged go through day after day.
The Pandemic came and along with it, brought in, similar uncertainty, similar fears, and similar despair, this time for everyone.
20 months hence, the world is opening up, vaccinated (and even unvaccinated) populous thronging every shop, every restaurant, every destination, in search of peace and happiness which they have been deprived of for over a year and a half, so as they believe (Finding happiness outside, in things, places, people, when it lies within us)…… Earlier one craved being at home, spending time with family, pursuing a passion, and when one got the desired outcome, one wished to step out in search of previous normal.
Not only People but businesses suffered too. Some businesses, sectors, segments, remained unscathed some flourished, some prospered immensely. Technology, Chemicals, financial services (thanks to booming stock markets & hyper fundraising activity both in debt & equity worldwide) to name a few are the ones, which kept going when the world and economic activity stayed stalled. Some smaller enterprises completely got wiped out whilst some stayed afloat.
Post the first wave, businesses started collecting broken shattered pieces and initiated the rebuilding process. A ghastly second wave emerged swiftly causing further and deeper damage. Now, at the present moment, from the face of it, things are getting back to normalcy.
Normalcy doesn’t mean necessarily normalcy for businesses as businesses again and especially the smaller ones (large businesses always have a bit of air-cover and shock-absorbing capacity) are in a wrestling match with uncertainty. Moment by moment changing energy prices, ever-changing raw material prices, hike in wages, rise in commodity costs all are pushing the smaller businesses to the corner.
This kind of disruption, this kind of uncertainty, this kind of challenging scenario occurs once or a couple of times in every century and it shakes the very core of smaller firms that have the risk of getting uprooted completely in the tornado of ambiguity.
Some of the interesting (word reflects the sentiments only for the beneficiaries) whilst for others, a disturbing phenomenon which one is witnessing today worldwide includes the following. I call it Oxymoronic economic activity.
1. Interest rates have been lowest in Independent India’s history and more corporates are paying off or paring off their debt. The Credit Offtake is ~ 2 decades low. (Lower Interest rates mean higher borrowings, whilst the contrary is happening here).
2. Unemployment is rising across the World, but so is the demand for labor and thus wages. (Ideally rise in unemployment pushes wages down, however the unexpected is happening. Social security allowances, fear of life, unwillingness to return back to the office are some of the reasons why people are quitting the workforce. Also, unskilled labor is finding it difficult to get jobs, as communication and computer skills are expected to be basic hygiene and technology is now in every sector and is impacting every aspect of one’s life.)
3. World has more Poor People than ever before and demand for Luxury items (consumed by the Super rich) is burgeoning whilst demand for low ticket FMCG (Fast-moving consumer goods) is slowing down. (The Wealth of Rich has grown in the last 18 months at a supernormal speed and so has the dissatisfaction in their relationships. Thus shopping and buying expensive goods are easy and cheap mood-lifters.)
4. Over 300 million People (maybe now 400 million) use or play or deal or invest (whatever word one wishes to use) in cryptocurrency. Of this 300 million, 100 million alone are in India making it the largest base for Crypto. Interestingly, Crypto is the fastest way of losing lots of money as well. Squid Game Crypto Currency became ZERO from USD 2800 in five minutes. Lots of people must also be getting richer by trading in Crypto as well (Pun intended).
5. Revenues are rising and revenues are rising handsomely, however, Profitability is declining. This is on account of shrinkage in margins. Unpredictable raw material costs, energy costs, commodity costs all not one are the culprits. Since Wholesale prices are moving up, manufacturers are passing the price hike to the end consumer and thus retail inflation in the Western World is a four-decade high.
6. The World is more leveraged than ever before and the biggest borrowers this time is not corporates but Governments worldwide. With rising inflation, one wishes to increase the interest rates to calm the Inflation. But increasing the interest rates will directly and first hit the biggest borrowers — Governments worldwide.
Who decides the Policy rates? Government. Why then should the government be axing the very branch they are sitting on?
7. Agriculture which was perceived as a stepchild, pulling growth and economic progress down is making merry due to the rise in Agricultural product prices as well as diversification in Rural income due to an increase in Opportunities in the rural sector.
8. Literate, educated people have lost jobs during the Pandemic and still, they are wealthy due to hyper participation in stock markets. Wealth Effect (The propensity of one spending more when one’s assets/investments in value has risen up) continues to support the overall demand and is keeping the retail end demand buoyant.
9. FIIs used to control the stock markets but now the shift of power has taken place from Big Boys to the common man. Now retail and retail investors drive the market due to ease of execution, ease of knowledge, and TINA (There is No Alternative) factor.
(A bunch of Reddit Investors now have the power to bring mighty hedge fund managers down).
10. Social Media influencers earn more than some celebrities and have a bigger fan following. (Understanding AI, SEO marketing, and custom-made content for the audience in their language, in their community, and in their ethnicity are doing the magic.)
11. After independence it all started with Roti, Kapda, and Makaan (Food, Shelter, and clothing). At the beginning of the 21st century, the focus shifted to Sadak, Bijli, Paani (Road, Electricity & Water). Now Technology (Wifi) is the new Utility and energy is a new luxury.
With these ever-changing norms, one thing is certain which anyways was always certain — “Change”.
Change nope, “Rapid change” which is now more pronounced, more proliferated, more powerful.
What holds good for humans is now even more relevant for smaller or medium-sized businesses? — “Adaptability”
“It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.” — Charles Darwin
