FF Insights #635: How a nation deals with inequality

April 21, 2022: The connection between store size and delivery time; The heights and depths of Alenka Artnik; Swiss Army pencils

Founding Fuel

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Good morning,

In his book The 10 Rules of Successful Nations, Ruchir Sharma, Founder and Chief Investment Officer of Breakout Capital, an investment firm focused on emerging markets, shares his insights drawn from his extensive travel and investment research on what makes nations successful.

One of the ten factors he looks at is how a nation deals with inequality. Every political leader promises to reduce inequality, but what they do on the ground matters.

He writes: “Growth is particularly at risk in countries where bad billionaires (those entrenched in traditionally corruption-prone and unproductive industries) are on the rise, because their success reflects deep dysfunctions: a business culture in which entrepreneurs become brazen after a run of success, a political culture in which officials grow complacent after a long period in power, an economic system in which cumbersome or nonexistent rules open the door to corrupt behaviour.

“Historically, political revolts against inequality have often been as destructive as the inequities themselves. Demagogues who seize private and foreign businesses in the name of redistributing wealth to the poor often end up keeping the money for themselves or their cronies—a pattern repeated with tragic frequency. Africa alone has seen this syndrome unfold under Robert Mugabe of Zimbabwe, Kenneth Kaunda of Zambia, and Julius Nyerere of Tanzania, among others.

“Mugabe ruled for more than three decades, aggressively redistributing property from the old white elite to the black majority, who in many cases did not know how to farm, and appropriating vast wealth for himself and his cronies. Agricultural production collapsed, turning a food-exporting nation into an importer. When Mugabe was ousted in 2017, Zimbabwe was as poor as when he took power in 1980.

“On the other hand, countries may be poised for an upturn if they are repairing the system to reduce inequality—for example, by writing land acquisition laws that fairly balance the interests of farmers and developers, as Indonesia did recently, or by holding auctions for public goods like wireless spectrum in a transparent manner that rules out backroom deals. Mexico’s auction in 2015 to sell offshore oil rights drew relatively low bids, but it was a success for the system because it was conducted live on TV, which made crony deal-making unlikely.”

The connection between store size and delivery time 

In a recent Twitter Spaces conversation hosted by Founding Fuel, Hari Menon, Co-founder and CEO of BigBasket, explained why he thinks quick commerce is unviable.

“A small set of orders get delivered in 10 minutes and it depends on proximity to the dark store.

If you have to make 100% of your deliveries in 10 minutes, then your radius has to be less than 500 metres. And therefore you need many more dark stores. And if you are serving only 500 metres then you will have x number of customers and so the dark store has to be smaller. But with a smaller dark store your ability to carry a range of products reduces.

“So, delivering all orders in 10 minutes is possible, but it’s crazy. It will not make money.

“The key is, what does the customer want? These things will evolve and customers and businesses will figure out their sweet spot.”

In a recent piece in MoneyControl, TN Hari, Menon’s colleague, says the sweet spot is likely to be 60 minutes, and explains his reasoning thus:

“My prediction is that the end-game for online grocery would be about being able to deliver an assortment of roughly 8,000 SKUs (give or take a few hundred) in 60 minutes.

“Companies are likely to approach this end-game from two directions; namely a) from 3,000 SKUs 10-19 min delivery to 8,000 SKUs 60-min delivery, and these will be companies such as Zepto and Dunzo, and b) full service companies like BigBasket (100,000 SKUs with 5-12 hour delivery) getting to 8,000 SKUs 60-min delivery.”

Dig deeper

The heights and depths of Alenka Artnik

Once in a while we come across exquisitely stories that elevate the spirit. Such as that of Alenka Artnik, the world’s greatest woman freediver. Overstruck by grief given her circumstances, Alenka found herself on a bridge, contemplating suicide, wanting to jump into the water below so she could drown herself. But she held back and went on to craft an altogether different narrative.

“Like pole-vaulters, free divers must announce their targets before they begin. For each competitor, the organisers adjust the length of the rope, at the bottom of which is a plate covered with Velcro tags. For the attempt to be successful, the diver, upon surfacing, must hand a tag to the judge, make the ‘okay’ signal with their fingers and thumb, and remain conscious with their head above the water for 20 seconds.

“Alenka starts her Vertical Blue dives with a 100 metre-plunge and completes it easily. A few days later, 103 metres. Then a metre deeper. If she can manage 105 metres, she will equal Zecchini’s world record. On the live internet stream of the dive, the commentator remarks on Alenka’s ‘perfect control, perfect technique’ after she comes up. 

“Hirose and Zecchini also reach 105 metres. Each diver has another two dives to go deeper. But a voice in Alenka’s head tells her to pause. 

“You need more time at these depths, she thinks. You are strong enough to stop here.

Hirose pushes on to 106 metres and then attempts 107 metres. On the ascent she blacks out. Zecchini tries for 107 metres and triumphs. 

“Alenka’s decision to step away after such a comfortable dive puzzles other competitors. Why quit when you have a chance to win, to claim a new world record, and to raise your international profile? Alenka has no partner, no kids, and no job to return to. What does she have to lose?

“But Alenka’s personal descent has taught her something: When you’ve been to the very edge of the abyss and found what makes you want to return to the surface—to live—you have everything to lose. 

“If anyone had asked, she would have answered: I feel too responsible to life to do something just because of my ego. This is why Alenka has never experienced a lung squeeze, why she has been one of the very few competitors to have never felt the breath of a safety diver on her eyelids to coax her out of that breathless, mammalian state. This is why she still, to this day, has never blacked out. 

“She refuses to become a danger to herself.

“But dangerous to her rivals? That will come.”

Dig deeper

Swiss Army pencils

(Via Reddit)

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Warm regards,

Team Founding Fuel

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