A newsletter that demystifies
complex economic jargon and
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By Vivek Kaul
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Why I am competing with Squid Games
One of my boyhood fantasies has been to blast the Guns N’ Roses song November Rain when it is raining in November. The trouble is that it has never rained in the places where I have lived for a substantial time (Ranchi, Delhi, Pune, Hyderabad and Mumbai) during November.
The closest I came to blasting November Rain was around a decade back when it freak rained in Mumbai in November. But at that exact moment, I was sitting at the Café Coffee Day opposite the Shivaji Park in central Mumbai, giving a job interview in an attempt to rectify the last job move, which had gone horribly wrong.
So, when it rained in Delhi last Sunday, it came as a pleasant surprise. Well, while November rains are freakish, October rains are a rarity, at least in the places where I have lived.
The quintessential north-Indian overrated temptation of snuggling up with a book while having a cup of chai along with some pakodas took over. The trouble was it was already post-dinner time by the time it started to rain.
Given this, I decided to read a book titled Exponential – How Accelerating Technology Is Leaving Us Behind and What to Do About It, written by Azeem Azhar, and was soon totally into it.
One interesting example that Azhar gives in the book is the impact smartphone sales had on chewing gum. As he writes: “In the 10 years from 2007, American chewing gum sales fell 15% – just as 220 million American adults bought their first smartphone. This was no coincidence. When people got into a shop queue, they would once have spent the time browsing the goodies for sale at the counter – and gum was the obvious choice. Now they were spending that time playing with their phones. So gum sales plummeted.” Of course, nobody saw this in advance and predicted it.
Nonetheless, the example fed into a topic that I have been thinking about lately. In the fast-changing world we live in, do we really know who we are competing against.
In this edition of the newsletter, I will write about all this and much more. Of course, I don’t promise to offer definitive solutions. But I do promise that by the end of this, you will at least start thinking about this basic question, in your own way, taking into account the life that you are currently leading.
So, where do we start?
We start at the very beginning. What is economics? Thomas Sowell, in his brilliant book Knowledge and Decisions, writes: “The classic definition of economics is that it is the study of the allocation of scarce resources which have alternative uses.”
Resources are limited, and they have multiple uses. And this creates a problem of allocation. How much resource do we use and for what output do we use it for, is a fundamental question in economics.
Sowell offers the example of coal. As he writes: “Coal, for example, can produce dyes, electric power, heat, nylon, or liquid automotive fuel.” It is also used as an input in the manufacture of steel and cement. Hence, the allocation of coal for its different uses becomes very important. Another way of saying the same thing would be that different sectors/industries compete to buy coal, as it is an important input in their specific production process.
As we know, India is currently facing a coal shortage. The bulk of India’s coal is mined by the public sector Coal India companies and the Singareni Collieries Co. (SCC), owned by the central government and the government of Telangana. In 2020-21, of the total production of 716.1 million tonnes, public sector companies mined more than 90%. Coal India companies produced more than 83% of the total.
Electricity is produced using coal, among other things. Over the years, India has moved towards renewable energy. In 2010-11, renewable energy formed around 10.6% of the electricity produced in India. By 2020-21, this had moved up to 24.7%, with solar and wind power leading the way.
Nonetheless, the dependence on coal to produce electricity continues. In 2010-11, coal-based electricity formed 54.1% of the total electricity produced. By 2020-21, it had fallen to 53%. In fact, as of September, coal-based electricity formed 53.7% of the total electricity produced in the country. Clearly, the fall hasn’t been much. In absolute terms, more coal is being used to produce electricity now than in 2010-11 as electricity demand has gone up.
Dear reader, this is not a piece on the coal crisis but on competition. Different industries compete for coal. Of these industries, the government has deemed power or electricity produced to be the most important, simply because it impacts almost all of us directly in our daily lives. In that sense, electricity or rather the lack of it, can swing votes.
In light of this, it’s hardly surprising that the government-owned Coal India, which produces a bulk of the Indian coal, has decided to regulate the supply of coal for non-power uses. As a senior Coal India official told the Press Trust of India: “We are regulating supply to meet the sudden jump in demand of coal from the power sector but have not stopped it to non-power consumers. Our daily supplies are in excess of 200,000 tonnes to non-power industries against the normal supply of around 300,000 tonnes.”
This will ensure that the power plants don’t run out of coal. Hence, there will be fewer power cuts than would turn out to be the case if power plants started running out of coal. But it will come at a cost. If the coal shortage continues, other industries will not have enough coal to produce what they do. So the other option for them is to import coal, which will take time and is expensive, given that coal prices have surged over the past year.
This will have an impact across different industries that use coal as an input. To give a simple example, if the problem of coal prices going up persists or enough coal is not available, cement and steel prices will go up. And all other things being equal, this will push up the cost of building real estate and, more importantly, the cost of building physical infrastructure.
Sowell gives a similar example in his book. As he writes: “The cost of any good is the cost of its ingredients, and their cost, in turn, is whatever alternative good had to be foregone in order to use them where they are used. For example, the real cost of a piece of cheese is the ice cream or powdered milk that could have been produced with the same original resource.”
This is how competition for an essential commodity at the heart of any economy works. Also, it’s not always possible to quantify such competition. But that doesn’t mean that it does not exist.
Moving on, we live in a world where many things at an individual level have gone digital. How does the competition work in that case? Let’s now look at that.
Who am I competing with?
When I first started freelancing, sometime in 2011, I wrote pieces for newspapers, magazines and websites. So, in that sense, I was competing with what others were writing for newspapers, magazines and websites. If my writing were better than theirs, I would get more work. That’s how the system worked.
This was before the rise of the cheap smartphone. In our heads, as readers or consumers of content, we still had divisions. A newspaper was a newspaper, a website was a website, and a magazine was a magazine. Gradually, these boundaries broke down.
The websites started to get into the territory of newspapers. Typically, a newspaper would report what had happened today, tomorrow. If a particular piece of news deserved some detailed analysis, that would appear in the magazines in the days and weeks to come.
The websites or the digital only publications first took away the market for breaking news. The newspaper websites caught on to this quickly. The newspapers, obviously, couldn’t. Gradually, the websites also started publishing analyses of events within a few hours of them happening.
For newspapers to continue to be relevant, they got into the magazine space. Long features and analysis, along with better design, became the order of the day. This does not mean that news was not important for them. When it comes to hyperlocal coverage, newspapers still do the best job.
As the nature of competition changed, the Indian magazines were caught napping (in fact, they are still napping). They still haven’t figured out a way to continue to be relevant.
The rise of the smartphone
At its heart, a smartphone is a general-purpose technology (GPT), which has had an impact across multiple sectors. This, as we shall see, has completely changed the media landscape as well.
But before we do that, we need to understand what exactly is a GPT. As Azhar writes in Exponential regarding the car, also a GPT: “To reach their potential, cars needed suitable roads – physical infrastructure that spanned nations. But cars also needed fuel and spare parts, and drivers needed sustenance – creating the demand for fuel stations and roadside cafés. Cars forced changes to the urban environment, and so cities started to change, with precedence going to motorized vehicles.”
These are just a few impacts that the car has had on the general economy. Along similar lines, a smartphone is a GPT. In the Indian case, smartphones have taken off only in the last few years, as they have become cheaper, and so has the internet.
As Azhar writes: “The smartphone has replaced many other consumer devices – Walkmans, calculators, diaries, watches and street maps. Camera sales have collapsed in the wake of the rise of phone cameras. And shopping has changed too.”
The smartphone has changed many other things. In the context of this piece, most importantly, the smartphone has changed how people consume the media, news or otherwise. Any piece of news or analysis can be delivered over a smartphone through various messaging apps or social media, or even email, for that matter. In that sense, the division between magazines, newspapers and websites, has totally broken down. While people in this business may still worry about it, the consumer clearly doesn’t.
Also, it’s not just news and analysis; people are consuming all other kinds of content on their smartphones.
They are watching long Netflix or Amazon Prime OTT series’, Instagram Reels and YouTube videos. In fact, many YouTube influencers, in the business of news or otherwise, have more robust followings than some small media houses. This has changed the advertising game, with many influencers also getting a cut of the big pie.
Then there are podcasts. While the medium may not have many followers in the absolute sense of the term, people who listen to podcasts spend a long time doing it. Also, it allows people to listen while doing other things. So in that sense, it is a powerful medium for anyone looking at niche advertising.
Of course, at its most basic level, one is competing with WhatsApp forwards as well.
In that sense, all boundaries in the media have broken down. And that’s thanks to the smartphone. The division that existed within the news media and between the news media and entertainment has totally broken down. Hence, to put it a tad simplistically, all my writing is competing with Netflix because at the end of the day, you, dear Reader, have an option right now, to stop reading this and move on to watching the superhit series Squid Game.
While this newsletter is free, most news media has gone behind the paywall in an attempt to drive up revenues. So, a consumer of different forms of media needs to decide whether they pay for news media or they buy a Hotstar connection, which lets them watch the T20 cricket world cup. This is a question that has now become very important for those with limited budgets.
At an aggregate level, this reminds me of what happened when in the late 1990s, live European football was first broadcast into Indian homes. We Indians figured out that Indian football was a slow-motion version of European football.
New York Cosmos vs Mohun Bagan at Eden Gardens in 1977 (Source: Mohun Bagan’s Twitter Handle)
Similarly, the Indian filmmakers and OTT series makers also need to up their game at an aggregate level. The discerning Indian viewer is now able to watch content from all across the world. So, such viewers really have no reason to sit and watch every time a Coolie No 1 gets remade. Also, when you can watch the original Govinda, why would you watch a wannabe facsimile Varun Dhawan?
Time and Sleep
As the Netflix CEO Reed Hastings said a few years back: “You get a show or a movie you’re really dying to watch, and you end up staying up late at night, so we actually compete with sleep [emphasis added].” In that sense, everyone in the content creation business is competing with time or the fact that there is only so much of it going around.
Dear Reader, the fact that you have read this piece up until now, means, at least in your head and time-space, I have managed to compete with Netflix, however briefly. For those who dropped out midway, I have failed.
To conclude, I am writing this on a dull and grey Delhi afternoon, where the pollution before Diwali is gradually setting in, the metros seem to be running on time, the sparrows and the pigeons are chirping away as they do, and it looks like it will rain.
And I am still waiting to blast Guns N’ Roses and November Rain in November. The chai and the pakodas of October notwithstanding.
Vivek Kaul is the author of Bad Money and was once labelled Twitter’s favourite economist. Have any feedback? Send in your bouquets and brickbats to him on Twitter.
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