Thursday, March 24, 2016

Easy Money and the Death of Darwinism


Business must have started with innovation and grown with imitation. The first traveling salesmen or money-lenders would have probably not worried too much about the uniqueness of their idea - there was enough space for everyone to survive and thrive. Then as markets must have begun to saturate, each new shopkeeper or money-lender must have found it difficult, and must have been forced to innovate again, or move to a new unsaturated market. This cycle must have repeated a thousand times in history. And as this happened, the scale of business must have changed, with brotherhoods of craftsmen, with trade-centers, then the Industrial Revolution and most recently with the Internet.

Today the theoretical scope of most businesses is global. Information Technology, the Internet, the English language (and translation tools) and the evolution of similar cosmopolitan markets have made the spread of business easy. The availability of funds is no longer the biggest constraint. The world is indeed your playground.

So that's great, isn't it?

Well yes, obviously; and no, not so obviously. You see, in the traditional setup, there was a fair bit of rich-get-richer, but there was Darwinism as well at play. It took generations of good work for, say, a restaurant to build a reputation. In the absence of a TripAdvisor or a Zomato, when people asked around for the best restaurant, those few restaurants with reputations would get disproportionate referrals. New restaurants would really have to work hard and innovate around customer-segments, service and of-course food to make it (as) big.

What happens now is different. Any hole-in-the-wall food outlet can get the same visibility as a third-generation restaurant. The good part is that a lot of these small guys get orders, which, a decade back, they wouldn't. The bad part is, and this part is controversial, not all of them deserve your orders. Try ordering.

Some of these guys are genuine, talented folks trying to make it in the new economy. But some others are fly-by-night imitators, who know they can order from themselves and make money, use cheap oil, run a happy-hour deal and get orders, and to cut a long story short, substitute marketing for reputation. Some will even get bigger and get funded, and then start offering you 'deals' that help you decide in their favor. Others will serve a few customers, get bad feedback, and relaunch with another name. They will buy banners and come up first in searches (no offence meant, but really how many feedbacks does a typical Foodpanda outlet have, and how hard is it to buy that?), and to cut a long story short, make money, while a lot of genuine outlets will find the going tough.

Today anyone can become an eCommerce seller, a delivery outfit, a home-improvement service, a beautician or a taxi-operator. At the level of businesses, someone's money can ensure you take a shortcut to scale and get ahead of other competitors. To be clear, what it means is that if your money comes in, you'll suddenly have pole position - but of-course it doesn't mean you'll win the race - which is fair. But if the investment-led discount-madness continues even for a while, the waters get muddy.

What is not fair is when the best team folds up because they have been undercut on price, swamped out of marketing race, had their key people poached, or any other reason that has nothing to do with how good one is at delivering the value the customer wants.

Here's wishing the madness eases soon. Here's wishing a return to meritocracy. May the best team win.