Category Archives: Vintage

Parting quiz

Who wrote this? Where is it taken from?

The young?man had a peculiar defect in that he could neither accurately describe what he saw nor report what he heard. The only profession where these defects do not matter being journalism, he had gone on to become a journalist.

(This is a paraphrase. It’s been a long time since I read the book, I don’t remember the exact words. I hope I haven’t changed the sense!)

Pepsi and Milk

People are always talking about some market failure or the other that allegedly justifies government intervention. I too have found a case of market failure – in the pesticide in cola issue.

No it is not what you are thinking. I’m talking about the irrational behaviour displayed by consumers. As Swaminathan Aiyar demonstrates(via Yazad), by CSE’s own data, Pepsi is way safer than milk, eggs, meat and other edible stuff. (To be very precise, what he demonstrates is that the actual pesticide content in Indian cola is much less than the Euro norm for the edible stuff just mentioned. Now unless you can make a case that all those edible stuff in India meet and exceed Euro norms by a wide margin, the statement that Pepsi in India is safer than milk, eggs and meat in India holds)

But faced with the fact that their water, milk and eggs are contaminated, customers are boycotting Pepsi. Isn’t that irrational?

Actually, the last statement is not quite accurate, because consumers were not told all these. As Swaminathan Aiyar says, CSE did some clever marketing. They keep saying sotto voce that their aim in carrying out the study was to focus on the water quality, but apparently they worked out that targetting the cola companies would carry more impact than talking about water, milk, eggs etc.

But still, why is that so? I mean, why did CSE take up this particular marketing pitch? Faced with a choice between saying “Your milk, eggs and vegetables are contaminated with pesticides!” and “Your soft drinks contain pesticides!” they calculated that the latter would carry higher impact. Surely this tells us a lot about the irrationality of customers? Faced with a choice between worrying about an issue that concerns their health and an opportunity to bash up MNCs, CSE thought that the people would choose the latter, and they seem to be right.

I think this is a clear case of Market Failure. But I am not calling for government intervention to force the people to buy cola. I just want to understand the consumer’s mind.

I don’t think this irrationality comes about just because of a dislike for MNCs. In my view, there is another explanation. Pepsi and Coke are “fun”.Things like milk and vegetables are necessities When it comes to the latter, people are perfectly capable of being rational. They won’t stop drinking milk just because it is somewhat contaminated. They are capable of taking calculated risks. But they don’t want to take any risk when they are doing something they think of as enjoyable (and frivolous, hence something they ca? do without). They don’t even like to be reminded of the danger. This dual mode of thinking leads to a perverse result – Pepsi and Coke are subject to a higher standard than miilk, eggs and vegetables though the latter are consumed much more often than the former.

That brings me to this article Ramnath wanted me to look at. It essentially argues that the cola companies mishandled the issue; they should have taken problem head on by admitting guilt and stopping marketing soft drinks till they were thoroughly tested and Euro-level standards were introduced. This would have built “trust and goodwill” among the consumers.

Sorry, but I don’t think so. I am not talking of the ethics of doing this, but business-wise, this would have been a bad decision. If I am right about my claim that customers don’t want to think too deeply about fun stuff, then taking such action would not lead to goodwill. It will simply remind people of pesticides. (“I don’t have soft drinks any more. They had some problem with pesticides because of which they had to withdraw from the market for months. They claim they’ve fixed it, but who knows and who cares?” )

The cola executives best hope is that the issue will blow over, and pesticides move from the front of their consumers’ minds to the back.

I don’t like this. As I have pointed out, this is a clear case of market failure. I would have preferred it if the cola companies tackle the issue the same way as I (or Swami Aiyar) have done – by pointing out facts, figures and logic. But I understand why they don’t do that.

(This will also explain why Pepsi and Coke don’t compete with each other on pesticidefree-ness. If Pepsi says “Drink Pepsi because Pepsi has 70% lower pesticide content than Coke” or some such thing, chances are, customers will desert not just Coke, but also Pepsi.)

The reading habit

Spending nights in a hotel room with nothing to do meant that I rediscovered my love of reading actual paper books. For me its an expensive hobby. My reading speed of 350 words per minute meant that I finished the India Unbound book I mention below in 2 nights. At that rate of devouring books, a few hundred bucks per book soon add up to real money. I suppose this bad habit will soon be cured.

Here is a quiz. Can any of my readers identify this passage? Who is the author and what is the context?

“All great literature must echo the soul of man. The struggles, agonies and anguish in the soul of the individual must be reflected in the work, against the background of historical and social convulsions of the countries in which the individual finds himself tossed about as a helpless victim. All the grimness of existence must find a place in a writer’s work. Above all, a certain degree of obscurity and difficulty of idiom in the text enhances the stature of a literary work.

“Applying these tests, Narayan’s work fails. His writing is too simple, and too readable, requiring no effort on the part of the reader. Mere readability is not enough. A reader must be put to work and labour hard to get at the meaning of the sentence; only then can he feel triumphant at having mastered a page.

Imports are better than exports

Why didn’t anyone blog about this article by Swaminathan Aiyar?

the language of economic diplomacy at WTO is highly misleading. When a country lifts a ban on imports, its negotiators at WTO claim it is a sacrifice. In fact the supposed sacrifice is a huge gain to consumers, who can now buy something that was not available earlier (save through smugglers).

Similarly, when a country agrees to lower its import duties at WTO, negotiators claim they have made a sacrifice. Yet, this enables consumers to buy the same item at a lower price. What diplomats call a sacrifice is actually a gain for ordinary citizens.

Why do economic negotiators of all countries use such crazy language? Are they ignorant of economics, or devoid of common sense? No, not at all. But at international negotiations they act on the unstated but dubious assumption that public interest lies in increasing the profits of their producers rather than in reducing prices for consumers. You might think that country negotiators would speak for the masses rather than corporates, especially socialist ones. Yet socialist countries (like India during the licence-permit raj) have always been at the helm of sacrificing consumers at the altar of producer interests. And all in the name of the poor!

Back

I had gone off on work and now I am back to enjoy the joys of unrestricted internet access, 1152 * 864 screen resolution, my browser configured the way I want it, and all the software I requir? already installed. So I think I will celebrate the occasion by blogging a bit over the weekend. But it will be only a short burst of activity after which we return to our already announced slowdown

Good old days

Mahesh writes:

…there was a time, in an India that I never knew, when we had to queue up for everything: sugar, rice, milk, cooking gas, telephones… even Bajaj scooters and HMT watches!

Makes me feel so old.

How was electricity adopted?

An unresolved question for my readers. This came up in the course of a heated discussion which threw up questions but no answers.
You needed power generators to make investing in inventing electrical appliances such as light bulbs and pumps worthwhile. But it wouldn’t be worth setting up power plants unless there was a market for it. So how did this get resolved?
Answers with suitable references will get extra credit. As a prize, the first person to answer correctly and comprehensively will be invited to my wedding*.

*So will all my other readers, but I think you should answer anyway.