Ten interesting things we read this week

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At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Business (The art and science of bundle), Lifestyle (90-second rule that builds self-control), Economy (Paul Krugman on America’s failing attempt to contain Covid), Technology (As machines get smarter how will we relate to them; Fake news is fooling more conservatives than liberals) and Coronavirus (Richard Koo on why the recovery will be so difficult; 4 new shopping trends post-lockdown in China).

Here are the ten most interesting pieces that we read this week, ended June 12, 2020-

1) Shishir Mehrotra – The Art and Science of the Bundle [Source: investorfieldguide.com]
In this podcast, Shishir Mehrotra, formerly handled product at YouTube, explains the ins and outs of bundles. He talks about why he is interested in the bundling business, the concepts of superfan, casualfan, and non-fan businesses. Also, he explores the four myths of bundling. 1) Bundling is bad for consumers as well as providers: In this he gives examples of cable and McDonald’s and showcases how when done well, bundling produces value for both consumers and providers by giving access for (and revenue from) CasualFans. 

2) Revenue from bundles should be allocated based on usage: To explain this well, he coins a term, “Marginal Churn Contribution”. In other words, he thinks that the best way to distribute money to provider X within a bundle is to ask “if I were to remove X from the bundle, how many people would churn?” 3) Bundles will always feel like a rip-off to consumers since they represent a lack of choice: For a Consumer to properly value a bundle, there must be a transparent (and reasonable) a-la-carte price for each of the products in the bundle. 4) The best bundles are narrow and have very similar products so they make sense to consumers: Mr. Mehrotra says that the best bundle is one that minimizes SuperFan overlap and maximizes CasualFan overlap. Over the years, he has found that of the 4 myths described, Myth 4 is inevitably the most controversial. It is certainly counter-intuitive and, in practice, difficult to implement. Typically, the question posed is: even if the “minimize SuperFans logic” is sound, isn’t it still too hard to explain such diverse bundles to consumers? The short answer is: yes it is hard to market diverse bundles... but it is not impossible, and when done well, is the key element to producing great bundles.

2) The 90-second rule that builds self-control [Source: psychologytoday.com]
No matter what the situation is, we ourselves are responsible for our reactions. Many a times we take decisions that we regret later. Or we get angry within a fraction of seconds and react accordingly, only later to realise that the situation could have been handled in a better way. In this piece, brain scientist Jill Bolte Taylor, author of My Stroke Of Insight, describes our ability to regulate that neurological process that she calls the 90-second rule: “When a person has a reaction to something in their environment, there’s a 90-second chemical process that happens; any remaining emotional response is just the person choosing to stay in that emotional loop.”

When someone or something sets us off, it’s because we don't possess the impulse control or we're not aware of another way to respond to the upsetting situation. No situation and nobody can make us feel or do anything. Just as Vicktor Frankl wrote in his book, Man’s Searching for Meaning, “When we can no longer change a situation, we are challenged to change ourselves... Everything can be taken from a human but one thing: the last of the human freedoms—to choose one’s attitude in any given set of circumstances, to choose one’s own way.” A preventive and more mature approach is making a U-turn and practicing the 90-second rule before the damage is done. Scientists say that constant reaction to things beyond our control not only creates misery but it also shortens our lives. 

Chronic reactivity creates a stressful biochemical boomerang that weakens the immune system and increases the likelihood of a heart attack or stroke. The next time you feel yourself triggered that helps you regulate your reaction: “Look at the second hand on a watch. As soon as you look at it, you’re now observing yourself having this physiological response instead of engaging with it. It will take less than 90 seconds, and you will feel better. Of course, you can always go back to thinking those thoughts that restimulate the loop. There’s probably a thought somewhere in your brain of somebody who did you wrong 20 years ago. Every time you think of that person it still starts that circuit. When things are getting hot and you’re getting hot-headed, look at your watch. It takes 90 seconds to dissipate that anger response.”

3) Paul Krugman: America fails the Marshmallow test [Source: NY Times]
Every country is trying to flatten the curve of rising Covid cases. Some of the countries were also able to contain the spread and flatten the curve. But when it comes to America, Paul Krugman, an American economist, feels that America has failed. New U.S. cases and deaths have declined since early April, but that’s almost entirely because the greater New York area, after a horrific outbreak, has achieved huge progress. In many parts of the country — including most populous states, California, Texas, and Florida — the disease is still spreading. Overall, new cases are plateauing and may be starting to rise. Yet state governments are moving to reopen anyway. But why is America failing?
 
It’s easy to blame Donald Trump. But America’s impatience, its unwillingness to do what it takes to deal with a threat that can’t be beaten with threats of violence, runs much deeper than one man. There have been enough international success stories in dealing with the coronavirus that America can learn from. First, you have to impose strict social distancing long enough to reduce the number of infected people to a small fraction of the population. Then you have to implement a regime of testing, tracing and isolating: quickly identifying any new outbreak, finding everyone exposed and quarantining them until the danger is past. 

This strategy is workable. South Korea has done it. New Zealand has done it. America in 2020, it seems, is too disunited, with too many people in the grip of ideology and partisanship, to deal effectively with a pandemic. America has the knowledge, they have the resources, but they don’t have the will.

4) As machines get smarter how will we relate to them [Source: Wired]
Artificial intelligence has made a vast change in our lives. The way we shop, the way we listen to music, or even driving. Generally speaking, people adapt well to new technologies. We steer hunks of speeding metal and communicate via tiny icons with élan. But more complex and dynamic AI systems, like robot cars, will challenge us in new ways. Millennia of biological and cultural evolution have given us brains and societies primed to read the behaviors, quirks, and transgressions of other people. With thinking machines, says Iyad Rahwan, director of the Max Planck Institute for Human Development in Berlin, “we're sort of stumbling in the dark.”

The hazards of not thinking clearly about AI have grown; soon, they will become momentous. The perky feminine-coded personas of virtual assistants like Amazon's Alexa divert us from considering the risks of allowing large corporations to record in our intimate spaces. The way that drivers, cyclists, and pedestrians understand and react to robot vehicles is a matter of life or death. Even when there's more than a split second to mull an AI system's decisions, its behaviour may be impossible to fully explain. 

Misjudging AI systems may lead us to misjudge people. People may find it even harder to clearly see the functions and failings of more sophisticated AI systems that continually adapt to their surroundings and experiences. As we interact with more AI systems, perhaps our own remarkable capacity for learning will help us develop a theory of machine mind, to intuit their motivations and behaviour. Or perhaps the solution lies in the machines, not us. Engineers of future AI systems might need to spend as much time testing how well they play with humans as on adding to their electronic IQs.

5) As India unlocks, here are six ways our lives have changed forever [Source: Livemint]
The current pandemic has come as a shock for everyone. From big to small and rich to poor, all have been affected by this pandemic. And this piece, throws light on how the world would be divided into two eras, BC (before covid-19) and CE (covid-19 era). Our lives will change dramatically. Working from home will be a norm for most of the organisations. The CE experience is unfamiliar and nothing in our living memories or lessons from history has prepared us for it. Yes, there was the Spanish Flu in 1918, but that’s so long ago that there is no visceral memory. 

Here’s how in six ways our lives would change forever: 1) A firewalled world: The key driver here is fear and mistrust of the outsider. The closest level of fencing starts with the home, extends to the neighbourhood/gated community and may continue to expand in ever widening circles to city, district, state and country. The circle of those whom we trust will probably whittle down to a handful. 2) The post-touch world: The key driver is the fear of infection. While currently this takes the form of wearing gloves or sanitizing everything obsessively, systemic solutions for this too may emerge. 3) Health data is the new oil: The key driver here is public safety. A Schengen Visa requires a covid-free certificate for application, one pre-travel test and another when you land. A health score could become as essential to life as one’s credit score.

4) Everything from home: The key driver is the sudden move to work-from-home (WFH), across organizations and sectors. Companies like TCS, Twitter, Facebook, Google and Accenture have announced that a significant part of the workforce will now be working from home as the norm. 5) Minus-one living: There is huge uncertainty around current jobs and the value of investments has plummeted.

Unemployment could rise to levels not seen since the Great Depression. Organizations, unsure of their future and dealing with southward graphs, will look at cost optimization and be more short-term driven. 6) Class clash: The already-high Gini coefficient may climb higher as unrest and anger among the poor, who are likely to get poorer, emerges as another key driver. The sharp contrast between the cushy lives of the well-to-do and the poor could lead to a huge class battle. And this all will depend on when the vaccine is discovered and manufactured in mass quantities. 
 
6) Covid-19 threatens Europe’s success at fighting inequality [Source: The Economist]
The pandemic has hurt each and every one in some way or the other. The people who are the most impacted are the lower and middle class. On February 28th Leon Elsjan of Wipper, a freelance sound technician, was running the sound system at the carnival-ending dance party in the town of Uden, watching costumed revellers consume vast amounts of beer. It would be his last gig for some time. This year’s carnivals were super-spreader events that introduced covid-19 to the Netherlands. In Uden, the death toll rivalled those in northern Italy, and the national government cancelled all public festivals until September. 

Mr. Elsjan of Wipper did not fall ill, but as a freelance, he was vulnerable in another way. For decades, Europe’s vaunted welfare states have kept inequality relatively low. The covid-19 recession threatens that success in three ways. 1) It hits badly paid workers harder than well-paid ones. 2) Lockdowns create new forms of inequality. Some sectors stay open while others shut down, and some people can work from home while others cannot. 3) The severity of the downturn has revealed holes in Europe’s welfare systems. Some countries are patching them, but others are having trouble.

Quantifying inequality is hard, but Europe is clearly relatively egalitarian. One metric is the Gini coefficient, measured from zero (perfect equality) to one (perfect inequality). For income after taxes and transfers in 2017 (the most recent year available for comparison), the Gini coefficient of the EU was about 0.30. In America it was 0.39, while East Asian countries like Japan and South Korea fell in between. In recent years, some economists have argued that wars and pandemics can lower inequality by destroying the wealth of the rich and creating opportunities for the masses. In a paper last month, economists from the IMF found that for epidemics, this did not hold: the big ones of the past century raised inequality. Mr. Elsjan of Wipper does not count on his industry coming back: “When I talk to younger guys, I tell them to think about another career.”

7) Fake news is fooling more conservatives than liberals. Why? [Source: The Economist]
The “infodemic” around Covid-19, declared by the World Health Organisation (WHO) in February, is not the world’s first outbreak of misinformation. This time the myths include the notion that the disease can be cured by drinking methanol, which has led to more than 700 deaths in Iran, and that it is spread by 5g transmitters, which has convinced arsonists in Britain to carry out more than 90 attacks on phone towers. Just as the virus lodges in people’s lungs, dangerous ideas are infecting their minds. One big difference between the infodemics of the 1300s and 2020 is the rapid worldwide transmission of today’s nonsense, enabled by the internet. 

In March a poll by Gallup International of 28 countries in four continents found that in all of them, at least 16%—and as many as 58%—of people thought Covid-19 was being deliberately spread. Just as misinformation is not new, nor is its political use. In 1964 an essay by a historian, Richard Hofstadter, on the “paranoid style” in American politics described “the sense of heated exaggeration, suspiciousness, and conspiratorial fantasy” running through everything from 18th-century protests against the Illuminati to the anti-Masonic movement. Yet whereas Hofstadter argued that the paranoid style came as easily to those on the left as on the right—for instance, he cited the rumours of a slave-owners’ plot that were propagated by some abolitionists—today’s infodemic appears to be spreading more easily among the world’s conservatives than its liberals.

In America, the Pew Research Centre found in March that 30% of Republicans believed the virus was created intentionally, nearly twice the share of Democrats. Last month a poll by YouGov found that 44% of Republicans think Bill Gates wants to use Covid-19 vaccines to implant microchips in people; 19% of Democrats agree. Wilder conspiracy theories aside, conservatives also seem more likely than liberals to question the official line on the pandemic. In late March, with Britain freshly locked down, a quarter of Tories but only 15% of Labour supporters believed that Covid-19 was “just like the flu”. Structural shifts may explain why conservative voters seem to be more prone to the infodemic, and why conservative leaders have more reason—and are more likely—to undermine reliable sources. For one thing, conservatives’ complaints that elites are not on their side have become more plausible.

8) 4 new shopping trends revealed in post-lockdown China [Source: World Economic Forum]
When something like the current pandemic happens, change is bound to happen. But when, where and how no one can say. Likewise, China is seeing a sea of change, and a few of them are related to their shopping behavior. Transaction volumes on JD.com on the first day of 618 Grand Promotion, the biggest mid-year shopping festival in China, which kicked off on 1 June, showed an increase of 74% year-on-year, demonstrating a strong recovery of consumer confidence. Here are four trends that have emerged: 1) A big step forward in online shopping habits: In the first four months of this year, China’s total retail sales of consumer goods amounted to RMB10.68 trillion ($1.5 trillion), a decrease of 16.2% compared with the same period last year, while sales of online retail reached RMB2.56 trillion ($360 billion), an increase of 8.6%. This shift from offline to online is significant and has continued after the lockdown. 
2) More family responsibilities for young consumers: Young people are the main driver of lockdown shopping, as they are savvier about using online shopping apps. Data indicates that since the beginning of this year, more than 70% of consumers born after 1995 have shifted from "buying only for themselves" to “buying necessities for the whole family”. 3) Shopping frenzy led by livestream and community group buying: To manage social distancing, consumers are using digital to connect, entertain and shop, fuelling a surge in livestreaming by retailers and social e-commerce. These innovative ways to shop have helped bolster sales for both international brands and local businesses.

4) Value for money, comfort and the new normal: Consumers have become cautious in buying related decision-making in this pandemic. Hence, sales of customized products directly tailored to consumers' needs have surged. As a result of Covid-19, customers are looking to invest more in products and services that provide comfort at home. Data shows that besides books and exercise equipment, expensive home furnishings goods - such as latex mattresses, silk quilts, smart bathroom mirrors and electrically heated towel racks - are in high demand. Although in many respects work and life have resumed in China, shopping data shows that people are shopping with the aim of adapting to the new normal.    

9) 3 top bosses reveal how to strike work-life balance while WFH with their spouses [Source: Economic Times]
Covid-19 has shifted our offices to our homes. Balancing between the household chores (as of course, there are no maids now!) and office work has become a task that no one actually thought of earlier. In this piece, three business heads talk about what it’s like working from home with their spouses, who are professionals too — and how they juggle work and family under one roof. 1) Rohan Bhargava (Co-founder, CashKaro): “Swati and I manage different parts of the business. While working, we are in our own zones managing our individual responsibilities. At the same time, because we are next to each other, strategic decisions are happening a lot faster. At the office, we would not even get time to speak at times. The current situation brings back amazing memories of when Swati and I started this business in a small apartment in London years ago.”

2) K Ganesh (Founder, GrowthStory.in): “When I am stuck with a big problem, I consult Meena to get her perspective. The fact that our skills and expertise are different also helps in getting diverse viewpoints. Given that we are rarely in the same conference or call, it is easy to schedule our respective engagements. It helps that we do not have any distractions or young children. The only thing we need to worry about is that our dog Curie does not need our attention at that point in time.” He also suggests keeping family and private time separate and specifically allocated. Also, build in joint fun activities or hobbies into your daily schedule.

3) Samrath Bedi (Executive director, Forest Essentials India): “Karishma and I have worked on certain projects earlier as well, but not for such an extended period. We try and keep work out of our personal lives and have respect for the hours that each of us need to dedicate to the task at hand. As soon as we went into lockdown, we planned a broad itinerary for the day and were able to carve out space in the house for different tasks. It allows for a better understanding of when one is busy and when we can actually enjoy this time with the family.” 
    
10) Richard Koo on why the recovery will be so difficult [Source: Bloomberg]
In the current crisis, how should the policymakers think about future and what are the steps they need to take? Richard Koo has all the answers and in this podcast he reveals them. He is the Chief Economist at the Nomura Research institute, and is well known for having popularized the concept of the "Balance Sheet Recession" drawing on his work from Japan’s post-bubble era. In this podcast, he talks about how his work applies to this crisis, what can be done to revive growth, and why the aftermath will be so difficult.

Mr. Koo says that those people who have savings will sustain less damage compared to those who didn’t have savings. He compares the current crisis with the banking crisis that US underwent in 1991-1992. There was a credit crunch that time and people who suffered almost never borrowed money in the following 10 years. Even if people come out of this current crisis, people will first start saving. 

Talking about household behavior, he says during pandemic, households are too kind. In this pandemic, even if you have the money, you can’t spend in this lockdown. So people would be saving. And for those people whose savings would be dried up, once the economy starts and they are back to work, they will try and save as much as they can. Those people who had income even in lockdown, as they were working from home, in the short run they will be so happy to spend money. So, they are the people who would be spending a lot of money once this is all over. Mr. Koo also believes that there will be a V-shaped recovery for a few months and then it will slow down.