Some of the most fascinating topics covered this week are: Lifestyle (Learning, growing and thriving in adversity), Investing (ESG at a tipping point), Technology (Long-tail problem in AI; How India became a hack-for-hire hub) and Geopolitics (China has blown its historic opportunity)
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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: Lifestyle (Learning, growing and thriving in adversity), Investing (ESG at a tipping point), Technology (Long-tail problem in AI; How India became a hack-for-hire hub) and Geopolitics (China has blown its historic opportunity) Here are the ten most interesting pieces that we read this week, ended July 31, 2020- 1) A Framework for Learning, Growing and Thriving in Adversity [Source: TEDxGateway; YouTube]2) Understanding and shaping consumer behavior in the next normal [Source: mckinsey.com]
The current pandemic is unique for the world. Many are struggling to cope up with their daily routine in this crisis. People no more can go to gym, shopping malls, social gatherings, etc. Such disruptions in daily experiences present a rare moment. The Covid-19 crisis has caused consumers everywhere to change their behaviors—rapidly and in large numbers. In the United States, for example, 75% of consumers have tried a new store, brand, or different way of shopping during the pandemic. Even though the impetus for that behavior change may be specific to the pandemic and transient, consumer companies would do well to find ways to meet consumers where they are today and satisfy their needs in the post-crisis period.
In such a situation, the following five actions can help companies influence consumer behavior for the longer term: 1) Reinforce positive new beliefs: Companies that attempt to motivate behavioral change by ignoring or challenging consumers’ beliefs are fighting an uphill battle. When consumers are surprised and delighted by new experiences, even long-held beliefs can change. 2) Shape emerging habits with new offerings: Companies can nudge consumers toward new habits through product innovation. For instance, the Covid-19 crisis has spurred consumers to become more health oriented and increase their intake of vitamins and minerals. Companies like Unilever are pushing such products.
3) Sustain new habits, using contextual cues: To help turn behaviors into habits, companies should identify the contextual cues that drive the behaviors. For e.g., more consumers are keeping hand sanitizer and disinfecting wipes near entryways for easy access and as a reminder to keep hands and surfaces clean. 4) Align messages to consumer mindsets: The quality of a company’s communication and its ability to strike the right tone will increasingly become a competitive advantage. McKinsey’s consumer-sentiment surveys show that consumers are paying closer attention to how companies treat their employees during this crisis—and taking note of companies that demonstrate care and concern for people. 5) Analyze consumer beliefs and behaviors at a granular level: Only monitoring product sales alone won’t help. Companies must also conduct primary consumer-insights work, with a focus on identifying changed behaviors and associated changed beliefs and motivators to get a comprehensive picture of the changing consumer decision journey.
3) ESG at a Tipping Point [Source: CFA Institute]
ESG investing has been gaining prominence lately. Amid the market turmoil of 2020’s first quarter, some predicted that ESG would be exposed as a bull market luxury: “Sustainability” is easy to champion during boom times, but when markets plunge, priorities like securing retirement savings dominate investors’ hierarchy of needs. ESG has defied the naysayers by continuing to attract capital in 2020. According to Morningstar research, mutual funds and exchange-traded funds (ETFs) designated as sustainable attracted $46 billion of inflows in the first quarter, in contrast to the several billion in net redemptions suffered by the overall fund universe. More than 80% of sustainable assets are in Europe. But ESG-oriented funds in the United States attracted record inflows in the first quarter, surpassing their previous record set in the fourth quarter of 2019.
Investor preference for passive, index-tracking strategies has carried over to ESG. This trend has been most pronounced in the United States, where index funds and ETFs captured 80% of sustainable flows in the first quarter of 2020, up from 60% in 2019. In February, Morningstar Indexes published research examining the risk profiles of its ESG-screened equity benchmarks. They found that 72% of the ESG indexes held up better than their broad market parents for the five-year period through year-end 2019. Research by Morningstar and others, across indexes and funds, has found that companies that score well on ESG also tend to exhibit higher profitability and stronger balance sheets, which make them more durable during times of market stress.
Efforts to bolster reporting and standardize ESG corporate disclosures will improve the company-level data that is the fundamental building block of portfolio construction. As the new normal of the post-pandemic world takes shape, there’s little doubt that ESG investing will grow in importance. Not only are sustainable assets likely to increase, but the materiality of ESG issues will be more widely accepted.
4) ‘It’s bullshit’: Inside the weird, get-rich-quick world of dropshipping [Source: Wired]
People are always on the lookout to get rich quick. And dropshipping is one of the tools that youngsters are using to get there. Dropshipping is a "fulfilment" method. At one end of the supply chain, an entrepreneur identifies a product – usually through Chinese e-commerce platform AliExpress – which they think they can sell to European or American consumers. They create a website using Shopify, and identify and target buyers, typically using Facebook ads, although you will find dropshippers on other platforms, including Instagram, or selling through marketplaces such as online homeware store Wayfair. When an order is received, the dropshipper purchases the item through AliExpress, and has it shipped directly to the buyer, pocketing their mark-up minus marketing spend.
Looking at success of some, many want to get in. Thomas Despin, a former dropshipper, is something of a legend in the dropshipping scene, having gained attention with a Medium essay he wrote announcing the closing of his business, headlined “11 months & $750,000 later, I decided to close my drop shipping business. Here’s why”. There is a sense among many in the Balinese town Canggu scene that the glory days of dropshipping may be coming to an end. There’s a stigma around dropshipping, as if the banknotes you earn are unusually smeared with grubby fingermarks. The most important decision a dropshipper can make, perhaps, is knowing when to get out.
When you’re done with dropshipping, where do you go? After closing his dropshipping store in September 2017, Despin purchased 1.38 hectares of Bukabuka island, and moved there in October 2018. He plans to open a sustainable retreat called Reconnect here in 2020. Despin is something of a legend in the dropshipping scene, having gained attention with a Medium essay he wrote announcing the closing of his business, headlined “11 months & $750,000 later, I decided to close my drop shipping business. Here’s why”. “I’m the opposite of what dropshippers like to say, because they like to see themselves as good entrepreneurs because they made money,” he says. “I’m completely fine with saying that I made a lot of money, six figures, and still I think I was dumb. I didn’t know what I was doing.”
9) Now you can work from the beach [Source: The Economist]
The current pandemic has made most of us work from home. But if you want you can now work from a beach as well. Mia Mottley, prime minister of Barbados, intends to introduce a “Welcome Stamp” for visitors to “work remotely in paradise” for up to a year. Like most of its Caribbean neighbours, Barbados has been good at keeping covid-19 out. Normally tourism brings in more than half of its foreign earnings. Now, many tourists are banned and the economy is reeling. The tourism minister, Kerrie Symmonds, puts unemployment at close to 40%.
Before now, moving to Barbados legally was difficult. Getting a work permit or immigrant status meant weeks or months of form-filling. Workers had to pay Barbadian income taxes. The new procedure looks quick and easy by comparison. For a fee of $2,000 for one person, or $3,000 for a family, you can take your Zoom calls from a real pristine white sandy beach, instead of merely selecting it as a virtual background.
There will be some checks on new arrivals. We do not want “the scum of the earth, but decent and upstanding types”, says Mr. Symmonds. Applicants must have health insurance, and the main breadwinner must earn at least $50,000. But otherwise the gates are open. “We welcome all. Everyone,” says Ms. Mottley. “All must breathe, in this world and in this country.” Other Caribbean islands are also considering such schemes. Bermuda has also announced one. So if you want to work from the beach, relaxed bathing in sun, there you have!