Ten interesting things we read this week

Some of the most fascinating topics covered this week are: Business (Building 1000 restaurants in 24 months), Investing (Money is a mental game), Parenting (Stop trying to raise successful kids), and Music (The necessity of musical hallucinations)

Published: Nov 9, 2019 09:17:38 AM IST
Updated: Nov 9, 2019 09:53:14 AM IST

g_123251_bg_reading_shutterstock_391226896_280x210.jpgImage: Shutterstock

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 (Building 1000 restaurants in 24 months), Investing (Money is a mental game), Parenting (Stop trying to raise successful kids), and Music (The necessity of musical hallucinations).

Here are the ten most interesting pieces that we read this week, ended November 08, 2019.

1) The REBEL method of building 1000 Restaurants in 24 months [Source: medium.com]
Looks like Jaydeep Barman, Co-founder/CEO of REBEL Foods, has found a way to exponentially expand his restaurant business. When he wanted to expand, the first thing that he did was to change the name of his company, “Faasos”. Yes, the brand that sold wraps and meals. They still do have Faasos as a brand, but they have changed the company name to REBEL Foods. And now they have multiple brands like Behrouz (Biryanis), Lunch Box, Ovenstory, Sweet Truth and of course Faasos. But, most importantly, they are now the largest cloud kitchen restaurant company with over 1500+ restaurants serving across 16 cities in India.

How did they do it? The explosive growth of food delivery, led by aggregators and of the sales of restaurant brands worldwide, point to one thing: just like every other consumer industry, Food and the business of restaurants is undergoing a structural shift wherein there are two parts — The Brand and The Distribution. For Mr. Barman and his company, this primarily meant, delivery-only restaurant brands could be built on internet, without worrying about building distribution/retail. He writes, a few quarters back, we saw this trend and thought, “we can scale Restaurant Brands 10x faster than today”. With only 100K restaurants in India (compared to 7Mn+ in China), and with 90% of them unorganized, we realized we had a terrific opportunity to build India’s largest restaurant brands, riding on our cloud kitchens, supply chain network, culinary expertise and technology. And thus came our idea of “One Cloud Kitchen = Multiple Restaurant Brands”. 

Also, they built a culinary innovation center which launched and scaled 280 different menu items. They had an end-to-end platform for a multi-brand operation from a kitchen to managing each step of the kitchen ops — queueing, load/prep time, batching of orders, out of the door algorithms, to inventory prediction based on consumption data, personal recommendation engine, deep integration with every aggregator, and last mile delivery app. Their every brand is owned by a Brand Manager — from inception to scale up. He/she is the parent of the brand and has the sole responsibility of making the brand ready for the big bad world.
  
2) Money is a mental game, more insanely than you thought [Source: Collaborative Fund]
Interest in investing biases exploded after the financial crisis showed investing has as much do with behavior as it does spreadsheets. But not all biases are bad, and we can become side-tracked obsessing over mental errors like psychologists were 30 years ago. The author of this piece says that some biases, intuitions that aren’t backed up with facts, can be lifesavers. And some of these are: 1) Allergic to nonsense bias: An overactive nonsense detector that asserts extreme skepticism when confronted with financial salesmanship. This is a bias because not all marketing – even the aggressive kind – is deceiving, and everyone is in sales whether they know it or not.

2) Enjoyment bias: An inefficient investing strategy that you enjoy will outperform an efficient one that feels like work because anything that feels like work will eventually be abandoned. 3) Reasonable ignorance: Intentionally limiting your diligence in order to avoid decision paralysis in a world where everything, if you dig deep enough, is more complicated than it seems.

4) Historical discounting: The recent past is the most relevant, because the importance of what happened in the far past decays as the cultural and legal forces that triggered a specific event change over time. You cannot compare asset valuations today with the asset values in 1890, because so much has changed since then – accounting standards, information distribution, securities laws, the makeup of sectors, etc.

3) New technology is hard to sell [Source: Collaborative Fund]
Polio is almost cured world over. Or you can say that the cases of polio have reduced drastically over the past decades. Soon after the polio vaccine was announced Congress funded a grant to ensure “that every child and expectant mother has the opportunity” to be vaccinated. The urge to vaccinate everyone as soon as possible was so high that the government awarded licenses to manufacturers without the standard review or supervision, leading to botched batches that killed 11 kids. The polio vaccine is an outlier in the history of new technology because of the speed at which it was adopted. It is perhaps the lone exception to the rule that new technology has to suffer years of ignorance before people take it seriously.

New technology is almost always a hard sell. But, why aren’t more new technologies adopted as quickly as the polio vaccine? There are a few overlooked explanations for the gap between new technology and consumer adoption. 1) Convincing people that you can solve their problems is harder than it seems because people don’t want to be told that the way they’ve always done things is wrong. 2) New technologies often spark cultural shifts towards ease and convenience, which for older generations are hard to distinguish from moral decline. 3) Familiarity is hard to distinguish from utility, so “this is how we’ve always done it” becomes synonymous with “this is the best way to do it.”

4) Grasping the value of new technology requires imagination. But unless you have skin in the game that doesn’t seem worth the effort because technology is supposed to make things easier and simpler, not wrack your brain. Sometimes entrepreneurs can’t understand why others can’t see the future they do. The answer is often that people without skin in the game are not in the future business; they’re in the today business. Jonas Salk didn’t have to wait before his polio vaccine become beloved. He wasn’t in it for the money, but the adulation he received was nearly instant. He was on the cover of TIME Magazine within days of his “product” launching.

4) Stop trying to raise successful kids [Source: The Atlantic]
Most parents value achievements and happiness over caring nature when it comes to their children. Kids learn what’s important to adults not by listening to what we say, but by noticing what gets our attention. And in many developed societies, parents now pay more attention to individual achievement and happiness than anything else. But, as per the author of this piece, that’s not how it should be. Parents’ emphasis on toughness is partly an unintended consequence of the admirable desire to treat boys and girls more equally. Historically, families and schools encouraged girls to be kind and caring, and boys to be strong and ambitious. Today, parents and teachers are rightly investing more time and energy in nurturing confidence and leadership in girls.

So what can parents do to encourage their children to become caring and kind in nature? 1) Set example yourself: Children learn by seeing what their parents do, and most children would want to be like their parents. So if you showcase a kind and caring nature, your kid will intuitively pick it up. 2) Advise our children to be mindful of the friends they make: Parents should not police friendships, but it’s important to nudge kids to notice classmates who are kind and compassionate. You can ask how those children treat others, and how they make others feel. That’s a starting point for developing friendships with children who have compatible values.

Evidence suggests that children who help others end up achieving more than those who don’t. Boys who are rated as helpful by their kindergarten teacher earn more money 30 years later. Parents should encourage children to do their best and take pride and joy in their accomplishments, but kindness doesn’t require sacrificing those things. The real test of parenting is not what your children achieve, but who they become and how they treat others. If you teach them to be kind, you’re not only setting your kids up for success. You’re setting up the kids around them, too.  

5) What’s an investing law? There’s no definition [Source: Collaborative Fund
Australian biologists recently discovered that 500 animals which were deemed extinct were alive! A lot of what we know in science is bound to change. That’s what makes science great, what makes it work, and what distinguishes it from religion. Science is filled with rules, evidence-based theories, and probabilistic observations. Laws – immutable truths lacking exceptions – are rare. Most fields only have a handful. The idea of flexible rules deriving from unshakeable laws applies to every field. And that applies to investing as well.

Investing laws are part of a foundation that governs most of what happens in investing, and will keep happening as long as investing exists. The author of this piece jots down 17 laws which can help in investing. Here are a few of them: 1) Optimism and pessimism will always overshoot because the boundaries of both can only be known in hindsight, once they’re passed: The correct price for any asset is what someone else is willing to pay for it, because all asset prices rely on subjective assumptions about the future. 2) Calm plants the seeds of crazy: If markets never crashed they wouldn’t be risky; if they weren’t risky they would get expensive; when they’re expensive they crash. The same is true for recessions. When the economy is stable people become optimistic. When they get optimistic they go into debt. When they go into debt the economy becomes unstable.

3) Luck and risk are the opposite sides of the same coin but we treat them very differently: Everything important in finance is about probability. And since most probabilities are less than 100, there’s a chance that you can make a good (or bad) decision and still end up with a bad (or good) outcome. 4) The biggest risk is always whatever no one is talking about, because if no one’s talking about it they’re not prepared for it: Carl Richards says it best: “Risk is what’s left over when you think you’ve thought of everything else.” 5) Behavior > analytics, because one can’t be taught and the other can: Today, learning about any company is easy. You get all the information at a click of a button. But, the behavioral side of investing is different. The behavioral side of investing will always be more important than the analytical side because good behavior and no data can still do well, but tons of data mixed with poor behavior is a lit fuse.

6) Who killed the gangster film? [Source: Livemint]
This piece is a tribute to the Hindi gangster films like Parinda (1989). If you’re a Bollywood movie buff, then you surely will know this film. It may not have been the first Hindi gangster film, but it was the first fully realized effort in the genre. It was also, in the words of director Vasan Bala, an “inside story", every inch of it in the shadow of the underworld. Parinda celebrates its 30th anniversary in November. Ram Gopal Varma’s equally influential Satya turned 20 last year. Both are classics in a genre that has fallen somewhat out of fashion. There hasn’t been a game-changing Hindi gangster film in a while.

The author writes how the rise in crimes in Mumbai was the background for these movies. You can see this reflected in the crime films of the 1940s and 1950s, like Kismet (1943, Ashok Kumar as a pickpocket), Sangram (1950, Ashok Kumar as a casino owner), Pocket Maar and House No. 44 (1956 and 1955, Dev Anand as a pickpocket), Awaara (1951, Raj Kapoor as a small-time thief), Shree 420 and Baazi (1955 and 1951—Kapoor and Anand, respectively, as card-sharps). There was one significant change, though. Hindi cinema in the 1970s wasn’t making gangster films yet, but it had started looking at the lives of real-life gangsters. Pran’s Sher Khan in Zanjeer (1973) is said to have been based on mob boss Karim Lala, who, like Khan, was a Pashtun and ran gambling and liquor joints.

But it looks like the gangster cinema period has transitioned to streaming TV now. The first season of Netflix’s Sacred Games (2018) found a way to connect a street hustler’s rise to power with the larger political and social currents of the time (the second season released in August). Amazon Prime’s Mirzapur (2018), set in a small town in Uttar Pradesh, was less intricate, but irresistibly pulpy. Talking about gangster movies, in 2000, the Mumbai police tapped an extraordinary phone conversation, with gangster Chhota Shakeel in Karachi on one end, and Sanjay Dutt and directors Mahesh Manjrekar and Sanjay Gupta on the other. Shakeel not only discusses flaws in Gupta’s films (he doesn’t like the continuity) but gives Manjrekar material for a possible film on his own life. Gangsters as screenwriters, as film critics—only Hindi cinema could allow for such a possibility. 

7) How and why a fashion brand lost its mojo [Source: Forbes]
Most of the millennials and Gen-next love to splurge on fashion and dress stylishly. But, with Forever 21, a fast fashion brand, filing for bankruptcy, that’s not a good news for most of the millennials. But, not to worry, here are a few solutions: 1) Start Buying “Investment Pieces”: Fast fashion is inexpensive up front, but it makes you continuously pay to replace defunct items, meaning your overall savings likely diminish (or vanish) over time. Instead, start purchasing “investment pieces,” or higher-quality clothing items (which often means more expensive) for your closet staples. Soon you’ll realise that you weren’t wrong with the purchase.

2) Take advantage of rewards, cash back and loyalty programs: There are ways to save on more costly clothing items—-not only looking for sales but also being strategic in how you pay for purchases. Using a cashback rewards card, for example, will give you instant savings. That’s how you start saving on clothes! 3) Don’t shy away from consignment: If you don’t frequent thrift and consignment stores, you’re missing out. If you take the time to really dig through those racks, you can find high-quality clothing for low prices.
 
4) Sell items you no longer want: If you buy quality items, and at some point they no longer suit you, you can sell them. There are several apps that make selling old stuff easier.  5) Rent one-time outfits: Special events usually call for one-time outfits. As ridiculous as it sounds, be realistic: Things like wedding guest and formal gowns are often worn just once. Instead of spending hundreds on one-time outfits—and then letting them collect dust in your closet—consider renting these pieces instead. That way, you won’t have to make a hole in your pocket, and you’ll get what you want at a much lesser price!

8) Of science, fear, and nuclear radiation [Source: Undark]
We all know what continuous exposure to radiation can do and how harmful its effect can be on a human body. If the intensity and rate of exposure are too great, the organism sickens and can die. This is called acute radiation syndrome, or ARS, and it killed many people in the aftermath of the atomic bombings of the Japanese cities of Hiroshima and Nagasaki in the 1940s. It also took a toll following the nuclear accident at Chernobyl, which was recently revisited, to critical acclaim, in a haunting HBO miniseries. Fortunately, most living organisms rarely, if ever, encounter radiation at such toxic levels.

Crystallizing events like these have reinforced in the popular mind a technical model that today informs the regulation of nuclear radiation the world over. It’s called the “LNT” model, short for “linear no-threshold,” and it holds that at any level of radiation exposure greater than zero, there is some damage to human DNA. The higher the level, the greater the harm. According to the LNT model, all radiation doses, however small, are dangerous, and the harm is cumulative over time. Thus, any exposure must be held to what nuclear regulators would call an “as low as reasonably achievable” dose, or ALARA.

Yet, an increasingly vocal group of nuclear experts suggests that the LNT model and its zero-sum approach to radiation may well be doing more harm than good. Outsized fear of radiation, they say — driven largely by the LNT framing — does much more than frighten people. It drives voters and governments, for example, to abandon or avoid nuclear power — even though its fossil-based alternatives pollute the air and warm the planet, arguably killing far more people each year. So does that mean we need a regulation overhaul? Some say yes. Andrew Maidment, the chief of physics for the Department of Radiology at the University of Pennsylvania, says, “It’s the model that has the least assumptions, but it should be used with a one-pound box of salt.”

9) The necessity of musical hallucinations [Source: nautil.us]
It is known that music activates our brains cells. Music, repetitive and patterned by nature, provides structure within which we find anchors, context, and a basis for organizing time. In the prehistory of civilization, humans likely found comfort in the audible patterns and structures that accompanied their circadian rhythms. Humans generated predictable and replicable temporal patterns by drumming, vocalizing, blowing, and plucking. When we imagine music, we literally compose—sometimes recognizable tunes, other times novel combinations of patterns and musical ideas.

Today, amid widely disseminated music, we are barraged by a cacophony of disparate musical patterns—more often than not uninvited and unwanted—and likely spend more time than ever obsessing over imagined musical fragments. The brain is a composer whose music orchestrates our lives. And right now the brain is working overtime. In a classic study from that year, researchers asked subjects to close their eyes and imagine hearing Bing Crosby sing “White Christmas.” Following 30 seconds of silence, over half of the subjects said they had heard the song playing in their head. Five percent said a record had been playing. The psychologists concluded that an auditory image could be generated from imagination alone.

Curiously, we perceive and interpret a sound’s fundamental frequency even when that component is absent, as long as we hear a few harmonically related components. That’s because the harmonics produce a range of subjective tones from the beat frequencies between them. Whether we are conscious of an idea’s origin, whether it comes in a dream, or invades our consciousness as an earworm, our ability to form and maintain musical images is a fundamental mental process. Perhaps as surrender to the noise and chaos that increasingly pummels our auditory system, musical imagery guides us, cajoles us, and sometimes coerces us, to peer inwardly, unravel, and understand the patterns of our lives.

10) Saudi Crown Prince has little to show 2 years after meteoric rise [Source: Business Insider]
Pressured into an apparent acceptance of responsibility for the murder of the Saudi dissident journalist Jamal Khashoggi and humiliated by an alleged Iranian strike that temporarily knocked out 50% of the country's oil production capacity, Prince Mohammed — MBS as he is widely known — struggles to command respect internationally and is regarded as weak by his principal regional rival, Iran. MBS's recent trials and setbacks are a far cry from his stunning rise to power in the summer of 2017. He shook the foundations of the kingdom in a palace coup that confirmed him as next in line to the throne.

More surprises were to follow: an equally unprecedented purge of potential opponents; the extraordinary detention of the Lebanese premier, Saad Hariri, on a visit to the kingdom; and a highly controversial "anti-corruption campaign." Then, to give his power-grab substance, his ambitious "Vision 2030" economic transformation plan, launched the year before his ascent, was presented with great fanfare to western audiences. In order to help pay for his reforms, he opted for a dubious anti-corruption campaign, culminating in the detention and interrogation of royals and businessmen at the Ritz-Carlton hotel in Riyadh. It turned out to be little more than an attempt to extort funds from the wealthy. And the resulting haul, it transpired, was significantly less than anticipated.

That’s not all, official unemployment is more than 12%, while the IMF's growth forecast for this year is just 1.9%, and that's despite the 2019 budget being the biggest ever. Low oil prices and turmoil in the Gulf have not helped. Nonetheless, more than three years after launching his Vision 2030 plans, the Crown Prince has little to show for his efforts. Foreign direct investment last year was about a twelfth of what it was a decade ago. Fortunately for MBS, the Saudi public, by and large, remains supportive, although gauging such sentiment in such a tightly-controlled country is never easy.

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