aim – Pertinent Observations

Zen and the art of shooting

So I was at this resort near Nandi Hills for a day-long workshop on Saturday (actually it was a three-day workshop but my session was only on Saturday so I went there only for one day). One of my colleagues and fellow-teachers had brought along an air gun and at a time when students were busy doing some homework we had given them, we went off for some shooting practice.

First we used cardboard pieces and drew targets on them. I remember taking some four or five rounds at it. First three times I shot way to the right of the target. The following time I decided to correct for this bias and aimed a little left of the target. However, it turned out I had overcompensated and I ended up shooting left.

This was the first time ever in my life that I was shooting (barring toy guns when I was a kid). The first couple of shots I was just getting use to the feel of the gun, the posture, etc. What I found tricky was that there were two viewfinders through which you had to look through simultaneously (genius design – to eliminate parallax error). And then you had to concentrate, focus and shoot.

My first few shots I figured that I thought too much about shooting. I took aim, and then held the position for a while till I was convinced that I was aiming right. Then I would get distracted (damn you, ADHD) and then I would have to try and concentrate again. This would happen a few times until I would go impatient and shoot randomly, and thus miss the target.

After a few rounds of shooting at the cardboard, we moved on to shooting a fruit. Four of us took two cracks each at the fruit, and I was the only one who didn’t manage to hit the fruit at all. On both shots I missed by a long way. I had that sinking feeling I always have when I’m trying to learn something as part of a group and end up being clearly the worst in the group. That’s a frequent feeling for me nowadays.

So for the last round where we used an empty Bacardi carton as our target (the aim was to hit the face of the Bat logo on the carton), I decided to adopt what one of my friends called the “Zen method”. “The first time you take aim, just shoot. Don’t over think”, he said. I had some reputation to salvage.

We all took two shots each at the carton. I did what I was told. As soon as I had taken aim, I shot. I ended up hitting the bat logo once on the tail and once on one of its legs. Here is a photo taken as soon as I had shot the tail (red circle; the other shot on the bat is a colleague’s). The Zen method worked!

PS: I think this is the first time ever I’ve put up my photo on my blog. So all those of you who read this but don’t follow me on any other social medium – you finally know what I look like.

New York

So in the wee hours of this Sunday morning I’ll be off to New York for a work trip. I’ll be there for three weeks which includes one normal weekend and one long 3day weeknd. Since this is my first ever trip to the other side of the atlantic I’m really excited.

I’ll be living in Lower Manhattan (place called Battery Park) and my office is supposed to be 10 minutes walk away. I hope to make as good use as possible of this trip, and hopefully I’ll have fun.
If any of you is in or around NYC and want to meet, let me know. Apart from the weekends, we can meet up on weekday evenings also
Put gyaan on places to see, visit, eat, drink, experience, etc. My aim on the trip is to put as little NED as possible and try and maximize fun
I want to shop also. Lots of things. Let me know what things are worth buying in New York, and places to buy them.
I plan to buy a DSLR camera. Talking to people about it, I’m looking for a Nikon D90/Canon 50D with the kit lens. Further lens purchases will be made later. Tell me where I can buy it. People have already suggested B & H in NYC. Any other places? And since i’m there for 3 weeks i suppose I can order online also.

Was thinking about this at office today while I was printing out my tickets, acco details, etc. Insanely kicked I am about this trip. Looking forward to having a good time.

Tranche of wallet

One of the buzzwords in marketing in the last few years has been “share of wallet”. “We don’t aim for market share in any particular segment”, they say. “What we are aiming for is a larger portion of the customer’s share of wallet”. Basically what marketers try to do is to design their products such that a larger portion of customers’ spending comes to them rather than go to competitors (again – they claim they have no direct competitors and everyone else who competes for the customer’s spending is a competitor).

So far so good. But the problem with looking at things from a “share of wallet” pespective is that it assumes that the wallet is homogeneous. That each part of the wallet is similar to the other, and spending for different items comes uniformly from all parts of the wallet. This isn’t usually very well recognized, but what matters more than “share of wallet” (of course that matters) is the “tranche of wallet” that this particular product sits in.

I don’t think I need to give a rigorous proof for this – but some spending is more equal than others. For example, if you are dirt poor and have only ten rupees left in your pocket, you would rather buy a loaf of bread than buy a tube of lipstick. Some goods are more important than the others. “Necessities” they call them. The rest become “luxuries”. Even the “luxuries” are not homogeneous – there are various tranches in that.

So the aim for the product manager should be to get into the deeper tranches of the customer’s wallet (assuming that the top tranche is the “equity tranche” – the one that takes the first hit when spending has to be cut). Targeting the top tranche may be a good business in good times, but when things go even slightly bad, spending on this product is likely to take a hit and thus the “share of wallet” falls dramatically. Getting into a deeper tranche means more insurance, so to say.

In the world of CDOs (from where I borrow this tranche, equity, etc. terminology), people who take on the equity tranche and other more risky tranches do so only in exchange for a premium – basically that you need to be paid a premium amount (compared to lower tranches) during good times so that it compensates for lack of income in the bad times. So this means that if you are trying to target the most disposable part of the wallet (i.e. the part of wallet that takes the first hit when spending has to be cut), you better be a premium player and make enough money during good times.

So the basic insight is that. The more disposable spending on your product is for your customer, the more the premium that you have to charge. Some products such as high end fashion accessories seem to have got it right. Extremely disposable spending, which leads to volatility of income; balanced by extremely high margins which make good money in good times.

Certain other products, however, don’t seem to have got it right. One example that comes to mind is Indian IT. Some of the offerings of Indian IT companies come near the disposable end of their customers’ wallets. However, to compensate for this, they don’t seem to charge enough of a premium. So they make “normal” profits during good times, and sub-normal profits during bad times – leading to an average of sub-par performance.

So before you enter a business, see which part of your customer’s wallet you are targeting. See if the returns that you will get out of this business in good times will be enough to tide you over during bad times. And only then invest. Of course, before the 2007-present downturn happened, people had no idea what bad times were, and thus entered into risky businesses without enough of a risk premium.