Not playing the game so well?
Vivek Singh Jamwal, FRM
Director, Private Markets Technology at Manulife John Hancock Investment Management
You are the guy in the room that has a lot of "potential" and have enough resources to make it into the big boys club. Well, you need a solid dose of determination, along with pragmatism and hard work to mobilize enough resources to make things happen. You start on your journey, things are going well. You are building "stuff", people are buying your "stuff" and everyone is happy. But then as you build and build more, you jack up the prices of the "inputs" that you use to build stuff. You realize that this pace of building is unprecedented and noone else has done it at such a large scale that you are doing. Hence, logically when you stop building as fast, "inputs" should not cost as much. Or maybe not - maybe you expect to be building forever, at current growth rates well into the future. Your suppliers - who provide you the inputs - cant they see this as well, or are they also thinking that this will last them to eternity? Well, for once me and my suppliers are on the same page. We all think that this party will go on. Suppliers start investing crazily, dreaming about the bright future, their coffers just bursting with cash and everyone having a "good life". I need the "inputs", suppliers see that, they jack up the prices. I get mad. I tell them - if I can't beat you, I will get you. I start buying them out at the height of all this boom at dreamy eyed prices.
And then the laws of nature take effect - as they've always had. Nobody can fight that. I've built lots of "stuff" and everyone has my "stuff". I can't manufacture "them", i can only manufacture "stuff". So I don't need to build as much "stuff", and I dont need as many "inputs", but wait - what about the resource company that I bought for the dreamy eyed price? What about my suppliers who leveraged to the hilt to supply to my growth ambitions, and their supply is coming onstream this year and the next?
Well, I sit here and smile at my foolishness. I built like crazy, jacked up the prices of my inputs, made my suppliers feel special, and them bought them at special prices. Who won? People who got out, got in again and starting playing with fire. And things are burning now. I need to play this game well, I need to learn.
*** - And if the story does not make it clear - "I" refers to China here.
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8 年Very well written article giving good analysis. Any venture big or small involve risk factors and ups and downs are bound to take place. These aspects need to be kept in mind. Weldone Vivek and keep writing...God bless you !!
Woori Private Equity Asset Management Managing Director (CIO)
8 年Very Impressive!!!
Woori Private Equity Asset Management Managing Director (CIO)
8 年Impressive PR
Enam Asset Management (Singapore) Pte. Lmt.
8 年Very well written Vivek! Captures the whole story in a short concise manner. Though, I have been thinking, what happens to the assets that you build when commodity prices were sky high. This would be important given that lots of their competitor assets can come at cheap raw material prices prevailing now and can be very competitive in the long run. Is the only solution for them is further monetary easing...will be interesting to see how the story unfolds