The Relentless - Dispatch 1

Here goes a first dispatch of 'The Relentless' - a quick rendition of what caught my eye over the last week (s). I look at Bitcoin's need to get more boring brand ambassadors on board, Tata’s pursuit of super-apps and the growing case of Chief Risk officers as humanity enters the age of “extreme risk”. 

THE SCOOP: El Salvador, a country in South America, became the first to make Bitcoin a legal tender.

THE DISSECTION:

§  After this law was passed, Bitcoin’s value went up to $37,000.

§  El Salvador doesn’t really have its own monetary policy and uses the US dollar as a currency, but the same cannot be said for India, which has its own currency.

§  The market would formulate the dollar-to-Bitcoin exchange rate.

§  Now, Bitcoin could be used to make payments, unlimited in any transaction and even for taxes and any exchanges made via Bitcoin will not be subject to a capital gains tax.

§  Contemporary economies like Paraguay, Mexico and Panama are also expected to follow suit.

THE TAKEAWAY:

§  El Salvador heavily relies on remittances sent from abroad and how Bitcoin eases or affects remittances should be observed by India since it has the largest remittance inflows in the world.

§  Even Nandan Nilekani, the co-founder of Infosys, vindicates crypto as an investment asset class and that it would significantly add value to the Indian economy and so, India can definitely sink its teeth into Bitcoin and expand the crypto ecosystem in India. So, Bitcoin needs more ambassadors like Nilekani, who is in the public eye, to back it.

§  Bitcoin was initially viewed in a hostile fashion, but now could potentially be classified as an asset class in India, with SEBI overseeing regulations, in cohorts with the finance ministry and the cryptocurrency industry in India.

§  That being said, it will probably be adopted only as an asset class and not a mode of payment, due to its volatility and fluctuations.

§  Some experts believe using cryptocurrency as a legal tender is only apt for economies that don’t have their own currency or rely on the US dollar, so it may affect the Indian rupee negatively if adopted.

§  That being said, there is a Cryptocurrency and Regulation of Official Digital Currency 2021 to be tabled during the Monsoon session.

§  Crypto-currency, including Bitcoin, is still seen as something for the young, hip and trendy and still faces opposition from traditional and more old-school forces like Charlie Munger and Warren Buffett. Elon Musk used to endorse it publicly, but now doesn’t after Bitcoin’s energy consumption crisis was more widespread. Hence, it could be posited that Bitcoin and other forms of cryptocurrency need more traditional brand ambassadors to vindicate its widespread use as opposed to more centralized forms of currency.

§  Even then, Bitcoin and other forms of currency, though still talked about in the form of rhetoric, are still not seriously spoken about in the same breath as mutual funds, ETFs, stocks and bonds.

§  The constant battle of cryptocurrency naysayers versus endorsers means that Bitcoin is in a major slugfest in establishing its credibility in developing countries like India.

§  Will more people like Nilekani speak up to validate cryptocurrency, like Bitcoin, not just as an asset class in India, but as a legal tender and kickstart discourse as to how viable it could really be? Or else, it’ll be in an eternal tango of one step forward, two steps back.

THE SCOOP: Tata Digital invests in 1mg and CureFit

THE DISSECTION:

§  Tata Digital acquired a stake in 1mg, an e-health space that provides affordable access to medicines, health and wellness products, telecommunication and diagnostics services and CureFit, an online fitness program.

§  It reportedly acquired a majority stake of roughly 55-60% in e-pharmacy startup 1mg, taking its valuation to around $450 million

§  Tata Digital will also potentially increase its shareholding, the goal being to ameliorate customer experience and the ability to provide healthcare products and services.

§  Tata Digital, which has Tata Group’s digital assets, also invested around $75 million in CureFit and its co-founder Mukesh Bansal, who also founded Myntra, was also announced as Tata Digital’s new president.

§  Tata Digital also purchased a 64% stake in BigBasket, an online grocery store, for around $219 million.

THE TAKEAWAY 

§  The move is expected to perfectly fit with Tata Digital’s portfolio to help build their digital ecosystem.

§  This new zeitgeist of business giants acquiring startups could well be the beginning of a new secular theme. 

§  This has been previously done in this new Industrial Revolution in India, so that the whole setup and talent is acquired, with Byju’s acquiring Aakash Educational Services for nearly $1 billion and Reliance acquiring companies like Saavn, Edcast, Eros and Hathaway.

§  This also ushers in the new area of super-apps, which refer to platforms offered by companies like Tata that provides services all under one umbrella, to offer a seamless omnichannel experience. The Tata Group is currently executing “The One Tata” strategy around the pillars of 3S (Simplification, Synergy, Scale) under the leadership of Natarajan Chandrasekaran.

§  Contemporary economies like China already have super-apps, like WeChat, which was intended to be a messaging app, but also diversified into shopping, ride services, a payment platform and a food delivery service. A brick and mortar contemporary are malls, which allows for accessibility of various products and services, under one platform.

§  This also means there would be increased revenue realization under one platform and a good chunk of consumer data could be acquired and capitalized on to learn more about user behaviour. Super-apps have been growing as a phenomenon, even bigger during the pandemic.

§  India, like most developing economies, has been gradually becoming mobile-first and becoming a trillion-dollar digital economy and yet, smartphones only have limited memory and storage and so, super-apps solves this problem, having comparatively lower memory and storage. On the supply side, app-makers get to ride on the distribution of the super-app. They also get ready-made payments and identity infra.

§  We’ve already had some precedence with this, with Reliance Industries having various services like payments, shopping, booking tickets and streaming content.

The question is what really is a “super” compelling case for super-app in a world where niche spaces are being positioned as new “moats” for tech success. Is there a unique user behaviour to these apps? And what really is a super app - is it a horizontal integration, an effort to maximise LTV from existing app users or a super-app with third-party players building experiences inside it?

As Terence Lee, writes in Tech In Asia on super apps, “It's like discovering ice cream and declaring that vanilla is the best and only flavour. That’s not the case.”

§  The issues that arise with this super-app ecosystem is the creation of monopolies in India, as well as the worry of breach of data privacy, with third-party service providers, with the seemingly altruistic reason of harnessing consumer behaviour and their needs.

§  Is this why the trend of a super-app hasn’t really caught on in the US and the UK?

THE SCOOP: A report by the Centre for Long-Term Resilience in the UK ominously states that we're living with an untenable degree of extreme risk.

THE DISSECTION:

? The goal for institutions is to ascertain how they can be prescient about unforeseen risks, especially.

? How these companies can measure this risk, the magnitude of this risk and how to prepare for such risk become the relevant questions.

? The people at the top have been acting in a manner as if no abnormality exists and yet, the pandemic crisis has shown us that Black Swan outlier events have not been taken seriously by CEOs and top executives and now they have been jolted out of their “Black Swan” blindness.

THE TAKEAWAY:

? We need to better understand how to face threats from unforeseen risks that cause a large magnitude of risks.

? The impacts on businesses by the COVID-19 pandemic are a testament to the fact that they’re experiencing unsustainably high risks.

? With vulnerable states of organizations, which are not impervious to shocks, those risks will only continue to experience in frequency.

? The acceleration of AI to great heights has made technology have more loopholes and easier access to infringe the privacy of individuals with consumer data.

? This also allows for more cyberattacks to be executed at higher rates with trojans, ransomware and viruses to dangerously penetrate interfaces of devices that people use.

? With so much fragility in these systems, a viable proposal is to have chief risk officers understand loopholes with existing government policies.

? Bio-security must have a clear path for various economies and ascertain DNA syntheses for potentially noxious pathogens.

? Before AI gets way too big to be controlled, its progress must be tracked to understand where it could go from each step and especially make sure it goes nowhere near any nuclear programmes.

? There ought to be global resilience to combat and counter possibly worrisome risks so that there is prescience to understand what catastrophes may lie ahead.

? Policies need to be incentivized to help develop clinical metagenomics, which refers to the study of genetic materials from environmental samples.

? Chief risk officers (CROs) primary focus on known risks, like insurance, checking known business variables, mitigating financial fraud and basic operational risk management, but unknown risks must also be incorporated and mechanisms and training must be implemented institutionally to help assess future outlier event risks.