Why Pareto Could be Skewed in Asian Markets

Pareto Principle could be simply summarised as: 80% of the effects come from 20% of the causes.

While this has been followed across industries for a long time, there's a very high probability that Pareto is skewed in most Asian or South Asian markets.

I will try to justify my argument based on the data points that I collected that affect the Pareto for the respective markets. It's safe to say it all comes down to how trust and the value of time work in Asian Markets.

Understanding the Value of Time.

It was fascinating to find out that most underdeveloped or developing nations have very different approaches to valuing time, this is mostly due to the:

1. People are paid on a monthly/weekly basis. They never get to analyze the true cost of their time.
2. No social security framework to fall back upon, compared to the West.

Thus, the risk appetite of people to 'try' different services and thus, allowing a fair chance for a product or service to be successful, increases significantly. This is one reason out of many that India is so successful in building SaaS products whose majority of the revenue is from the western markets.

A real-world example could be, a guy in the West who wouldn't mind trying a new ride-hailing app, even though it could be expensive and he is not sure if the experience would be as similar to Uber or another leading company or a SaaS product which could drive the efficiency of its staff by 25-30%.

OR

A working couple in the UK wouldn't mind trying a new service if that allows them to reach their work 30 minutes earlier. (This also explains why Starbucks and similar high gross margin coffee shops are very successful in the West while they struggle in South Asian countries.)

The Concentration of Trust in Society

While I tried my best to collect the data from reliable sources over the internet, it's important to understand that this is just me exploring my ideas and sharing it with everyone. To address the multiple blindspots and cultural biases that drive the trust dynamics in different Asian economies is an extremely challenging task to do, especially for our Indian Economy.

Whether the concentration of trust is good or bad is very subjective. I will be focusing on how it negatively impacts the society.

The impact on small businesses:

- Limited access to finance:?

When trust is concentrated among established players,?banks and financial institutions might be more inclined to lend to them,?leaving start-ups struggling to secure funding for growth and innovation.

Crony capitalism also plays a significant role here which causes many start-ups to never reach their potential and die.

- Unequal regulatory environment:?

A start-up working in a space that requires political support deals with an extreme amount of friction which kills the enthusiasm they started with in the first place.

- Disruptions in supply chains:?

While this has been largely transformed due to the democratization of the supply chain by platforms like Amazon, and Flipkart and startups like Shiprocket, we are yet to reach its full potential.

A few insights for Indian Markets:

1. 80-85% of Bollywood's revenue goes to the concentration of 9-12 people.
2. Regardless of the talent, entertainers(Celebrities, Actors, etc) are immensely successful in India compared to the West.
3. Nepotism is extremely high compared to the western parts of the world, again, due to the concentration of trust in Indian Society.
4. The rise of conglomerates/companies benefiting from the concentration of trust in various industries like Tata Group, Hiranandani Group, Lodha Group, PayTM, Hinduja Group, Adani, etc.

While the data collected is for my curiosity, I found the only exception to this could be tech startups and as we grow towards digital industrialization, I expect the concentration of trust to be more democratized as we are seeing already with D2C and other industries as well.

Key takeaways:

Let me summarise my learnings from exploring this area, I will be dividing it into two separate sections:

1. Digital Businesses:

For any SaaS product to become successful in Asian markets, it needs to offer a disproportionate amount of value compared to the Western markets. Which makes it difficult for any SaaS products to scale over a certain amount in Indian or Asian markets.

Also, unless India achieves significant growth in its GDP per capita, it will always remain the ideal place to build SaaS products for the West, but SaaS companies will struggle to grow beyond a certain point.

2. D2C Businesses:

As democratized supply chain and access to other technologies have played a key role in D2C brand's success and lowering the concentration of trust, I believe we are still far away from reaching the full potential of the democratized economy if we zoom out and see, we're just getting started and there's a lot of opportunities for businesses to grow considering the pace of our technology adaption is quite a commendable achievement which warrants an exponential growth.

Overall, It's an exciting time to build for and in India.

Sources:

https://www.annualreviews.org/doi/pdf/10.1146/annurev-polisci-052918-020708

https://link.springer.com/article/10.1007/s10902-018-0021-0

https://www.mdpi.com/2227-7099/9/1/39