Monday, May 07, 2001

Trapped in the Past

In an article entitled “Trapped in the Past” author Jim Rogers underscores what our text points out regarding the need for looking at all sorts of data and then looking again first hand!

Roger’s opening hypothesis, which he shares in the article, was his long held belief that “India might give China a run for its money as the next great economic superpower.”

He details the research that supports this including:

India’s population stands at more than 1 billion people
In India, “for the past seven years, gross domestic product has risen 6% to 7% annually”
India’s participation in the Information Technology industry has risen from an export value of $50 million to $6.3 billion in the past 7 years
India is home of some of the world’s “most fertile soil” making the area for “ideal for agriculture”
The Himalayas, the Taj Mahal, and the Kovalam beach resorts make for a potentially strong “tourism industry.”

Of course, he weighs in with the less favorable research as well:

Roughly 50% of India’s population is illiterate
400 million of India’s population live on less than $1 per day
India’s “archaic laws obstruct the creation of farms larger than 18 acres thereby locking in much of the potential of that rich soil
The Indian government subsidies “amounted to 14% of GDP” to back up the government’s strong belief in self-reliance and their subsidization of nearly every form of required industry.
24 languages spoken by more than 1 million people each with at least 1,600 dialects

Faced with plans to invest in India’s high-tech industries and believing that the positives would outweigh the negatives, Rogers decided to travel to India for some first hand research of his own before making any such investments.

What Rogers found, as he traveled the country, was that in spite of India’s high-tech superpower reputation:

He had trouble placing a phone call from most anywhere.
The “country’s crumbling freeways are a tangle of traffic jams.”
He “often had trouble finding running water.”
What’s more “power shortages result in frequent brownouts and black outs.” (Yes, I know it sounds like California but in India it’s estimated that) such “shortages reduce India’s GDP by 2.5% annually.”

Lastly, Rogers recounts how ENRON, the Texas-based energy MNC, has spent most of its time since it entered India in 1992 “fighting the government, trying to get paid” for work the Indian government had previously encouraged.

What’s more, he then uncovered that since 1991, “India has managed to attract a total of only $23.7 billion in foreign direct investment [while] China attracts that much in less than six months.

As you might have guessed by now, Rogers’s conclusion was to decide against investing in India’s high-tech business at this time. Instead, and surprising to himself, he decided to buy shares in Indian Hotels, a company poised to take advantage of the increasing travel mobility of India’s 250 million plus middle class citizens by buying up inexpensive, quality hotels throughout the country.

All of which brought to mind a minor but similar experience I enjoyed many years ago while working for a fellow in Dayton, Ohio. (You knew I’d get in a personal story, right? J)

The fellow I was working for at the time decided he wanted to retire (at a relatively young age) to North Carolina. His main motivators were weather, a low cost of living, and a belief that he could duplicate his electronics superstore concept (a fairly novel idea back in the early 1980’s) in the “less competitive” but still supportive North Carolina he perceived.

To that end, I scoped out basic demographic data on each of the major cities in North Carolina. With that data in hand, he suggested a field trip to see first hand what a recommended plan of action might be. Accordingly, an associate and myself were sent on a mission to discover the ideal location for his retirement retail electronics operation.

After a week of touring the state from end to end, taking photos, doing interviews, compiling dealer lists from local phone books and countless miles of windshield time, we returned to Dayton late on a Sunday night with our conclusion firmly in mind.

At Monday morning’s debriefing, our boss asked what we had found to serve as the best electronics retail business opportunity in all of North Carolina. With a perfectly straight face, we both recommended that he forget about the electronics store idea and open a chain of bars instead. (Yes, you heard right.) J

You see, at the end of every evening, after such exhaustive (I can assure you!) work my associate and I always had difficulty in finding an establishment of relaxation that might serve a little alcohol. What we had discovered was that the South’s concept of private, membership-only clubs as the only viable way to enjoy a little beverage was standing between us with all that road dust and a more relaxing few hours. Along the way, we also learned that the state and local governments were slowly waking up to reducing their alcohol related restrictions.

Of course, we had also seriously looked at the electronic retail business as was our mission and our conclusion in that regard was that the seeds had already been sown in North Carolina. Between the existing independents and the chain operations which had just started to eye the market we had concluded that North Carolina was well on its way to emerging as a truly competitive electronics retail market. Further, our employer would have to contend with these unexpected forces if he continued with the idea of retailing in North Carolina.

Needless to say, we made quite a stir. However, we did remain gainfully employed and our employer decided against the move to North Carolina and to this day still operates his electronic related (but now non-retail) business in Dayton, Ohio.

You see, there is research and then there is research!



Sources:


Worth, May, 2001 p 36-40.Title: Trapped in the Past
Author: Jim Rogers


P. Cateora, J. Graham. "International Marketing." Irwin McGraw-Hill. 1999.

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