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Why you shouldn’t set prices based on value created

December 25, 2017October 18, 2020Paras ChopraBusiness, Economics

I was talking to a friend who has subscribed to an online publication called The Ken. This subscription costs him around Rs. 2000 per year and he gets access to hundreds of exclusive in-depth, well-researched articles on Indian startups. I asked him if he’ll renew, and he said probably not as he didn’t think that he got worth his money from the 15-20 articles that he had read. This conversation was happening at a bar where the average bill per person comes to be about Rs. 1500. I pointed this to him and we wondered why he was willing to pay Rs 1500 for a 3-hour sitdown at a bar but doesn’t find it worth Rs 2000 to read 15-20 well research articles. ... Read the entire post →

Endowment effect in business

December 21, 2017Paras ChopraBusiness, Psychology

We value things we own much more than the things we don’t own. It’s called the endowment effect. This goes well with our intuition that other people don’t value our things as much as we do. But it isn’t just that other people devalue what we have. Experiments show that if we reverse the roles, our willingness to pay is much less for the same product that we were earlier owning (and were demanding a high price for).

How does this disparity in selling price and purchase price occur? It occurs because buyers don’t have perfect information about a product and cognitively what “jumps” in the mind of a seller is benefits of the product or service (while seller focuses on costs). ... Read the entire post →

What food delivery companies can learn from Netflix

December 20, 2017Paras ChopraBusiness, Economics, Systems

It’s in the news today. Ola, India’s largest on-demand taxi service, has acquired FoodPanda India (from its parent company Delivery Hero) in a stock-swap transaction. FoodPanda is in food delivery business (like GrubHub in US or Delivery Hero in Europe).

Ola’s Founder and CEO said the usual acquisition-related things in a press release.

I’m excited about our partnership with Delivery Hero as we team up to take Foodpanda India to the next level. As one of India’s pioneers in the food delivery space, Foodpanda has come to be a very efficient and profit focused business over the last couple of years. Our commitment to invest $200mn in Foodpanda India will help the business be focused on growth by creating value for customers and partners. With Delivery Hero’s global leadership and Ola’s platform capabilities with unique local insights, this partnership is born out of strength. ... Read the entire post →

Don’t go where the puck is going

December 15, 2017December 19, 2017Paras ChopraSystems

Making predictions about future is more than a fun past time. Gartner, Forrester, and many other research companies justify their existence by predicting where technology industry is going. Other organizations (like PwC, below) once in a while go crazy and release predictions decades ahead of now.

Do we even know if these countries will remain by 2050? (original source)

Such long-range predictions are ironic because we can’t even get short-range predictions right. For example, from this news report:

While projecting a more optimistic picture of the global economy, the International Monetary Fund (IMF) on Tuesday slashed India’s growth forecast by 0.5 percentage points to 6.7 percent in 2017. ... Read the entire post →

Revenue requires investment, profit requires creativity

December 14, 2017December 19, 2017Paras ChopraBusiness, Economics, Systems

The purpose of a business is to generate over its lifetime a higher return for its shareholders than what they would have gotten by investing in risk-free options (such as government bonds). This is a slightly technical definition but an example will illustrate what I mean.

Imagine there is an entrepreneur with a business proposal and he requires a $100 of investment for it. He reaches out to you and pitches his idea to seek your investment. To make a decision, you’ll probably analyze and estimate how much return you’d get in return of money you give to him. If you usually get 6% interest annually in a savings bank account, you would expect a higher return from the entrepreneur (given there’s a risk of losing your entire $100 while your money in the bank is virtually risk-free). In fact, you’d expect an unjustifiedly high rate of return because like all humans you’re risk averse and hence demand more upside than what seems fair. Absurdly high expectations is what makes entrepreneurship so hard. ... Read the entire post →

Nobody likes using technology

December 13, 2017December 19, 2017Paras ChopraBusiness, Psychology

If you are an engineer, the title of this article may shock (or even offend) you. But if I rephrase, I’ll merely state what’s immediately obvious: people are motivated towards achieving their goals and technology is simply the means towards that end (and not an end in itself). This holds true even for engineers. When they get excited about new technology (say, a new programming language), they’re responding to their intrinsic motivations of exploration, competence, social acceptance (or even aesthetic appreciation). ... Read the entire post →

Good engineers make terrible leaders

December 9, 2017December 19, 2017Paras ChopraNotes and Summaries

Yuval Noah Harari in his highly celebrated book Sapiens says that human values are shared myths and that there is no objective basis in humanism. I agree with him.

In several separate exchanges on Twitter, I’ve debated the claim that technology has caused progress in human society or that there’s never been a better time to live than now.

It’s actually not true. Progress is personal and subjective. For some, mental peace through meditation is progress. For others, increasing religious devotion is progress. Any objective measure of progress implies a moral stance. ... Read the entire post →

Why people jump red lights and what it says about startup failure

December 8, 2017December 19, 2017Paras ChopraPsychology

One of the many things that used to baffle me was people’s behavior that’s evidently harmful to themselves. Take the case of Pune (a city in India where I live). It has simultaneously the lowest rate of helmet adoption and the highest number of two-wheeler casualties. How do you explain that?

Obviously, my confusion was a cognitive bias that impacts many people. It’s the mind projection fallacy: how I think is how other people must also be thinking. It’s an understandable bias as we know no other mind better than ourselves. We have direct access to our thoughts, but for others we can only guess why they’re behaving a certain way. My mistake was that I assumed that if I understand the tradeoff between the cost of wearing a helmet and benefits of avoiding a potential accident (conditioned on how frequently I use a two-wheeler * probability of an accident each time I use it), I’d be foolish not to wear a helmet. ... Read the entire post →

I turned 30 and here’s my scorecard

June 11, 2017Paras ChopraPersonal8 Replies

Last week (on 3rd June 2017), I turned 30. I don’t have any bittersweet emotions about ageing and I certainly don’t feel old. In fact, I feel really good. Now I know more about the world and people than before. I have friends and family around me. Most importantly I married my best friend. So no qualms about turning 30. None at all.

But this date is semi-important to me for two reasons. One is because I recently realized that my life has been been blazing through and I haven’t been doing enough reflection on my mistakes or experiences. Sure, I used to (and still do) think about questions such as what is money, what philosophy is about and why freedom is important. But I haven’t reflected enough on my own life experiences and mistakes. I thought reflecting on my 20s will be a good start. ... Read the entire post →

Strategy eats cool tech and culture for its lunch

February 20, 2016Paras ChopraEntrepreneurship5 Replies

Peter Drucker is famously attributed to have said culture eats strategy for breakfast. Every time I have a discussion with my entrepreneur friends, the discussion quickly gravitates towards what we think is fundamentally important for business success. The factors usually include technical skills, marketing capabilities, culture, hiring quality, and funding. I used to think that it was the team and culture that was most important (and certainly at Wingify, we give a lot of emphasis on building the right culture). But is culture enough? ... Read the entire post →