“Don’t cry because it’s over. Smile because it happened.” – Dr Seuss
Latest quarter (July-September) and month (October) have been good for most Indian listed companies. Excluding a few outliers that were forbidden from functioning, such as multiplexes, malls and hotels, most reached between 80% and 120% of where they were a year back. Multiple metrics – revenues, collections, disbursements, orders, utilization – tell the same story. A meaningful part of the system functioned near normal, despite some lockdowns during this period.
Back to Dr Seuss. A lot of newsprint is expended on whether it’s over. How much is pent-up demand? Will it sustain? How are retails compared to wholesales? How’s festive season shaping up? Will mythical second wave, bad loans, inflation, elections or China play spoiler? This is the mandatory ‘but’ to be appended to every piece of inconvenient good news. I have neither interest nor ability to speculate on such lines. To me, the most remarkable thing is that it happened at all.
After the fact, buggy humans rationalize with “of course, it had to turn out as it did”, irrespective of how unlikely the course of events were before the fact. We are also on a hedonic treadmill, where we quickly incorporate positive developments into a new baseline, take it for granted and resume cribbing. Let’s rewind to March-April. If your memory is fallible like mine, revisit headlines, stories and call transcripts from that period: we’re all gonna die; we’ll never have a life; forget about discretionary purchases, except Chyawanprash; consumers are irrevocably scarred. Unemployables of the world outdid each other in dreariest doomsday prediction contests. Psychos in housing societies and Whatsapp groups messed with our routines and minds. Lockdowns, arbitrary restrictions and assorted mitigants made it tedious to step out of home, let alone run complex business operations across far-flung locations. New normal, not near normal, was the refrain.
If we don’t mix up hindsight with foresight, and frame our recovery against context and expectations, it’s as remarkable as Rahul Tewatia going from 5 runs off 13 balls to 48 off the next 18 in a pressure situation. Two aspects stand out. First, businesses have demonstrated incredible resilience and adaptability. Second, people aren’t scarred.
While financials have been impressive, the more remarkable part is operational. Companies that I respect have shared videos, pictures and details of how they revamped their operations to incorporate covid-safety. It’s a ridiculous achievement to run at near 100% while hurriedly adapting to disruptive changes across the board. Everything from busing to cafeteria to shopfloor moved to new normal. A single factory falling into a containment zone broke the whole chain. A few employees or family members inevitably falling sick quarantined key people for weeks. Imagine closing complex contracts or upselling without in-person meetings. Or completing software installations or quarterly reconciliations with thousands of staffers working remotely. I have heard stories of companies committing to critical export orders, only to have arbitrary local restrictions ruin the whole thing. Or about factories which had hundreds of employees camp there for weeks, with the company taking care of everything. It was likely even harder outside the factory, in terms of logistics, warehousing, handling or inventory suddenly getting stuck in the boondocks.
One legitimate application of forecasting is for scenario planning in decisions with significant real-world consequences. Businesses prepared for the worst case in their range of outcomes and had to pivot to beyond best case in a matter of weeks. It must have taken one hell of a scramble on all fronts to pull this off (in turn, resulting in absurd margins that mess with analyst minds and models). Businesses handled extreme swings and disruptions, with the sword of getting tagged as a super-spreader hanging over them. It’s also remarkable that there’s not one meaningful outbreak that emerged out of business operations that ran at full throttle in a dynamic environment. The next time I meet business managers, I might just embarrass them with a sashtanga namaskaram.
I have no insight into the Indian psyche. I merely study aggregate outcomes of what millions do with their money. That said, consumers seem back at whatever they were doing before March. My favourite illustration is decorative paints. Repainting one’s home is expensive, tedious and easy to postpone. At a time when every stranger is viewed as a germ carrier, hordes need to camp inside one’s house for days to get this done. In March, outlook seemed grim. I was amazed to see this industry reach last year’s activity levels by July. Other discretionary high-value durables show a similar story. It’s not just about willingness to spend money, but about willingness to spend hours at outlets with strangers figuring out comparisons and financing. While online sales have jumped sharply off a low base, a vast majority of near-normal consumption is of the high-touch kind. Reassuringly, even purchase of capital equipment by businesses has recovered for the most part. Epidemic damage is both physiological and psychological. While we have done reasonably well on the former front, latter had the potential to ruin livelihoods well after lockdowns ended. I’m glad to see minimal psychological scarring.
The evidence that I have presented pertains to relatively large companies across sectors. While this is a non-trivial part of the economy, it isn’t all of it. There are pockets that are further away from normalcy: SMEs; a range of sectors from air travel to school buses; unorganized labour. I am not making the case that all is well or normal. I simply want to draw attention to how extraordinary recent turn of events are. Others can do justice to the negatives.
Social world is messy due to feedback loops. It’s why brands are sticky, good businesses stay good and turnarounds are tough. If something’s on a roll or in a rut, it’s hard to find a starting point to break out of that cycle. For this reason, it’s sometimes good to collectively take in positive news without entering a new cycle of doubt. Feel fine, act normal, see many doing so, feel finer, repeat, reinforce. Our unforeseen uptick is an opportune starting point to get out of the rut we were forced into. There’s no guarantee, but without a shared sense of normalcy, there’s no chance. Necessary condition has been met, even if we don’t know whether it’s sufficient.
In asking people to ‘go shopping’ in October 2001, Bush urged a return to normalcy so that terrorists don’t doubly hurt America. Indians have already heeded his wise advice, and agile businesses made sure that their trip was fruitful. Compared to abysmally low expectations just a few months back, we have what my industry refers to as a ‘big beat’. What my industry doesn’t mention is that ‘big beat’ is a euphemism for a disastrous forecast. So, why bother with a new cycle of embarrassing predictions? Don’t fret whether it’s over. Smile because it happened.
[PS. My cheer is linked to real-world progression and improving livelihoods, not buoyancy in my make-believe world. A positive correlation between mood and fickle markets is unsound, both personally and professionally.]