• Tassos Stassopoulos

Spreadsheets can’t predict behaviour


Far too many companies still operate from their own ‘financially-driven’ set of values. They still haven’t understood that trends are shaped by people. Their distorted vision of the future is often transferred to investment managers who use companies as their primary sources of information.


This tunnel vision is more common than many realise. An Apple investor, for instance, might look at a picture of 10 young people in Emerging Markets holding their smartphones. He sees 3 holding iPhones, and the exciting potential that the other 7 will one day be rich enough to be able to afford one too.


But if you instead focus on the people and their values, you’ll see a different picture. You see one iPhone user who values security because it’s a harder phone to hack, and two other iPhone users who value status. But the other 7 don’t want to buy an iPhone. They might have even switched away from an iPhone when they last changed handsets, opting for something that’s better value-for-money, having viewed iPhones as overpriced. It’s a mistake for investors to believe that people will always strive to follow the same path.


A person’s values are usually applied consistently. Those who want a value-for-money phone will often be thrifty in other categories. They do that for all they buy, and even where they eat. It’s part of how they want to live their lives. They might feel they’ve worked very hard to earn their money and so don’t want to waste it.

To predict behaviour, and what will come next, we need to first understand what people feel and care about.

As investors we can’t predict what people will do next by modelling them in a spreadsheet. To predict behaviour, and what will come next, we need to first understand what people feel and care about.


In finance we like the idea of Big Data which shows us what is happening, and we try to draw our own conclusions as to why something is happening. In Ethnography we go the opposite way. By studying a person’s life and values, ethnographers take a step back in order to understand the “why” and how it applies to the values of wider groups in society.


To illustrate, let’s take Aaha, 39 years old, who’s lived all her life in the in Malad, a lower middle-income area in Mumbai. She married at 19 and has a teenage son. She always wanted to contribute to the family income and started to offer tuition to kids in the neighbourhood. However, her real passion was making women like her beautiful, and she spotted a big opportunity for grooming in India.


She saw rising demand from women from lower-middle income backgrounds who had joined the white-collar labour force. She saw further demand from people from a broader cross-section of society who were becoming more self-conscious, now that their images are shared by friends and family on social media.


To fulfil her dream, she got a loan from her sister for a beauty course and convinced her reluctant husband to let her follow her passion. She built her business through word-of-mouth, and as it grew, she started producing her own branded line of cosmetics, a quality product at a more affordable price.

This is because we tend to look at the world through a microscope, searching for any small thing we might recognise and then claiming to have found it buried among everything else.

She learned about the properties of various ingredients, helping her not only to reproduce popular products, but also to substitute certain ingredients so she can sell her products at more affordable price points.


She also trained other women to become beauticians, and while some are now her competitors, they are also clients, buying her cosmetics.


Such female entrepreneurship is happening across many societies in Emerging Markets. Through our financial lens or as far as a spreadsheet in concerned, Aaha barely exists because she isn’t formally employed. This is because we tend to look at the world through a microscope, searching for any small thing we might recognise and then claiming to have found it buried among everything else.


By stepping back from the microscope and just observing, we can see armies of women who are becoming entrepreneurs, who need microfinancing for their businesses, who are benefiting from informal channels of education and are following their values.


The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of Trinetra Investment Management LLP and are subject to revision over time. Trinetra is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

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