What Slippers Tell You About Asset Management
As a part of my welcome-to-Ghana gift from MEST, I received this pair of flip-flops (called slippers in Ghana). Rest assured, no one gave me used slippers. These were brand new when I received them.
Fast-forward about 5 months — about 5 months ago. After almost daily use, the plastic strap of the slipper managed to wear straight through the rubbery sole. No shock here. Every good thing must come to an end including a comfortably worn-in pair of slippers.
I asked Kento — one of MEST’s Ghanaian security guards — where I could buy a new pair. When I did, he gave me a slightly puzzled look. He then asked if rather than buy a new one, if I’d like my slipper repaired. He said the slipper repair man passes the White House often and Kento would be happy to ask him to repair my slipper.
At this point, I gave him a puzzled look. Firstly, I was surprised to hear there was a person that made a living repairing slippers. After I got past that, I admit I didn’t even think about his question, but simply said something along the lines of, “No, that’s okay. I’ll just get a new pair.” When Kento asked if I was sure, I considered it a bit more and thought, “Well, why not?”
The slipper on the left was repaired first and after a few months, I got the slipper on the right repaired. The craftsmanship has been solid. No issues. Considering the repair was probably about 1/6 the cost of the slipper (1 cedi v. 6 cedis per slipper) it made sense.
The reason why I point this story out is it’s indicative of a much bigger trend I’ve seen across Africa regarding maintenance. By and large the mentality here is to minimize any costs right now as much as possible. In the slipper example, it works out to everyone’s benefit. I staved off buying a pair of slippers and gave someone work.
When I was traveling in Northern Ghana, however, I came across this mentality with (likely) a less favorable outcome.
At a bus station, I watched as a shipment of various products (produce, grains, and consumer packaged goods) were offloaded from a truck (above) into small vehicles used to distribute to various shops. I’ll point out two things in this picture. Firstly, notice how high the products were stacked above the container. Secondly — even though about 1/4 of the truck had been offloaded — notice how close the truck bed is above the tires.
I’m not going to proclaim myself an expert on vehicle maintenance, but my guess is that in hopes of packing as much as possible on the truck — saving extra shipments — the struts on this truck will wear out quickly. Of course, you don’t have to pay for struts today, that’s a problem you can worry about in the future. However, my guess is it will be very costly to repair in the future and potentially (probably?) more costly than just sending an extra shipment.
From an entrepreneur’s perspective, this mindset makes it tough to sell people/businesses on the idea that giving our start-up money now will increase money in the future. Often times people are content with the status quo. A more compelling proposition is that we can do the exact same for you now, but cheaper!
These examples reinforce my thinking that the businesses that will most likely succeed here will optimize the current ways of doing things (to save money today) as opposed to introduce new ways of doing things (to generate money tomorrow). By way of example, I believe that all things equal, businesses that optimize the status quo (e.g. sharing economy companies like Uber and Airbnb) are more likely to succeed compared to businesses that might provide the market entirely new offerings.
Of course, this is a sweeping statement. You can think of many success stories — Jumia, to name one — that might be sold as more convenient as opposed to cheaper*. However, I’m convinced that many inefficiencies in Ghana (and across the continent) will be addressed by companies who are interested in applying methods or technologies to optimize the current networks/processes rather than build new ones.
*I’d argue I joined Amazon because it provided the cheapest books around, not because they were willing to deliver — although that was a bonus.