Equal Exchange

Dhruv Tandon
Nov 4 · 4 min read

This essay is written by Dhruv Tandon, a product manager at Drip Capital, who loves to tinker with new products, design and tech that has the potential to change the status quo. Opinions put forth are my own and do not reflect that of my employer.

Fullmetal Alchemist is one of my all time favourite Japanese anime mangas. A host of well developed characters based in the mythical world of alchemy which was governed by the principle of equal exchange. The alchemists could only “transmute” elements from one form to the other but could not create value from scratch. The anime was a story about two brothers who tried to bring their departed mother back to life by assembling the elements of a human being: Water (35 L), Carbon (20 kg), Ammonia (4 L), Lime (1.5 kg), Phosphorous (800 g), Salt (250 g), Saltpeter (100 g), Sulfur (80 g), Fluorine (7.5 g), Iron (5 g), Silicon (3 g) and fifteen traces of other elements.

They learnt the hard way that the value of humanity isn’t just the materials within them as their transmutation goes terribly wrong brings back a half human – half monster being that resembles their mother to suggest that their mother’s humanity had some inherent value that couldn’t be replaced with just non living materials.

Being new to the space of international trade while working in Product for Drip Capital, I had to ratchet back to first principles. This thinking reminded my of my childhood favourite anime series as I understood more about the global world of trade. A trade of goods doesn’t just involve the inherent value of the goods themselves. It often brings about circumstances that allow a designer in US to manufacture items in Vietnam to sell to customers in Europe benefiting both parties in economic and social terms. Ocean transportation and the container have reduced the costs of cross border trade, and this in turn has made the world a more connected deeply integrated ecosystem where labour costs in market X can affect sales of goods halfway around the world.

Human beings are the only species that enter in to contracts of trade with each other. Ponder on that thought as you appreciate how the British colonialists of the yesteryear conquered the seas with the technology of navigation and built their economies through trade. This is how exchange of goods brings economic and human value to the collective and drove the colonialists to explore the uncharted world.

One reason why we are able to unlock value through trade can be explained by the economic principle of opportunity cost.

A benefit, profit, or value of something that must be given up to acquire or achieve something else. Since every resource (land, money, time, etc.) can be put to alternative uses, every action, choice, or decision has an associated opportunity cost.

Assume two countries, UK and India

They both produce textiles and books. Their relative production levels are shown in the table below.

For the UK to produce 1 unit of textiles it has an opportunity cost of 4 books. However, for India to produce 1 unit of textiles it has an opportunity cost of 1.5 books

If each country now specializes in one good then, assuming constant returns to scale, output will double.

This is the theory behind how trade makes the world a better place, humanity as a collective whole is more efficient than the self and how equal exchange includes non material value. In an ideal world if we are able to make trade cheaper and easier, the collective would be that much more efficient.

There are many problems faced by a seller and buyer of goods in international trade. When goods take a long time to reach its destination and cross international borders, clear customs, lack of trust and long credit periods leads to friction that makes international trade harder.

At Drip Capital, we are working on a number of products to bring the buyer and seller closer through technology that can bridge the gaps of trust and credit between these parties.

We are optimistic that the closer we are able to achieve equal exchange in international trade, the more value of human capital we can unlock.


    Dhruv Tandon

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