THE TIPPING POINT

Authored By Malcolm Gladwell.

Written in the year 2000, Malcom Gladwell’s book brings out things that are current, relevant and relatable. He brilliantly explores the tipping point phenomenon which is a magic moment when an idea, trend or social behavior crosses a threshold and spreads like wildfire. He highlights the three rules that causes something to reach a tipping point. The three are the law of few, the stickiness factor and the power of context. In this review, I’ll highlight important points that Gladwell made in each of the three defining factors for an idea to grow to the tipping point.

The law of few states that any kind of social epidemic is heavily dependent on the involvement of people with a particular rare set of social gifts. These social gifts include connectors, mavens and salespersons. Connectors they are people who know everyone and connect people to the world. Mavens are people that we rely upon to connect us with new information and salespersons are people who influence us to buy and change our perception. These personalities for only 20% of the society but tend to influence 80% of the outcome.

The stickiness factoris the quality that compels people to pay close sustained attention to a product, concept or idea. If you want an idea to spread you must make sure it sticks, make it stand out from the crowd. Sometimes changing the small details makes a big difference.

The power of context suggests that behavior is sensitive to and is strongly influenced by its environment. Malcolm Gladwell gives an analogy of the broken window theory which argues that a crime is an inevitable result of disorder. If a window was broken and left unrepaired people will think that no one cares and more windows will be broken. Minor problems are recipe to bigger ones.

Ideas always spread like epidemic, epidemic starts after crossing the tipping point threshold, few people start the epidemic, an idea must stick before it can spread and the smallest change in context will determine whether an epidemic takes off or not and this can currently be relatable to our business.

FINANCIAL CONVERSATIONS FOR COUPLES

Hosted by Virginia Credit Union in August 2020.

The webinar dissected into the subject of money which has been perceived to be a course of discord among couples. Sylvia Watford who was the presenter in the webinar suggested practical ways of building financial harmony in among couples. Silvia is a Senior Financial Education Specialist and her thoughts in the webinar were as follows:

Foremost, Sylvia Watford recommends partners to understand each other’s relationship with money, how they view it, their biggest financial concerns and their decisions regarding money that they are likely to agree with.

Secondly is value. What are your values and your partner’s values? Identifying your values helps you to identify your unconscious beliefs that control how you spend, this will enable you to align your money with values so as to accomplish your goals and dreams.

Brainstorm your goals with your partner, you can do this individually then jointly this gives room for negotiations and realizing what are your “SMART” goals as a couple. Sylvia Watford made this approach her fourth suggestion in the webinar that sought to educate couples on fundamentals of financial harmony.

Fifth is to constantly communicate and discuss your finances to eliminate distractions and hold each other accountable.

How will you manage your money? There  is no right way or wrong way, couples should have a conversation of whether they would love to combine everything , completely separate everything or have an hybrid plan where there is ours, mine and yours.

The webinar advised couples to assign roles on who will handle what in their common financial plan. Harmony as a couple is attainable if you keep  the end and the beginning in mind ,visualize success ,stay organized, be realistic ,monitor your progress, manage setbacks and reward yourself along the way.

REGULATE DIGITAL LENDERS TO CLEAN CHAOS

In a financial world that is increasingly open and subject to technological advancements, modern-day lending has been taken a notch higher with the creation of digital platforms that have made loan acquisition convenient in terms of speed. Mobile money services such as M-Pesa allow customers to deposit, borrow and transfer money. Digital lenders such as Tala and Okash have not been left behind, as they have set up shops in Kenya, offering quick loans usually processed within 24hrs or even less through mobile phone applications. They understand that time is money for individuals and small businesses and that with quick decision making and a slick customer experience they can win the business. With the Covid pandemic cutting down the availability of cash for individuals and capital for small businesses, borrowers are willing to risk higher debt for a quick turnaround to offset cash flow deficits.

The infiltration of the market by digital lenders has swarmed borrowers with higher interest rates, leading to mounting defaults and an increased number of defaulters listed with the Credit Reference Bureau (CRB).  Many consumers do not understand loan computation, only realizing the financial burden when the loan is due. In extreme circumstances, digital lenders have gone ahead to publicly shame debtors by calling friends, colleagues, and family, creating additional pressure to repay loans. Digital lenders have taken advantage of the absence of proper regulation to run businesses as they deem fit to the detriment of consumers.

Whilst it’s impossible to go back to the old bank-driven system which is time-consuming and excludes a given portion of the population, it is unfair for the citizenry to continuously pay for the financial experimentation of tech startups. There’s a need for a sound regulatory system that makes digital credit responsible. Enactment of laws that require digital lenders to submit product pricing to the Central Bank for approval before launching to lower interest rates and a further capping of non-performing loans to avoid an increase in the amount payable due to late payment would go a long way into creating relief for consumers. Additionally, having all digital lenders under one regulator who exercises oversight on the sector, licenses players will bring about order in a rather chaotic industry.

THE MAN THAT MADE KENYAN JOURNALISM- Hillary Boniface Ng’weno

He was everything that a 20th Century parent wanted in their child. The late Hillary Boniface Ng’weno became the first Kenyan to join Harvard University and the first Kenyan to hold a degree in nuclear physics. Contrary to the norms of his times, the Harvard graduate returned to Kenya and found passion in storytelling as a newspaper scribe. He rose in ranks at Daily Nation to become an editor and later founded his own publishing company, Stellescope. Mr. Ng’weno diversified his media empire through publication of the famous Weekly Review and other periodicals including Financial Review, Industrial Review and Rainbow. After 24 years of publishing, he wound up Stellescope in 1999 to launch Kenya’s first independent television news station, STV. He sold STV in 2,000 and reinvested himself as a historian through his award winning documentaries such as The Making of a Nation.

Mr. Hillary Ng’weno had myriad opportunities to live and work abroad but chose to invest his intellectual capital into Kenya and its people. He dared entrepreneurship in an industry he knew nothing about except a passion for writing and shaping opinions. When every media company that had set footprint in Kenya was a “too-big to compete multinational”, the young Mang’u High School alumnus made his moves brilliantly to become a coveted “made in Kenya” media owner. As an editor, he understood the value of coffee in conversations with writers and how a formal outfit world limit the depth of connection between a leader and his teammates.

The industrial journey of Hillary Boniface Ng’weno is one that took paths not travelled before. He made new mistakes and like a caterpillar, he evolved from his enterprise failures as many times as he could. Anytime he sold his business, he never asked how much a seller was willing to pay, but why they wanted to buy. He understood that he was the most important asset in his businesses except for being a mortal being. Hillary wielded power through his work and used it to pioneer journalism that constructs government and governance. Mr. Ng’weno lived to his aspirations. When he died in July 2021, his legacy challenged many journalists to think beyond the newsroom and scientists to reimagine art. His portrait remains an icon on Kenya’s wall of fame and his name a household brand in Africa’s journalism.

GOOD FOOD CHOICES ARE GOOD INVESTMENT

Take some time and reflect on your latest food choices. That plate of food that you last ordered in the restaurant or the stock of food resting on the shelves of your home kitchen. Would you love to change mind about what you are eating? I think you should free yourself from malnutrition by making good food choices.

Food choices are good investment. They yield positive returns in the form of good health and progressive economic outcomes. On the flip side, poor food choices may contribute to incidences such as cardiovascular diseases, diabetes, growth retardation in early life and chronic neurological disorders such as Alzheimer’s disease. Diabetes, for example, with a burden of 347 million people worldwide having it has been linked to unhealthy diets that are high in Carbohydrates, fats and sugars; and low in vegetables and physical activity. The global economic burden of treating diabetes has been increasing exponentially from US$1.3 trillion in 2015 and it’s projected to rise to an estimated US$2.1 to US$2.5 trillion by 2030. Poor nutrition causes morbidity and mortality which attracts a financial burden. Bethany Frankel notes that your diet is a bank account and good food choices are good investments.

The increase in number of eateries selling fast foods and processed foods, known to be high in sugar and saturated fats which have a negative effect to the body has contributed to unhealthy choices. Poor maternal nutrition, which plays a key role in determining infant outcomes, has also scaled up malnutrition. While malnutrition is an unprecedented pandemic in Africa, few people seek nutrition intervention and there’s limited interest from the population to learn about it. We are duty bound to understand what we eat and what it does to our bodies. Taking a personal initiative to read about food, consult with a nutritionist and making radical changes to our recipes and menu should be our starting point. The same way we plan with our time and money, let us also plan our diet. I recommend the Mediterranean diet for starters in this journey of investing through good food choices.

CYTONN? UNDERSTAND PRIVATE EQUITY.

Private equity (PE) is a developing feature in many African markets whose growth is facing many lips and bumps in a public that grapples to understand it. Coined from their private nature of raising and investing funds, PE firms, instead of approaching banks and the capital markets to raise funds, approaches sophisticated investors. They promise a return slightly higher than that offered by traditional assets which include government securities among others. Centum, is an example of a private equity firm in Kenya and has historically invested in private companies such as Isuzu East Africa, Almasi Beverages and Nairobi Bottlers.

Currently, one of the PE firms, Cytonn, is in the spotlight for failing to meet its obligations to investors. Founded in 2014, the firm has experienced its highs and lows. I credit Cytonn for raising billions of shillings in a record short time. For instance, as of June 2021, two of its unregulated products (CHYS & CPN) had an asset-base of Kes.15.9bn vis-a-vis liabilities amounting to Kes.14.3bn. So is all the heat and condemnation on Cytonn warranted?

Most Private Equity funds invest in long term projects with characteristic challenges arising from their long life. In Cytonn’s case; there is value, only that the Cytonn promise was over ambitious with time. Cytonn recruited clients with short term views to finance its long term portfolio, exposing itself to liquidity risk and a tarnished reputation. Coupled with a slumping market for real estate, they have to attract new strategic investors to boost liquidity. Its short-term minded investors remain with few options, such as converting their debt into residential units, extending the maturity periods or taking legal action.

I opinion that we blame the Capital Markets Authority (CMA) for being the proverbial dog that barks without biting. In cases such as the Atlas Africa Industries where CMA failed to enforce proper financial reporting. CMA watched Imperial bank’s floatation of bonds worth Kes. 2bn only for the bank to go under a month later. Commercial Banks on the other hand have brainwashed fixed deposit investors by offering them peanut returns on their “safe” investments. Investors are also to be blamed for not reading investment proposals carefully, underestimating potential risks involved and how the Force Majeure clause can be exercised. I conclude in the words of Peter Lynch, “Never invest in any idea you can’t illustrate with a crayon.”