Care to share some toilet paper?

A short funny story for a Friday afternoon. After the amusing stories about umbrella sharing, this week, I bring you toilet paper. No, toilet paper sharing is not the latest fad in China. Instead, this story is about how facial recognition is changing toilet paper usage in China. Happy Friday!

A short funny one for a Friday afternoon.

For those that have been following my blog, I have been quite amused by some of the “silly” ideas that have popped up in China’s sharing economy. I had written about “Care to share an umbrella?” and “Care to return an umbrella?”

Well, this week I bring to you toilet paper.

No, there isn’t an app for people to share toilet paper but there is a machine in China’s toilet which regulate how toilet paper is dispensed in public toilets.

How many squares is fair?

This story is from today’s HKEJ. For those of you that have visited China and had to go to the bathroom, you would have noticed that the way that toilet paper is dispensed is a bit different.

Rather than putting a roll within each stall, they have a central dispenser outside near where you wash hands. So, if you need to use the toilet, you take a few or a lot of squares and then go and do your business inside the stalls.

The problem was that some individuals took too many squares. Rather than taking what they needed, they just grab a lot, perhaps to save for later or use somewhere else.

In order to combat against wastage and improper use, someone came up with a technological solution – Facial recognition.

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Image from

In order to obtain toilet paper from the central dispenser, you need to look into the facial recognition camera. At that point, the machine will spit out a few squares for your use. However, let’s say you’ve eaten something bad and need a few more squares. In that case, you’ll have to hold it for nine minutes longer as the machine knows you have just taken some toilet paper and won’t dispense more to the same person until nine minutes have passed.

Did it work?

Yes. According to the story, the city government found that on average the number of toilet paper rolls used declined from 6-8 rolls to about 3 rolls.

Now, if someone can do a similar tally to see if the usage of hand soap has also seen a corresponding increase, that would be fun. Hope you’re not reading this as you are eating.


Happy Friday!


Postcards from the supermarket – Which is more expensive? Buy-side Vs. Sell-side

Greetings from the produce section of your local supermarket. As I was meeting an old friend for lunch today, I came across some novelty melons. When I thought about how much they costs, the question of value came to mind. In this case, I would argue that their value could be totally different if one were to take a sell-side versus a buy-side perspective. Answer key at the bottom of the post, no peaking.

Greetings from the Produce section of your local supermarket.

Yesterday afternoon, my daughter said she was hungry. So, I made her a strawberry jam sandwich. She was still hungry, so I asked her to go to the supermarket next door to buy some fruit. She came back with a melon and said we got the most expensive one.

I freaked out!


Because I thought she got one of those Japanese musk melon that costs hundreds of dollars. What a relief it was when I found out that it only costs HK$60 (around US$7.50).

The biggest watermelon I have ever seen

That brings us to today. As I was getting ready to meet an old friend for lunch, I passed by a high end supermarket in the centre of town and I saw the biggest watermelon in my life. If you can see the label below, it was called a Japanese Jumbo Watermelon. What was even bigger was the price tag. I won’t reveal it yet, but it costs an arm and a leg.

FullSizeRender 4Given the previous day’s experience, I proceeded to check out the prices of some of the other types of melons.

Here is one of a Korean musk melon.

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Then, some Japanese varieties. Here is a Japan Shizuoka Melon.

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And here is a Japan Heart Shape Melon.

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Which one is most expensive?

This got me thinking…would my kids be able to guess which one is more expensive? If I asked you to rank them from the cheapest to the most expensive, my guess is that 95% of you would get it right. The answer is at the end of this post but try not to jump to the end just yet.

When we think about price, most of us probably approach this question from the “Buy” side perspective (i.e. the consumer perspective).

Buy side Vs. Sell side – Value can be very different

But as I wondered who would fork out such a huge sum for these novelty produce, I started to think about which one is more expensive from seller’s perspective.

I guess there’s probably the odd fellow who shells out thousands of dollars for a heart shaped melon to impress a new girlfriend but in most cases, these fruits probably just sit there. At the end, when they start to spoil and the owner or the staff probably crack the melons open and eat it themselves so it doesn’t go to waste.

So from the seller’s perspective, these novelty melons’ value is really just as a sales gimmick. From a marketing perspective, they help to draw in the crowds but in terms of their actual sales value, in most cases, it is zero (i.e they don’t sell). Conversely, although the regular fruits sells for much cheaper, their higher volume means they offer much greater value to the seller.

So if one had to rank the fruits from cheapest to most expensive, it does really depend on whose perspective you take. Now you can scroll to the bottom to reveal the actual prices of the melons. Did you get it right?

Buy side perspective – From cheapest to most expensive

Sell side perspective – From cheapest to most expensive






Answer – Actual price of the produce

  • Korean Musk Melon – HK$80 (around US$10)
  • Japan Shizuoka Melon – HK$498 (around US$64)
  • Japan Heart Shaped Melon – HK$1,388 (around US$180)
  • Japan Jumbo Watermelon – HK$2,988 (around US$385)

Care to return an umbrella?

About a month ago, we wrote about the latest fad in China, umbrella sharing. Today, the Chinese press provided an update on how that venture has gone. I’m not making this stuff up.

About a month or so ago, I wrote about the latest fad in China’s shared economy – Sharing umbrellas (link here).

There’s been an update. According to the Hong Kong Economic Journal, one of these umbrella sharing companies started operations in April and had rolled out its sharing service in 12 cities including Beijing, Shanghai, Nanjing and Guangzhou. It invested in 300,000 umbrellas with a “no fixed-base” approach. At Rmb60 per umbrella, its initial outlay was Rmb18mn.

Under this system, the umbrellas have a lock on it and in order to use it, you have to pay a Rmb19 deposit and would be charged 50 cents for every 30 minutes of usage. Once the deposit is paid, the renter would receive a four digit code to unlock the umbrella. This is how many of the bike sharing systems are set up.

That was the theory. In the real world, what wound up happening was that after a few months, most of the umbrellas have disappeared, rendering the initial Rmb18mn a complete loss.

The real winner? The umbrella makers

Normally, one would have thought that a Rmb18mn loss would have kicked some sense into investors but in the current easy money environment where profits don’t matter, the company is doubling down. The umbrella sharing start-up is now saying that the real money is in advertising. You see, there are eight sides to an umbrella and surely someone would be willing to give them money so that they can advertise some dot-com venture on the umbrella. That’s not the end, The company’s ambition have grown, it is now targeting to buy another 30mn umbrellas (i.e. stepping up its initial investment 100x), some with night glow feature and some with a GPS so that they will at least know where the umbrellas have gone.

I imagine that the GPS will show many of the umbrellas in the closest dumpster.




Going once, going twice, SOLD!

Land prices are going crazy in Hong Kong. While the conventional explanation chalks this down to the market’s rosy prospects, could it actually be due to the change in land sale mechanism? How does the auctioning and tender process impact on pricing? To find out, we conduct a little experiment using some snacks that my kids love.

Over the past four months, Hong Kong land sales have rocketed.

In February, two Chinese developers paid HK$16.9bn bid for a residential site in Hong Kong. This was 43% higher than the previous record of HK$11.82bn that Sino Land paid 20 years ago during the height of the 1997 bubble. I suppose, it’s like the first person to break the four-minute mile, once someone shows that it can be done, the records just kept tumbling. By mid May, Henderson Land raised the bar by another 38% with its HK$23.28bn winning tender for a Central commercial site then just two weeks later Nan Fung upped the record again to HK$24.6bn for a site near the old Kai Tak Airport.

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So what is going on here?

While the simplest explanation is that bidders are pricing in some pretty fanciful assumptions (see Pure Imagination), could these crazy land prices be the unintended consequences of some well-intended government policies? Specifically, we are referring to how the Government changed from selling land via public land auction to a land tender system.

In order to find out, I have asked my two kids, aged 10 and 7, to help me out with a little experiment. But before that, some background on the land sale mechanism in Hong Kong.

Background on Government Land Sale system

In Hong Kong, the Government owns all of the land and each year, it “sells” the land for private use by granting 50 year leases. This system had been in use for decades (the first land auction took place in 1841 in Macau) but what had changed more recently was the sales mechanism.

October 2011 – From public auction to closed tender

Prior to October 2011, the Hong Kong Government used to sell land both through public land auction as well as through a closed tender process. For instance, in the fiscal year March 2011, of the 11 sites sold that year, all were sold by auction. However, by the next year, tenders now made up 75% of the sites sold. By last year, all sites were sold by tender.

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So, why was the change made?

The actual rationale was never really explained but I think the officials were worried that the excitement from the land auction would spill over to end-users and cause home prices to spiral up.

Take the last public land auction as an example. In September 2011, a small residential site in Yuen Long received 162 total bids from eight different parties. The final price of HK$361mn was 84% higher than opening bid. You can see that when the Government is trying to cool the market, this type of hotly contested auction was less than helpful.

So someone decided, let’s sell the land via a closed tender system instead. In this case, interested parties are asked to submit a sealed bid by a certain deadline. Then after a few days, the winning bidder and the winning bid are announced.

Much less excitement, or so they thought…

Good in theory but terrible in practice

But like many things, what sounds good in theory often lead to unintended consequences. The problem was that while the auctions could be exciting, they also provided a lot of transparency on the price discovery process to the market. Although participants could try to disguise their identities, you can still see what the other guys are bidding.

As we’ll see later on, the closed tender process did the exact opposite and actually back-fires on the original intent.


Experiment – What is the fair price for jelly snacks?

In order to test out this theory, I conducted a little experiment using some snacks that my kids love.


This picture is a little Japanese jelly snack. Each pack comes with six little jellies inside and costs around $13 from the supermarket.

First, the tender…

In the first case, I decided to sell the jelly packs to them using the tender mechanism. I told them that they are supposed to keep their bids confidential, that there is a minimum reserve price so if they only bid $1, I won’t part with my jelly snack. They have five minutes to submit their bid.

The first point to note is that they immediately began to discuss what they should bid. So, collusion and bid rigging almost appears to be in-born.

The second point to note was the huge spread between the two bids. My 10-year-old bid $20 and lost to my 7-year-old who bid $100, nearly 7x the actual market price. As the $100 is way above my reserve price, I awarded the Lychee flavour jelly pack to my 7 year old.

Then, the auction…

Next came the auctioning of the Peach flavour jelly pack. I once again went through the rules with them. I told them that I would announce the opening price, if they want to bid, they can raise their hand. Similar to the tender, I have a reserve price, so I might not sell it if the bidding is too low.

I started the bidding at $5 and surprisingly there were no bids. After a few warnings that if there are no bid, then no one gets the jelly pack, my 10-year-old raised his hand at $5.

Again, there was silence, no bidding from my 7-year-old who was earlier happy to pay $100 for the jelly. I warned that $5 is still too low, I’m not going to part with it. After a bit more encouragement, my 10-year-old raised the bid to $10.

It was going slowly but as the bids were still too low, I again warned that the jelly would be withdrawn. This time, my 7-year-old jumped in and bid $15. With the auctioning bug now catching on, she then proceeded to bid against herself and raised the price to $20.

Since this has now reached the earlier tender price from my 10-year-old, he did not want to over pay. I lowered the increment to only $1 and at $21, he went for it.

Not wanting to lose the jelly, my 7-year-old jumped back in and bid $22.

I was hopeful that the bidding action may start to heat up. But even though I said that at $23, it would only be $2 more than his last bid, he wouldn’t go for it.

In fact, they started to converse again with the older one telling the younger one not to bid again and instead they can share the spoils. They wouldn’t budge and the bids stayed at $22. At the end, my 7-year-old won both packs of jelly.

Key takeaways from this auction-tender experiment

So, what’s the conclusion here?

  • (1) The tender fetched a price that was 4.5x that of the auction ($100 versus $22)
  • (2) The tender resulted in a much larger spread between the highest and second highest bid ($100 versus $20)
  • (3) If the idea is revenue maximization, then tender is the way to go.
  • (4) If the idea is to restore supply-demand equilibrium while limiting price growth, although the auction process may appear more exciting, the greater transparency actually limits price growth especially when there are unsophisticated bidders involved.
  • (5) Even though the auction process results in a lower price, it was still able to cover my costs, so there is no risk of “wasting a resource”. In total, the $122 raised nearly covers my costs by 4.7x.

As a final note, what I haven’t told them is that I actually have two more packs of the jellies in the fridge. So, while the participants may think that they are bidding for a limited resource, if one is able to be patient and trust that more supply is coming, the fair price may be lower.

At some level, I believe the kids do know that there is more supply. I can always go to the super market to buy more. But, in the current environment of easy money and instant gratification (or the fear of losing out), what is a +50% premium?

Bring back the public land auctions.

Care to share an umbrella?

Much has changed in the past 17 years. Amazon has just hit US$1,000 and now boast a market cap which is double that of Walmart. While much has changed, one hasn’t and it is human nature. The fear of missing out is a huge motivator and has historically led to all sort of silly investments. Care to share an umbrella?

Overnight, Amazon’s share price rose above $1,000 for the first time. It now sports a market cap of US$476bn, which is roughly double that of Walmart (US$237bn). The Nasdaq at 6,203 is now also 24% higher than the 2000 bubble peak.

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(Source: Google finance)

Much has changed except one thing – Human Nature

Although much has changed over the past two decades with many of the internet companies now generating very strong cash flows, there is one aspect that hasn’t – human nature. Greed and fear are two powerful drivers for human behaviour. I don’t know which one is the stronger motivator but I would reckon that “Greed” and the “Fear of Missing Out” trumps the “Fear of Loss”.

While the market is not as crazy as 1999 when anything with a “.com” had money being thrown at it, there are some signs that money has once again become too loose and investors are making all sorts of investments that make very little sense to me. To begin, let’s talk about what are the latest fads. While some would suggest that it is “streaming”, “AI”, “VR”, “IoT”, I would argue that it is the idea of the “sharing economy”.

Does it make sense to share?

Now, I am not knocking the sharing economy. I think in many cases, it makes a lot of sense. For services like Uber and AirBnB, the sharing bit helps to increase productivity for an asset which is otherwise being left idle. So if one can increase the usage rate from say 10% to 25%, you have increased the productivity by a factor of 1.5x, which makes perfect sense.

But what about umbrellas?

Umbrellas do not strike me as something that makes sense for sharing. Unless you are the type who avoids getting a tan on a sunny day, the time when most umbrellas tend to come out is when it rains. And when it rains, that’s when everyone needs an umbrella. There is no sharing unless you want to get wet.

Although that might sound intuitive enough, I am apparently very wrong to the tune of a couple of million dollars. According to an article in today’s HKEJ, umbrella sharing in China has been attracting a massive amount of venture capital money. Two types of umbrella sharing business have emerged in China. In the first type, there are fixed points where the umbrellas are stored or fixed. In the second case, there are no fixed points. In either cases, these start-ups rely on the internet and apps to take deposit and rent out the umbrellas.

On reading this news story, the first thing I had to check was the date. I had to make sure that it was not April 1st. For me, if I happen to get caught without an umbrella when it rains, the first thing I will do is to dive into a convenience store and buy one for about US$10. I don’t think I would pull out my mobile phone, launch an app, check the closest rental point, walk there, get wet, then rent an umbrella for something I hope is well below US$10, but that is just me.

But regardless of my views, I think you got to give a lot of kudos to the guys who came up with the umbrella-sharing idea. If anything, they are now millions of dollars richer, thanks to the generosity of the venture capital guys.

Zombies vs Gazelles

I came across some fun facts on entrepreneurship. According to the NUS, the 5-year survival rate for tech start up is 53%. 20% are self-sustaining. 8% are considered as “gazelles” while 56.8% are struggling or “zombies”

There is a computer games that I used to love playing. It was called Plants Vs. Zombies (PvZ for short). The idea was simple, you tend a garden where you plant things like Sunflowers, Pea Shooters, Potatoes with the aim of defeating an army of attacking zombies.

It’s a fun game but this post is not about the computer game. Instead, I came across an interesting article talking about Zombies vs. Gazelles in the context of high tech start-ups in Singapore. It was a study done by National University of Singapore’s entrepreneurship center (full article here). Some key findings include:

  • Five-year survival rate – 53% in Singapore Vs. 49% in US and 42% in UK. Interestingly, the study argue that the higher Singapore survival rate may be due to government support, resulting in Zombie companies and hence the title.
  • 90.3% of founders are male, down from 94% in 2010
  • 55.5% of founders are younger than 39% years old, up from 53.6% in 2010
  • 56.5% are first time entreprenuers, up from 46.6% in 2010
  • One-fifth of start-ups are now self-sustaining
  • More than half have yet to achieve cash flow breakeven
  • 8% of companies are classified as Gazelle’s – those with 20% revenue growth for more than four years
  • 56.8% are classified as “Struggling” – those with less than 10 employees and little or no revenue growth.

Although the study is in the context of high tech start-ups , I wonder how much of the findings would also be applicable to non-tech start-ups.

If one were to simply look at the above stats, it would appear that the odds of finding success is low. Despite that, I still think one should give it a try for two reasons. Firstly, a 20% self-sustaining rate is better than 0%, which is what happens if you don’t try. Secondly, I think there is a tremendous amount of change going on. The impact from artificial intelligence, automation and competition from cheaper labour is likely to bring change to our longer-term careers whether we like it or not. So, despite only an 8% chance of being a gazelle, we best start to take charge of our own future. Who knows, we could even become a rock star like the zombie below.