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Saturday, March 12, 2016

Perhaps We've Grown As Big As We Can Get ? Maybe So According to Satyajit Das

This morning I sat down on the bus stop bench to put on my sneakers before my morning walk, it's become almost a ritual to turn up bare feet for my walk, often running late. There is usually on a Saturday morning either the vomit of a party reveller from the night before splattered beneath the bench or else the subsequent acidic stain of previous attacks left eating into the stone until a local council worker cleans it up. The sun was still rising on the bay and the air was still moist, summer was having a hard time leaving and autumn seemed rather shy this year. Ready to put my first sock on I noticed coming down the promenade Satyajit Das, my economics go-to man, one of the more erudite and free thinking men of Sydney, if not the world. He walks alone most mornings and is so very unassuming that if you don't know how to spot him, by way of his oblong glasses, 20 year old white t-shirt and equally aged sneakers, you'd never catch him.

Not that Das would want me to write about it, but I first saw him on the Matt Damon narrated Inside Job which documented the Global Financial Crisis - it's causes and effects. He also has a skewed view of the world. It wouldn't do him justice to label him a pessimist, nor would it ever be possible to call him an optimist. He's a realist at best and this morning, responding to my statement that "I think it's possible for a government to prop up an economy just by selling confidence", he responded with "no, that's just not possible. An economy also needs good fundamentals". Then the third person in our entourage, a mathematically minded aviation enthusiast added "yeah, Das is right, it's a bit like a pilot saying to his passengers 'we've lost the wings but I'm still going to try and fly this plane'".

The overarching feeling to these 'walk and talks' that I have between myself, my friend and Satyajit is 'what does the future look like for the global economy' - and these walks only ever occur when all the elements are right for us to all meet up on the promenade.

Whereas I often take an optimistic view towards the global economy, Satyajit's position is usually a given. So much so that he is listed 126 on a website which lists the 150 things that that the world's smartest scientists are worried about - namely, that economic growth will halt.

Certainly in my own experience we seem to have reached a plateau for our business and I can relate to this feeling that economic growth may be slowing or stagnating. Every year it seems slightly harder to make the same gains from sales, customer bases do not seem to grow but rather expand and contract to make the end of the year seem to have no real change from the last. Further, in the customer's pursuit for greater bargains both in bricks and mortar and on the web, and his/her newly founded web sourced authoritative product knowledge base, the preference seems to have become one of 'I want to pay rock bottom dollar prices but I want the same quality that I am accustomed to'. I am not one to ever look around and feel pessimistic about life, rather I am astounded at our ability to adapt and evolve and if I think about what was around when I was a child and compare it to the world today, we have gone ahead in leaps and bounds. But if every buyer is squeezing every last drop out of the seller, how in God's name is he supposed to grow? Certainly I pity both myself and other fashion brands in the Australian retail sector. I am in a niche, I can only imagine how much my flower might wilt if faced with stiff competition.

There's something in the talk below that seems like a truth that needs to be digested. Are we all a little too obsessed with growth and what price are we paying for it in the long run? You may not necessarily agree with everything Satyajit says below, but personally I've never met a man with a greater breadth of knowledge than him, so it's worth your time to listen to what he has to say. One observation that really stuck with me, which I assume is correct factually, is that 85% of debt raised from the early 1990's to today has been raised to finance things other than plant and equipment. Traditionally plant and equipment were the things that allowed us to grow our businesses and provide a return on an asset. Instead, much of the debt raised has been used, as Satyajit points out, for one person purchasing a house from another at a higher price, who then sells it to another person at an even higher price.

What do I make of all of it? I don't think I could really tell you right now. But if the Sydney housing bubble bursts, I will be sure to say 'I told you so'.

If you want to read more of Satyajit click here, or read his most recent book A Banquet Of Consequences, here


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