{"id":1100,"date":"2010-02-04T11:39:20","date_gmt":"2010-02-04T04:39:20","guid":{"rendered":"\/?p=1100"},"modified":"2010-02-03T22:07:48","modified_gmt":"2010-02-03T15:07:48","slug":"an-adventure-capitalists-noes-on-indonesia-part-1","status":"publish","type":"post","link":"https:\/\/asiawheeling.com\/?p=1100","title":{"rendered":"An Adventure Capitalist’s Notes On Indonesia (Part 1)"},"content":{"rendered":"

This is the first post in a series titled “Adventure Capitalist’s Notes,” which will be posted at the end of our time in each country. \u00a0They will be written by Scott, the AsiaWheeling resident “Adventure Capitalist,” and comment on curious market-oriented phenomenon\u00a0occurring\u00a0in each currency zone. \u00a0We encourage informed opinions, corrections, and clarifications in the comments of the post. \u00a0These posts, like all of AsiaWheeling’s content, are not to be construed as investment\u00a0advice.<\/em><\/p>\n

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Pre-Measurement<\/strong><\/strong><\/strong><\/strong><\/span><\/span><\/h2>\n
One thing we came across in Indonesia was the premeasurement of petrol used in motorbikes. \u00a0While many more developed countries and cities will sell all petrol using pumps with large reservoirs, smaller stands in Indonesia will measure out liters of petrol to be stored in bottles. \u00a0This achieves a series of valuable benefits specific to the market.<\/span><\/div>\n

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Mechanisms of Trust<\/strong><\/strong><\/strong><\/strong><\/strong><\/div>\n

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First, it creates transparency and trust regarding the actual amount of petrol being purchased. \u00a0Signs across Indonesia warn consumers against vendors tweaking the sensitivity of their scales in favor of overcharging. \u00a0A makeshift pump or on-the-spot measurement system exposes itself to this dubious behavior. \u00a0Premeasurement also allows the buyer to inspect the hue of the petrol and see that each bottle is issued by a previous third party with the liter marking.<\/span><\/div>\n

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Inventory Dosage<\/strong><\/strong><\/strong><\/strong><\/div>\n

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Second, for the buyer, it provides for an appropriate “dosage” required by both the buyer and the seller. \u00a0For the buyer, one liter at a time is all that is necessary to keep her bike going, and is a cheaper purchase \u00a0than an entire tankfull. \u00a0With small bottles available in abundance, there is no need to tie up working capital in excess gas.<\/span><\/div>\n

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Likewise, for the seller, it provides an appropriately sized inventory on hand, rather than a traditional underground reservoir requiring land, construction, maintenance, and a huge capital outlay to refill.<\/span><\/div>\n

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Branding Petrol<\/strong><\/strong><\/strong><\/strong><\/strong><\/div>\n

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Third, and possibly the most intriguing differentiation from stand to stand is branding. \u00a0The petrol itself isn’t branded with an oil company, but rather by the vessels in which it sold. \u00a0Across Indonesia, one sees Absolut vodka bottles as a standard for one liter transactions. \u00a0Above you see Coca-Cola bottles, and below, Absolut vodka.<\/span><\/div>\n

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Coca-Cola, Absolut, Jack Daniel’s, and even giant sake bottles are used to store single liter doses of petrol. \u00a0Is there a value ascribed to these branded holding vessels? Is one stand considered subtly more reputable if all of their bottles are matching in brand? \u00a0Does this suggest that Coca-Cola and Absolut are more reputable brands than <\/span>Pertamina<\/span><\/a> or Shell?<\/span><\/div>\n

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Modular Currency<\/strong><\/strong><\/strong><\/strong><\/strong><\/span><\/span><\/h2>\n
In paying for a box of biscuits that came to 4,000 rupiah (USD 0.42), I handed the woman a 10,000 note. \u00a0With the box of biscuits came rp6,000 change in the form of a rp5,000 note stapled to a rp1,000,\u00a0effectively\u00a0minting a single rp6,000.<\/span><\/div>\n

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Brilliant. \u00a0I’d never encountered this before, and in the U.S. where bills are slightly more sacrosanct, this would be considered a defacement risking rejection or confusion if used in a transaction. \u00a0Most likely, of all the change given out at this counter all day, there are two or three most common amounts. \u00a0To save time, the shopkeeper could prepare by finding these most common combinations and joining them together for later use.<\/span><\/div>\n

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This got me thinking about the concept of a modular<\/a> currency, one that physically can be combined to create single units of a larger amount; one that has the tactile and visual attributes of the value it represents.<\/span><\/div>\n

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Both physical and numerical currency, like all other things, has been designed. \u00a0In the case of the combined rp6,000 note, the top down design of the Bank of Indonesia has been modified and re-designed by the end user of the currency. \u00a0If universally accepted within the nation (the key attribute of currency), this modification may have further implications.<\/span><\/div>\n

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The concept of currency itself is completely modular. \u00a0One hundred cents make one dollar, and 100 pence make one pound.<\/span><\/div>\n

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Whatever the total amount owed happens to be, the buyer can combine any denomination of smaller units summing to the amount due. \u00a0For the most part, coins worth less are smaller, and coins worth more are larger and sometimes shinier. <\/span><\/div>\n

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The five Swiss Franc coin (~USD5), for example, is heavy enough to serve as a paperweight, and about the size of a Ritz cracker. \u00a0It really feels like it’s worth something compared to any other coin out there.<\/span><\/div>\n

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Because of the relative velocity of notes, larger, less common bills like the USD $100 are more often crisp, where $1 bills are worn, crumpled, and soggy.<\/span><\/div>\n

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In developed nations, representing and designing on top of currency rarely happens on the physical level, because the transactions demanding re-designed currencies are generally\u00a0very large and represented primarily on computer screens. \u00a0Medium sized transactions in the developed world, done on credit card, are notoriously non-physical. \u00a0Because the use of “plastic” is so effortless and removed from the concept of actual cash, it is a huge contributing factor in amassing large personal debt and even bankruptcy. \u00a0It seems removing the physicality of cash has both large costs along with its obvious benefits of traceability and compactness.<\/span><\/div>\n

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However it’s the largest transactions in the developed world which are the biggest examples on non-physical currency modification, and also have the power to be the <\/span>most harmful for our economy<\/span><\/a>.<\/strong><\/strong><\/strong><\/strong><\/strong><\/span><\/div>\n

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These supercharged re-designed currencies, an analog to the rp6,000 note, are over the counter (OTC) financial derivatives<\/a>. \u00a0Swaps<\/a> are a piece of currency that you revisit every couple of months to staple on given amount. \u00a0A\u00a0subprime CDO <\/a>is no more than the soggiest, most disgusting one dollar bills stabled together and placed to equal value as a crisp Benjamin.<\/span><\/div>\n