Perfect information is only theoretical. If reality afforded it, its dissemination would abolish free markets. Everything would be determinable. But this is not how the real world works. Individuals determine their risks and rewards and act upon it. When fate remains unknown and markets remain free, everyone wants to make a buck for themselves.

The real estate sector has been a favourite asset for Pakistanis and yet stories of developers defaulting on promises are accentuated by files which never translated into real pieces of land. Others complain their land never yielded the returns promised. Most of this money only rotates around real estate itself instead of moving into productive assets.

Remaining outside banking channels hampers growth since bank deposits are used to finance the productive workings of an economy. Commercial real estate may be valuable, but the ability of shops to sell rests on the economy’s productive capacity where goods need to be manufactured. This activity provides employment, and the earning is then spent on consumer spending. Prime commercial real estate still remains underutilised.

Modern times and more information have not made for better investors but changed the avenues money is deployed with the goal of multiplying.

Just because an entrepreneur has a pitch desk doesn’t mean its worth funding

When the markets were bullish, every idea was funded. A pitch deck — a collection of slides with basic information about the idea, problem, and team — was enough to raise millions of dollars.

Social media banners and streetwise billboards would feature a new brand every week. With little to no products of their own, and barely any time in operation, it was always confounding for those more critical of what was happening.

Unabashed spend on advertising was driven by the hope of capturing significant market share in a short time — a task few can achieve, and historically a practice MNCs can perhaps manage in new markets.

Somehow every market was worth in the billions, while not untrue, did not mean new entrants could capture swiftly. The country was drowning in problems which could be “solved for” and in the process, make the owners of those companies dizzyingly rich. Of all the outlandish ideas, one can only wonder why there wasn’t enough ingenuity to create fuel reserves out of a mobile application.

Over time, a lot of these companies have run out of cash and discontinued operations. Others only barely exist. With the hype finally over, let me state that not every idea is worth funding, not every problem pressing enough to cater to, and half glitchy website and an unbuilt app doesn’t merit it being called a technology business.

Technology is a tool to capitalise on existing assets. Productive capacity is determined by physical and natural capital. The software can optimise machinery, reduce energy wastage, or automate processes. Natural capital spans everything from fuel deposits to biological assets. Some of these are finite resources, but livestock or arable land can be managed to boost productivity. A rudimentary example can be the decision to eat beef from a cow or let it reproduce calves that’ll multiply over the years and produce milk.

Yet despite the limitations, the fear of missing out has always found populist support. Stock markets have climbed but also crashed. The dotcom bubble of the early 2000s exemplified how the chance to make money off something unclear is an attractive proposition.

This era saw a number of technology companies listed with high valuations and constant trading of stocks, despite nobody actually knowing what the company did. Others failed in execution, which included “pets.com”, selling pet supplies and lasting two years.

The rise of listings of such companies propelled the Nasdaq Index, which dipped over 70 per cent thereafter. The rise of crypto remains akin to this. The promise of something on the back of a security convinced people to plough billions of dollars in. To this day, there is no real use for these currencies. The underlying asset is unproductive.

After a year of filtering deals, ideas and promises from actual businesses, one tends to use a litmus test. One of the most frequent is asking to explain what a business does in one sentence. The longer the answer, the harder it’ll be to make any money.

Yet, within the chaos, there exists room for technology to be profitable and have a use case. Simple platforms make it possible to bookkeep and improve efficiency, making it easier for small businesses to operate. For instance, a stretched home chef can cut down time spent on administrative tasks and focus more on producing the food. Ride-hailing applications have also used excess capacity in vehicles while providing service to those in need of transport.

Though ideas will remain abound, some do carry the potential to improve livelihoods, and others are best left alone.

Published in Dawn, The Business and Finance Weekly, February 20th, 2023