Bottled Insights

One of the first courses during my bachelor's degree was microeconomics. One model outlined showed how profits should be non-existent in perfect competition. We know the world is far from perfect in everything, so it is no big deal if profits exist. Still, the inverse correlation between competition and profitability should be valid. Furthermore, the lower the scarcity and possible differentiation of a good, the lower the profitability should be since new entrants can quickly jump into the market if they see the possibility of making a profit. With this in mind, drinking water (in countries where it is not scarce) should be the least profitable good overall.

Well, you now know my surprise when, reading the Forbes list, I came across Zhong Shanshan, the richest man in China. His net worth of $60.1B (2023) is strictly linked to Nongfu Spring, a company whose primary revenue stems from selling bottled water.

Which lessons can we learn from this fact? Probably many, depending on the point of view. One is that execution is crucial to success. Another one is that “theory will bring us only so far.” The world is more complex than what models can incorporate (especially consumer behavior), so empiric testing is the ultimate validator.

Related to how the scientific method works and how it links to taking risky bets, I share the following video on Karl Popper: