What Shark Tank India taught me about the capitalism of our times

By Tony Kurian

Like many of my fellow citizens I have become a fan of Shark Tank India. It has become some sort of
a ritual for me to wait with anticipation for the 10 PM show to begin. There is a lot to look forward in
the show. It is laced with fabulous pitches, drama between sharks, negotiations for a great deal and
some really funny moments. There is also the excitement of playing the fictional entrepreneur and
investor in my head. But above all, I religiously watch this show for the lessons it teaches me about
the capitalism of our times. Through shark tank we get a sneak peek into the hallowed yet
inaccessible world of start-up investing. Here, we get to listen to investors talking to us like never
before. It is in these conversations that I learned some important lessons about capitalism.

I am not interested in justifying or defending the sharks or entrepreneurs. One can find several such
discussions on social media. What I am interested in is sharing some lessons about capitalism which I
believe are important for us both as citizens as well as consumers.

Gross reality of gross margins

One of the most repeated questions on the show is “what is your gross margin?” For the uninitiated,
gross margin is what the company retains after deducting the costs directly associated with the
production of goods. This can include cost of raw materials, production expenses, labour charges,
etc. Put simply, it is the cost of production. Companies do incur other costs including marketing,
logistics etc., but as consumers, cost of production is what matters to us the most. Most companies
on the show had a gross margin of anywhere between 60 and 80 percent. Higher the gross margins,
happier the sharks were. Sample this: a canned energy drink company which appeared in Season 1
was sold for Rs 110, while the cost of producing it was a mere Rs 20, amounting to an 80 percent
gross margin.

So why should this bother me as a consumer? Not even in the wildest of my imagination would I
think that something I pay Rs 110 for costs only Rs 20 to produce. Information about the cost of
production will help consumers to assess the welfare they receive from each purchase and take
rational decision. As consumers, we are asked to believe that the MRP is a natural outcome of
market forces and any discount we get on the MRP is a benefit to us. If there is something Shark
Tank teaches us about price, it is that there is nothing natural about price, and discounts are
arbitrary at best. Taking cognisance of this fact, a bill called “the Consumer Goods (Mandatory
Printing of Cost of Production and Maximum Retail Price) Bill, 2006” was presented before
parliament. The bill mandates manufacturers to print the cost of production alongside the MRP on
all products. While the bill does not specify any formula for fixing MRP, it mandated that the cost of
production be printed on the package. The bill reasons that such a measure will “curb the greed of
manufacturers” and will help consumers to make better buying decisions. The bill was put up before
parliament in 2014 and 2022 but is yet to be passed. If enacted, the bill will prevent companies from
contributing to inflationary pressures by arbitrarily hiking prices. If the cost of production is printed,
consumers will have the ability to know how much of the increase in price is on account of inflation
vis-à-vis companies attempting to take advantage of inflation. What Shark Tank has achieved albeit
inadvertently is to give access to consumers to the world of the cost of production. It is through
obfuscating from consumers the cost of production that capitalism makes us believe that every deal
we get is a good deal. Shark Tank has put a question mark on that perception and made us privy to
the fact that only a minuscule amount of what we pay is the actual cost of the product.

Too much competition: “for that reason I am out”

The common sense with which most of us grew up is that capitalism is an economic system which
promotes competition, and competition will bring efficiency. In other words, common sense had it
that everyone will have a fair chance to compete and make a living. Watching Shark Tank, one
cannot stop wondering how far the practice of capitalism is from common sensical view of
capitalism. Sample some of these instances from the show. An often-repeated phrase in the show is
“Main iss industry ka goonda hoon” (I am the goonda of this industry). Frequently told as a joke, this
phrase captures the anticompetitive tendencies of present-day capitalism. This supposedly
innocuous phrase is a candid admission that there is indeed a goonda for each industry and it is
impossible to compete against the goonda on an equal basis. Despite all the talk about competition,
our markets are still highly concentrated. A recent study by Institute For Studies in Industrial
Development identified eleven sectors with significant market concentration including domestic
appliances and communication equipment.

One of the most cited reasons for the sharks to not invest is the lack of scalability. The assumption
that every entrepreneur is here to make a multimillion-dollar company and every business has to
become huge is simply wrong. As sharks are looking for exit money, scalability becomes imperative
for them. But this does not always bode well for the interests of society. In its original form,
capitalism was intended to create many freely competing family firms and not a few multimillion
firms. The requirement of scalability which the show places as a sine qua non of success was not a
part of capitalism’s original vision.

The show had other moments where it revealed how fair competition is more of a fiction than a fact
in capitalism. Sharks have multiple times cited the inability of a product to compete with a legacy
firm as a reason for not investing. One shark famously told an entrepreneur that she would not
invest in her friend’s competition. These instances demonstrate that deep pockets and strong
networks matter beyond good ideas.

It is indeed ironic that a show intended to encourage entrepreneurship and affirm our belief in an
entrepreneurial capitalism has inadvertently shined a spotlight on the functioning of real capitalism.
Success of the show has enabled us to understand how far the reality of consumer welfare and free
and fair competition is far from the one promised to us. Perhaps, the success of this show should
prompt us to counter offer a version of capitalism which respects our rights as consumers and gives
opportunity to every citizen to have a fair chance in the competition.

Tony Kurian is a PhD candidate in the department of Humanities and Social Sciences at IIT Bombay.
His area of research is economic sociology. His twitter handle is @mtonykurian.