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Dangerous metaphors — April 13, 2020

Dangerous metaphors

Why talking about the war on coronavirus is causing harm

Metaphor is not merely a tool reserved for poets. It soaks our language from our everyday conversation to the most high-flying rhetoric. We understand the world through metaphors. It helps lend physicality and understanding to abstract concepts. George Lakoff, in Metaphors We Live By, even says that our entire conceptual model of reality is metaphorical. Metaphors are powerful. We need to use them to come to a better understanding of our world.

The coronavirus pandemic has prompted many commentators, journalists and politicians to liken it to a war. It is a battle against an invisible enemy. It requires sacrifice and bravery to overcome. It is an easy and, at first sight, apt metaphor to employ. The response to coronavirus requires a collective effort and will, a coming together of the whole community in a single-minded focus, and a suspension of normality that does resemble nations during wartime. It creates heroes and famous battles that inspire stiff upper lips and helps us shoulder the burden of onerous measures. But the sheer quantity of such analogies does create harm.

Metaphors are powerful because they transform the general into the specific. Big ideas are shrunk down to graspable things. Metaphors allow us to budget time and shine a light on an idea. Situations can be looking up or going downhill.

Arguments become battles which allows you to assault an opponent’s logical position. Professional outrage merchants on YouTube post videos where they ‘destroy’ someone and their thinking through argument. These verbal battles between opponents leave one side victorious and the other defeated. War is a powerful metaphor in this context because arguments do mimic the contours of armed conflict. It places two sides against one another.

With coronavirus that is not the case. There are no good guys or bad guys. There is humanity and then there is this little packet of proteins and genetic code. Coronavirus does not spy or strategise, it does not invade or invent terrible new weapons. There are no allies or axis, no central powers and no entente. But constant talk of war can leave us creating an enemy where there is none. It leads to President Trump tweeting and ranting about the ‘China virus’. It allows us to forget the very real human suffering and hardship faced by the citizens of Wuhan. It is there on Twitter when people, escaping small and squalid flats, walk in a park and get called traitors or collaborators conspiring with a foreign enemy. Collective action on a global scale is needed to overcome coronavirus. But by overusing the war metaphor it splits people and nations apart.

Photo by Stijn Swinnen on Unsplash

It goes beyond that too. The war metaphor makes it easy to ignore the death and destitution the virus causes. When battles are won with courage and bravery those who succumb to the virus must have lacked fight. People do not die because they are without a certain quality. They die because a virus attacks their lungs and makes it impossible to breathe. Delivery workers, shop staff and healthcare professionals are called heroes. This verbal admiration, echoed praise, is not backed up by material action though. Those stocking shelves and delivering food packages are not given hazard pay or sick leave. Those working in hospitals and care homes are not given the protection they need. But by recognising them as heroes we can be blinded to what they actually require. We can pat ourselves on the back after a weekly round of applause for the health service or talk about minting medals. This does not help and is only possible because we are employing the language of war when we talk about this healthcare crisis.

Weneed metaphors to help us make sense of the world. In First You Write a Sentence, Joe Moran says that ‘metaphor is how we nail the jelly of reality to the wall.’ War is not a reality for many of us in the west. We know it through movies and videogames. That creates a false impression of what must be done. It creates sides and divides people. It underplays the seriousness of things. The coronavirus pandemic is not a war but a healthcare crisis. It is an unneeded metaphor. Plague is as much a rider of the apocalypse as war is. When a metaphor gets repeated too often, when it becomes a runaway metaphor, it risks obfuscating the real nature of things more than it clarifies them. We have reached that point by now. We must see this pandemic as it really is and face it together with the understanding that gives us.

All the Coffee in China — April 10, 2020

All the Coffee in China

The story behind Luckin Coffee’s $310m fraud

Photo by Jakub Dziubak on Unsplash

The world’s attention is fixed on coronavirus. That’s why you might have missed the news that a Chinese start-up admitted to an over $300m fraud. It’s a good time to bury bad news, but not so for Luckin Coffee. The markets took notice and hammered China’s largest coffee shop chain. Its share price has plummeted, from over $50 in mid-January to less than $5 today. That 95% drop wasn’t the end though. Its chairman was forced to default on a $500m loan and shareholders have organised and are suing the company. It is a fall from grace for a darling of the Chinese start-up scene akin to that of WeWork’s. What happened?

Tea reigns in China.

It has the beverage of choice for thousands of years. From the lowliest peasant to the highest-ranking bureaucrats and rulers, everyone in China drinks tea. Chinese cities are studded with teahouses. Patrons gossip, smoke cigarettes and play board games, often spending hours sitting sipping tea. Starbucks wanted to change that and launched in China in 1999. Beforehand coffee had only been served in hotels and other places foreigners congregated. With the launch of its first outlet, Starbucks tried to change the palette of regular Chinese consumers, unaccustomed to the taste of coffee. Sugary and milk-laden drinks were the way to get people drinking coffee.

But as important was presenting the drink as western, youthful and cosmopolitan. Young, urban professionals, working in China’s booming tech hubs, began to take to the new drink. A nascent coffee culture was appearing. Serving social media-friendly beverages and contrasting with the sedate pace of teahouses, coffee took on a glamour similar to the people it served. Its ambitious image struck a chord with the tech industry where late nights were fuelled by coffee. Enter Luckin.

Founded in October 2017, Luckin Coffee grew from its base in Xiamen quickly. By May 2019 it was already running 2,370 locations, a growth trajectory that fit in with the booming tech start-ups. It managed this by eschewing the type of stores favoured by its competitors. Starbucks was by now the largest coffeehouse chain in China with Costa in second. Their Chinese stores are familiar to anyone who knows the laptop strewn tables and young creatives nursing cups of frappuccinos, iced coffees or macchiatos in any western city. Luckin’s locations were a little different.

If you wander into any of Luckin’s outlets you won’t be able to order a coffee at the counter. A little strange for a business which makes money by selling coffee. Instead, you must place and pay for your order through its app. Customers collect their coffee at kiosks smaller and without the comforts of a Starbucks or Costa. This tech-first approach appealed to Luckin’s target consumer. It also helped keep costs low as the firm expanded.

Customers are served quickly, and the turnaround time is low. This low-cost ethos helped Luckin undercut Starbucks on price and appealed to price-sensitive Chinese consumers who could get tea for cheap. Luckin also offered free and discounted cups of coffee to new customers. This aggressive and targeted discounting could only have been done through an app which tracked customer orders, tastes and signups. Another feature of Luckin’s model that appealed to its chosen demographic was delivery. Customers could get their coffee delivered straight to their offices or studies within half an hour. It was a feature Starbucks eventually copied, though it took them a while to do so.

Luckin grew. It grew fast. But it needed money — and lots of it. Less than a year after it was founded, in July 2018, it secured $200m of funding in an early series round. A year after it had launched, it had 1,300 locations. It was on its way to achieving its goal of eclipsing Starbucks as the largest coffee chain in China. In May 2019, it launched an IPO in the US. It raised $561m to help its ambitious growth strategy and was valued at $4bn. It needed the money as it was burning through cash at around three times the rate it was bringing it in. From its cashless stores and data mining app to its clientele and areas where it opened, Luckin positioned itself like a tech start-up. It produced the growth required to stay in that company too. But much like WeWork, Luckin was a traditional business masquerading as a tech start-up. WeWork was essentially a landlord. Luckin sold coffee. The bubble was ready to burst.

In January 2020 Luckin continued its expansion by launching vending machines that served coffee. They achieved the long-term goal of having more locations than Starbucks. Though the people behind Luckin didn’t know it, it was to be the company’s high point.

Photo by Szymon12455 on Unsplash

That same month, on 31 January, Muddy Waters, an investment firm that backs up its positions with investigative research, tweeted out a report that claimed Luckin was fabricating its sales. By watching thousands of hours of CCTV, examining customer receipts and monitoring app metrics, the report claimed that Luckin had been overreporting revenue since the third quarter of 2019. Founded by Carson Block, Muddy Waters was a firm that investigated Chinese businesses and took a short position if they smelled something fishy. Block had dealt with tech entrepreneurs early in his career and had come away from the experience with a sour taste in his mouth. The lying and obfuscation had motivated him to start his investment firm. Seeing the numbers Luckin released, Block and Muddy Waters thought that not everything at the firm was kosher.

To grow as bigger than Starbucks in less than three years Luckin had to launch a lot of new locations. Over 4,000 of them. Often these were near existing Luckin outlets. They targeted tech quarters and university districts. When a firm opens new stores in such a manner, it is expected that sales per store will fall. The new shops cannibalise some of the existing customer base of the older ones. Despite how aggressive Luckin was expanding, this was not happening. Instead comparable store sales were going up by around two-and-a-half times. Those were unbelievable numbers — and for good reason.

After the Muddy Waters tweet, Luckin took a small hit to its share price. But it wasn’t until early April when things got bad. An internal investigation backed up the allegations. The Chief Operating Officer was fired after over $300m of sales were found to be faked. Luckin’s cofounder, Lu Zhengyao, may have to step down from his other companies as the stink spreads.

Luckin may survive, but it will tough. Analysis from Seeking Alpha shows that each Luckin store is averaging a turnover of only $350 per day. Even in China, with low labour and other costs, that is hardly enough for a viable business. And it’s hard to believe any numbers coming out of the company right now, so the situation could be a lot worse. One redeeming quality is that China’s coffee culture has a lot of room to grow. The average Chinese person only drinks around 5 cups of coffee per year. Americans drink over 400. The entire Chinese coffee market was worth only $8.2bn in 2019 but is growing at a rate close to 10%. Its economy is reigniting after the coronavirus lockdown. It may just be enough to keep Luckin limping on.