the Market Soul © 1999 - 2011 Headlines

Thursday 31 December 2009

The Last Good Day of the Year

As the last (or as some claim, preliminary) day of this decade dawned, I thought about the irony and constant ‘conflicts’ that live and economic activity always presents us with.

The last 18 months in particular was evidenced by a constant attack on the ‘Western Capitalist’ model, due to the deep and prolonged recession, set off by the Credit Quake of 2008 – 2009.

As it is a ‘Quake’ and not a ‘Crunch’, we have and still are experiencing aftershocks of varying magnitudes.

However, the irony of economic activity is the dichotomy the theory and reality actually presents us with.

If we focus on just one of these little ironies, it is the story of scale.

Economic theory would have us believe that ‘Economies of Scale’ is desired as the Total Cost curve is lowered, thereby maximising profit at the point where the Total Revenue curve is at its apex and the Total Cost curve at its base, with the gap in between representing profit.

Yet, with banks being “too big to fail”, this flies bang in the face of the economies of scale theory.

Therefore, there is a delicate balancing act and a ‘Stakeholder’ management approach that we need to follow and implement in the years to come, in order to address one of the inherent weaknesses in the way in which we have managed and controlled the capitalist economic system.

Don’t get me wrong on this point though, I am still arguing for a Libertarian approach and philosophy. What I believe the problem is that the libertarian philosophy is watered down and contaminated; thereby diluting and distracting focus from its core principles, thus rendering it merely an aspiration rather than a true and meaningful alternative to a more politically controlled socialist approach to economic life.

One of the goals and aspirations I have with this blog is to inspire and educate, thereby encouraging a constant questioning of the status quo which will hopefully lead to a change in mindset and economic growth “so that we can encourage the growth and development of sustainable human endeavours ...”, as the concluding sentence in the header to this blog page testifies.

To this end, I wish everyone a very prosperous and happy start to 2010, whether it be the end of the first decade of the 21st Century or the beginning of the second decade...

Let 2010 be the year in which we encourage more equal and equitable access to markets for all willing and able participants in the capitalist market mechanism. However, let us all have tolerance and respect for the points of view and practices which do not encourage a truly libertarian philosophy and approach too. It is only in sharing and respecting that we will all get along and make progress somehow.

theMarketSoul © 2009

Friday 25 December 2009

The Value of Structure

Most of my musings on this web log is focussed more on economic themes and ideas.  However, today I want to turn my attention more to the value question related to corporate structure and the importance and significance that structure can play in change management and the behavioural aspects around a corporate restructure.

Recently I was involved at an organisation that had admirably survived the credit quake of 2008 – 2009, without any serious casualties.  No redundancies had been made during this period, as the focus very quickly turned to managing and controlling overhead costs.  Trading volumes and values had been severely affected, with a significant dent to the gross contribution line, however the pipeline of new product launches kept supplementing the existing strong product proposition.  There had just been slight deviation in overall underlying profitability due to a loss of focus on the customer.  This was mainly due to the corporate structure not servicing the market in the most effective way possible.

It took a few months for the group leadership to realise this, but once the challenge was recognised, the cogs of corporate restructuring was set in motion.

And this is exactly the root of another problem scenario:  ‘Corporate Inertia’.

I find it very sad and demoralising when employees who have served their corporate masters very well and over many years come up with phrases like: “...I am just waiting for my cheque...”, referring to the expected windfall from a redundancy package.

But, I have digressed enough. 

Structure sends a very powerful message.  Delay causes uncertainty and frustration.  Invisible leadership causes the ship to list wistfully and wastes opportunity.

As a very poetic Felix Dennis once stated in his poem “How to get Rich”:

‘But take it from me,
Execution is key’

So the real value in structure is by minimising the opportunity cost of wasted time.

Employee motivation is a very difficult thing to reinvigorate, once the ship has listed woefully.

My simple massage in any corporate restructure and change management effort is this:

Do it fast, effectively and be visible and accessible as a new leader taking on the responsibility of managing the division for value.  Time is short, energy a precious commodity which should not be wasted by focussing on the right things at the wrong time.  Some reflection, a slight pause to catch ones breath is permissible; but do not forgo the opportunity to get everyone on board and in the right seats once the bus leaves the stop...

theMarketSoul ©2009

Monday 14 December 2009

Obituary - Paul Samuelson (15 May 1915 - 13 December 2009)

It was with great sadness that I read the Paul Samuelson obituary in the Times of 14 December 2009.

As an eternal student of economics I remember reading Samuelson & Nordhaus's 'Macro Economics' as an undergraduate commerce student. Terms like "the paradox of thrift" will remain with me until I too will grace the equivalent of the Viking's Great Hall of Warriors in Valhallha...but first I must find my 'sword of doom' to wield in battle against other greater minds on this battle field for the ground-swell for knowledge and understanding in the arena of Applied and Behavioural Economics.

From 'Analysis to Synthesis' is my current battle cry. As a Behavioural Profit Mechanic I have through subtle means tried to persuade traditional accountants to appreciate the 'Art of Accounting' versus the science of the purely technical application of their chosen vocation.

Statements like 'dancing around the cauldron of the monthly management account stew' are completely misunderstood and construed as a maverick's flight of fancy.

Yet analyse the deeper meaning of that statement and you will discover that I am battling against the 'tyranny of the status quo' by creating a visual metaphor for a totally worthless exercise of chopping the financial story-board into these artificial time frames called calendar months, in order to create or colour a picture of financial performance. And yet every management accountant will have to come clean and confess to the most dreaded phrase of this tyranny...'Let's just accrue to budget'.

Any guilty consciences out there?

I for one will admit to in the past having fallen victim to this practice...

Have you?

theMarketSoul (c) 2009

The commerce of transit

We are off on holiday and yet again sitting in the 'holding pens' called airport transit lounges.

I look around me see if there are any economic lessons to pick up on, as our laboratory is a constantly seething, bubbling cauldron of activity.  Yes, off course I am referring to the laboratory of the experimental, behavioural economist...
And the answer to the question is a resounding yes.
An airport transit lounge is a hive of commercial activity.  A few are individual travellers, pairs or family or loose- family groupings.  Some are grumpy, happy, tired, confused  (you obviously spotted me in the crowd) and a range of other states of being.

Everyone knows they are only there for a specified period of time and are desperate to avert the chasms of boredom enveloping them.

Hence some clever people invented the 'Duty Free' shopping experience. What a great way for retailers to boost their profit margins, whilst making us all believe we are saving money because the sales (or consumption) tax has been removed?

We are off to another transit hub, where they introduce another twist in the tail - the foreign exchange issue. Better leave your calculator behind and trust in the information asymmetry of the estimate conversion factor...

theMarketSoul (c) 2009


Thursday 3 December 2009

The Hypocrisy of Turmoil

I am experiencing an increasingly level of frustration and disillusionment with the existing debates and discussions, both political and otherwise, going ‘live’ and being aired with reference to the free market system and markets in general, in the face of the current global financial crisis and turmoil (also referred to in earlier blog postings as the Credit Quake).

My frustrations have a few key themes:

  1. Lack of the correct language being used
  2. Lack of an understanding and appreciation of the free market system in general
  3. Lack of a differentiation between mechanistic systems and human behaviours (partly stemming from a lack of the correct technical language being ustilised) [The morality of the market vs the morality of people (also referred to as agents) operating within the market]
  4. A lack of appreciation and understanding that economic value and measures are not monetary related, but that money is a subset (via Monetary Economics), within the wider discipline of Economics.

Part of the challenge of this blog and other blogs of a similar ilk is to raise the bar as far as the general discourse is concerned.

Please tune in from time to time to help support intelligent debate and a fruitful learning experience.

theMarketSoul © 2009