Pure logical would dictate that (and indeed a convex demand curve) that as you ‘slide’ down the curve, the price / cost would become lower. Yet in practice, this hardly ever happens? Big Question mark…
Is this because the further we slide down the Experience Curve, the more utilitarian (fancy economic term we used there!) the benefit becomes? Yet, it also adds to the overall risk of the Experience or Value being added.
Is this a counter intuitive argument or are we just getting plain confused by the inverse relationship?
The future of work and engagement has already begun. That is stating the blatantly obvious, but are we really prepared for it, yet?
Here is a little taster of what we think the future of work will look like for most individual participants in the labour and skills supply market.
The key is that the industrialised ‘factory’ and production line models are now slowly but surely falling apart. The expectation for grown up individuals to turn up 5 days a week and sit at ‘battery hen‘ cubicles and perform tasks a ‘production line’ manager allocates and oversees are numbered.
The fundamental problem today is that no one has yet effectively resolved the ‘contracting’ and hence TRUST problem of delivery on a large scale. We can do it effectively on the micro level, with freelancers selling there individual skills on small tasks and projects, where the risk of failure or an adverse outcome is mitigated. However, we have not yet evolved far enough up the trust hierarchy to fully outsource mission critical projects to ‘clustered’ skills and solution provider hubs, in remote and distant locations, far removed from the core.
Platforms where suppliers and demanders of services can be matched
A common global business Lingua Franca
These are only a few of the factors either contributing or detracting from moving the revolution on in significant leaps and bounds.
Therefore, to conclude this first stab at a look at the future world of work, we hypothesis that the future will have large groups (what we will call CLUSTERED SKILLS HUBS) of skills pools bidding for contracts to supply services and solutions to leaner and meaner multinationals in cross border transactions and flows that are worth trillions of dollars annually.
Right now, we can’t see any major G20 sovereign government dealing effectively with this challenge, to ensure that they contribute and facilitate the move towards the new future of COLLABORATION.
We have been following the G20 ‘get those naughty multinationals in the tax tent’ debates raging for a few months now, with amusement we have to add; here at theMarketSoul and have the following short thought piece to contribute to the debate.
We know the ‘outrage’ really is all about the what the OECD calls the ‘general erosion of the tax base’, which in our opinion is just a distraction for proper structural reforms in the western democracies contributing to the G20 and OECD coffers.
The real issue is the power of civil society structures, such as multinational corporations, versus nation states. We constantly get an earful on how undemocratic corporations are from a liberal social leftist media and how dangerous unfettered corporate power is.
Yet, multinationals are far more democratic, in both structure and performance, than any sovereign government will ever be. If the corporate governance structure is correctly set up, then every corporate entity has an annual AGM at which point the corporate leaders have to resign, on a rotational basis, depending on individual Articles of Association or Memorandum ofIincorporation provisions (depending in which jurisdiction the corporate entity ‘resides’). How often does a sovereign leader stand down, in comparison and leave it to the popular vote to be re-elected? Certainly not on an annual basis, as is the case for most corporate leaders.
This leads us to the real thought piece of this article, namely the fact that corporate ownership and access to corporate ownership should really be extended to as wide a base as possible, rather than a few ‘monied’ or opportunist participants in the market.
Legislation around employee share ownership schemes are still very cumbersome and rules, rather than principles driven.
The real revolution we require is not around a new tax base or recapitalizing democratic bankrupt nation states; however we require a revolution of democratic corporate ownership to sweep the length and breadth of the land, in order to spread the risk, add additional wealth creation opportunities (and hence a widened wealth tax base) for smaller, leaner and meaner governments to address. This a cry from civil society to the inner ‘goodness’ of political society to sit up, take serious stock and work on longer-term solutions to the erosion of their tax bases, rather than the usual headline grabbing short-termist market distorting interventions the G20 governments are so infamous.
As economists (assuming that most of our readers have a vague interest in the subject matter we keep on harping on about most of the time) we should all be aware of, if not au fait with Opportunity Cost.
As a one line refresher: Opportunity Cost is the cost or value forgone by choice. Choosing one option or outcome over another, automatically leads to an alternative opportunity forgone, hence the cost element.
So the real challenge is to extract the ‘right’ amount of value or benefit from the chosen option versus the forgone option. This is the real difficulty when the counter-party does not share the same or a similar risk profile.
What is the answer then?
Well as vaguely competent economists our stock answer is: It depends!
Lets peal this back one level and start with the this position: the very fact that you had a choice in the first place is a very good thing. A lot or market participants are never really afforded the luxury of this or any choice. They just have to lump it and get on with whatever activity keeps them sustained. Therefore, from this extreme position an answer might be that we should count our blessings and just accept the inevitable and get on with choosing and working through the consequences.
However, in a world driven by value maximisation, the fact that we have to make the optimum choice does become more significant and important. What tools can we employ in a world of Information overload, yet still Information Asymmetry to come up with the optimal solution?
Why are we so fixated by process, yet so bad at the design aspect of the process?
By this question we mean the following:
Process design is focussed on capturing the greatest number of transactions or interactions and to efficiently and effectively ‘process’ them.
Yet all processes have EXCEPTIONS. If so, why are we so bad at designing Process Exception mechanisms?
Pareto efficiency is fine and there always has to be a cost benefit analysis of the value added in every process, but we miss or frustrate too many users by not moving beyond the confines of the cost-benefit, by just leaving the ‘Exceptioners‘ dangling, frustrated and bemused. If the old adage holds true that one negative word of mouth feedback is the equivalent of 10 positive comments, then that 10% exception item begins to be of major concern. Even at a lower tolerance threshold of say 5% exceptions and negative experiences, the risk and cost associated with negative customer / client feedback seems worth the effort to pay a bit more attention to managing the DESIGN and process loops to effectively deal with the exceptions. We’ll leave efficiency at the front door for the moment…