The Market Burden

Illustrates the intersection of supply and dem...
Illustrates the intersection of supply and demand curves as the free market equilibrium (Photo credit: Wikipedia)

Today’s post is actually only a short sound bite for further conversations to be developed in the future:

The real burden of the open and free market is the fact that it does not always behave and act in the way the market participants anticipated. [In other words, the market might be open and free but not perceived as fair – a real challenge when the clearance mechanism experiences the odd bottleneck moment, because in the long run, the market should and will always clear and achieve equilibrium].
The burden the market then bears is in the form of interference and regulation…
Counter argument always very welcome.
theMarketSoul  ©2013

A Disconnected World – The Information Age Irony

As economic beings we are extremely ‘short-sighted’ by nature. We don’t fully appreciate the differences and interactions between the short-, medium- and long-term.

English: Watt's steam engine at the lobby of t...
Image via Wikipedia

It was Burns & Mitchell (1946) who tried to measure the economic cycles. Today there are four broad classifications of business cycles as follows:

  • Kitchin cycle (3 – 5 years) – The rate at which businesses build up their inventories
  • Juglar cycle (7 – 11 years) – Related to Investment flows into Capital such as factories and other capital means of production
  • Kuznets cycle (15 – 25 years) – Period between booms in corporate or governmental spending on large scale Infrastructure projects, such as rail, roads, etc.
  • Kondratiev wave / cycle (45 – 60 years) – The ‘super-cycle’ referring to the phases of capitalism.  Crises such as the Great Depression and the current Financial & Sovereign Debt driven contraction.

But the Information Age has undermined these cycles? Or only undermined our understanding of these cycles?  That is the key distinction we need to draw.

Are there any longer-term term cycles, which are beginning to contract with advances in Technology.

The Dark Ages (lets say from the collapse of the Roman Empire) until the enlightenment lasted around 1,000 years.  The Enlightenment (approximately 1650s) through to the First Industrial Revolution (from mid 1700’s to mid 1800s) lasted around 200 years.  The Second Industrial Revolution (driven by electricity from around mid 1800s) lasted another 100 years.

Another view of the bridge
Image via Wikipedia

The Third Industrial Revolution, or rather the Digital Revolution is the COMPUTER or DIGITAL AGE.

However, interesting this brief synopsis of economic history is, the actual relevant issue is recognising the length of the TRANSITION period between these ‘Leapfrog’ Technological advances.

We are not very good (yet) at recognising, never mind managing these tectonic shifts in the economic landscape.

Is this were we found ourselves today?

English: Plot of growth of exponential economi...
Image via Wikipedia

theMarketSoul ©2012 

Our Lessons from 2011

 

We decided to summarise our learning from 2011 into two brief thoughts:

 

The May 1, 2010 cover of the Economist newspap...
Image via Wikipedia
  1. The pains and strains of the economic sovereign debt melt-down in 2011, should stand us in good stead to deal with even more debt and sovereign strain in 2012, as More and Bigger Europe continue to miss the point; this being that more bureaucracy and more government and regulation will not get the INNOVATION engine started again to Recapitalise Europe!

    Graphic "When Greece falls" presente...
    Image via Wikipedia
  2. Translational differences will matter.  The CLOUD is a huge business and business model transformation opportunity.  IT ‘Geekery’ and language could scupper this potential opportunity and we need to develop more ‘CLOUD TRANSLATION’ services so that a broader community and eco-system can get involved in an aspect of “INNOVATION ignition” in 2012.
Clouds over Tahoe HDR #1
Image by Bill Strong via Flickr

All the best and good luck in 2012.

 

theMarketSoul ©2011

The Ice Age is Cometh

Originally published 4 October 2009:

Information Asymmetry is what drives the market. We alluded to this in an earlier blog posting (see Market Responsibility, Saturday, 18 October 2008). Yet we still hear the socialist agenda mention regularly that if it wasn’t for the recent government interventions to ‘save the market’, the market would have collapsed. We are sorry, but we just don’t buy this. Yes it is true that individual institutions in the market would have failed, but as a mechanism, the market would have wobbled and other participants would have picked up the distressed bits and pieces and carried on.

True, there was a crisis of liquidity in the system, with severe knock on effects, but as a mechanism for allocating resources, effort and reward, we still believe the market would have survived, with or without the ‘nuclear’ option intervention we saw. The moral of this tale is that unfortunately the socialist elite now believe and make the rest of the market believe that they hold the moral high ground and can dictate the agenda for the next several years. Oh well and so the pendulum swings…

Which was entirely a side track to the real intention behind this posting.

‘The Ice Age is Cometh’ was an article headline in the Radio Times edition of 16 – 22 November 1974. A friend of ours came out with the rank smelling edition of the Radio Times of late 1974, that he discovered stuffed in the chimney breast of his new home. Stuffed in that chimney-breast to obviously keep the cold draughts out, as according to the subtitle the next 1,000 years could be very, very cold, with an advance of the polar ice caps and glaciers. Did we blink or something? We will challenge the BBC to dig out the programme aired in the week of 16 – 22 November 1974 on BBC 2, so that we can be reminded how quickly the agenda and the focus can shift, if we take our eye off the ball and let information asymmetry spin the agenda out of our control.

And we suppose we cannot deny the evidence currently in front of our eyes. Polar ice caps are retreating, which is true if you focus purely on an evidence based approach to trying to understand the wider system. But do make your observations and emotive arguments from within the system, or do you need to step outside that system in order to be more objective. And what about intuition? On a purely intuitive level we believe the earth of GAIA is a self correcting system but we do not have enough evidence to conclusively prove this assertion.

So, in the meantime, we swing one generation to the next, waiting for the ‘Information Assymetrists’ (yes our new made up word de jour) to set the agenda and the morals of the market.

As a soul in this market arena we just keep on being amazed, day in and day out. Please just give us the ability to take the long view…

theMarketSoul ©2009

Risk Management Ideas

Risk has as one of its essential elements TRUST as a foundation.

Trust on the other hand has many other factors that interplay and interact on it.

Markets are created when there are needs that are not immediately met from you local environment and therefore scarcity exists.  Market participants step in to fill this ‘needs’ void.

English: Risk management sub processes
Image via Wikipedia

As for any subset of Risk, either Operational, Market, Liquidity, Interest, etc. a big part of the assessment process it not just about looking inward and assessing the risk profiles, risk attitudes, risk systems, etc., but an important part of the process is stepping into the realm of uncertainty and looking outwards and the wider market context we find ourselves in.

Being too prescriptive about the individual risk profiles and control systems will only stifle innovation and growth.  Some say we need a very healthy dose of growth right now, whereas others are content with the new world order of the ‘anti growth economic’ bias (our description of austerity) we have already entered in the Western Hemisphere.

Our positive risk management framework, also known as Value Oriented Risk Management encapsulates both risk and uncertainty management and combines it with the best offerings of Value Based Management.  (For more information or to contact us, please click on the Contact us link or read the article entitled “The Intersection – Where Risk, Value & Reward link by clicking on the embedded link.

Our Value Oriented Risk Management is the positive Risk Management focus, acting as an enabler ensuring that you unlock value in your organisation a midst the regulatory compliance constraints added to your management agenda.

TheMarketSoul ©2010