If only we could…

…[take] the human being out of the market entirely, then we should have a proper, effective and efficient market…?
So might go the refrain of Neo-liberal economics, or at least a slightly different take on the Neo-liberal ideal of ‘every interaction should be a market transaction‘.

inspiration

That Neo-liberal economic refrain is part of the inspiration behind the creation of the ‘Soul of the Market’ or rather theMarketSoul and this site.
With this last post of 2013, we thought a bit of reflection and a reminder of our inspiration and founding philosophy might be in order.
In order for a market to be effective, there has to be a few ripples in the ebbs and flows of the transactions and interactions making up the market processes.  Therefore, we have to be able to tolerate human frailties and flaws, or else the market becomes too mechanistic and dare we say it preordained.  This can naturally not be an effective outcome for any market.  Human failings and market failure are two sides of the same coin.  However, we should work together in order to limit the inevitable damage and negative consequences of both human and market failure.  This does not necessarily translate into more regulation, might we add at this juncture.
Let us never forget this and celebrate process frailty, failure, learn to develop and embrace tolerance, persistence and perseverance; basic elements of human nature
We should never forget our inspiration, put it to aspiration and strive to achieve our own unique and specific dreams.
Human Nature / Logo
Human Nature / Logo (Photo credit: Ars Electronica)
Go, Inspire, Aspire and Achieve…
theMarketSoul ©2013
Our final word of 2013 is:

CONSOLIDATION

Immediacy – Analysing the Behavioural Dimensions

The problem of getting too distracted by constantly fire-fighting in business settings

Français : Logo de Connecting Emotional Intell...

We might have heard it referred to as phrases such as “blinkered vision, short-term thinking”, possibly even “tunnel vision” or something similar; however the challenges of Immediacy is (1) the hidden cost and (2) damage it does to our organisations and culture within those organisations.

This is a behavioural consequence of a much more deep rooted problem.  It could possibly be insecurity or ‘over’ control, mistrust or some other behavioural issue.

However, we would like to make a bold statement that the problem is one of an over commented emotional connection to what we do. Too much passion and care in other words. This is not a bad thing in itself, but it must be tempered and balanced by its opposite twin, namely logic and deliberation.

Too often we let the Emotional Intelligence (EI) side of our personalities or just pure emotions (if we lack in the finesses of EI) rule the roost and we park logic and Business Intelligence (BI) at our peril.

What to do, in order to balance the equation:

When faced with the typical flight or flight scenario of a mini crisis at work or during a project;, stop or pause for a little while in order to achieve two very important objectives:

  1. Calm down the emotional roller coaster.
  2. Take stock in order to appraise and assess what would be the most logical course of action to take next.
English: Book Cover
English: Book Cover (Photo credit: Wikipedia)

As an experiment in BI versus EI today and over the course of this week, just think and apply these two simple steps and monitor and evaluate the outcomes and consequences.

You might be pleasantly surprised…

Feedback most welcome.

theMarketSoul © 2013 

Continuing conversations in Friction Costs: Increased Friction Costs II

A few weeks ago we published what seems like our most popular blog article to date, namely Increased Friction Costs.

As it has been our most read article, we thought we might continue to build on the theme of Economic Friction Cost.

 

English: The model shows institutions and mark...
Image via Wikipedia

Williamson (1993) published some work on Transaction Cost Economics (TCE) in a book entitled The Economic Institutions of Capitalism’.  TCE is an equilibrium theory and looked more closely at the firm level or micro-level analysis and at behavioural aspects of ‘rational choices’.  Up until that point most economists had only considered production cost as part of profit maximisation assumptions, and not at transaction costs within the firm.

Transaction Cost Economics focuses predominantly on the governance of ongoing contractual relations (Williamson, 2007).

 

English: relation of real money demand and nom...
Image via Wikipedia

But what exactly, in practical terms are Friction Costs?

 

As stated in our previous article there is a large element of hidden costs implicit in Friction Costs.  Friction Costs can be highlighted by analysing the end to end or life cycle costs of any product or service.  A general rule of thumb that is applied to life-cycle costing is to take the visible ‘advertised’ cost and double it up.  That exercise generally gets you very close to the full life-cycle cost of any product of service.  This rule of thumb works with large capital projects, as well as estimating the full employment costs of hiring people.

 

But friction costs go further than this.  You might call it the fourth dimension of costs as it incorporates time value and opportunity cost elements.

 

Time value has two specific meanings for us here:

 

 

  1. Time value due to down time, loss of productivity, etc. This is more accurately referred to a value of time
  2. Time value in terms of the diminishing purchasing power of money, due to factors like inflation and opportunity costs when money is not put to beneficial uses.  This is the general use of the term Time Value of Money and ustilises Present Value techniques via a discount rate to work out the equivalent value of money in today’s purchasing power terms, whether we look into the past or into the future.

 

Thus, the two areas we have to focus on during the expansion of the Friction Cost exploration in the next article will be time value and opportunity cost elements, as part of our enquiry into delving into a better understanding of Friction Costs.

 

 

theMarketSoul ©2010