Where are we in this image? Maslow explains economics
All economic theories are at the service of political economy. So this is a non-partisan but very political column today. If you are sensitive to arguments against bad economic policies, don’t read. But beware, while being let go by your formerly safe company, or forced to take a job at McDonald, that you were warned here first. On second thought, strike that, McDonald is hiring fewer people due to the forementioned bad policies.?
You are probably familiar with the popular (though not proven) theory of human motivation advanced by Maslow. Like JZ or Cher, Maslow has only one name. Sure, he was born Abraham Maslow but a name like Abraham these days may offend some at Harvard and send some Hamas supporters to block your roads, calling for Jewcide (a version of genocide cleared by the woke Left.) ?So, just Maslow.?
According to Maslow, survival needs (food, shelter, security) must be fulfilled first before higher level needs such as self-actualization are pursued. ?When life is good, people climb up to wishing for self-actualization. They take risks. They create. They invent. They aspire.?
When life is hard, people just covet safety above all.
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The theory has been criticized for its rigid hierarchy. The current perspective is that people are motivated by overlapping needs. Even the impoverished are at times motivated to achieve, be respected, leave a legacy, fulfill a dream. Several notable billionaires started that way (no, Trump not included).?
Ah… but not today. And not according to “progressives” who are determined to protect people from their own mistakes and shield them from any responsibility for bad decisions. The narrative advanced by “progressive” politicians and supported by about 49% of the US voters is that markets are bad, government is good. Simple, catchy, almost as delusional as MAGA, and horrible in the long run. From sea to sea, the government will set us free, right? ?
The narrative advanced by “progressive” politicians and supported by about 49% of the US voters is that markets are bad, government is good. ?
You need to be able to predict how it will affect your job.
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Maslow was right more than he was wrong?
Even if we accept that there are people who are motivated by higher level needs for esteem and achievements while their survival needs are not fully satisfied, the supporters of a social economic paradigm that advocates anti-market, pro-State quick fixes to people’s needs simply prefer safety to progress. Their biggest weapons are regulations.?
No, you can’t have both safety and progress. This is a misunderstanding of how progress is achieved. There are always tradeoffs. ?The Left’s economic policies prefer safety and damn progress. Ironically, they are called… progressives.
There is a tradeoff between safety and progress. Always.
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Recent examples of absurd “progress” affecting business decisions?
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Just the tip of the iceberg:?
Simply granting stock options, for example, is pretty difficult in most European countries. It’s famously difficult to part ways with hires that turn out to be misfits.” Never before has “America innovates, China replicates, Europe regulates” so aptly captured each region’s comparative advantage.?
iRobot is failing as EU regulators and Elizabeth Warren cheer on the ruling against Amazon acquisition. iRobot just laid off 31% of its workforce. Chinese companies now dominate the market.?
In the years after California seemingly kicked its plastic grocery sack habit, material recovery facilities and environmental activists noticed a peculiar trend: Plastic bag waste by weight was increasing to unprecedented levels. “What happened is that plastic bag companies invented these thicker plastic bags that technically (i.e., by regulations) meet that definition of reusable but are clearly not being reused and don't look like reusable bags and which just circumvent the law's intent," said Jenn Engstrom, CALPIRG'S state director. No, it doesn’t circumvent. It exposes why regulations aren’t the way to achieve policy goals.?
Seattle, notorious for the love of Big Brother Knows Better, is killing gig work. It’s first-of-its-kind ordinance aimed at helping app-based delivery drivers earn higher pay resulted in minimum pay being $26 per hour. Great, right? What a benevolent city council! Alas, the new ordinance also caused orders to go down significantly, and drivers to stay idle much longer. One restaurant reported orders down from 170 to 16 the same day the ordinance went into effect. Who gets hurt? The drivers it supposed to help and the consumers that pay more for deliveries. "We warned the previous City Council”, said Instacart. ?The Council response? “The law does not require companies to increase prices for customers."
LOL.?
If it weren’t so sad, it would be comic. Says an Uber Food driver, "… maybe they need to see us homeless in the streets It’s hurting us, it’s hurting the consumer, it’s going to close restaurants, please repeal it."
“Progressives” hardly ever admit wrong direction. They typically ignore unintended consequences. ?They are righteously blind or blindly righteous.
In Australia, Uber is forced to pay $178 million to compensate taxi drivers who saw their state-protected business declining with the entry of gig workers. If that is what progress entails, Australia says, we will stay with horse and buggies.?
Finally, good old rent stabilizing rules in NYC. Economics 101 teaches that rent control reduces the availability of apartments for rent. The recent report adds to this the 2019 rule requiring rent-controlled prices to rise at a max of 3%. The result is that landlords can’t invest in bringing apartments up to code when the rent-controlled tenant leaves. So far, only Left-wing politicians (e.g., NY mayor’s office) can deny this simple fact. But here is the unintended consequence beyond just reducing values of properties in NYC by 60-70%- the banks financing these real estate investments are in serious trouble. ?
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Alternative perspective
Competition analysts typically shy away from macroeconomic perspectives. Many of my CIP?s don’t have any formal education in economics. However, as a competition analyst you must internalize that inevitably all laws that regulate how private enterprise responds to market forces (demand and supply) come with a host of unintended consequences. What you need as a competition analyst is to be creative to predict those consequences, as they affect much broader and unexpected groups. Even a first-year undergraduate (OK, maybe not at Berkely or Harvard) can see their arrival by just thinking through which sectors and which companies might be affected.?
What you need as a competition analyst is to be creative to predict those consequences
Providing management with early warning of the effect of bad regulations (with lots of good intentions like being re-elected) will earn you credibility.
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High-powered innovations in competitive strategy: ForesightSims? simulations, business war games, workshops on strategic thinking, teacher, prolific author including 12 HBR digital articles, nonprofit board member.
11 个月Thanks, Ben Gilad. Interesting indeed, as always, and interesting even if we have different preferences. Which is actually key to what you first mentioned. There are always tradeoffs, as you said. (I say it too.) In your piece, you make the case for innovation (as opposed to replication and regulation), and call out that innovation necessarily requires certain tradeoffs (e.g., the real possibility of losing real money). If voters prefer to make tradeoffs that lead to regulation and safety, isn't that their prerogative? That's sort of the whole point of voting. What we need is internal consistency. We're not doing a terribly good job at internal consistency, except perhaps to the degree that states have different rules, demands, and opportunities. Or let's put it succinctly. Steven Wright said, "On the other hand: different fingers."
Intersecting science with art
11 个月the only newsletter that I read from the tons I have accepted invitations from, I wish to see realists, pluralists, etc... side by side with some kind of rigour and grace, do share any links or maybe you can analyze those frames in the future! All my love, king kong ps. realism liberalism and constructivism, maybe! would you call competitive intelligence as out of the box?
Not all regulations are bad. Some protect the common good at the expense of added costs (consider wastewater pollution controls that add costs to the polluters and their customers while making water safer for those downstream). The challenge for CI pros and everyone else is not about regulation's downside; it's about finding ways to work within the rules. Of course, some regulations are just stupid and bad policy. Those should be abolished. Just don't be too hasty. I serve on my town's planning commission, which sets zoning regulations and specifies how land can be used. Years ago, we updated rules covering what could be built and operated in a mixed commercial district (warehousing, hotels, restaurants, retail, etc. ) and what was inappropriate. One of the district's abutting homeowners was outraged that regulations would prevent him from building whatever he wanted. A few years later, this homeowner's neighbor sold his lot. The new owner was going to put in a goat slaughterhouse. I never saw someone switch from anti-regulation to pro-regulation so quickly. Just goes to show that perspective is everything. CI professionals must examine regulations' pros and cons and find the opportunities, threats, and workarounds.
Managing Director, Expedient
11 个月As always this is a great post. We go through waves of government regulation and deregulation (once in a while) but it always comes back to progressive governments de-emphasizing viable economics in favor of government spending and votes. And even in California where the writing is on the wall and society is breaking down, they keep adding more and more government subsidies. It's not stopping homelessness, it's not increasing company profits, and it's destroying cities. And yet it goes on and on.
Principal @ Connect Public Affairs | Providing Competitive Intelligence and Strategic Foresight to address Public Affairs challenges. Fellow of Council of CI Fellows. Founder & CEO @ Your Brain Is Not Full.
11 个月Ah yes, sadly too many businesses forget to pay attention to the non-market factors that impact their organization. Whether it is regulation, legislation or attacks from third-party protest orgs, they can have a dramatic significance to your organization's competitive environment, A great article Ben Gilad.