Learning about Risk and Reward in the Marketplace

The US has a culture where commerce permeates everything. It’s practically omnipresent. Because of this many Americans unknowingly learn facets of business that other cultures do not. A Harvard Business Review blog entry by Vijay Govindarajan called Marketplace Literacy: A Reverse Innovation Opportunity? pulls out three aspects of business: the skill being sold, the know-how to be efficient and the know-why to be effective. Here’s an excerpt example:

Marketplace literacy itself can be viewed at three levels: the concrete level of vocational skills or a trade, the more abstract level of business know-how, and the level of understanding, or “know-why,” about the marketplace. For instance, suppose a poor woman who knows how to cook (a vocational skill) starts a food shop. To run the business, she needs know-how — specifically, she needs to know how to set the menu and prices, choose a location, and promote her business. She also needs “know-why” — to understand why it’s important to be customer oriented, why to choose one location and not some other, and, ultimately, why to go into this business and not something else.

The second two items really leverage planning. Knowing details, spotting trends, and anticipating demand levels enable a good business person to set up a business for success. Many people in the US get lulled into a belief that their intuition is the same thing as truly understanding what can or will happen. Another HBR blog entry discusses the differences between foresight and intuition. It’s by Jeff Stibel and it’s called How Forethought (Not Intuition) Separates the Good from the Great. Here’s an excerpt:

But let’s beclear: Intuition is different than forethought. Intuition is another oneof those necessary but not sufficient traits. Without intuition, thehuman race would have been finished a long time ago. Intuition rests onthe ability of the brain to read patterns, and react accordingly. Forinstance, you don’t need to accumulate hundreds of details about acoiled object in your path to jump out of the way. The brain decidesinstantly that it’s a snake. Now the object may merely have been acoiled rope — and you may have jumped into the air needlessly, to theamusement of passers-by. But that is because the brain is built to reactquickly. It doesn’t wait for all the details.

Here’show forethought is different from intuition. To have forethought, youneed an abundance of details and you must labor over them. There is noright answer when thinking about the future, merely an endless number ofscenarios. It is what the Stanford economist Thomas Sowell calls”long-range thinking.” Forward thinking is the brain’s way to chip awayat the edges of uncertainty, to make bets based on past experience. Thebest of the best do this incessantly.

Finally, I mention these two items because the US economy is essentially sitting still. The inputs – the data – used for decision making is not currently trust worthy. Legislation over the past two years, such as Health Care reform and Financial Reform, have left many businesses flummoxed as to what to do, so they’re not investing until a path is clear. Geoff Colvin in his article Uncertain of future regulation, businesses are paralyzed provides a stat that is indicative of a business environment in wait:

Once these mammoth laws are enacted, government agencies must write new rules to implement them. For example, the Dodd-Frank law requires 243 new rules, by the count of the Davis Polk & Wardwell law firm, and no one yet knows what they’ll require. 

But it’s also a time of getting ahead. Sunk costs are a reality in business and holding off on investments or hiring is valid to a point. The problem is waiting too long can lead to lost opportunity in the marketplace. After all, business is all about risk and reward.

Working Thoughts 10/21/08
The Next Stimulus Package Must be a Job Creator

Working Thoughts 10/21/09
US Values have Changed, but the Change is Subtle

About benleeson
My name is Ben Leeson. I currently work for a large financial company in IT. I went to school at Marist College in Poughkeepsie, NY. I graduated with a B.S. in Business Administration concentrating in HR. Professor William Brown taught me and I enjoyed his classes; even acquiring an appreciation for just about all things HR. I didn’t pursue a job in that field after college but I’ve kept up with it. This blog will further my fascination with all things HR. I hope to grow my knowledge of the area through thoughtful writings and spirited feedback. I will attempt to have a fairly routine style so anyone reading can come to expect certain segments. Please excuse my incorrect grammar and occasional misspelling.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: