1 PRELIMINARIES ME JOE WEALTH CREATION CURIOUS OPTIMISTIC

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1 PRELIMINARIES ME & JOE & WEALTH CREATION CURIOUS & OPTIMISTIC BENEFICIARIES VICTIMS &

1 PRELIMINARIES ME & JOE & WEALTH CREATION CURIOUS & OPTIMISTIC BENEFICIARIES VICTIMS & STUDENTS COMPLEXITY CHANGE CONFLICT SCARCITY = APPARENT CHAOS ? but things are NOT RANDOM there are PATTERNS ! WHY is the JOINT STOCK COMPANY so successful at WEALTH CREATION ? ? JSC CURIOUS there are many ways of ORGANISING activities why are some COMPANIES more successful than others? why are some MANAGERS more successful than others? can we LEARN from & IMITATE successful organisations? OPTIMISTIC the JSC is SURPRISINGLY successful success is not random there is a PATTERN take a DIFFERENT look at an old institution unusual insights emerge & lead to a better UNDERSTANDING BENEFICIARY LEARNING, INNOVATION and ASPIRING trying to understand the JSC WEALTH is important more CHOICES seem to result in less infant mortality VICTIM wealth creation isn’t easy WHO is tying our shoe laces together? who is to blame for this CONSPIRACY? STUDENT what is going on? ? NB. THERE’S NO USER MANUAL ! jpb

2 SCOPE from LEARNING & INNOVATION to WEALTH with the JSC AGE OLD PROBLEMS

2 SCOPE from LEARNING & INNOVATION to WEALTH with the JSC AGE OLD PROBLEMS COMPLEXITY CHANGE CONFLICT SCARCITY ECONOMIC REALITIES SPECIALISATION SCALE SCIENCE SYNERGY IMITATION INVENTION INVESTMENT = LEARNING & INNOVATION ESSENTIAL CO-OPERATION SELF HELP - FAMILIES - PARTNERSHIPS - CHURCHES - CLUBS - SOCIETIES - VOLUNTARY GROUPS - PUBLIC AGENCIES or PRIVATE COMPANIES ? ? Providing more CHOICES and more SYNERGIES for MASLOW’S INDIVIDUAL ASPIRATIONS SURVIVAL SECURITY FRIENDSHIP INDIVIDUALITY ESTEEM FULL POTENTIAL JSC from LEARNING & INNOVATION to NB. BAFFLING DIVERSITY ! WEALTH CREATION jpb

3 ISSUE CO-OPERATING with STRANGERS CO-OPERATION? HOW? WHO DECIDES? ? EVOLUTION or PLANNED DESIGN

3 ISSUE CO-OPERATING with STRANGERS CO-OPERATION? HOW? WHO DECIDES? ? EVOLUTION or PLANNED DESIGN CUSTOMER CHOICE or EXPERT REGULATION ENTREPRENEURS or BUREAUCRATS HEURISTICS or ALGORITHMS CO-OPERATION or COERCION ? ? MARKETS ? or PLANNED DESIGN ? TWO OPPOSING WORLD VIEWS FOCUS on the - JSC the JSC is an EVOLVED INSTITUTION enabling STRANGERS to CO-OPERATE in the LEARNING & INNOVATION process ADVANTAGES for ALL FOLK in the LONG TERM EFFICIENT low cost EFFECTIVE customer benefits MORAL lawful activity POTENT better than competitive alternatives the JSC is also ROBUST !! NB. BOTTOM UP EVOLUTION OR TOP DOWN DESIGN ! jpb

4 THEME ROBUST INSTITUTIONS EVOLVE TOLERANT of IGNORANCE IMMUNE from TREACHERY How do we

4 THEME ROBUST INSTITUTIONS EVOLVE TOLERANT of IGNORANCE IMMUNE from TREACHERY How do we organise co-operation? KNOWLEDGE IGNORANCE LEGAL UTOPIAN CONTRACTS BLISS ? NAÏVE TRUST TREACHERY CO-OPERATION ‘We are ignorant of what it is we do not know, even though we know more than we can ever say’ John Gray ‘From the bowels of Christ, I beseech you, think that you may be mistaken’ Oliver Cromwell ‘Organisations based on trust and good intentions are very fragile & easily invaded & exploited by opportunistic agents’ Oliver Williamson ‘Evolutionarily stable strategies are stable because they are immune from treachery’ Richard Dawkins NB. AUTOMATIC RESPONSE TO PARASITES & PREDATORS ! jpb

5 SOURCES KINDRED SPIRITS just a few GUIDES & MENTORS CREATIVE ACCOUNTANCY Kaplan, Pollard,

5 SOURCES KINDRED SPIRITS just a few GUIDES & MENTORS CREATIVE ACCOUNTANCY Kaplan, Pollard, Chandler BUSINESS STRATEGY Kirzner, Porter, Stacey MARKETING PRACTICE Lever, Hardy, Levitt TECHNOLOGY MANAGEMENT Rosenberg, Nelson, Ganguly ECONOMIC THEORY Smith, Ricardo, Solow, Romer PUBLIC CHOICE POLITICS Buchanan, Becker, Rubin PHILOSOPHY & HISTORY OF SCIENCE Popper, Kuhn, Wilson ORGANISATION STRUCTURES Mac. Gregor, Akoff, Senge COMPLEX SYSTEMS Checkland, Ormerod, Holland EVOLUTIONARY PROCESSES Dawkins, Axelrod, Dennett HISTORICAL EVIDENCE Braudel, Mc. Neill, Hicks ECONOMIC ANALYSIS CONTROL THEORY Metcalfe, Wolf, Williamson Ashby, Cziko, Rothschild NATURE of PROFIT Hayek, Baumol, Fukuyama SAFEGUARD of COMPETITION Friedman, Kirzner, North INDIVIDUALITY of REALITY Kant, Maslow, Pinker MAGIC of PROPERTY Coase, Mc. Gregor, Romer COMMON LAW Posner, De Soto, Ridley CULTURE Nozick, Novak, Diamond NB. A DWARF ON THE SHOULDERS OF GIANTS ! jpb

6 STRUCTURE MODELS PROBLEMS REALITIES & UNDERSTANDING TOPICS WEALTH MACHINE JSC HOW IT WORKS

6 STRUCTURE MODELS PROBLEMS REALITIES & UNDERSTANDING TOPICS WEALTH MACHINE JSC HOW IT WORKS - THE CASH FLOW MODEL n BUSINESS ACCOUNTS n BUSINESS STRATEGY n MARKETING n TECHNOLOGY AGE OLD PROBLEMS - n COMPLEXITY n CHANGE n CONFLICT n SCARCITY RELEVANT SOURCES - n COMPLEX SYSTEMS n EVOLUTIONARY PROCESSES n HISTORICAL EVIDENCE n ECONOMIC REALITIES ECONOMIC ANALYSIS n SATISFICING n SUPPLY & DEMAND n COMPARATIVE ADVANTAGE n TOTAL FACTOR PRODUCTIVITY n ENDOGENOUS GROWTH WHY IT WORKS - THE CONTROL MODEL n NATURE of PROFIT n SAFEGUARD of COMPETITION n INDIVIDUALITY of REALITY n MAGIC of PROPERTY NB. ILLUMINATING REALITY ! jpb

7 THE JOINT STOCK COMPANY CO-OPERATIVE VENTURES PARTICIPATION & CONTRIBUTION CORPORATE WEALTH PROFIT !

7 THE JOINT STOCK COMPANY CO-OPERATIVE VENTURES PARTICIPATION & CONTRIBUTION CORPORATE WEALTH PROFIT ! UE L A RS V E G IN OM T D S U AD C r o f JSC ! ENTREPRENEURS with IDEAS INVESTORS with CAPITAL INVESTMENT ENCOURAGED n Limited liability n Stakes can be cashed n Anyone can join INNOVATION REWARDED n Finance available DRIVEN by PROFIT OWNED by SHAREHOLDERS and CONTRACTS NB. PROFIT FROM PLEASING CUSTOMERS ! for SUPPLIERS for EMPLOYEES jpb

8 THE WEALTH MACHINE CIRCULATING RESOURCES picking up PROFIT each cycle DYNAMIC EBB &

8 THE WEALTH MACHINE CIRCULATING RESOURCES picking up PROFIT each cycle DYNAMIC EBB & FLOW of OPPORTUNITIES SOURCES of FINANCE OWNERS LOANS DEBTORS CASH POOL CREDITORS COSTS FIXED ASSETS MATERIALS DEPRECIATION VARIABLE FIXED DIRECT INDIRECT DISTRIBUTION FACTORY SALE ! STOCKS FINANCIAL ITEMS PROFIT TAX DIVIDENDS RETAINED PROFITS NB. THE MAGIC ROUNDABOUT ! jpb

9 THE BUSINESS ACCOUNTS IDENTIFYING FLOWS MEASURE or MIRAGE? CASH RESOURCES IN CUSTOMERS SUPPLIERS

9 THE BUSINESS ACCOUNTS IDENTIFYING FLOWS MEASURE or MIRAGE? CASH RESOURCES IN CUSTOMERS SUPPLIERS EMPLOYEES SALES ASSETS WEALTH OUT Dynamic fluctuating ebb & flow of resources WHY MEASURE? n EFFICIENCY & WEALTH PAST PERFORMANCE n SOLVENCY & HEALTH CURRENT POSITION n LIQUIDITY & RISK FUTURE PROSPECTS THREE REPORTS n PROFIT & LOSS ACCOUNT n BALANCE SHEET n CASH FLOW STATEMENT HOW MUCH PROFIT not CASH? SPENT on CAPITAL or REVENUE? WHERE IS IT GOING? DIFFICULTIES n Income fluctuates n Assets must be n Costs must be n Uncertain future TIMING is not consistent VALUED and there are no market prices ALLOCATED and there are no invoices ESTIMATES are never ‘correct’ PRINCIPLES n CONSISTENCY n PRUDENCE n ACCRUAL n GOING CONCERN for comparison for safety for timing for clarity but the ACCOUNTS tell only HALF THE STORY with focus on n COSTS but not QUALITY / SERVICE / SKILLS n YESTERDAY but not TOMORROW n COSTS of DOING but not COST of ALTERNATIVES n RULES but not LEARNING / INNOVATION NB. CAVEAT EMPTOR ! jpb

10 THE PROFIT & LOSS ACCOUNT PROFIT or CASH? TIMING ISSUES INCOME EXPENDITURE when

10 THE PROFIT & LOSS ACCOUNT PROFIT or CASH? TIMING ISSUES INCOME EXPENDITURE when EARNED when the deal is struck not when the cash flow in when INCURRED when committed not when the cash flows out the day to day transactions of the wealth machine involving a SURRENDER and a GAIN of a benefit culminating in the PROFIT & LOSS ACCOUNT CREDITORS COSTS DEPRECIATION MATERIALS VARIABLE FIXED DIRECT INDIRECT CASH SALES & DEBTORS DISTRIBUTION STOCKS SALE ! FINANCIAL ITEMS PROFIT INCOME TAX DIVIDENDS RETAINED PROFITS COMING IN EXPENDITURE GOING OUT BALANCING across the SALE ! NB. BUY NOW PAY LATER ! jpb

11 THE BALANCE SHEET CAPITAL or REVENUE? VALUATION ISSUES ASSETS what we have of

11 THE BALANCE SHEET CAPITAL or REVENUE? VALUATION ISSUES ASSETS what we have of VALUE FIXED for generating income CURRENT for funding stocks, debtors and cash LIABILITIES what we OWE to pay never = EQUITY to pay long term = DEBT RESERVES to pay next year = LOANS to pay this year = creditors dividends tax a snapshot of the balance culminating in the BALANCE SHEET BALANCING across OWNERSHIP ! OWE OWNERS EQUITY DEBT CASH FIXED ASSETS - DEPRECIATION CREDITORS & accruals STOCKS DEFERRED INCOME PROVISIONS DEBTORS & prepayments SALE ! FINANCIAL ITEMS GOODWILL PROFIT TAX DIVIDENDS RETAINED PROFITS NB. WHO PAYS HOW MUCH WHEN ? jpb

12 THE CASH FLOW STATEMENT STREAMS POOLS & LEAKS REAL ISSUES when push comes

12 THE CASH FLOW STATEMENT STREAMS POOLS & LEAKS REAL ISSUES when push comes to shove MARGIN & SPEED minus INVESTMENT = NET CASH FLOW with a little help from INVESTORS and BANKERS PROFIT is good but NO CASH NO BUSINESS !! BALANCING across the CASH POOL ! SOURCES of FINANCE OWNERS LOANS CASH SALES & DEBTORS DRIPPING IN ! CASH CREDITORS FIXED ASSETS COSTS VARIABLE FIXED DIRECT INDIRECT LEAKING OUT ! MATERIALS DISTRIBUTION SALE ! STOCKS FINANCIAL ITEMS TAX DIVIDENDS NB. YOU CAN’T EAT PROMISES ! PROFIT jpb

13 BUSINESS STRATEGY DISCOVERING MARGIN & SPEED SHAPING CURVES SPEED REVENUE ££’ss PROFIT MARGIN

13 BUSINESS STRATEGY DISCOVERING MARGIN & SPEED SHAPING CURVES SPEED REVENUE ££’ss PROFIT MARGIN COSTS PRICE VOLUME what BUSINESS STRATEGY delivers the MAXIMUM PROFIT ? where does MC = MR ? the curves are not ‘KNOWN’ or ‘FIXED’ they depend on : - n PRICING POLICY - INNOVATION, COMPETITION, QUALITY, SERVICE, PRODUCT DIFFERENTIATION n COST STRUCTURE - SPECIALISATION, SCALE, SCIENCE, INVESTMENT & QUALITY of INPUTS n SALES VOLUME - ADVERTISING, PROMOTION, DISTRIBUTION COMPLEX, DYNAMIC & INTERACTIVE SYSTEMS CONTINUALLY EXPERIMENT to DISCOVER PROFIT - n HIGHER PRICES = LOWER VOLUME ? ? n LOWER COSTS = LOWER QUALITY = LOWER PRICES ? ? n HIGHER VOLUME = LOWER COSTS = LOWER PRICES ? ? NB. JUGGLING WITH COMPLEXITY ! jpb

14 PRICES SPECIALISATION & MARKET POSITION NICHE EXPERTISE WHAT DO WE DO BETTER THAN

14 PRICES SPECIALISATION & MARKET POSITION NICHE EXPERTISE WHAT DO WE DO BETTER THAN OUR COMPETITORS ? CONSIDER MARKET NICHE? or BROAD MARKET? but. . . RISK of MARKETING MYOPIA? RISK to EXCELLENCE? YESTERDAYS PRODUCT? JACK of all TRADES MASTER of NONE? How to SECURE HIGHER PRICES ? & ADVANTAGE CONSIDER - LEADERSHIP n SUBSTITUTES ? VOLUME n IMITATION ? PROFIT n CUSTOMER LOYALTY ? n SUPPLIERS ? n SUPPORT SERVICES ? n DISTRIBUTION ? SPECIALISE !! INNOVATE !! n REGULATION ? ACQUISITION of SKILLS FOCUSED EXPERTISE SKILLS FULLY UTILISED DIVISION of LABOUR NB. PRACTISE MAKES PERFECT ! jpb

15 COSTS SPECIALISATION & COST BEHAVIOUR COMPLEXITY COSTS INDIRECTS PARADOX ££’s ‘Hawthorn’ effect relentless

15 COSTS SPECIALISATION & COST BEHAVIOUR COMPLEXITY COSTS INDIRECTS PARADOX ££’s ‘Hawthorn’ effect relentless increase bureaucracy & restructuring time attention - effort - focus COMPLEXITY VARIETY ££’s complex intermittent % waste simple continuous number of varieties time PARETO LEARNING CURVE ££’s vital few COST REDUCTION - frequency cumulative volume SIMPLICITY - SCIENCE - INNOVATION - INVESTMENT - DESIGN - AUTOMATION - SIZE REDUCTION - SEPARATION - RESTRUCTURING - RIGHT FIRST TIME etc NB. KEEP IT SIMPLE STUPID ! jpb

16 VOLUME SPECIALISATION & SCALE ECONOMIES GLOBAL MARKETS maturity volume cow decline star growth

16 VOLUME SPECIALISATION & SCALE ECONOMIES GLOBAL MARKETS maturity volume cow decline star growth development problem dog local / national / international / global Technology critical - innovate? find the niche? market research? Capacity critical invest? advertise? promote? Profit Costs critical - divest? milk? acquisition? relaunch? drive down the learning curve? COMPETITIVE ADVANTAGE from SPECIALISED NICHE and SCALE n LEARNING EFFECTS of SKILL ACQUISITION n LEARNING EFFECTS of SKILL UTILISATION n SPREAD of FIXED COSTS over more units n PURCHASING POWER for MATERIALS, SERVICES & FINANCE n LOWER CAPACITY COSTS = AREA OUTPUT = VOLUME n AFFORDABLE LUMPS of INVESTMENT & RISK n MORE OPPORTUNITIES for in house facilities vertical integration long production runs automation/mechanisation process flow skills training NB. THE BIGGER THE BETTER ! jpb

17 MARKETING TASKS CUSTOMER VALUE & MARKET RESEARCH CHOICES COMPETITION? COMPETITORS are PACE SETTERS

17 MARKETING TASKS CUSTOMER VALUE & MARKET RESEARCH CHOICES COMPETITION? COMPETITORS are PACE SETTERS NOT WINNERS! PRICE? CUSTOMER VALUE INNOVATION SPECIALISATION SERVICE? COSTS QUALITY? DECISION VOLUME n PERFORMANCE n PRESENTATION n PACKAGING RESPONSIVENESS n CONSISTENCY n COURTESY n CHOICE n AVAILABILITY n ADVERTISING n RELIABILITY n EFFICIENCY of DISTRIBUTION CHANNELS MARKET RESEARCH n INFORMATION to reduce risk (about yesterday? ) n REAL BEHAVIOUR (not saying but doing) n JUDGEMENT CRITERIA (technical specification? ) n MATCHING customer & product n TESTING (not subterfuge and intrigue) n BEWARE of ‘me toos’ (competitors do market research) n NB the best info comes from your existing customers ! OR real products at real prices against real competition in real markets !!? ? NB. THE CUSTOMER IS KING ! jpb

18 QUALITY BRAND POSITION & ADVERTISING PRODUCT DIFFERENTIATION QUALITY VALUE BEST CHANCE n PREMIUM

18 QUALITY BRAND POSITION & ADVERTISING PRODUCT DIFFERENTIATION QUALITY VALUE BEST CHANCE n PREMIUM MORE VOLUME BUT TOTAL REVENUE ? GOOD QUALITY AT A PREMIUM BUT WILL THEY PAY THE PRICE ? n MARKET NORM ALWAYS RISKY n ECONOMY STANDARD QUALITY AT A DISCOUNT BUT IS IT JUST A COMMODITY ? NEVER PRICE (NOT COST) ADVERTISING for - n VOLUME - persuade to try n MARKET SHARE - technical innovation - better than competitors n MARKET GROWTH - a bundle of new promises - better than prior art ACTIONS = CHECK CUSTOMERS - IMPROVE QUALITY PUSH PRICES - CHECK COMPETITION saturation advertising spend effective spend ££ voice unheard in the market place volume NB. VALUE FOR MONEY ! jpb

19 COMPETITIVE ADVANTAGE BRAND LEADERSHIP & ALTERNATIVES CHOICES for CUSTOMERS them Quality Service oh

19 COMPETITIVE ADVANTAGE BRAND LEADERSHIP & ALTERNATIVES CHOICES for CUSTOMERS them Quality Service oh dear ! Price index us steady improvement ? ! we’re ahead ! DYNAMIC COMPETITIVE MARKETS n CONTINUOUS improvement needed to progress n NEW OPPORTUNITIES are always opening up performance is RELATIVE & CHANGING A CONTROL SYSTEM ! COMPETITORS SET POINT CUSTOMER DECISIONS INVESTMENT RESPONSE TESTS NB. FIRST PAST THE POST ! MARKETS PRICE QUALITY SERVICE INFO WINNERS jpb

20 SERVICE BRAND LOYALTY & REPEAT PURCHASES EXISTING CUSTOMERS are VALUABLE ASSETS ENCOURAGING LOYALTY

20 SERVICE BRAND LOYALTY & REPEAT PURCHASES EXISTING CUSTOMERS are VALUABLE ASSETS ENCOURAGING LOYALTY n COURTESY COMMUNICATION UNDERSTANDING HELP with a SMILE n AVAILABILITY FAST ON TIME WHEN WANTED n RELIABILITY PREDICTABLE FLEXIBLE EFFICIENCY of DISTRIBUTION CHANNELS QUALITY = FUNCTIONAL BOND SERVICE = SOCIAL BOND LOYAL CUSTOMERS n FREE ADVERTISING n NO GO AREA for COMPETITORS n SPEND MORE n LOW RISK THE LOYALTY DISCOUNT diminishing returns they don’t like the product ! 5% 4% 3% 2% 1% small discounts big incentives 0 loyal customers NB. RESPOND ! jpb

21 TECHNOLOGY APPLICATION of SCIENCE TECHNOLOGICAL & ORGANISATIONAL ‘KNOW HOW’ SCIENTIFIC METHOD n OBSERVATION

21 TECHNOLOGY APPLICATION of SCIENCE TECHNOLOGICAL & ORGANISATIONAL ‘KNOW HOW’ SCIENTIFIC METHOD n OBSERVATION n MATHEMATICAL THEORY n TESTABLE HYPOTHESES n EXPERIMENTAL VALIDATION n PEER REVIEW no one can claim superior access to wisdom but the process of science and it’s application as technology is the best bet ‘KNOW HOW’ = ‘SURVIVAL VALUE’ GROWTH OPPORTUNITIES – SCALE – GLOBALISATION ! SPECIALISATION – TECHNOLOGICAL INNOVATION ! n MASSIVE REVOLUTION IN MICRO ELECTRONICS n SYNERGY of BRAINS & MICRO CHIPS n SPEED & DYNAMICS n BARRIERS DISAPPEAR ‘KNOW HOW’ - LEARNING and INNOVATING in the n PRODUCTS n PRODUCTION n PEOPLE NB. MORE & MORE FROM LESS & LESS ! JSC R & D FACTORIES HUMAN CAPITAL jpb

22 PRODUCTS R&D & INNOVATION ‘KNOW HOW’ = LEARNING & INNOVATING TECHNOLOGY is ‘KNOW

22 PRODUCTS R&D & INNOVATION ‘KNOW HOW’ = LEARNING & INNOVATING TECHNOLOGY is ‘KNOW HOW’ and is exploited throughout the process from INVENTION to APPLICATION - n INVENTION n MARKET RESEARCH n DEVELOPMENT n TEST MARKET n ADVERTISING n PRODUCTION n DISTRIBUTION n SALES INNOVATION FUNNEL MANY PROJECTS COMPETE IDEAS for SCARCE RESOURCES BUZZ & MOST FAIL SELECT FEW REACH the MARKET AROUND from RESEARCH thru DEVELOPMENT to MARKET NB. A BETTER MOUSE TRAP ! jpb

23 PRODUCTION FACTORIES & CONTINUOUS FLOW for SALE S ‘KNOW HOW’ = DESIGN &

23 PRODUCTION FACTORIES & CONTINUOUS FLOW for SALE S ‘KNOW HOW’ = DESIGN & OPERATING METHOD A COMPLEX INTERACTIVE LOGISTICAL SYSTEM OPERATIONS PROCUREMENT DISTRIBUTION CU ST OM ER SALE ! STORE STORE SU P PL IE RS PRE-PROCESS MACHINES SUB ASSEMBLY/PACKING STS CO TS & INPU INFORMATION SERVICES ENERGY LABOUR FIXED ASSETS MATERIALS ! SS E EN V I S ON P ES R n CONVERSION PROCESSES n ADDING VALUE for CUSTOMERS n MAXIMISING SALES REVENUE ORGANISING COMPLEXITY n SIMPLIFY SEPARATE DOWNSIZE REDESIGN AUTOMATE n MANAGE CULTURE CHARISMA CRISIS n SELF CONTROL DECISIONS HYPE GOALS INFORMATION MOTIVATE NB. CONTINUOUS IMPROVEMENT !! jpb

24 PEOPLE HUMAN CAPITAL & PATTERNS in the BRAIN ‘KNOW HOW’ = CREATIVE LEARNING

24 PEOPLE HUMAN CAPITAL & PATTERNS in the BRAIN ‘KNOW HOW’ = CREATIVE LEARNING n BRAINS make MODELS n MODELS are tested in REALITY n DOCKING of PROBLEMS & SOLUTIONS PROBLEM BEST OPTION AVAILABLE AT THE TIME BETTER MODEL LEARNING EVIDENCE OF OUTCOMES INNOVATIVE UNDERSTANDING CREATIVE INNOVATIVE EXPERIMENT TWIN LOOPS - in the BRAIN - in REALITY n BEST OPTION from PAST EXPERIENCE n BETTER OPTION from FUTURE EXPERIMENT LEARNING INNOVATION INVESTING in PEOPLE n SPECIALISED SKILLS ACCOMPLISHMENTS & APTITUDES n EDUCATION n EXPERIENCE been there seen it done it bought the T-shirt n SELF CONFIDENCE for experiments & failures n FLEXIBILITY MOBILITY RISK THRESHOLD HEALTH STRENGTH ENERGY NB. PERSONAL PORTFOLIOS OF SPECIALIZED SKILLS ! jpb

25 COMPLEXITY UNLIKELY TRUTH & WHO KNOWS? the PROBLEM of SCIENCE - - HEURISTICS

25 COMPLEXITY UNLIKELY TRUTH & WHO KNOWS? the PROBLEM of SCIENCE - - HEURISTICS or ALGORITHMS? SCIENCE is solving increasingly intricate puzzles, success is awesome & intoxicating but scientific KNOWLEDGE is no longer about CAUSE & EFFECT because : - n INFINITE REGRESSION to the ULTIMATE CAUSE of CAUSE n INNOVATION is about HITHERTO UNCONNECTED IDEAS n INACCURACY of MEASUREMENT LEADS to UNKNOWN EFFECTS n INTERACTION means CAUSES can’t be ISOLATED n DECISIONS themselves CHANGE the EFFECT n FEEDBACK results in EFFECTS becoming CAUSES n EMERGENT PROPERTIES of SYSTEMS don’t have CAUSES COMPLEXITY EXPLODES the necessary computer would be the size of the universe itself ! MORE MEASUREMENT & INSTRUCTIONS THE = HIGHER COST & LOWER VALUE! PRODUCTIVITY PARADOX the REALITY of MANAGEMENT is HEURISTIC : - n BUILD on past success n CHOOSE the best option at the time n DO DEALS for mutual advantage n EXPERIMENT to discover improvements n TIT FOR TAT to protect investment n LEARN from experience PATTERNS EMERGE IT IS NOT RANDOM !! NB. EFFECTS ARE THE CAUSE ! jpb

26 COMPLEX SYSTEMS NON LINEARITY & ITERATION 'KNOW HOW’ EMERGES ORDER & FEEDBACK EMERGENT

26 COMPLEX SYSTEMS NON LINEARITY & ITERATION 'KNOW HOW’ EMERGES ORDER & FEEDBACK EMERGENT PATTERN unexpected FEEDBACK LOCAL ACTIVITY simple rules of behaviour UNINTENDED CONSEQUENCES UNEXPECTED RESPONSES from SIMPLICITY to COMPLEXITY SCIENCE has solved the MYSTERY but left the WONDER of UNLIKELY TRUTH. . . … we look for GOD in the wrong place he is not the ‘DESIGNER’ but the EMERGENT ORDER in COMPLEX EVOLVING SYSTEMS on the edge of chaos n CREATIVE DIVERSITY not STANDARDISATION n UNOCCUPIED NICHES not STRUGGLE n ACQUIRED IMMUNITY not TREACHERY n CO-OPERATION not EXPLOITATION n CHOICE not COMPETITION CO-OPERATION EMERGES from LOCAL ACTIVITY in the JSC ! NB. SERENDIPITY ! jpb

27 CHANGE FLEXIBILITY & WHO RESPONDS? the PROBLEM of STRUCTURE - - ENTREPRENEURS or

27 CHANGE FLEXIBILITY & WHO RESPONDS? the PROBLEM of STRUCTURE - - ENTREPRENEURS or BUREAUCRATS? ERS M O UST C THE W SALE !! HEEL FELL O FF QUALITY & PROFIT are NOT ALTERNATIVES. PROFIT ONLY comes from SATISFIED CUSTOMERS. BUREAUCRATIC REGULATION : - n inhibits INNOVATION as change & flexibility are reduced n drives CAPITAL & investment overseas or underground n diverts resources from CUSTOMERS to the ‘rules’ n incurs COSTS of quangos, red tape & small print n provides CARTELS ‘legal’ protection from competition n replaces CAVEAT EMPTOR with a false sense of security n separates RESPONSIBILITY from control n confronts the innocent instead of THE GUILTY n presents opportunities for BRIBERY, CORRUPTION & COVER UP n encourages INTERVENTIONIST instincts & delusions of control & hinders CO-OPERATION & local KNOWLEDGE REGULATION is no substitute for entrepreneurial action & risk as suppliers REGULATION have much more to loose from antagonised customers than from malleable inspectors ENTREPRENEURS DISCOVER a BETTER WAY ! NB. ENTANGLED IN RED TAPE ! jpb

28 EVOLUTIONARY PROCESSES CONTINUOUS COPY VARY SELECT EVOLUTIONARY STABLE STRATEGIES EMERGE MAXIMUM VALUE MINIMUM

28 EVOLUTIONARY PROCESSES CONTINUOUS COPY VARY SELECT EVOLUTIONARY STABLE STRATEGIES EMERGE MAXIMUM VALUE MINIMUM RESOURCES SURVIVAL the EDGE of CHAOS EFFICIENCY = CREATION = the EMERGENCE of ORDER ! STAGNATION CHAOS EXTINCTION MUTATION RATE 1 - SELF REPLICATION 2 - RANDOM MUTATIONS 3 - DEVELOPMENT 4 - NATURAL SELECTION = dna inexorable repetition = opportunities to progress = influences in the environment = effects on the gene frequency ECONOMIC REALITIES = SPECIALISATION, SCALE, SYNERGY, SCIENCE, IMITATION, INVENTION, INVESTMENT 2 + 2 = 5 ECONOMIC SYNERGIES SURVIVE ALTERNATIVE STRATEGIES DIE OUT ENVIRONMENTAL DEVELOPMENT & DIFFERENTIAL SURVIVAL SPONTANEOUS CO-OPERATION DISCOVERY & IMMUNITY SPECIALISATION & NICHES TRIAL & ERROR DIVERSITY & REPLICATION NB. WASTE NOT WANT NOT ! jpb

CONFLICT 29 CUSTOMER WISHES & WHO CHOOSES? the PROBLEM of POLITICS - - CO-OPERATION

CONFLICT 29 CUSTOMER WISHES & WHO CHOOSES? the PROBLEM of POLITICS - - CO-OPERATION or COERCION? DIFFERENT people at DIFFERENT times have DIFFERENT perspectives from DIFFERENT inheritances DIFFERENT experiences & DIFFERENT circumstances . . . COERCION to resolve conflict results in power being concentrated in ELITE DICTATORSHIPS – BISHOPS PRINCES GENERALS or MAJORITIES n INEFFICIENT n market information & control are absent n INEFFECTIVE n KNOWLEDGE for decisions is incomplete technical detail innovative alternatives Joe’s wishes unintended consequences n IMMORAL n majorities DICTATE their perspective to minorities n interest groups are BRIBED in return for support n bequests from tax leads to CORRUPTION n VULNERABILITY from dependency on others n ALIENATION from remote decisions n DEMORALISATION from unfulfilled expectations n HELPLESSNESS as one ‘dictator’ succeeds another n IMPOTENT CAPITAL MOBILITY DEFEATS IMPOSED CONTROL the benefits of ECONOMIC CO-OPERATION exploit wealth creating realities within robust institutions where everyone participates & contributes without harm to others. RESULTING in CONFLICT RESOLUTION as more PARTICIPATION & CONTRIBUTION produce more WEALTH, INCOME & COMPASSION for more PEOPLE in MASS MARKETS NB. IT’S THE ECONOMY STUPID ! jpb

HISTORICAL EVIDENCE 30 STATISTICAL UNIFORMITIES FREEDOM & DEMOCRACY EMERGES Why did it the jsc

HISTORICAL EVIDENCE 30 STATISTICAL UNIFORMITIES FREEDOM & DEMOCRACY EMERGES Why did it the jsc evolve when it did where it and why not elsewhere? Why Western Europe? Why 1500 AD? INDIVIDUALISM - INDEPENDENCE - TOLERANCE - PLURALISM ADVANTAGES of HISTORICAL EVIDENCE n REALITY from the PAST n AWAY from the EMOTIONAL PREJUDICE of the moment But LESSONS n IDEAS have invariably been proved WRONG n IDEAS have invariably been IMPOSED upon poor joe n DETECTIVE WORK is necessary to reveal a golden thread of BOTTOM UP DISCOVERY & ACCUMULATION of SURVIVAL SYNERGIES as Joe & his mates respond to TOP DOWN IMPOSITION by BISHOPS PRINCES GENERAL & MAJORITIES MORALITY & LAW = obligation & trust = harms & hards in the warp & weft of society common law evolved CULTURE & RELIGION = learning across generations = centuries of experience n breaking the grip of established AUTHORITY n opening up DIVERSITY and choice n encouraging CO-OPERATIVE INSTITUTIONS n establishing SCIENTIFIC METHOD n REWARDING successful innovation directly n ENABLING economic growth by a generally accepted system of tort law, free trade and innovative technology n DEFENDING created wealth from predators and parasites NB. PATTERNS FROM THE PAST ! jpb

31 SCARCITY QUARTS & PINT POTS & WHO BENEFITS? the PROBLEM of ECONOMICS -

31 SCARCITY QUARTS & PINT POTS & WHO BENEFITS? the PROBLEM of ECONOMICS - - CUSTOMERS or EXPERTS? HOW MUCH? WHO PAYS? WHO BENEFITS? there’s not enough to go round! everyone wants different things! for all goodies someone somewhere has to pay & pay again to maintain! The difficulty is finding willing payers? Ask the tax man! Everyone is his own willing expert! n SPENDING is easy but FINANCING is difficult n spending OTHER PEOPLE’S MONEY is even easier n income is what SOMEONE IS WILLING TO PAY. if your costs are not covered - no deal. n CUSTOMERS WON’T PAY for inefficiency ineffectiveness immorality or impotence n ‘KNOW HOW’ is more valuable than ‘resources’ n PRICE increase = lower OUTPUT & INVESTMENT throughout history a shortage of willing payers has resulted in BISHOPS, PRINCES, GENERALS & MAJORITIES succumbing to violence SATISFIED CUSTOMERS ARE THE ONLY WILLING PAYERS! NB. THERE’S NO FREE LUNCH ! jpb

ECONOMIC REALITIES 32 SURVIVAL BEHAVIOUR SUCCESSFUL BEHAVIOUR EMERGES CO-OPERATION EMERGES 2 + 2 =

ECONOMIC REALITIES 32 SURVIVAL BEHAVIOUR SUCCESSFUL BEHAVIOUR EMERGES CO-OPERATION EMERGES 2 + 2 = 5 relentlessly seeking the BEST PERCEIVED SURVIVAL VALUE in excess of the UNAVOIDABLE COSTS available at the TIME GAME THEORY TIT for TAT TRANSPARENT GENEROUS PEACEFUL FORGIVING ‘nice’ , clear & simple strategy never wins at the expense of others only retaliates if provoked reverts to co-operation after retaliation ‘THE KEY TO DOING WELL LIES NOT IN OVERCOMING OTHERS BUT IN ELICITING THEIR CO-OPERATION NO CENTRAL AUTHORITY IS NEEDED, RECIPROCITY IS SELF POLICING’ - AXELROD. COLONISE ideas & successful strategy spread in populations LEARNING experience from successful cultures over generations INNOVATION generating & testing new ideas n NO PRESCRIPTION because different people are at different positions at different times n NO EQUILIBRIUM just dynamic discovery & accumulation by evolutionary trial & error NB. PLAY THE GAMES ! jpb

ECONOMIC ANALYSIS 33 ADMITTING IGNORANCE CO-OPERATIVE SYNERGIES EMERGE ANALYSING CHOICE ANALYTICAL TOOLS for UNDERSTANDING

ECONOMIC ANALYSIS 33 ADMITTING IGNORANCE CO-OPERATIVE SYNERGIES EMERGE ANALYSING CHOICE ANALYTICAL TOOLS for UNDERSTANDING ALL HUMAN BEHAVIOUR n SCIENTIFIC n ORGANISATIONAL n POLITICAL n ECONOMIC n SUPPLY & DEMAND n COMPARATIVE ADVANTAGE n TOTAL FACTOR PRODUCTIVITY ECONOMICS is a DISCOVERY and ACCUMULATION process in our ignorance we are forced to choose to survive – Herbert Simon – ‘we encounter many branches in the maze of life’s path, we follow now the left fork, now the right. The metaphor of the garden of forking paths is irresistible to anyone who has devoted their scientific career to understanding human choice'? Herbert Simon - SATISFICING Adam Smith - SUPPLY & DEMAND David Ricardo - COMPARATIVE ADVANTAGE Robert Solow - TOTAL FACTOR PRODUCTIVITY Paul Romer - ENDOGENOUS GROWTH NB. THE BLIND WATCHMAKER ! jpb

SATISFICING 34 INDIVIDUAL CUSTOMER & INVESTOR CHOICE MACHO MANAGERS think they ‘GET a GRIP’’

SATISFICING 34 INDIVIDUAL CUSTOMER & INVESTOR CHOICE MACHO MANAGERS think they ‘GET a GRIP’’ by PURPOSEFUL PLANNED DESIGN but REALITY is DIFFERENT CONSUMER & INVESTOR CHOICES involve individual decision making behaviour based on HERBERT SIMON'S 'satisficing' - n BUILDING on proven inherited success, imitate success, there is no better place to start, don't reinvent the wheel n freely CHOOSING between options available at the time and the place, unhindered by 'rent seeking' Bishops, Princes, Generals or majorities n EXPERIMENTING to generate diversity and increase the chances of discovering new tricks n CO-OPERATING with others to discover better tricks from synergies which are not available to individuals n RETALIATING against the inevitable parasites and predators to defend accumulate benefits n LEARNING from the successful outcomes of differential survival and starting again HERBERT SIMON again - 'We encounter many branches in the LABYRINTH of life’s path, we follow now the left fork, now the right. The metaphor of the garden of forking paths is irresistible to anyone who has devoted their scientific career to understanding human choice' NB. A GARDEN OF FORKING PATHS ! jpb

35 SUPPLY & DEMAND MARGINAL UTILITY & OPPORTUNITY COSTS & PRICES DEMAND PRICE MARGINAL

35 SUPPLY & DEMAND MARGINAL UTILITY & OPPORTUNITY COSTS & PRICES DEMAND PRICE MARGINAL UTILITY GLUTS QUEUES SUPPLY OPPORTUNITY COST PRICE TOO HIGH - LOW DEMAND OVER SUPPLY PRICE TOO LOW - EXCESS DEMAND INADEQUATE SUPPLY QUANTITY PRICE in a free COMPETITIVE MARKET with CHOICE provides INFORMATION for decisions AUTOMATIC SAFEGUARDS are built in as PRICES are necessary for proper CHOICES everyone takes DECISIONS after negotiating their ‘BEST VALUE’ from MARGINAL PRODUCTIVITY firms RESPOND by searching for the best OPPORTUNITY COST n CUSTOMERS must be willing to purchase n SUPPLIERS must be happy to deliver n EMPLOYEES WORK n BANKS LEND DECENTRALISED decisions & dispersed wealth result in effective & efficient ALLOCATION as more people PARTICIPATE as they choose & innovate for satisfaction & profit NB. INNOCENT SIGNALS ! jpb

COMPARATIVE ADVANTAGE 36 SPECIALISATION AGAIN No NOT ABSOLUTE but COMPARATIVE ADVANTAGE DAVID RICARDO explained

COMPARATIVE ADVANTAGE 36 SPECIALISATION AGAIN No NOT ABSOLUTE but COMPARATIVE ADVANTAGE DAVID RICARDO explained comparative advantage and emphasised the mutual benefits for everyone from specialisation and free trade but the concept is troublingly counterintuitive – Nobel laureate Paul Samuelson – 'thousands of important and intelligent men have never been able to grasp it or believe it even after it was explained to them'. . . The Open University - ‘The principles of comparative advantage and gains from trade are the most important results in the whole of economics. They apply at national, and also individual level. It maybe that a doctor is better than a farmer both at practising medicine and growing potatoes. It does not follow that the doctor should do both. If each specialises in the activity in which they have comparative advantage and engage in trade they are both better off than if each tries to be self sufficient’. KEY POINTS – n EVERYONE has different OPPORTUNITY COSTS and a comparative advantage in something n EVERYONE benefits from SPECIALISATION and trade even when the gifted are better at all activities n the principle explains TRADE advantages at INDIVIDUAL and national level, with money or barter n specialisation and trade will EVOLVE because extra 'VALUE' is created, it does not require understanding or the intervention of the specialists n REAL WAGES are determined by the value of output n PRICES are determined by supply & demand n PRICES & EXCHANGE RATES don’t determine trade, they result from trade, they are measurements of opportunity costs NB. GUNS or BUTTER ! jpb

TOTAL FACTOR PRODUCTIVITY 37 MEASURING IGNORANCE PRODUCTION FUNCTION OUTPUT O 2 change due to

TOTAL FACTOR PRODUCTIVITY 37 MEASURING IGNORANCE PRODUCTION FUNCTION OUTPUT O 2 change due to technology 2000 Ok change due to capital O 1 1950 k 1 k 2 CAPITAL per LABOUR unit In 1957 Robert Solow used 'growth accounting' mathematics to analyse historical GDP data and identified the overwhelming importance of a residual, ‘total factor productivity’, in securing growth and NOT the Neoclassical endogenous input variables capital (resources) and labour (effort). Solow defined ‘total factor productivity’ as technological innovation, 'know how‘, understanding and practice. NB. MONEY IS NOT A PROBLEM ! jpb

ENDOGENOUS GROWTH 38 PRODUCTIVE OUTPUT from ‘KNOW HOW’ MONOPOLISTIC COMPETITION in COMMERCIAL R&D DEPARTMENTS

ENDOGENOUS GROWTH 38 PRODUCTIVE OUTPUT from ‘KNOW HOW’ MONOPOLISTIC COMPETITION in COMMERCIAL R&D DEPARTMENTS ‘KNOW HOW’ a NON-RIVAL PARTIALLY EXCLUDABLE GOOD PAUL ROMER and endogenous growth theory lifted some of the gloom of the ‘dismal science’ by focusing economic analysis on INCREASING RETURNS and Adam Smith's 'Pin Factory'. Romer integrated into mainstream economics the growth effects of TECHNOLOGICAL ‘KNOW HOW’ from specialisation and scale through education, training, R&D, incentives and coordinating institutions. . . and also the debilitating effects of political collective decisions, protectionism, regulation and taxation - n Enable the growth of HUMAN CAPITAL - n Tort Law, Trade, Technology n education, education n diversity, health, intensive interactions n Enable MARKET CO-ORDINATION - n free trade, capital, competition, wages and prices n establish property rights n low intervention, tax, inflation n establish trust for investment and saving Endogenous growth theory, emerged in the 1980's as mathematical tools offered opportunities to model the complex non-linear processes of human behaviour. The failure of Eastern Europe to achieve economic growth was beginning to be explained as EVOLUTIONARY THEORY was integrated into economic orthodoxy. NB. A LEG UP NOT A HAND OUT ! ! jpb

WHY MARKETS ? 39 CO-OPERATION OBLIGATION & TRUST COMPLEXITY CHANGE CONFLICT & SCARCITY IT

WHY MARKETS ? 39 CO-OPERATION OBLIGATION & TRUST COMPLEXITY CHANGE CONFLICT & SCARCITY IT IS EASY TO SATISFY MAJORITIES IN STABLE SITUATIONS but the market continually responds to individuals with different preferences, expectations & knowledge, & at the same time automatically adjusts to change & complexity. PRINCIPLE FEATURES OF MARKETS - decentralised decisions where customers vote using price information about competing alternatives by a voluntary exchange of private property ESSENTIAL PREREQUISITES n rules for the definition exchange & protection of private property n uninhibited access to customers n obligation & trust UNAVOIDABLE CONSEQUENCES n rising prices to pass on information n bankruptcies when losers fail to respond efficiently & effectively n unemployment following adjustment to change there’s no such thing as society … only different people at different time in different places choosing different things n EDUCATION n AVERAGE is an ABSTRACTION …. VARIATION is REALITY … n from GENES to ORGANISMS to CULTURES … PROPERTIES of the whole EMERGE … n POPULATION FREQUENCIES CHANGE Blind generate &test - not design - aspiration endeavour & ingenuity to discover the best option available at the time - not bishops princes generals nor majorities - tyranny and oppression is not an ess – crowd trouble emeges !! NB. MARKET FORCES ! jpb

40 WHY JOINT STOCK COMPANIES ? SELF SUSTAINING GROWTH TORT TRADE & TECHNOLOGY OWNERS

40 WHY JOINT STOCK COMPANIES ? SELF SUSTAINING GROWTH TORT TRADE & TECHNOLOGY OWNERS HIGH PROFITS JSC SUPPLIERS HIGH PRICES SECURE CONTRACTS CUSTOMERS HIGH WAGES SECURE JOBS LOW PRICE HIGH QUALITY EMPLOYEES To resolve the conflicts & make the m/c work the Owners must decide because of – n THE NATURE OF PROFIT n THE SAFEGUARD OF COMPETITION n THE INDIVIDUALITY OF REALITY n THE MAGIC OF PROPERTY - INFORMATION - CONTROL - PURPOSE - IMMUNITY MAXIMUM PROFIT - if you don’t the Japanese will !! There are no customers no suppliers no employees & no share price in a profitless company! OWNERSHIP RISK - everyone else has a contract OWNERSHIP BEHAVIOUR - Is VITAL OWNERSHIP IDENTITY - is irrelevant It is not a zero sum game, profit is created, Additional wealth, it is spent or invested, either way all participants benefit. OWNERSHIP RESPONSIBILITY is to SEARCH for PROFITABLE INVESTMENT the only POWER OWNERS have is NOT to INVEST NB. BREAKOUT ! jpb

41 THE CONTROL MODEL ADAPTIVE SELF REGULATION AUTOMATIC RESPONSES WEALTH OUT unknowable outcomes BARGAIN

41 THE CONTROL MODEL ADAPTIVE SELF REGULATION AUTOMATIC RESPONSES WEALTH OUT unknowable outcomes BARGAIN PRICES - INFORMATION SENSOR COMPETING ALTERNATIVES - DIVERSITY COMPLEXITY CHANGE SET POINT SYSTEM CONFLICT ALGORITHM SCARCITY CUSTOMER VALUE JUDGEMENTS - CHOICES ACTUATOR RESOURCES IN 2 nd law costs BEST PERCEIVED OPTION AVAILABLE AT THE TIME OWNERSHIP RESPONSES - PERSONAL RISK / REWARD PROFILES SPECIALISATION SCALE SYNERGY SCIENCE IMITATION INVESTMENT INNOVATION n different people, different experiences, different places, different times … NB. HANDS OFF ! jpb

THE NATURE of PROFIT 42 INFORMATION DISPERSED & TACIT KNOWLEDGE MULTIPLE ROLE - n

THE NATURE of PROFIT 42 INFORMATION DISPERSED & TACIT KNOWLEDGE MULTIPLE ROLE - n MEASURES how much wealth is created maximum value at minimum cost n SIGNALS where to concentrate activities where scarce resources produce most satisfaction n REWARDS innovation investment & risk spur to change & experiment n FACILITATES the ebbs & flows of uncertainty copes with inevitable losers INDISPENSABLE in all COMPETITIVE DYNAMIC MARKET SYSTEMS If information & motivation are to be effective profit must be maximised it cannot be ‘just’ or ‘fair’ PROFIT is a SURPLUS resulting from WEALTH CREATION it cannot be an EXPROPRIATION from buyer to seller. PROFIT is not a part of zero sum games where STEALING is the only option. PROFIT in positive sum games becomes a MORAL imperative and explains why the Bishops after outlawing USURY in 1571 revised their decision and inlawed it only 50 years later in 1624 NB. UNFAIR & UNJUST ! jpb

43 THE SAFEGUARD of COMPETITION ALTERNATIVE OPTIONS ACCESS to CHOICE Not REGULATION but AUTOMATIC

43 THE SAFEGUARD of COMPETITION ALTERNATIVE OPTIONS ACCESS to CHOICE Not REGULATION but AUTOMATIC CHECKS & BALANCES n CONTROLS EXPLOITATION & CORRUPTION SUPPLIERS CUSTOMERS EMPLOYEES FINANCIERS must be happy to deliver must be happy to purchase must be happy to work must be happy to lend otherwise they choose the alternative n FEEDS PROGRESS MORE DIVERSITY & CHOICE MORE CONSIDERED DECISIONS MORE PROGRESSIVE LEARNING THE BETTER EMERGES OTHERWISE the ALTERNATIVE WINS COMPETITION between PRODUCERS gives CUSTOMERS and EVERYONE CHOICE PROGRESSES INTEREST GROUPS will always try to RIG COMPETITION for Their own advantage but the best antidote is ANOTHER COMPETING INTEREST GROUP NB. LIKE IT OR LUMP IT – VOTE WITH YOUR FEET ! jpb

44 THE INDIVIDUALITY of REALITY CONTINUOUS CHOICE CONTINUOUS EVALUATION n PURPOSE M HI AS

44 THE INDIVIDUALITY of REALITY CONTINUOUS CHOICE CONTINUOUS EVALUATION n PURPOSE M HI AS ER L AR OW CH ’S Y FULL POTENTIAL ESTEEM INDIVIDUALITY n RESPECT n INITIATIVE FRIENDSHIP SECURITY FOOD n CULTURE n INDEPENDENCE SEX SHELTER n MONEY EVERYONE has a DIFFERENT POSITION at DIFFERENT TIMES for DIFFERENT REASONS !! ITY UAL VID INDI the cause of all CONFLICT the source of all CREATIVITY MONEY gives some OPTIONS & INDEPENDENCE but doesn’t help with DECISION MAKING CULTURE gives some GUIDANCE but doesn’t help with PERSONAL DECISIONS INDIVIDUALITY & INDEPENDENCE are about PERSONAL CHOICES NB. MY HUMBLE CONTENTION ! jpb

45 THE MAGIC of PROPERTY ASPIRATIONS & INCENTIVES IMMUNITY from TREACHERY RESOURCES CONTROLLED by

45 THE MAGIC of PROPERTY ASPIRATIONS & INCENTIVES IMMUNITY from TREACHERY RESOURCES CONTROLLED by their OWNERS for BENEFIT or SALE tend to be & R PRESE VED ENHAN CED EFFICIENT use of SCARE RESOURCES REDUCING WASTE & DEPLETION and CREATING VALUE In excess of COSTS The NATURAL EVOLUTION of the extended phenotype BIOLOGY BEHAVIOUR TOOLS PROPERTY each is an extension of genetic inheritance each addition is painfully acquired through & T EFFOR ENT TM INVES PRIVATE PROPERTY Is not forced on people if greater benefits are perceived collective ownership will thrive OWNERSHIP BEHAVIOUR CREATES WEALTH OWNERSHIP IDENTITY IS IRRELEVANT … unfortunately all property becomes a target for parasites and predators and must be defended if it is to exist … NB. THE TRAGEDY OF THE COMMONS ! jpb

WEALTH CREATING ACTIVITIES 46 CO-OPERATIVE SYNERGIES EVERYDAY CHOICES GO LEFT or RIGHT? SATISFICING !!

WEALTH CREATING ACTIVITIES 46 CO-OPERATIVE SYNERGIES EVERYDAY CHOICES GO LEFT or RIGHT? SATISFICING !! SPECIALISATION - focus education & training to acquire better skills which can be offered for sale SCALE - more volume lower cost - drive down the learning curve SCIENCE - scientific problem solving ‘know how’ is massively & increasingly available to all SYNERGY - experiment to find the emergent 2 + 2 = 5 synergies they can’t be predicted they must be discovered IMITATION - copy successful practice there’s no better place to start INNOVATION - make a better mouse trap & the world will beat a track to your door INVESTMENT - sacrifice some of today’s pleasurable consumption & tomorrow will be better There is no secret economic activities are well understood but organisation is necessary as the co-operation of strangers is essential - here’s the rub - how do we organise the activities of countless SPECIALISING agents on an ever increasing SCALE with ever more disparate knowledge ? ? Co-operations EVOLVES in ROBUST institutions - NB. NO ONE SAID IT WAS EASY ? JSC jpb