Category Archives: Business

How economics can help us pick a job or an industry

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Generally speaking, it pays to be in industries where prices and demand are going up.

Economics 101 tells us that prices generally increase due to low supply and high demand, more suppliers enter the market attracted by high returns.  Eventually competitively reduces returns and prices will stabilise, acting as a disincentive to new suppliers.  Alternatively, or synchronously, demand may also drop away as people find substitute goods and services.

So rising prices and rising demand is the ideal scenario.  But what about an industry where you have either prices or demand going down?  Well, typically, the decrease in one needs to be less than the increase in the other.  I’ll give some examples.

Prices declining, demand increasing

Information Technology is a good example of extreme price decline, but massively increasing demand.  Computers have also been able to innovate and increase demand over many years.

Prices declining, demand flatting

Retail is an example of an industry where demand is flattening out and prices are going down.  For a long time demand was enough to compensate for the declining prices.  Also, by contrast to information technology, retail is – arguably – less able to truly innovate.  Fashion trends are innovation in retail clothing but the real ‘innovation’ in retail has so far been to replace bricks and mortar with online shopping, which has just exacerbated the downward pressure on prices.

Prices and demand declining

And when you have prices and demand going down, get out.  I’ll try to think of some industries that fit this and edit this post when I do.

The stable option (accounting and law)

Exceptions to the above are accounting and law, professions that are largely sector agnostic.  They will always exist so long as we trade with one another (accounting) and murder and assault are illegal (law).  So they’re pretty safe industries to work in but may exhibit ups and downs along with the broader business cycle.

 

Conclusions

I don’t claim to have the answers but I do like farming and food production.  Increasing demand and increasing prices over potentially a long time, with declining supply of the factors of production (namely land, fertiliser and water) make this an attractive area to me.  And if you don’t want to read the tea leaves and divine the future, just become an accountant or lawyer.

 

The future of Nokia should be microfinance

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Having been the dominant mobile phone handset maker for a long time, Nokia is now on a slippery slide down from the top.  In developing markets, Nokia is still doing well, but is increasingly challenged by low cost Chinese manufacturers.

I took the screenshot from the Nokia website showing the history of the company.  They have changed businesses in the past and I think it’s time for them to change businesses again.  The battle for high end mobile phones is over for now, with Apple and Google squarly in the lead and not looking like slipping any time soon.

So, if I were in charge at Nokia, I’d focus on the intersection of microfinance and mobile phones.  Leave Apple and Google to battle it out for the smartphone market for now, wait for the dust to settle.  Meanwhile, aggressively expand business and expertise in low and lower-middle income countries where microfinance and mobile payments and banking has huge potential

A history of Nokia (chart)

2012-beyond: Mobile microfinance

Anybody can be an entrepreneur, it just takes practice.

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POST SUMMARY
“Life can only be understood backward, but must be lived forwards.” – Soren Kierkegaard

  • School teaches us to understand and deal with knowns.
  • Much of life requires us to respond to the unknown.
  • Anything written with hindsight will tell a cleaner narrative of events.
  • A diary is a better medium for insight into the story of events as they occur.
  • Dealing with unknowns only improves with practice and repetition.
  • The real lessons for business or life success are in daily diaries, not autobiographies.

I got into a discussion on Twitter that subsequently led to some interesting comments about the benefits of hindsight and how strategy and success can look so deliberate once we’re on the successful end of things.

It got me thinking about the benefits of hindsight in telling a story, our education system and reporting of business success in the media.

 

ON HINDSIGHT

Hindsight is a great thing for story writing because the beginning and the end are known.  To repeat something that I tweeted in the discussion, “Most of school you’re taught to assess facts and write an answer to the known. Life and business requires adaptation to the unknown.“.  That is the whole point.  Writing about something after it has happened means the story is necessarily biased towards the known outcome.  In short, it makes it look like things were more known or more planned than they actually were.

 

ON SCHOOL AND EDUCATION

This got me thinking about school, and how school can better prepare people for uncertainty they’ll face in the real world.  You see, for most fields, knowledge of the knowns is all that is required.  I certainly wouldn’t want my doctor to try a new and unproven approach to surgery in place of a proven one.  However, particularly in business, or the attainment of most goals, what is more important is the ability to respond to external stimuli and react accordingly.  Not necessarily with one correct answer but with the best answer at the time, or perhaps many different answers.

So how to teach this in school?  I realised that we need to understand where similar principles already exist.  In my opinion, two of those areas are sport and music – particularly jazz or just jamming.  And what lessons can we learn from these two skills.  It’s just that, they are skills that are practiced.  If a mistake is made, you are penalised (a fat rejection in basketball or stuffing up your solo in music).  However, you know next time what to avoid and how to be better.

 

ON ENTREPRENEURSHIP AND THE MEDIA
Before I go on, let’s get one thing straight.  I don’t particularly like the word ‘entrepreneur’, and I like ‘entrepreneurship’ even less.  I always preferred ‘businessman’ because to me, a businessman sounds like he finishes what he starts, an entrepreneur just starts something up and feels that is an achievement.  Anyway, that’s beside the point.  Entrepreneur is usually a pretty hot keyword so I’ve used it – I don’t have an alternative to suggest either. 

Where were we.  Yes.  Entrepreneurship, startups, business men, business women, business teenagers.  We often read their stories with interest on Techcrunch, Mashable, TED, Business Week, Fast Company and gang.  However, as we discussed in the aforementioned Twitter converstation, their stories often make them seem like super-people when it comes to achievement.  But that is only because of the benefit of hindsight.  You see, anybody can be an entrepreneur, it just takes an idea, constant practice and some luck.

P.S. If you’re already a successful entrepreneur, or you’re planning to be one, do me a favour and write a daily diary of you work towards your goal.  It will make for more interesting reading when you’re finally featured on Mashable.