Tag Archives: demand

Your Demand is my Command

The use of power to achieve results typically requires arrogance and lack of empathy.  Almost exclusively the practice is focused on self-aggrandizement, i.e., the action or process of promoting oneself as being powerful or important.

This method can get results but often it leaves a field of dead bodies.  Ultimately it is not a sustainable way to operate.  For one thing, the bodies do run out eventually.

Motivation

Demanding others adhere to your wishes works when the perceived consequences are motivational.  Fear of bad outcomes (e.g., violence, lost job, smeared reputation) do motivate us, but it is limited.

Keeping your instructions limited to a small audience, told not to share, is another typical motivating technique used by the autocratic.

This works because those in the know want to stay that way and so are motivated to follow direction.  Sharing with others can lead to a power challenge and the leader does not want that.

Tactical

The approach, where a super leader dictates who does what and when with minimal (if any) collaboration is very tactical.  That is, constituting actions carefully planned to gain a specific advantage for the leader.

Not surprisingly the super leader approach is appreciated by many organizations, both social and commercial because it does lead to results.  Things get done.

The lack of sustainability and the fact that outcomes are not of high quality is often overlooked.   The overriding fact is “shit got done”.

Equity Market Supply and Demand

At a recent Reuters Investment management conference, presenters suggested the growth in Corporate earnings during the past year is in the double digits.

Credit Suisse reported an annual increase in global wealth of $17 trillion U.S. dollars, rising to an overall estimated total of $280 trillion.  This growth linked to increases in Corporate earnings.

This capital accumulation needs to be employed whether as venture capital, equity  or other investments.  That is, within the constraints of risk, as your capital increases you have a desire to employ it to get more capital.

Availability of Equity

On the flip side of growing capital are equity investments.  Although not a unique vehicle, investing directly in a companies stock via direct purchase, mutual funds or exchange traded funds (ETF), is a popular way to continue to grow your wealth.

At the aforementioned Reuters conference there was also some solid data presented indicating the supply of new equities was currently experiencing a net growth of zero.

Market Value Rises

And so, we arrive at a simple but logical explanation for the current explosion in the value of equity markets – world wide.   It is probable, one of the factors driving price gains is the ready availability of capital versus the flat supply of available equities to invest in.

Simply put demand exceeds supply.

The Predicted Market Correction

For months now many analysts have noted the precipitous heoghts equity markets have risen to, predicting a correction or a crash.  Historically the economic fundamentals do not support this so it is puzzling for some.

I believe the current state of prices is to some extent just a reflection of supply and demand and won’t change until either of those factors are altered, i.e., more equities available for sale or less capital accrued.  Both things are linked to overall economic activities.

Supply and Demand

Continuing to explore the theme I started yesterday,  about why we pay what we do for things, today we’ll explore the concept of supply and demand and how it affects what things are worth.

My example of a pub lunch that cost $4.00 in 1977 and $15.00 raised the question of why I would be willing to pay so much more some 38 years later, for basically the same thing.  Part of the answer is I could afford it easily.

Another part of the price equation is demand. For the pub owner the more people that want to buy the lunch the more likely he (or she) is to raise the price.  It’s pretty intuitive that demand is linked to price however it really is a complex relationship and demand is driven by far more than just price.

 

Lets Consider Desire (Demand) and Availability (Supply)

In fact if the purchaser has more  funds (e.g., through inflation) they can afford to pay more.  In this case it is possible desire for the product is driving the purchase decision as opposed to cost.  (Think, ” I want it”).   Additionally, as we know, affordability can be enhanced by borrowing, in these cases the purchase ultimately costs more (the interest on the loan) but we get it now and satisfy our desire.  Clearly cost was not the prime factor in the decision.

Desire is also linked to availability.  “It’s the last one I better snap it up regardless of price”  or “There are ton’s of those on the market, no hurry to buy, let’s wait the price will probably go down”

A key to successful product marketing is to raise desire.  That is help you understand the reasons you need a thing – a low price can be one of these reasons.  In conjunction with desire it helps to give impression of urgency (hurry before they are gone).

The underpinning of the purchase though is definitely affordability.  This is why things can cost more, because not only did the price go up but incomes rose as well so we can afford it (inflation affects both cost and revenue).

How about branding?

A product’s brand is just a label for what people think about the product.  That is things like reliability, value, quality.   Consider two automobiles – a Ford and a BMW.  Both are just molded tin on wheels that take you places – basically perform the same function but the brands have very different impressions and these contribute to demand (also the availability of the product from the automakers) and thus drives the price.

What’s Next?

Tomorrow’s  post will continue on this theme focusing on the impacts of deflation and recessions on the pricing, supply and demand.