Basis of Competition II

I wrote about the basis of competition in schools. What about in business? Is it price? There are many prices associated with a specific business: the price of their shares, the price of their products, the price they pay their staff, and the price they pay their suppliers, and so on. What is the price that we should take reference from?

Or are those a distraction like the way grades are distraction from learning? Because what is a business for? To make a profit? Hardly. Profits are incentives; and incentives tend not to be an end in themselves but a means to an end for a system. So what is the end that we want to achieve as a society to allow businesses to continue perpetuating? Probably to continue producing and delivering goods and services that people need; that makes the society ‘better’, and raise standards of living.

So why are businesses talking so much about the prices? Are these prices linked to the end goals of the businesses? What are the end goals they have in mind?

Serving the public

Every single year, a proportion of the graduating cohort of Singaporeans join public service. It’s no wonder because they mostly hire only Singaporeans. It was strange then when as a public servant, I was helping the Singapore companies find Singaporeans to fill their headcounts and meet their talent requirements. It was difficult; the quality of labour available to be hired off the market wasn’t really there.

And then I thought about the people within the service and whether they’d be able to fit the requirements of these companies and be satisfied with the remuneration. Sometimes so, and I then wonder why we are still in public service. Often it was about serving the public, working for the higher goal and mission. It could also be just some kind of Messiah complex.

Either way, the great resignation tsunami is hitting our shores and there is no turning back. The burn-out, being always on and on the hook, responsible for some public complaints, angst against the establishment: these are all wearing our people out. Perhaps then, it’s time for a change.

Scheduling rest

As we step deeper into the future of work, one with lots of knowledge-working, sitting in front of a computer, with a pandemic out there and remote work, there’s going to be less boundaries between work and other segments of life. The ‘always on’ mode will be tightening around us and eventually suffocating us.

The ability to truly disconnect and disengage from work is so important that our bodies would otherwise rebel by shutting us down, both physically and mentally. And that’s why we not only need to think about the amount of time we need to finish a piece of work, but also the amount of rest we will need in-between the work, and after that.

We should be scheduling the rest into our calendars, and that should not be something negotiable. Even if we think it is. Our culture still needs quite a bit of work to get there.

Service standards

Market competition drives improvements and with service, there’s always room for some kind of improvement. And the ability to charge people for such improvements is perhaps the main challenge for these firms. Personally, I think the ability to serve well in F&B to generate loyal, recurrent customers who are always in the area is quite valuable. Nevermind whether you’re operating a chain store or not.

The other day, I was at 79 Robinson Road’s Fun Toast outlet. I ordered a set with a drink and a sandwich to go. The coffee was ready in about 2-3 minutes upon ordering and I was holding on to it while waiting for my sandwich which took another 7 minutes. By the time I arrived in my office to drink my coffee with my sandwich, the coffee was pretty lukewarm.

If they had been thoughtful – and such takeaway orders should be extremely common – they’d wait for the sandwich to be ready before preparing the drink. Especially since they’d know better than anyone else how long it takes to make the sandwich. But they don’t want to take ownership of this problem of coffee turning cool, nor the risk of forgetting your drink order when the food is ready. The result is poor service. Or at least unthoughtful service.

You can be sure I won’t be going back there anytime soon though my office is nearby. Would I pay just a little more for the thoughtfulness? Probably for the drink, yes.

Gifting Economy

It’s the Christmas season and a period of lots of shopping, mostly for others rather than oneself. Gifting is a tricky affair and most economists think it’s a bad idea to give someone something in particular. In fact, that might be the reason for Boxing Day; where you box up the stuff you don’t want from your Christmas gifts and give them to the less privileged. Yes, it is not another day to shop, and certainly nothing to do with fighting in the boxing ring.

It is much better for you to offer a cash gift and let people do the shopping themselves for what they actually need. Yet this can feel hyper-rational so the modern economy settles for something in-between by giving shopping vouchers instead. It is cash already spent on something but allows you to go through the process of choosing what you want on yourself.

And then there’s a whole economy and market out there which simply caters to selling products which are specifically designed to be gifts. These typically feature fancier packaging and more frills designed to pass the message ‘I’m being extravagant with you’. They are also environmentally unfriendly and produces much more waste than we need to.

Peacock feathers may be necessary for the peacock to attract a mate; but being environmentally wasteful to impress our fellow earth-dwellers probably is not wise systematically. Let us not be fooled by the ways of our culture.

Talent hoarding

Companies have long recognised that hiring talented people off the job market is an important aspect in market competition since the labour market became much more open and knowledge workers became much more mobile. In the past when most employment were seen as lifelong, companies really only had to focus on competing on getting their products and services out.

Labour was previously seen as largely rather ‘fungible’; it was probably more important to get cheap workers than good workers because in the traditional labour economics, quality of labour wasn’t so much a quantifiable parameter.

No longer, but there are two ways to think about this competition. We can hire talents to make better products, perform better services for customers; and at the same time, it takes these talents off the market for our competitors and thereby strengthening our position. For those with monopoly power, the second objective might be more important than the first.

This is because the monopolies tend to have the power to pay for these talents through the market power they weld on both ends: both the labour market as well as the market for their customers. They are big enough to be able to squeeze the more commoditised labour while paying big bucks for their ‘talents’, and also pass on some of the costs to customers.

There is a price to pay however, for talents who are in these hoarding entities; (1) they may end up being unfulfilled or unsatisfied; (2) they tend to end up being disempowered rather than empowered in these environments; (3) they are conditioned to take less risks.

(2) and (3) contributes to (1) but the dissatisfaction can come from the bureaucracy and continued need to keep up with appearances rather than practice genuine innovation. (2) happens partly because monopolies are great businesses or entities that can survive poor management thanks to their power. Finally, (3) is a result of these environment that tends towards status quo and entrenched power structures.

And sometimes, just sometimes, the biggest monopoly out there is the state.

What do you want to care about?

What do you care about is not always something your body, personality, character imposes on you. You can make a choice whether to care or not; and a lot of it depends on the goals and purpose you have selected in your life. For the longest time in human history, what people care about is true basic survival, and also survival of the tribe, the family.

When we talk about survival today, it is actually a different level, there’s more than just physical safety, and having a filled stomach; it is often also about psychological safety, dignity, and some degree of a filled ego. Likewise, we start to subconsciously (or consciously) care about a lot more things than we used to.

With so much to care about, there’s that tension to between being able to not care about non-core objectives, to be willing to be criticised for being single-minded – against trying to juggle and balance just about everything and potentially achieving none of your core objectives.

Dressing appropriately

What are clothes for? To protect us from elements, to cover us, to make us look good, give us a certain sense of identity? Probably all of them? So what does appropriate mean here? From a perspective on weather and climate, or activity, or culture, or identity?

Dress codes are cultural innovations and we need to see how we are interacting with the culture whenever we dress in certain ways. The awareness of this allows us to gain some agency to decide, what we are really dressing for and which goal we want to pursue in our choice.

Of course, I’m really not really talking about dressing but the many other choices in life we make so subconsciously or without conscious thought that we take them for granted. We forget that we are playing by cultural rules, we even forget that we actually have a choice in terms of what purpose we can choose to serve.

Metric and outcomes

A metric is a good way to hold one accountable for certain outcome. And if you want to set some common indicators of performance that people can agree on, then you can get on with focusing on achieving some degree of the outcome.

The challenge again is Goodhart’s Law where setting a particular measure as a target for certain outcomes make the measure become a poor one. This tends to be rather pronounced in economics, whether you’re thinking about GDP, interest rates (specific ones like LIBOR), even CPI for inflation and so on.

When businesses are measured on their success by profit metric, we forget that they are there to serve the community, to provide goods and services people need and demand for, to improve people’s lives and give them more choices. Those are the outcomes we want. The ability to generate profits merely allows them to continue generating good outcomes.

Likewise, we want to make money to be able to support our families, our (reasonable) lifestyles and maybe free up more time for leisure. But when money becomes tied to your identity, like the way profits have been tied to the identity of businesses, then your ability to provide for your family cease being a good measure of what you’re trying to achieve in life.

We need to focus on the outcomes and ditch the metric when the time for that comes.