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Hi my dear friends here is lesson of Joint stock company

Hi my dear friends here is lesson of Joint stock company

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    Jsc Jsc Document Transcript

    • 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 ?? 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?? THERE’S NO USER MANUAL ! JSC
    • SCOPE
        • from LEARNING & INNOVATION to WEALTH with the JSC
      • AGE OLD PROBLEMS
      BAFFLING DIVERSITY ! 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 from to WEALTH CREATION LEARNING & INNOVATION JSC
    • 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
      • ? ? ? ?
      • or
      • TWO OPPOSING WORLD VIEWS
      • FOCUS on the -
      • 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 !!
      MARKETS ? PLANNED DESIGN ? BOTTOM UP EVOLUTION OR TOP DOWN DESIGN ! JSC
    • THEME
        • ROBUST INSTITUTIONS EVOLVE
      • TOLERANT of IGNORANCE
      • IMMUNE from TREACHERY
      KNOWLEDGE IGNORANCE TREACHERY CO-OPERATION ? NAÏVE TRUST AUTOMATIC RESPONSE TO PARASITES & PREDATORS ! LEGAL CONTRACTS UTOPIAN BLISS ‘ 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 How do we organise co-operation?
    • 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 MacGregor, Akoff, Senge COMPLEX SYSTEMS Checkland, Ormerod, Holland EVOLUTIONARY PROCESSES Dawkins, Axelrod, Dennett HISTORICAL EVIDENCE Braudel, McNeill, Hicks ECONOMIC ANALYSIS Metcalfe, Wolf, Williamson CONTROL THEORY 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, McGregor, Romer COMMON LAW Posner, De Soto, Ridley CULTURE Nozick, Novak, Diamond A DWARF ON THE SHOULDERS OF GIANTS !
    • STRUCTURE
        • MODELS PROBLEMS REALITIES & UNDERSTANDING
      • TOPICS
      WEALTH MACHINE
      • HOW IT WORKS - THE CASH FLOW MODEL
        • BUSINESS ACCOUNTS
        • BUSINESS STRATEGY
        • MARKETING
        • TECHNOLOGY
      ILLUMINATING REALITY !
      • AGE OLD PROBLEMS -
        • COMPLEXITY
        • CHANGE
        • CONFLICT
        • SCARCITY
      • RELEVANT SOURCES -
        • COMPLEX SYSTEMS
        • EVOLUTIONARY PROCESSES
        • HISTORICAL EVIDENCE
        • ECONOMIC REALITIES
      • WHY IT WORKS - THE CONTROL MODEL
        • NATURE of PROFIT
        • SAFEGUARD of COMPETITION
        • INDIVIDUALITY of REALITY
        • MAGIC of PROPERTY
      • ECONOMIC ANALYSIS -
        • SATISFICING
        • SUPPLY & DEMAND
        • COMPARATIVE ADVANTAGE
        • TOTAL FACTOR PRODUCTIVITY
        • ENDOGENOUS GROWTH
      JSC
    • THE JOINT STOCK COMPANY
        • CO-OPERATIVE VENTURES
      • PARTICIPATION & CONTRIBUTION
      CORPORATE WEALTH JSC ! ENTREPRENEURS with for CUSTOMERS ADDING VALUE INVESTORS with INVESTMENT ENCOURAGED INNOVATION REWARDED
      • Limited liability
      • Stakes can be cashed
      • Anyone can join
      • Finance available
      DRIVEN by PROFIT and CONTRACTS for SUPPLIERS for EMPLOYEES PROFIT FROM PLEASING CUSTOMERS ! OWNED by SHAREHOLDERS CAPITAL IDEAS PROFIT !
    • THE WEALTH MACHINE
        • CIRCULATING RESOURCES picking up PROFIT each cycle
      • DYNAMIC EBB & FLOW of OPPORTUNITIES
      THE MAGIC ROUNDABOUT ! SOURCES of FINANCE OWNERS LOANS DEBTORS CASH FACTORY STOCKS PROFIT COSTS FIXED ASSETS MATERIALS CASH POOL CREDITORS VARIABLE FIXED DIRECT INDIRECT DISTRIBUTION SALE ! TAX DIVIDENDS RETAINED PROFITS DEPRECIATION FINANCIAL ITEMS
    • THE BUSINESS ACCOUNTS
        • IDENTIFYING FLOWS
      • MEASURE or MIRAGE?
      CAVEAT EMPTOR ! RESOURCES IN WEALTH OUT CASH SALES ASSETS SUPPLIERS EMPLOYEES CUSTOMERS
      • Dynamic fluctuating ebb & flow of resources
      • WHY MEASURE?
      • EFFICIENCY & WEALTH PAST PERFORMANCE
      • SOLVENCY & HEALTH CURRENT POSITION
      • LIQUIDITY & RISK FUTURE PROSPECTS
      • THREE REPORTS
      • PROFIT & LOSS ACCOUNT HOW MUCH PROFIT not CASH?
      • BALANCE SHEET SPENT on CAPITAL or REVENUE?
      • CASH FLOW STATEMENT WHERE IS IT GOING?
      • DIFFICULTIES
      • Income fluctuates TIMING is not consistent
      • Assets must be VALUED and there are no market prices
      • Costs must be ALLOCATED and there are no invoices
      • Uncertain future ESTIMATES are never ‘correct’
      • PRINCIPLES
      • CONSISTENCY for comparison
      • PRUDENCE for safety
      • ACCRUAL for timing
      • GOING CONCERN for clarity
      • but the ACCOUNTS tell only HALF THE STORY with focus on -
      • COSTS but not QUALITY / SERVICE / SKILLS
      • YESTERDAY but not TOMORROW
      • COSTS of DOING but not COST of ALTERNATIVES
      • RULES but not LEARNING / INNOVATION
    • THE PROFIT & LOSS ACCOUNT
        • PROFIT or CASH?
      • TIMING ISSUES
      SALE ! INCOME when EARNED when the deal is struck not when the cash flow in EXPENDITURE 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 BUY NOW PAY LATER ! INCOME COMING IN EXPENDITURE GOING OUT BALANCING across the SALE ! CASH SALES & DEBTORS STOCKS PROFIT COSTS MATERIALS CREDITORS VARIABLE FIXED DIRECT INDIRECT DISTRIBUTION TAX DIVIDENDS RETAINED PROFITS DEPRECIATION FINANCIAL ITEMS
    • THE BALANCE SHEET
        • CAPITAL or REVENUE?
      • VALUATION ISSUES
      WHO PAYS HOW MUCH WHEN ? 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 OWNERS EQUITY DEBT DEBTORS & prepayments STOCKS PROFIT FIXED ASSETS - DEPRECIATION CASH CREDITORS & accruals SALE ! TAX DIVIDENDS RETAINED PROFITS FINANCIAL ITEMS GOODWILL OWN OWE DEFERRED INCOME PROVISIONS BALANCING across OWNERSHIP !
    • THE CASH FLOW STATEMENT
        • STREAMS POOLS & LEAKS
      • REAL ISSUES
      CASH YOU CAN’T EAT PROMISES ! SOURCES of FINANCE OWNERS LOANS STOCKS PROFIT COSTS FIXED ASSETS MATERIALS CREDITORS VARIABLE FIXED DIRECT INDIRECT DISTRIBUTION SALE ! TAX DIVIDENDS FINANCIAL ITEMS CASH SALES & DEBTORS BALANCING across the CASH POOL ! DRIPPING IN ! LEAKING OUT ! 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 !!
    • BUSINESS STRATEGY
        • DISCOVERING MARGIN & SPEED
      • SHAPING CURVES
      REVENUE COSTS PROFIT VOLUME ££’ss MARGIN SPEED
      • what BUSINESS STRATEGY delivers the MAXIMUM PROFIT ?
      • where does MC = MR ?
      • the curves are not ‘KNOWN’ or ‘FIXED’ they depend on :-
      • PRICING POLICY - INNOVATION, COMPETITION, QUALITY, SERVICE, PRODUCT DIFFERENTIATION
      • COST STRUCTURE - SPECIALISATION, SCALE, SCIENCE, INVESTMENT & QUALITY of INPUTS
      • SALES VOLUME - ADVERTISING, PROMOTION, DISTRIBUTION
      • COMPLEX, DYNAMIC & INTERACTIVE SYSTEMS
      • CONTINUALLY EXPERIMENT to DISCOVER PROFIT -
      • HIGHER PRICES = LOWER VOLUME ??
      • LOWER COSTS = LOWER QUALITY = LOWER PRICES ??
      • HIGHER VOLUME = LOWER COSTS = LOWER PRICES ??
      JUGGLING WITH COMPLEXITY ! PRICE
    • PRICES
        • SPECIALISATION & MARKET POSITION
      • NICHE EXPERTISE
      WHAT DO WE DO BETTER THAN OUR COMPETITORS ? CONSIDER or but ....... but ...... RISK of MARKETING MYOPIA? RISK to EXCELLENCE? YESTERDAYS PRODUCT? JACK of all TRADES MASTER of NONE? How to SECURE & ADVANTAGE CONSIDER - LEADERSHIP  SUBSTITUTES ?  VOLUME  IMITATION ? PROFIT  CUSTOMER LOYALTY ?  SUPPLIERS ?  SUPPORT SERVICES ?  DISTRIBUTION ?  REGULATION ?  ACQUISITION of SKILLS FOCUSED EXPERTISE SKILLS FULLY UTILISED DIVISION of LABOUR PRACTISE MAKES PERFECT ! MARKET NICHE? BROAD MARKET? HIGHER PRICES ? SPECIALISE !! INNOVATE !!
    • COSTS
        • SPECIALISATION & COST BEHAVIOUR
      • COMPLEXITY COSTS
      KEEP IT SIMPLE STUPID ! ‘ Hawthorn’ effect bureaucracy relentless increase & restructuring ££’s % waste ££’s ££’s ££’s ££’s ££’s PARADOX INDIRECTS COMPLEXITY VARIETY attention - effort - focus time simple continuous LEARNING CURVE complex intermittent PARETO frequency cumulative volume vital few COST REDUCTION - SIMPLICITY - SCIENCE - INNOVATION - INVESTMENT - DESIGN - AUTOMATION - SIZE REDUCTION - SEPARATION - RESTRUCTURING - RIGHT FIRST TIME etc etc time number of varieties
    • VOLUME
        • SPECIALISATION & SCALE ECONOMIES
      • GLOBAL MARKETS
      • COMPETITIVE ADVANTAGE from SPECIALISED NICHE and SCALE
      • LEARNING EFFECTS of SKILL ACQUISITION
      • LEARNING EFFECTS of SKILL UTILISATION
      • SPREAD of FIXED COSTS over more units
      • PURCHASING POWER for MATERIALS, SERVICES & FINANCE
      • LOWER CAPACITY COSTS COSTS = AREA
      • OUTPUT = VOLUME
      • AFFORDABLE LUMPS of INVESTMENT & RISK
      • MORE OPPORTUNITIES for
      • in house facilities vertical integration long production runs
      • automation/mechanisation process flow skills training
      THE BIGGER THE BETTER ! volume local / national / international / global development maturity decline growth star cow problem dog Technology critical - innovate? find the niche? market research? Capacity critical - invest? advertise? promote? Costs critical - milk? relaunch? drive down the learning curve? Profit critical - divest? acquisition?
    • MARKETING TASKS
        • CUSTOMER VALUE & MARKET RESEARCH
      • CHOICES
      CUSTOMER VALUE DECISION COMPETITION? PRICE? QUALITY? SERVICE? SPECIALISATION COSTS VOLUME
      • INNOVATION
      • PERFORMANCE
      • PRESENTATION
      • PACKAGING
      • CONSISTENCY
      • CHOICE
      • ADVERTISING
      • RESPONSIVENESS
      • COURTESY
      • AVAILABILITY
      • RELIABILITY
      • EFFICIENCY of DISTRIBUTION CHANNELS
      THE CUSTOMER IS KING ! COMPETITORS are PACE SETTERS NOT WINNERS!
      • MARKET RESEARCH -
      • INFORMATION to reduce risk (about yesterday?)
      • REAL BEHAVIOUR (not saying but doing)
      • JUDGEMENT CRITERIA (technical specification?)
      • MATCHING customer & product
      • TESTING (not subterfuge and intrigue)
      • BEWARE of ‘me toos’ (competitors do market research)
      • NB the best info comes from your existing customers !
      • OR real products at real prices against real competition in real markets !!??
    • QUALITY
        • BRAND POSITION & ADVERTISING
      • PRODUCT DIFFERENTIATION
      • ECONOMY
      • PREMIUM
      • MARKET NORM
      QUALITY PRICE (NOT COST) VALUE NEVER BEST CHANCE MORE VOLUME BUT TOTAL REVENUE ? ALWAYS RISKY
      • ADVERTISING for -
      • VOLUME - persuade to try
      • MARKET SHARE - technical innovation - better than competitors
      • MARKET GROWTH - a bundle of new promises - better than prior art
      • ACTIONS = CHECK CUSTOMERS - IMPROVE QUALITY
      • PUSH PRICES - CHECK COMPETITION
      VALUE FOR MONEY ! STANDARD QUALITY AT A DISCOUNT BUT IS IT JUST A COMMODITY ? GOOD QUALITY AT A PREMIUM BUT WILL THEY PAY THE PRICE ? volume advertising spend ££ saturation voice unheard in the market place effective spend
    • COMPETITIVE ADVANTAGE
        • BRAND LEADERSHIP & ALTERNATIVES
      • CHOICES for CUSTOMERS
      FIRST PAST THE POST !
      • DYNAMIC COMPETITIVE MARKETS
        • CONTINUOUS improvement needed to progress
        • NEW OPPORTUNITIES are always opening up
      • performance is RELATIVE & CHANGING
      • A CONTROL SYSTEM !
      TESTS MARKETS WINNERS INVESTMENT RESPONSE CUSTOMER DECISIONS PRICE QUALITY SERVICE INFO COMPETITORS SET POINT Quality Service Price index we’re ahead ! oh dear ! steady improvement ?! them us
    • SERVICE
        • BRAND LOYALTY & REPEAT PURCHASES
      • EXISTING CUSTOMERS are VALUABLE ASSETS
      • ENCOURAGING LOYALTY
      • COURTESY COMMUNICATION
            • UNDERSTANDING
            • HELP with a SMILE
      • AVAILABILITY FAST
              • ON TIME
        • WHEN WANTED
      • RELIABILITY PREDICTABLE
            • FLEXIBLE
      • EFFICIENCY of DISTRIBUTION CHANNELS
      • QUALITY = FUNCTIONAL BOND
      • SERVICE = SOCIAL BOND
      • LOYAL CUSTOMERS
          • FREE ADVERTISING
          • NO GO AREA for COMPETITORS
          • SPEND MORE
          • LOW RISK
      • THE LOYALTY DISCOUNT
      RESPOND ! diminishing returns they don’t like the product ! small discounts big incentives 5% 4% 3% 2% 1% 0 loyal customers
    • TECHNOLOGY
        • APPLICATION of SCIENCE
      • TECHNOLOGICAL & ORGANISATIONAL ‘ KNOW HOW ’
      • SCIENTIFIC METHOD
        • OBSERVATION
        • MATHEMATICAL THEORY
        • TESTABLE HYPOTHESES
        • EXPERIMENTAL VALIDATION
        • 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’
      MORE & MORE FROM LESS & LESS ! JSC
      • GROWTH OPPORTUNITIES –
      • SCALE –
      • SPECIALISATION –
        • MASSIVE REVOLUTION IN MICRO ELECTRONICS
        • SYNERGY of BRAINS & MICRO CHIPS
        • SPEED & DYNAMICS
        • BARRIERS DISAPPEAR
      • ‘ KNOW HOW’ - LEARNING and INNOVATING in the
        • PRODUCTS R & D
        • PRODUCTION FACTORIES
        • PEOPLE HUMAN CAPITAL
      TECHNOLOGICAL INNOVATION ! GLOBALISATION !
    • PRODUCTS
        • R&D & INNOVATION
      • ‘ KNOW HOW’ = LEARNING & INNOVATING
      • TECHNOLOGY is ‘KNOW HOW’ and is exploited throughout the process from INVENTION to APPLICATION -
        • INVENTION
        • MARKET RESEARCH
        • DEVELOPMENT
        • TEST MARKET
        • ADVERTISING
        • PRODUCTION
        • DISTRIBUTION
        • SALES
      A BETTER MOUSE TRAP ! INNOVATION FUNNEL SELECT FEW REACH the MARKET MANY MANY IDEAS BUZZ AROUND PROJECTS COMPETE for SCARCE RESOURCES & MOST FAIL from RESEARCH thru DEVELOPMENT to MARKET
    • PRODUCTION
        • FACTORIES & CONTINUOUS FLOW for SALE
      • ‘ KNOW HOW’ = DESIGN & OPERATING METHOD
      RESPONSIVENESS ! A COMPLEX INTERACTIVE LOGISTICAL SYSTEM PROCUREMENT OPERATIONS DISTRIBUTION SALE! STORE STORE STORE PRE-PROCESS MACHINES SUB ASSEMBLY ASSEMBLY/PACKING CUSTOMERS SUPPLIERS INFORMATION SERVICES ENERGY LABOUR FIXED ASSETS MATERIALS INPUTS & COSTS
      • CONVERSION PROCESSES
      • ADDING VALUE for CUSTOMERS
      • MAXIMISING SALES REVENUE
      • ORGANISING COMPLEXITY
      • SIMPLIFY SEPARATE DOWNSIZE
      • REDESIGN AUTOMATE
      • MANAGE CULTURE CHARISMA
      • CRISIS HYPE
      • SELF CONTROL GOALS INFORMATION
      • DECISIONS MOTIVATE
      CONTINUOUS IMPROVEMENT !!
    • PEOPLE
        • HUMAN CAPITAL & PATTERNS in the BRAIN
      • ‘ KNOW HOW’ = CREATIVE LEARNING
      • TWIN LOOPS - in the BRAIN - in REALITY
      • BEST OPTION from PAST EXPERIENCE LEARNING
      • BETTER OPTION from FUTURE EXPERIMENT INNOVATION
      • INVESTING in PEOPLE
        • SPECIALISED SKILLS ACCOMPLISHMENTS & APTITUDES
        • EDUCATION EDUCATION EDUCATION
        • EXPERIENCE been there seen it done it bought the T-shirt
        • SELF CONFIDENCE for experiments & failures
        • FLEXIBILITY
        • MOBILITY
        • RISK THRESHOLD
      • HEALTH
      • STRENGTH
      • ENERGY
      PERSONAL PORTFOLIOS OF SPECIALIZED SKILLS ! BETTER MODEL BEST OPTION AVAILABLE AT THE TIME INNOVATIVE UNDERSTANDING EVIDENCE OF OUTCOMES CREATIVE INNOVATIVE EXPERIMENT LEARNING PROBLEM
        • BRAINS make MODELS
        • MODELS are tested in REALITY
        • DOCKING of PROBLEMS & SOLUTIONS
    • 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 :-
      • INFINITE REGRESSION to the ULTIMATE CAUSE of CAUSE
      • INNOVATION is about HITHERTO UNCONNECTED IDEAS
      • INACCURACY of MEASUREMENT LEADS to UNKNOWN EFFECTS
      • INTERACTION means CAUSES can’t be ISOLATED
      • DECISIONS themselves CHANGE the EFFECT
      • FEEDBACK results in EFFECTS becoming CAUSES
      • EMERGENT PROPERTIES of SYSTEMS don’t have CAUSES
      • COMPLEXITY EXPLODES the necessary computer would be
      • the size of the universe itself !
      • MORE MEASUREMENT & INSTRUCTIONS
      • = HIGHER COST & LOWER VALUE!
      • the REALITY of MANAGEMENT is HEURISTIC :-
      • BUILD on past success
      • CHOOSE the best option at the time
      • DO DEALS for mutual advantage
      • EXPERIMENT to discover improvements
      • TIT FOR TAT to protect investment
      • LEARN from experience
      PATTERNS EMERGE IT IS NOT RANDOM !! EFFECTS ARE THE CAUSE ! THE PRODUCTIVITY PARADOX
    • COMPLEX SYSTEMS
        • NON LINEARITY & ITERATION
      • 'KNOW HOW’ EMERGES
      • ORDER & FEEDBACK
      SERENDIPITY ! EMERGENT PATTERN unexpected FEEDBACK FEEDBACK UNINTENDED CONSEQUENCES UNEXPECTED RESPONSES LOCAL ACTIVITY simple rules of behaviour CO-OPERATION EMERGES from LOCAL ACTIVITY in the JSC !
      • 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
            • CREATIVE DIVERSITY not STANDARDISATION
            • UNOCCUPIED NICHES not STRUGGLE
            • ACQUIRED IMMUNITY not TREACHERY
            • CO-OPERATION not EXPLOITATION
            • CHOICE not COMPETITION
    • CHANGE
        • FLEXIBILITY & WHO RESPONDS?
      • the PROBLEM of STRUCTURE - - -
      • ENTREPRENEURS or BUREAUCRATS?
      ENTANGLED IN RED TAPE !
      • QUALITY & PROFIT are NOT ALTERNATIVES.
      • PROFIT ONLY comes from SATISFIED CUSTOMERS.
      • BUREAUCRATIC REGULATION :-
      • inhibits INNOVATION as change & flexibility are reduced
      • drives CAPITAL & investment overseas or underground
      • diverts resources from CUSTOMERS to the ‘rules’
      • incurs COSTS of quangos, red tape & small print
      • provides CARTELS ‘legal’ protection from competition
      • replaces CAVEAT EMPTOR with a false sense of security
      • separates RESPONSIBILITY from control
      • confronts the innocent instead of THE GUILTY
      • presents opportunities for BRIBERY, CORRUPTION & COVER UP
      • encourages INTERVENTIONIST instincts & delusions of control & hinders CO-OPERATION & local KNOWLEDGE
      • REGULATION is no substitute for entrepreneurial action & risk as suppliers have much more to loose from antagonised customers than from malleable inspectors
      • ENTREPRENEURS DISCOVER a BETTER WAY !
      SALE !! CUSTOMERS THE WHEEL FELL OFF
    • EVOLUTIONARY PROCESSES
        • CONTINUOUS COPY VARY SELECT
      • EVOLUTIONARY STABLE STRATEGIES EMERGE
      • MAXIMUM VALUE MINIMUM RESOURCES
      WASTE NOT WANT NOT ! SURVIVAL EFFICIENCY MUTATION RATE CHAOS STAGNATION the EDGE of CHAOS = CREATION = the EMERGENCE of ORDER ! EXTINCTION EXTINCTION 1 - SELF REPLICATION = dna inexorable repetition 2 - RANDOM MUTATIONS = opportunities to progress 3 - DEVELOPMENT = influences in the environment 4 - NATURAL SELECTION = 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
    • CONFLICT
        • CUSTOMER WISHES & WHO CHOOSES?
      • the PROBLEM of POLITICS - - -
      • CO-OPERATION or COERCION?
      IT’S THE ECONOMY STUPID !
      • 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
      • INEFFICIENT
        • market information & control are absent
      • INEFFECTIVE
        • KNOWLEDGE for decisions is incomplete
            • technical detail
            • innovative alternatives
            • Joe’s wishes
            • unintended consequences
      • IMMORAL
        • majorities DICTATE their perspective to minorities
        • interest groups are BRIBED in return for support
        • bequests from tax leads to CORRUPTION
        • VULNERABILITY from dependency on others
        • ALIENATION from remote decisions
        • DEMORALISATION from unfulfilled expectations
        • HELPLESSNESS as one ‘dictator’ succeeds another
        • 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
    • HISTORICAL EVIDENCE
        • 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 -
      • REALITY from the PAST
      • AWAY from the EMOTIONAL PREJUDICE of the moment
      • But LESSONS -
      • IDEAS have invariably been proved WRONG
      • IDEAS have invariably been IMPOSED upon poor joe
      • 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
      • breaking the grip of established AUTHORITY
      • opening up DIVERSITY and choice
      • encouraging CO-OPERATIVE INSTITUTIONS 
      • establishing SCIENTIFIC METHOD
      • REWARDING successful innovation directly
      • ENABLING economic growth by a generally accepted system of tort law, free trade and innovative technology 
      • DEFENDING created wealth from predators and parasites
      PATTERNS FROM THE PAST !
    • SCARCITY
        • QUARTS & PINT POTS & WHO BENEFITS?
      • the PROBLEM of ECONOMICS - - -
      • CUSTOMERS or EXPERTS?
      THERE’S NO FREE LUNCH !
      • 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!
      • SPENDING is easy but FINANCING is difficult
      • spending OTHER PEOPLE’S MONEY is even easier
      • income is what SOMEONE IS WILLING TO PAY. if your costs are not covered - no deal.
      • CUSTOMERS WON’T PAY for inefficiency ineffectiveness immorality or impotence
      • ‘ KNOW HOW’ is more valuable than ‘resources’
      • 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!
    • ECONOMIC REALITIES
        • 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 ‘nice’ , clear & simple strategy
      • GENEROUS never wins at the expense of others
      • PEACEFUL only retaliates if provoked
      • FORGIVING 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
      • NO PRESCRIPTION because different people are at different positions at different times
      • NO EQUILIBRIUM just dynamic discovery & accumulation by evolutionary trial & error
      PLAY THE GAMES !
    • ECONOMIC ANALYSIS
        • ADMITTING IGNORANCE
      • CO-OPERATIVE SYNERGIES EMERGE
      THE BLIND WATCHMAKER !
      • ANALYSING CHOICE ANALYTICAL TOOLS for UNDERSTANDING ALL HUMAN BEHAVIOUR
        • SCIENTIFIC
        • ORGANISATIONAL
        • POLITICAL
        • ECONOMIC
            • SUPPLY & DEMAND
            • COMPARATIVE ADVANTAGE
            • 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
    • SATISFICING
        • 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' -  
        • BUILDING on proven inherited success, imitate success, there is no better place to start, don't reinvent the wheel 
        • freely CHOOSING between options available at the time and the place, unhindered by 'rent seeking' Bishops, Princes, Generals or majorities
        • EXPERIMENTING to generate diversity and increase the chances of discovering new tricks 
        • CO-OPERATING with others to discover better tricks from synergies which are not available to individuals
        • RETALIATING against the inevitable parasites and predators to defend and accumulate benefits
        • 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'
      A GARDEN OF FORKING PATHS !
    • SUPPLY & DEMAND
        • MARGINAL UTILITY & OPPORTUNITY COST
      • COSTS & PRICES
      DEMAND SUPPLY MARGINAL UTILITY OPPORTUNITY COST GLUTS QUEUES PRICE QUANTITY PRICE TOO HIGH - LOW DEMAND OVER SUPPLY PRICE TOO LOW - EXCESS DEMAND INADEQUATE SUPPLY
      • 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
      • CUSTOMERS must be willing to purchase
      • SUPPLIERS must be happy to deliver
      • EMPLOYEES WORK
      • BANKS LEND
      • DECENTRALISED decisions & dispersed wealth result in effective & efficient ALLOCATION as more people PARTICIPATE as they choose & innovate for satisfaction & profit
      INNOCENT SIGNALS !
    • COMPARATIVE ADVANTAGE
        • 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 –
      • EVERYONE has different OPPORTUNITY COSTS and a comparative advantage in something
      • EVERYONE benefits from SPECIALISATION and trade even when the gifted are better at all activities
      • the principle explains TRADE advantages at INDIVIDUAL and national level, with money or barter
      • specialisation and trade will EVOLVE because extra 'VALUE' is created, it does not require understanding or the intervention of the specialists
      • REAL WAGES are determined by the value of output
      • PRICES are determined by supply & demand
      • PRICES & EXCHANGE RATES don’t determine trade, they result from trade, they are measurements of opportunity costs
      GUNS or BUTTER !
    • TOTAL FACTOR PRODUCTIVITY
        • MEASURING IGNORANCE
      • PRODUCTION FUNCTION
      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 Neo-classical endogenous input variables capital (resources) and labour (effort). Solow defined ‘total factor productivity’ as technological innovation, 'know how‘, understanding and practice. change due to technology change due to capital OUTPUT k1 k2 CAPITAL per LABOUR unit 2000 1950 O2 Ok O1 MONEY IS NOT A PROBLEM !
    • ENDOGENOUS GROWTH
        • 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 -  
      • Enable the growth of HUMAN CAPITAL -
        • Tort Law, Trade, Technology
        • education, education, education
        • diversity, health, intensive interactions
      • Enable MARKET CO-ORDINATION -
        • free trade, capital, competition, wages and prices
        • establish property rights
        • low intervention, tax, inflation
        • 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.
      A LEG UP NOT A HAND OUT ! !
    • WHY MARKETS ?
        • 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
        • rules for the definition exchange & protection of private property
        • uninhibited access to customers
        • obligation & trust
      • UNAVOIDABLE CONSEQUENCES
        • rising prices to pass on information
        • bankruptcies when losers fail to respond efficiently & effectively
        • unemployment following adjustment to change
      • there’s no such thing as society … only different people at different time in different places choosing different things
      • EDUCATION EDUCATION EDUCATION
      • AVERAGE is an ABSTRACTION …. VARIATION is REALITY …
      • from GENES to ORGANISMS to CULTURES … PROPERTIES of the whole EMERGE …
      • 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 !!
      MARKET FORCES !
    • WHY JOINT STOCK COMPANIES ?
        • SELF SUSTAINING GROWTH
      • TORT TRADE & TECHNOLOGY
      OWNERS CUSTOMERS SUPPLIERS EMPLOYEES HIGH PROFITS LOW PRICE HIGH QUALITY HIGH PRICES SECURE CONTRACTS HIGH WAGES SECURE JOBS
      • To resolve the conflicts & make the m/c work the Owners must decide because of –
      • THE NATURE OF PROFIT - INFORMATION
      • THE SAFEGUARD OF COMPETITION - CONTROL
      • THE INDIVIDUALITY OF REALITY - PURPOSE
      • THE MAGIC OF PROPERTY - 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
      BREAKOUT ! JSC
    • THE CONTROL MODEL
        • ADAPTIVE SELF REGULATION
      • AUTOMATIC RESPONSES
      RESOURCES IN 2nd law costs WEALTH OUT unknowable outcomes SCARCITY COMPLEXITY CHANGE ALGORITHM SET POINT SYSTEM SENSOR ACTUATOR BARGAIN PRICES - INFORMATION COMPETING ALTERNATIVES - DIVERSITY OWNERSHIP RESPONSES - PERSONAL RISK / REWARD PROFILES SPECIALISATION SCALE SYNERGY SCIENCE IMITATION INVESTMENT INNOVATION CUSTOMER VALUE JUDGEMENTS - CHOICES BEST PERCEIVED OPTION AVAILABLE AT THE TIME CONFLICT HANDS OFF !
      • different people, different experiences, different places, different times …
    • THE NATURE of PROFIT
        • INFORMATION
      • DISPERSED & TACIT KNOWLEDGE
      • MULTIPLE ROLE -
      • MEASURES how much wealth is created maximum value at minimum cost
      • SIGNALS where to concentrate activities where scarce resources produce most satisfaction
      • REWARDS innovation investment & risk spur to change & experiment
      • 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
      UNFAIR & UNJUST !
    • THE SAFEGUARD of COMPETITION
        • ALTERNATIVE OPTIONS
      • ACCESS to CHOICE
      • Not REGULATION but AUTOMATIC CHECKS & BALANCES
      • CONTROLS EXPLOITATION & CORRUPTION
        • SUPPLIERS must be happy to deliver
        • CUSTOMERS must be happy to purchase
        • EMPLOYEES must be happy to work
        • FINANCIERS must be happy to lend
        • otherwise they choose the alternative
      • FEEDS PROGRESS
        • MORE DIVERSITY & CHOICE
        • MORE CONSIDERED DECISIONS
        • MORE PROGRESSIVE LEARNING
        • THE BETTER EMERGES
        • OTHERWISE the ALTERNATIVE WINS
      • COMPETITION between
      • gives CHOICE
      • and PROGRESSES
      • INTEREST GROUPS will always try to RIG COMPETITION for
      • Their own advantage but the best antidote is ANOTHER
      • COMPETING INTEREST GROUP
      PRODUCERS CUSTOMERS EVERYONE LIKE IT OR LUMP IT – VOTE WITH YOUR FEET !
    • THE INDIVIDUALITY of REALITY
        • CONTINUOUS CHOICE
      • CONTINUOUS EVALUATION
      FOOD SEX SHELTER FRIENDSHIP ESTEEM FULL POTENTIAL INDIVIDUALITY EVERYONE has a DIFFERENT POSITION at DIFFERENT TIMES for DIFFERENT REASONS 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 SECURITY MASLOW’S HIERARCHY
      • PURPOSE
      • RESPECT
      • INITIATIVE
      • CULTURE
      • INDEPENDENCE
      • MONEY
      INDIVIDUALITY !! MY HUMBLE CONTENTION !
    • THE MAGIC of PROPERTY
        • ASPIRATIONS & INCENTIVES
      • IMMUNITY from TREACHERY
      RESOURCES CONTROLLED by their OWNERS for BENEFIT or SALE tend to be & 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 & 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 … INVESTMENT EFFORT ENHANCED PRESERVED THE TRAGEDY OF THE COMMONS !
    • WEALTH CREATING ACTIVITIES
        • CO-OPERATIVE SYNERGIES
      • EVERYDAY CHOICES GO LEFT or RIGHT?
      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 - NO ONE SAID IT WAS EASY ? JSC SATISFICING !!