Traditional vs. New Economic Thinking
- February 7, 2017
- 3 Comments
Fred Wilson of Union Square Ventures has this great post on New Economics, in which he quotes a table that lists economic thought for each of 6 categories:
- Networks and Institutions
In particular, I recall taking economics in college and being frustrated with economic thought around individuals: the idea that they are rational (individually) or that they have perfect information – or even GOOD information, seemed crazy to me in the days pre-Internet.
Fast forward 10 years and having perfect information seemed possible. Price discovery was dramatically improved for example. But fast forward another 10 years, and there’s too much information. So much information that having the best price online probably means you’re doing business with someone unsavory. Striking the balance between all the information and the information that matters is hard.
So we’re back to judgment calls, at an individual level.
And it isn’t really that different for institutions. We’re not 100% rationally optimizing our business. We care about relationships with our customers, partners, and vendors. We make financial compromises for companies that are a joy to work with. We walk away from financially rewarding situations if it hurts our culture.
It’s also worth thinking about this with respect to BPM:
Old BPM: steps are pre-defined, ordered, connected, and inside the organization, focused on efficiency of the system overall.
New BPM: the process is partially or loosely defined in advance, ordering is informed by humans or AI, and focus is on customer experience and/or revenue rather than efficiency – processes are both in- and out-side the company’s four walls.
Old BPM: I have a project to get done, BPM looks like a good approach.
New BPM: Process is the enabler of my digital transformation initiative, the secret sauce.