Market Share

Market Share: The percentage of a market accounted for by a specific entity.

 

Unit Market Share: The units sold by a particular company as a percentage of total market sales, measured in the same units.

 

This formula, of course, can be rearranged to derive either unit sales or total market unit sales from the other two variables. 

 

Revenue Market Share: Revenue market share differs from unit market share in that it reflects the prices at which goods are sold. In fact, a relatively simple way to calculate relative price is to divide revenue market share by unit market share.

 

As with the unit market share formula, this equation for revenue market share can be rearranged to calculate either sales revenue or total market sales revenue from the other two variables.

 

Diamond-Water Price Paradox

 Adam Smith [1723 – 1790] was confounded. One of the greatest economic and social thinkers in the history of ideas struggled with the so-called “diamond-water paradox,” which Smith explained in Chapter 4 of Book I of Wealth of Nations: “Nothing is more useful than water: but it will purchase scarce anything…. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it” )quoted in Skousen and Taylor, 1997). None of us would be able to live beyond a couple of weeks without water, yet its price is relatively cheap compared to the frivolous diamond, which certainly no one needs in order to stay alive.

 

Most people confronted with this paradox – including Smith – would resolve it by replying the supply of diamonds is sparse compared to water, and hence they command a higher price. This is an intuitive, and very reasonable, solution. After all, water is approximately 71 percent of the earth’s surface, while diamonds are found in only a limited number of places in the world, and the supply is even further restricted by diamond cartels, such as De Beers, which of course did not exist in Smith’s day.

 

Yet the scarcity theory lacks explanatory power…. Besides being abundant, water tends to be priced based on the marginal satisfaction of the last quantities consumed, so the water you use to wash your car is far less valuable than the first few litres drunk to quench your thirst. Of course, if the water companies knew you were dehydrated in the desert, instead of washing your dog, they would be able to price those precious first litres at a higher price; but learning this type of information about exactly what all of their customers are doing with the water they use is prohibitively expensive. However, bottled water companies have figured out how to extract some of the consumer surplus, since they are partially selling convenience, and able to charge a higher price for water than petrol (R. Baker, Pricing on Purpose, 2006)

Collaborators

At different times in history, and under different circumstances, the word “collaborator” has connoted something negative. To be dubbed a collaborator meant you were a bad person, you had sold out your “people”, your comrades.

 

Those Black people and leaders who collaborated with the Apartheid regime in South Africa, who chose to “work within the system” were reviled because they were used as an instrument of oppression, they were used to spread the lie that there was Black self-government, they were used to institutionalise the homeland or Bantustan system.

 

In Europe, collaborators worked with the Nazi occupiers to oppress and repress their citizens. They helped to out members of the resistance, and to point out those who were hiding Jews. There are countless other similar instances throughout history and in different parts of the world.

 

In science, in tech, in business, however, collaboration is a good thing. To be a collaborator shows maturity and intelligence, especially emotional intelligence. Numerous inventions, numerous endeavours, would not have been possible, or they would have been difficult, to achieve without collaboration. Frequently many projects are only possible through collaboration. The race to build the atomic bomb in America was a collaboration of a number of eminent scientists. The International Space Station was and is a collaboration of a number of nations, including political, military and security rivals (or enemies?) Russia and the United States. In fact, for many years until late 2020, the US didn’t even have the capability to send astronauts to the ISS and had to rely on the collaboration and cooperation of Russia. The United Nations system, the World Bank and the IMF, etc., all are a result of cooperation and collaboration. The latest example are the several COVID-19 vaccine initiatives, both on the side of Big Pharma and researchers, and on the side of nations.

 

Developing a healthy regard towards collaboration is key to success and progress. While competition is also good, after all it too does drive success, it is foolhardy to disdain collaboration. We require more, not less, collaboration. We need to grow more collaborators. In science, in tech, in business, to be dubbed a 

Biden’s Hypocrisy on Iran and Cuba

During the American presidential campaign, Joe Biden made a number of foreign policy promises. For me, a non-American who didn’t matter in the scheme of American politics, the three promises that stood out and that made me supportive of a Biden win, and indeed hopeful and elated when he did win, were: Biden’s promise to reverse Trump’s decision and re-enter the Iran nuclear deal; the promise to revive contacts with Cuba and end the embargo Trump had re-imposed; and, lastly, to re-enter the Paris Climate Accord.

 

Biden has made good on the last one, immediately signing an executive order giving effect to his promise. However, for me the first two were more important in that they have been the most egregious of American foreign policies, consigning the peoples of both Iran and Cuba to the most difficult conditions and to pose existential threats to both countries. Biden’s reluctance to honour his promises in this respect are puzzling and very disappointing. CNN’s Fareed Zakaria’s take on this is that Biden is playing to a domestic audience, in particular Republicans. Whatever his reasons, his snail pace or seeming hypocrisy are unacceptable.

 

To his enduring credit, former American president Barack Obama had bucked decades of American foreign policy by signing the Iran nuclear deal and ending the Cuban isolation. 

 

When Trump came to power, he immediately reversed course on both policies. Before and during his campaign, Biden vehemently criticised Trump for these two decisions, among others, vowing to reverse them if and when he won. He hasn’t done that. Surprisingly, Biden’s new foreign and national security teams are essentially the same people who negotiated both policies under Obama. Particularly with respect to the Iran nuclear deal, they made a point of arguing that Trump’s so-called maximum pressure campaign of sanctions was not going to succeed because the deal they had negotiated was as good as it could get. Now that they are in power, however, they have hypocritically maintained the sanctions and are seeking to wring new concessions from Iran as a pre-condition to re-entering the deal. This is unacceptable and is a case of wanting to have their cake and eating it.

 

The world should call out Biden on his hypocrisy, and the other members of the Iran nuclear deal should support Iran’s position that the US is the one at fault for having pulled out and the starting point is them returning, and not the other way round as they are arguing. Clearly, at this point the only difference between Biden and Trump is that there is no imminent threat of war or missile strikes against Iran, but the suffering experienced by ordinary Iranians hasn’t changed. It would seem that, for the world, there may be no point in trusting American administrations, whether Democrat or Republican.

A primer on airline pricing

One of the most scorned and disdained – and least understood – pricing strategies is employed by the airline industry, illustrated by this anonymously authored email about purchasing house paint, circulated in Australia where Qantas has a large share of the market:

 

First, a reprise of how ordinary hardware stores sell paint:

 

Customer  Hi. How much is your paint?

 

Salesman  We have normal quality paint for $18 a litre and premium paint for $25. How many litres would you like?

 

Customer  Five litres of normal paint please.

 

Salesman  Great. That will be $90.

 

Now, imagine you are buying paint from Qantas: First you spend days trying to reach them by phone to ask if they have paint. Nobody answers. So, you drive to a Qantas store.

 

Customer  Hi. How much is your paint?

 

Salesman  Well, sir, that all depends on quite a lot of things.

 

Customer  Can you give me a guess? Is there an average price?

 

Salesman  Our lowest price is $12 a litre, and we have 60 different prices up to $200 a litre.

 

Customer  What’s the difference in the paint?

 

Salesman  Oh, there isn’t any difference; it’s all the same paint.

 

Customer  Well, then I’d like some of that $12 paint.

 

Salesman  When do you intend to use the paint?

 

Customer  I want to paint tomorrow. It’s my day off.

 

Salesman  Sir, the paint for tomorrow is the $200 paint.

 

Customer  When would I have to paint to get the $12 paint?

 

Salesman  You would have to start very late at night in about 3 weeks. But you will have to agree to start painting before Friday of that week and continue until at least Sunday.

 

Customer  You’ve got to be kidding!

 

Salesman  I’ll check and see if we have any paint available.

 

Customer  You have shelves FULL of paint! I can see it!

 

Salesman  But it doesn’t mean that we have paint available. We sell only a certain number of litres on any given weekend. Oh, and by the way, the price per litre just went to $16. We don’t have any more $12 paint.

 

Customer  The price went up as we were talking?

 

Salesman  Yes, sir. We change the prices and rules hundreds of times per day, and since you haven’t actually walked out of the store with your paint yet, we have just decided to change. I suggest you purchase your paint as soon as possible. How many litres do you want?

 

Customer  Well, maybe five litres. Make that six, so I’ll have enough.

 

Salesman  Oh no, sir, you can’t do that. If you buy paint and don’t use it, there are penalties and possible confiscation of the paint you already have.

 

Customer  WHAT?

 

Salesman  We can sell enough paint to do your kitchen, bathroom, hall and north bedroom, but if you stop painting before you do bedroom, you will lose your remaining litres of paint.

 

Customer  What does it matter whether I use all the paint? I already paid you for it!

 

Salesman  We make plans based upon the idea that all our paint is used, every drop. If you don’t, it causes us all sorts of problems.

 

Customer  This is crazy!! I suppose something terrible happens if I don’t keep painting until after Saturday night!

 

Salesman  Oh yes! Every litre you bought automatically becomes the $200 paint.

 

Customer  But what are all these “Paint on sale from $10 a litre” signs?

 

Salesman  Well, that’s for our budget paint. It only comes in half-litres. One $5 half-litre will do half a room. The second half-litre to complete the room is $20. None of the cans have labels, some are empty and there are no refunds, even on the empty cans.

 

Customer  To hell with this! I’ll buy what I need somewhere else!

 

Salesman  I don’t think so, sir. You may be able to buy paint for your bathroom and bedrooms, and your kitchen and dining room from someone else, but you won’t be able to paint your connecting hall and stairway from anyone but us. And I should point out sir, that if you paint in only one direction, it will be $300 a litre.

 

Customer  I thought your most expensive paint was $200!

 

Salesman  That’s if you paint around the room to the point at which you started. A hallway is different.

 

Customer  And if I buy $200 paint for the hall, but only paint in one direction, you’ll confiscate the remaining paint?

 

Salesman  No, we’ll charge you an extra use fee plus the difference on your next litre of paint. But I believe you’re getting it now, sir.

 

Customer  You’re insane!

 

Salesman  But we’re now THIS COUNTRY’S only paint supplier! And don’t go looking for bargains! Thanks for painting with Qantas (R. Baker, Pricing on Purpose, 2006).

Tackling crime - augmenting the virtuous circle

Unemployment and high crime rates tend to go together. A high crime rate is a disincentive to investment, attraction of skills and a damper on tourism and, therefore, exacerbates unemployment. A high crime rate also contributes to a social breakdown and encourages the emergence of bad trends, including mob justice in all its manifestations.

Even though tackling crime is not directly part of an economic policy, because of its direct impact on economic activity it is imperative to include it in any economic proposals.

It is really an intellectual game

 Development is really, ultimately, an intellectual game. 

 

The standard prerequisites for development are well known, but the power of intellect is hardly ever mentioned, if at all.

 

The fact that intellectual capital, intellectual wealth, trumps everything.

 

The intellect of a people to choose and elect the right leaders.

 

The intellect of the leaders to choose and doggedly follow the right policies.

 

The intellect to realise and understand that, ultimately, intellect trumps everything.

 

The intellect to realise that lack of natural endowments/resources does not doom you to failure, that there are many paths to development, that in fact, in a perverse but virtuous way, lack of endowments may actually be a blessing because it frees the intellect to think creatively, to innovate, not to depend on ‘natural capital’, but to depend on abundant, perpetual intellectual capital. Or, conversely, that abundant natural resources are not a prerequisite, nor do they ensure, development and that, perversely, if unaccompanied by intellectual power may actually be a ‘curse’ for they tend to lull the mind and promote lazy thinking.

 

Give me a resource rich country, and I’ll give you a country with none but is at the top of all human and economic development indices.

 

All that is required is to free the intellect and shun lazy thinking like the plague.