Friday, April 10, 2009

Leveling the Playing Field...What's That About?!

For those of you reading this blog for the first time, the first question that probably comes to mind is, What's this "Leveling the playing field" stuff about? After all, in 25+ years of Procurement, the last thing I or my colleagues ever worried about was a sense of fairness...that's the job of free markets to sort out. This blog will not be some Obamarama liberal rag or a home for dogmatic dittohead diatribe, I assure you.

My philosophy has always been a simple one - nobody will sign a contract, no matter how onerous the terms, if it ultimately is not in their best interests to do so. You hear about win-win solutions all the time, and I've always been in favor of them as long as they were really Win-win solutions (and I had the upper case W)! I've been on both sides of the equation, during buyers markets when you could leverage everything under the sun, and during sellers markets where if you didn't buy now, good luck, because the price would be 10% higher tomorrow. This is where I developed my first axiom of business - TIMING ISN'T EVERYTHING, IT'S THE ONLY THING.

So I'll say it now, Leveling the playing field has nothing to do with a sense of fairness, but it has everything to do with finding a sense of BALANCE over time. It's about knowing that all things in life have cycles - whether they are business cycles from growth to recession, El Nino-La Nina ocean water warming and cooling cycles, 22 year sunspot cycles, geopolitical cycles from liberalism to conservatism, or corporate cycles from centralization to decentralization and conglomeration to divestiture. It's about knowing when these cycles converge and that bad things happen when the balance of the two motivators in markets, fear and greed, get out of balance, and you are not prepared for them. There are always consequences:
  • When assets are leveraged 40:1 into derivative instruments that nobody can value on an open market in order to maximize sales and trading profits, there is no balance;
  • When hedge funds and speculators can drive commodity prices and company share prices (in which they have no commercial business interest) to great and sudden extremes disproportionately impacting buyers, sellers, workers and investors alike, there is no balance;
  • When the only solution open to you to improve profit margins is to move jobs thousands of miles away to low cost countries, there is no balance (mind you, outsourcing and offshoring do have their place as part of the solution);
  • When every category of spend is consolidated with large multinational suppliers to maximize "savings" at the total exclusion of small and diverse-owned businesses, many of whom represent your customer base, there is no balance.

Invariably, these forces do come into balance sooner or later, because greater forces are at work (the Adam Smith "invisible hand"?), but not without major dislocations in markets and consequences for all involved. So how do you break these "cycles of violence" and take control of your future - as a buyer entrusted with stewardship of your company's funds, or as an entrepreneur struggling to gain access to financial and human capital and technology to compete in a flat world (I love Tom Friedman, so let's get that on the table)? That's where LF Enterprises comes in, and that's what this blog is all about. I'd love to hear your comments.


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