Revenge of the microeconomist in the real world

We are in a world of opportunity and hurt.  Demand is high, spirits (and prices) are up, and supply is constrained.  What’s a leader to do?

Geoff Wilson

When I was a young man I learned microeconomics on the back of a simple diagram with two lines…one for demand (always downward sloping) and one for supply (this one goes up).

Turns out, the microeconomists were right.  Mostly.

We are living in a fever dream at the moment.  It comes with the pleasure fog of rising demand for…well…everything as people regain the confidence that they can interact and transact with one another without threatening lives. It also comes with the tormenting nightmare of not being able to hire, source, or build the products and services that they need.

There’s plenty of blame to go around. The most plausible explanation is that we are simply mired in the midst of a massive supply chain bullwhip that is synchronized around the world for once. As positive and negative information trickles out across industry chains, individuals firms attempt to adjust…and they do so badly.

Add the labor-market distortions brought by extended unemployment benefits, extended school and family support organization closures, fear of the unknowns around coronavirus reoccurrence, and general inflation; and you have a multi-faceted political and commercial game that would make George R. R. Martin blush.

But all of this is couched, at least for the moment, within a massive environment of opportunity.  Demand is popping for most of the economy, and poised to pop for much of the rest.

So (as I’m often wont to ask), what’s a leader to do?

Here are a few ideas.

  • Embrace, but prioritize, the opportunity: George Patton’s theory of war was “violent attacks with everything, everywhere” and, while Patton was certainly an effective field general, that theory won’t get you far when you have more opportunity than fuel (yeah, Patton ran out of fuel, too).  Reinvigorate your opportunity analysis approach.  Sometimes, in the cold light of day, an opportunity to serve an existing customer more deeply is actually a massive drain of resources that should be deployed to new customer demand. Sometimes, the opposite is true.  How will you know until you’ve actually thought about it?


  • Take the opportunity to actually, really, innovate: Your cupboard is almost bare and your stove is almost out of gas, but the customer is ready to eat. Sure, you’ve always cooked the meals in-house, but perhaps now it’s time to try something new.  Innovation is a funny thing.  We all “talk” about being innovative, but–as the old saying goes–necessity is the mother of invention. Use the constraints to identify new ways of serving customers and allocating resources.  Maybe it’s time to look more closely at your portion size controls, or your fueling strategy, or your staffing policies, to see if a habit of “just a little bit extra” for customers who are “in”  is creating a reality of “just a little too little” for new customers.  Maybe it’s time to look at your inventory (or talent) pools in Pacoima, Paris, Prague, and Pune and think about them more globally.  Innovation might just be the act of ensuring your organization has the tools necessary to allocate and reallocate resources. It might also be investigating whether your current models of working are overbuilt for accomplishing the task at hand.


  • Explore new supply chain structures and mechanisms: Your suppliers haven’t performed, so what do you do?  Hammer them. Am I right? Penalties, complaints, responsive declarations of force majeure, and just plain angry talk abound right now.  Maybe it’s time to think about how to partner differently.  I have no doubt that new, enduring partnerships will be forged from the fever fire of the current environment.  I also have no doubt that a lot of relationships will be broken in ways that won’t be forgettable in the near future.  Take the time to look your suppliers in the eye and solve problems with them.  Look for new ways of partnering.  Look for new economic models (maybe incentives vs. penalties). Look–most importantly–for the priorities you need to set.  Oh, and if you are the one getting hammered, it’s ok to partner more closely with those customers now…and then fire their keisters later.  An elephant never forgets.


  • Get rid of taboos: There’s that group across town whom you’ve never worked with because, well, you don’t like them. Maybe they stole your cookies once in the lunchroom in 3rd grade. Maybe they fired you once. Maybe they based their operations in China (or California) and you just won’t go there. Taboos can relate to suppliers you work with, customers you would never put on allocation, places you’d never recruit from, or any number of other things.  Your proverbial elephant maybe hasn’t forgotten a bad experience.  Maybe you need a new elephant. Challenge those old taboos.  We are in a time of supply creation.  Think that way.

These are ideas.  They might not apply to you, but then again some might.  I encourage you to look at your own situation for what it is, and choose accordingly.

The economists have us in their thrall at the moment. We are waiting for the invisible hand to rise up and do its work. In the meantime, we see opportunity, and we see constraint…and in between the two is the imperative to act.

Now it’s your turn:  How are you thinking about tackling the current supply / demand imbalance?  Punching an economist is not a valid answer. 

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