Nov/090
The market as economy
One of the most common business metaphors is the market. But what exactly is a market? And how does that metaphor help us understand the wider economy within which the business will act? It’s worth thinking sidewise for a while to make better sense of this. First, whilst we may talk about ‘the economy’, there are actually at least three different ‘economies’ in action:
- the transaction economy – the exchange of goods and services
- the attention economy – the personal and shared use of our time and attention
- the reputation economy – how and why (and whether) we trust each other, to do business with each other and spend time with each other
All of these are interweaving in the market at every moment: transactions depend on attention, which in turn depends on mutual trust, and so on. And the market itself has at least four distinct dimensions:
- markets are transactions
- markets are conversations
- markets are relationships
- markets are shared purpose
Markets are all of these, all together, all at the same time. So let’s wander around the market for a while, to see all these in action. First, it’s obvious that markets are transactions, because that’s the most visible part of what’s going on. Goods and money changing hands, services ordered, bills paid, and so on. Markets are transactions.
Price matters, of course. But despite the theories of ‘monetarist’ economists, markets aren’t only about price: if we look around, it’s also clear that markets are conversations. Not just that there’s a lot of talking (shouting!) going on, but also advice on how to use things, what sauce would be best with this cut of meat, warnings about torque-wrench settings for worn-out parts on the old engine you’re fixing up. Sometimes the conversations might include a bit of ‘up-selling’, but if you push it too hard you’ll lose the whole of the sale. And if we’re too busy shouting “My bananas are the best in the market!!”, we probably won’t even notice the quiet guy at the side of the stall who’s too timid to ask to buy them – so we can lose the sale that way, too. One of the most important lessons in both marketing and sales is that markets are conversations, not a shouting-match – and we need to pay attention if we want to be paid in a subsequent transaction. Markets are conversations.
Often a conversation may have nothing to do with the transaction at hand, but are more about creating longer-term connections between people, because markets are relationships too. Transactions only happen when there is trust, and one of the key components in that trust is a sense of relationship. This is part of how brands come into the picture, but it also has a strong personal element as well: for example, you exchange a smile with the woman at the cheese-stall, which may not lead to any immediate transaction – such as because you don’t need to buy cheese today – but may well leave you more willing to go there on the next time you do need to buy cheese. Markets are relationships.
Yet we could also note that there’s more than just one ‘the market’. In fact, there are many different markets, each with its special emphasis. Many towns and villages have their own open-air street-market, like the one in the town I’m staying in right now, with stalls for every kind of small everyday thing that anyone might need: meat and bread and cheese and beans and vegetables and clothes and footwear and the inevitable bootleg-videos. But there’s also the stock-market, where they sell cattle, and the other stock-market, where they sell shares and bonds and hope; there’s the farmer’s market, the specialist cheese-market, the craft-market, and so many others, each with their own special place and setting, their own rules and regulations, their own ways of trading, their own rituals and culture, and so on. Ultimately, markets are shared purpose: they provide a literal and metaphoric space where people can gather to share transactions and conversation, build relationships, and so on, all towards a common aim. And even if that shared aim is not explicit, it’s always there in some form: we know we go to the cheese market for cheese, not stocks and bonds; we go to the used-car market for information on used-cars, not the information on the best tortillas in town. (Okay, we might find that information there, but that isn’t the purpose of the market itself!) Markets convene around a shared purpose.
And markets engage in all three economies: transactions, attention, trust. Although often ignored or forgotten, trust is probably the most important of these: transactions won’t happen unless there is both attention and trust, and attention itself will not be gained without trust. And trust in turn is an economic value because it can be created, and destroyed, by third-parties as reputation: “don’t buy anything from Margarita at the market”, a friend whispers in your ear, “her tortillas are not even fit to feed the pigs…”. Reputation matters: we need to grow it and maintain it just like any other personal or corporate asset. (To imagine a world in which reputation itself could be the key currency of trade, see Cory Doctorow’s novel about a future Disneyland, “Down and Out In The Magic Kingdom”.) The market is all of these, all at once.
So when you hear a reference to ‘the market’, stop for a moment, and consider what that actually means – and what it means for your business, too. Are they talking only about transactions? Or do they – and you – acknowledge the conversations, the relations, the implicit purpose of the market itself? And do they – and you – understand the way in which reputation, trust and the earned ‘right’ to others’ attention all underpin the transactions of the real, live market?
Perhaps something to think about, anyway.