Intentions and consequences
Do well-intended strategies have untoward long-term results?
In his 1990 seminal book, “The Fifth Discipline: The Art & Practice of the Learning Organization,” MIT professor Peter Senge introduced an interesting concept: “There is a particular system archetype, first identified by ecologist Garrett Hardin and called ‘The Tragedy of The Commons,’ which is especially relevant for making localness work. It describes situations where what’s right for each part is wrong for the whole.”
In our agrarian past, “the commons” was a common grazing ground for the livestock of the families that surrounded it. Each family wanted to become more prosperous, which meant more animals. As each family pursued the prosperity that was rightfully theirs, over-grazing was the result.
Offshore fishing is another example.
Commercial fishing is a tough way to make a living, especially in our New England winters. It’s inherently dangerous with frequent casualties. As a result, fishermen want to catch as many fish as possible to feed their families and the families of their crews. They need a good boat with the best equipment and fishfinding instruments money can buy.
You guessed it: Overfishing is a danger, and as a result, there could be no more fish for anyone regardless of how good their equipment is. Unfortunately, that’s where we are today for some species.
Why does all this matter? Here we are with massive supply chain problems and record inflation. Every time we go to the grocery store or the gas station, we spend a lot more than we used to spend. For many, that means far less discretionary income to spend on anything that is not an absolute necessity.
Companies producing the nice-tohaves are really feeling the pinch. We have no idea how long this will continue or how much worse it can get. For instance, I should probably buy a new car, as mine is starting to show its age. However, car dealers are trying to make as much as they used to make selling fewer cars. They’re adding a fee of $5,000 or more to the retail price.
My car still runs great, and I’ll hang on to it until the dealers become more reasonable. I wonder how many prospective customers are doing the same?
This is where the Tragedy of the Commons comes in. With each car dealer, each business, doing what’s best for itself, we’re destroying our economy as a whole. In periods of high inflation, everyone suffers. However, too many of us want everyone else to suffer except us.
Some businesses are wise enough to pass as little of their increased costs as possible on to their customers. They’re willing to accept lower margins to keep their customers in the game. As a result, they’re often more profitable than the high margin folks through sustained or even higher volumes.
This is so obvious in gasoline retail. As you drive around, it’s interesting to see the lines at the lower-priced stations, and the lack of customers at the high-margin stations. Does anybody really think they can make more money selling expensive gas to just a few instead of cheaper gas to many?
In the case of car dealers, the supply may be limited because of the chip shortage. Admittedly, customers don’t always remember the good things we do for them, but they never forget getting screwed. Yes, you can make more money now from folks who are desperate, but are you considering the long-term consequences?
My father was in the Navy, serving in the South Pacific during World War II. Through Armed Forces Radio, he had heard that Royal Dutch Shell sold gasoline to the Germans. Maybe they had no choice as Germany invaded Holland. Regardless, my father could never bring himself to stop at a Shell station. Out of respect for him, I never go to Shell either. Obviously, Shell survived, but I wonder how many WWII veterans and their kids never bought from them. I wonder how much better they could have done over decades if this unfortunate story had never surfaced?
No question, it’s a long time to hold a grudge, but business decisions today, especially in desperate times, can have very long-term consequences. I wonder how many managers are considering the long term in today’s decisions?
Ronald J. Bourque, a consultant and speaker from Salem, has had engagements throughout the United States, Europe and Asia. He can be reached at 603-898-1871 or RonBourque3@gmail.com.