Financial Markets

In a thought provoking article at the Harvard Business Review site titled “Beyond the Banking Crisis: A Strategy Crisis”, Umair Haque looks deeper into the impact that the Internet has had in leveling many playing fields.

Competitive advantage is fundamentally about making markets work less efficiently. One catastrophically effective way to do that is to hide and obscure information – to gain bargaining power relative to the guy on the other side of the table.

In finance, those lessons achieved a profoundly perverse apotheosis: it was, ironically enough, Wall St itself that finally succeeded in making markets fail faster, harder, and more intensely than anyone dreamt possible.

Later he says :

Why? An edge principle: we’re both always and everywhere better off not dealing in lemons at all – because what goes around comes around. If I sell you a lemon today, you might hack it, tweak it, remix it, and sell it back to me slightly altered tomorrow. Sound familiar? It should – it’s essentially the story of why structured products are imploding.

But there’s a much deeper point here; a much bigger reason we need radically different approaches to strategy built for today’s new economics.

It’s simple: orthodox strategy doesn’t stop at finance. Strategy as shadow-making, moral hazard, and market subversion is rife across the economic landscape, from food, to pharma, to autos, to media. It’s what the industrial-era firm has hardwired into its stale, tired DNA.

If you really want to see the bankruptcy of orthodox strategy in action, click those links – and spend a few minutes thinking about how those industries (and more besides) have spent the better part of a century and countless billions creating more and more elaborate shadows to hide behind.

As in finance, the victimizer is becoming the victim: as interaction accelerates, these industries are increasingly falling victim to the games orthodox strategy so earnestly taught them to play.

Your comments/views appreciated.