Ethical markets of the future will need bear additional factors necessary to deflect exploitation by cabal, cartel and mafia entities. Specific components of objective measure for risk, value and currency will need to be brought to bear. Things which serve to disempower those who draw down the majority of a value chain’s margin, yet provide the minority of its actual value.
I am currently involved in the creation of a new marketplace – the Herculean task of one of my development companies. The team which is taking on this challenge has deliberated at significant length and depth over the last few years, as to the ethical components which should be incorporated into this new marketplace’s functionality. This style of trade has not been practiced before, so we must step carefully and deliberately. The marketplace is targeting the Asian and Latin American regions, so not only do we need to be sensitive to cultural differences, but as well our product needs to reflect the particular business practices which are peculiar to those sourcing and demand environments. Accordingly, my team has met with numerous trading entities in an effort to grasp the detailed nature of their material trades; and as well, has conducted trades of their own, in order to understand the nuances, pitfalls and complexities wound up in those regions’ international trade of goods.
Yes certainly the price-to-quantity of the traded component or supply plays critically into any market transaction consideration. Price per quantity indexing and discovery (lower left of the graphic above) are all important functions in a marketplace. However, price and quantity are not the only factors which are actually traded inside a market. The critical value of effort, material or scarcity which is placed into or imbues the traded items, are essential in any pricing play. As well, the ‘skin in the game’ which both the offer and bid makers possess, must be fairly addressed inside any value chain of goods/services. These new market factors are being added into our trading platform, as shown in the graphic above and highlighted by the gold glow around those quantified and managed transaction measures. A utility token for stakeholder risk, and one for value provision – along with a supply chain which ships exactly what the customer has ordered, nothing more/nothing less – these are the critical praxis elements of the value chain of the future. The quality-history of the product in terms of its pedigree and pathway of provenance, these elements are to be traded inside the market of the future, and not simply price and quantity.
If one is placing their season, business or family at risk, then that entity should be rewarded with greater control of the distribution of profits inside their value chain. If one is committing to raw materials or supplies necessary in manufacturing a good, then they should be compensated for this value provision – and not be abused by monopsonistic or exploitative speculators/cartels, who control nothing but market access.
Crony Driven Entities (Syndicates)
A cartel sells you your market access.
A cabal sells you social or club legitimacy.
A cathedral sells you your own self realization.
A mafia sells you your own livelihood and/or life.
A party sells you your right to exist.
Intermediaries, who are simply conducting the equivalent of a phone call connecting two parties (supply and demand agents), or are performing nothing but a low-risk arbitrage/distributorship function in between, should be positioned as a lesser-value play inside a trade, all things being equal. Today’s reality inside any given trading market is that intermediaries, because of the fog-of-trade on both the demand and supply side, draw down the lion’s share of profit margin available in the trading value chain.
It is the job of a flat ethical price-making market to offer the intelligence to the value provider and risk bearer so that those parties may discern this process:
1. Know what value is
2. Know what value is needed most
3. Choose the highest need of the highest value
4. Hedge the risk which achieves this.
The Crony creates a Fog of Trade, such that the value provider and the risk bearer cannot discern the above. That way they reap your value and hand you the unhedged risk. This in turn serves to creates a displaced grey market inhabited by the huckster, hustler and shyster. Consisting mostly of poseurs who wish to be real someday, but must cheat a little along the way in order to survive.
For instance, a factory which produces a product may only draw 12 cents of the margin dollar for a given product. Likewise the retailer who sells the product might draw down another 12 cents of its margin value. Intermediaries who simply connect the factory with the retailer, end up drawing down 76% of the available margin, simply because they have a vantage point which allows them to see the landscape on both the supply and demand side of the equation. A sophisticated market of the future will need to level this landscape and allow both the high-value production and high-value demand sides of the value chain to survey the entire market. It is one thing to eliminate the middle-man (in old retail lingo), but when the middle-man is both drawing down the super-majority of the available margin, and as well is obfuscating the information which its partner entities need in order to derive a healthy business on their own, then this backwards structure of market needs to be changed.
Today’s commodity futures markets in the West, as well as many food and bulk trades in Asia and the Americas fall victim to this type of intermediary ruled trade practice. The result is higher prices paid by trading principals, and higher costs borne by their citizens for simply basic products. The future of market trading platforms involves rectifying this imbalance in the value chain.
The Principal Ethic of a Value Chain
Margin performance must follow a provision of value and/or an assumption of risk, or inflation ensues.
Inflation is every bit as much a dilution of economic value, as it is an increase in prices.
When risk and value are ignored, three types of default trading member emerge, whether we want them to or not. The objective of an ethical market is to make value and risk manifest and quantifiable, so that these cabal/cartel/mafia entities cannot pull of their normal exploitation.
Huckster – sells value first and then price. A huckster differentiates or inflates a product value in order to obscure price performance.
Example: A consumer goods toy manufacturer who only gives a discount if unreasonable amounts of units are purchased by their demand customer, who must then dump that excess inventory to the aftermarket, and subsequently damage their own brand through oversupply. Product dumping inflation ensues. eBay is flush with supplies of that toy as a result.
Hustler– deceives two parties as to value and price, as the go-between in a pseudo-transaction. Misadvertises to both parties that they have a value or price commitment from the other party.
Example: An intermediary tells a chocolate products manufacturer that they have a committed supply of cocoa bean from a producer in West Africa – and tells the cocoa bean producer that they have a proof of funds MT-799 and ICPO from a buyer. Neither is in fact true, and when the parties meet, trust plummets, and subsequently there is a low probability of transaction success. The most likely outcome of a hustle being that each party thinks that the other party, as well as the hustler, are fraudulent players.
Hustle Chain – a chain of agents and/or hustlers who in sequence make representations upline and downline to each other between a putative buyer and a seller (or value provider and risk undertaker). The longer the chain of such entities the more exaggerated or ‘certain’ the representations. A chain of eagerness or greed in which favorable information is spawned and unfavorable information is filtered out, in both directions. Value, capability and availability of the product are exaggerated as the ‘pseudo-offer’ is passed upline, while willingness, demand or ability to pay on the part of the bidder are up-spun as a ‘pseudo-bid’ coming downline. This type of unqualified principal or procedure-less pseudo-trade collapses 99 out of 100 times.
Shyster – sells price first and then value. A shyster blends, shorts, conflates or confuses product in order to obscure value performance.
Example: A food distributor who delivers CIF shipments which contain a mixed blend of production lots which might or might not fail quality inspection individually, yet overall averages to an acceptable product quality. Human health suffers as a result.
We have all run into these types of entities in our past of course. But in a complex market, their presence and role may be obscured by the intricacies of the trades themselves. Their presence causes market inefficiency, friction and inflation. Their presence causes suffering. These players are the cabals, cartels and mafias who rule our information, news, currency, consumer goods trade, agricultural trade, food trade, electronics trade, material resource, equity markets, etc.
An Example of Exposed Corruption
In one particular former socialist country, now attempting to free itself from the heavy hand of its Bolivar masters, producers were fully unaware that the freight costs they were paying to ship their goods were a full 80% higher than their counterparts in neighboring free trade countries. This placed an extra $8 per unit (or 30%) premium upon their product globally. It made them non-competitive for decades. They were told that the ‘arrogant West just did not like them’ and refused to buy their products. They were unable to see this cost imbalance until they were afforded access (pro bono) to our market package.
This excess cost was strangling them collectively as an industry. Its burden carried by this nation’s producers because the logistics providers were the ‘only game in town’, as authorized by their nepotistic Ministry of Trade – and the fact that one of the ministers wanted to be very rich, at the expense of his nation’s entire group of producers.
There were some rather angry producers as a result of this learning experience. History isn’t kind to men who play god.
These producers bore all the value, as well as all the skin in the game. Meanwhile this Minster and his service-monopsony bore zero risk – zero value. This type of Crony activity is just sick, and boils my blood. I spend much of my life helping to topple unethical entities just like this (think skepticism as well).
This is the future – the ethical exchange of value, the ethical compensation for risk, an understanding of who the stakeholders are in the trade and commerce equation – and which parties constitute the undue and low value influences. Yes, we ‘cut out the middle man’ in some markets over the last 50 years – but we still have a long way to go, in order to make these principles the ethic inside of our broader world.
This revolution will apply to claims to ‘represent science’, medicine and governance in our future as well. A smart and informed stakeholder population is rising fast, and will demand no less. Nor should they.
The Ethical Skeptic, “The Future of Ethical Markets”; The Ethical Skeptic, WordPress, 3 Dec 2019; Web, https://theethicalskeptic.com/2019/12/03/the-future-of-ethical-markets/