Majority Rule, Tyranny of Markets– When Majority Decides: Good for Some But Not for Others…

Majority Rule and Tyranny of Markets: The prevailing view is that markets allow every consumer to get exactly what they want, regardless of what other consumers want… But in reality, markets do not work as well as people think– consumers only get what they want when a majority of other consumers want the same thing… 

Similarly, a fundamental political principle provides that a majority usually constituted by fifty percent plus one of an organized group will have the power to make decisions binding on the whole…

The essence of democracy is the ‘majority rule’, the making of binding decisions by a vote of more than one-half of all persons who participate in an election. However, constitutional democracy in our time requires majority rule with minority rights…

According to Thomas Jefferson; the ‘will’ of the majority shall prevail, but that ‘will’ to be rightful must be reasonable; the minority must possess their equal rights, which the law must protect… In every genuine democracy today, majority rule is both endorsed and limited by the constitution, which protects the rights of individuals… ‘Tyranny of Minority’ over the majority is barred, but so is ‘Tyranny of Majority’ against minority…

According to Joel Waldfogel; in business the ‘majority rule’ is the ‘tyranny of markets’, and it arises when two conditions hold: 1.) costs to produce product or service is substantial… 2.) product or service preference differ substantially across groups of consumers… Hence, an all-virtuous view of free-markets is often viewed cynically…

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According to Joel Waldfogel; while markets do a good job of providing products that a majority of consumer demands, they can fall short of meeting needs of consumers with less prevalent minority preferences… So while more demand generally helps bring forth more variety and more resulting satisfaction, it only pays off for individuals in the dominant group… The Internet has given individuals a chance to seek out rarer products or services but it has also, in its own way, added to market tyranny by giving business the tools to target ‘majorities’ around the world… Hence, the decision to ‘let the market decide’ may be good for some consumer, but not for others…

In the article Tyranny of the Market: Why You Can’t Always Get What You Want by Joel Waldfogel writes: Economists have long counseled reliance on markets rather than on government to decide a wide range of questions, in part because allocation through voting can give rise to a ‘tyranny of majority’… Markets by contrast, are believed to make products or services available to suit any group of consumers, regardless of what others want… However, reality is markets either; don’t, can’t, won’t… always give consumers what they want… When product or service costs are substantial, markets provide only those desired by large concentrations of consumers. As a result, consumers are better off when more consumers share the same product preferences…

Hence, small groups of consumers with less prevalent tastes, such as; blacks, Hispanics, Asians, people with rare diseases, people living in remote areas… find less desirable selections in markets. In these cases, an actual ‘majority rule’ and ‘tyranny of markets’ occurs such that a single product or service can suit the larger group of consumers, but not the others…

Majority rule is binary decision rule that is used most often in influential decision-making bodies, including; business development, board of directors… Some scholars recommend against use of majority rule, arguing that it might lead to a ‘tyranny of majority’… While other theorists argue that majority rule protects the integrity of the business…

According to Helene E. Landemore; majority rule is not just a fair way to aggregate and adjudicate between diverse preferences, but also and perhaps primarily, a predictive tool tapping the famous ‘wisdom of crowds’… The assumption is that the crowd is wise and not primarily because of its numerous but because of the cognitive diversity, likely correlated with the presence of many people… In this view, the virtue of majority rule is to turn diverse individual judgments into accurate collective wisdom… According to Randall Peterson; majority rule simply does not work because it makes for unhappy minorities… they have nothing invested in success and often have something invested in failure… Majority rule is a bad way of going about business…

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In the article Corporate Imagination and Expeditionary Markets by Gary Hamel and C.K. Prahalad writes: The global competitive battles of 21st century will be won by companies that build and dominate fundamentally new markets, e.g.; speech-activated appliances, artificial bones, micro-robots, driverless cars… disruptive products or services that not only make the inconceivable, conceivable, but also create new and largely uncontested competitive space.

Over the next decade companies must stake out new competitive space in order to survive, grow… Early and consistent investment in core competencies is one prerequisite for creating new markets…  Corporate imagination and expeditionary markets are the keys that unlock new opportunities. A company that under invests in core competencies, or inadvertently surrenders them through alliances, outsourcing– robs its future. Companies must have the imagination to envision markets that do not yet exist, and embrace them ahead of the competition…

Companies must strive to create new competitive spaces by imagining new ‘opportunity horizons’ that stretches far beyond the boundaries of its current business… Horizons that identify, in broad terms, the market territories that the business hopes to embrace over the next decade… these opportunity horizons represents a company’s collective imagination in which key new benefits are harnessed to create new competitive spaces, reshape existing spaces…

But companies must also ask: How does their innovation affect current revenue stream? The concern is valid, but it can stifle business imagination. When new opportunities are seen only through the lens of existing businesses, most will fail… Four elements combine to quicken a company’s business imagination… 1.) escaping the tyranny of served markets … 2.) searching for innovative product or service concepts… 3.) overturning traditional assumptions about price/performance relationships 4.) leading customers rather than simply following them…

Business must think outside their current boundaries; they must fuel their business imagination by exploring the white spaces that lie– within, between, on the edges… of their existing business spaces… and they must ask the tough questions, such as: Why does the product or service have to be this way? They must imagine other functionalities could be– unbundled, re-bundled, re-invented… hence, escaping the orthodoxy of conventional product, service thinking. Companies must challenge existing price/performance trade-offs, and assume that an existing product or service concept is not the only jumping-off point for new product or service efforts…

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Of course it’s important to listen to customers, but to be a market leader business must do more… There are three kinds of companies; 1.) those that simply ask customers what they want and end up as perpetual followers… 2.) those that succeed, for a time, to push customers in directions that customers do not want to go… 3.) those that lead customers where they want to go before customers know it themselves… Companies that succeed in educating customers in what is possible with technology and business imagination are the business leaders of the 21st Century… Customers must be given not merely what they asked for, but what they have not yet dreamed of…

Business commitments to innovation, disruption… must be measured in terms of persistence rather than just investment, which often results in risk being under-managed and expectations over-inflated… Hence, when there is no risk and only a time-adjusted view of business outcomes, new opportunities will wither for lack of attention… When failure is seen only as dollars lost, not as dollars foregone new business opportunities are prematurely abandoned… In many companies, re-igniting the corporate imagination requires profound changes in mind-set… ‘opportunity horizons’ must command as much management’s time as ‘operations’ management…

“Imagine if all of life were determined by majority rule. Every meal would be a pizza. Every pair of pants, even those in a Brooks Brothers suit, would be stone-washed denim. Celebrity diet and exercise books would be the only thing on the shelves at the library. And, since women are a majority of the population – they’d all be married to the hottest going celebrity.” Quote by P. J. O’Rourke

It’s management’s responsibility to inspire the organization with views of distant shores, and then help the intrepid explorers to set sail… According to one CEO; the trouble is we are running out of executive cycles, we just don’t have the bandwidth to look at new opportunities…

According to another CEO; we know that we have to make plans for the next generation product but we are just too busy right now… Both these companies are overwhelmed by the needs of their existing customers, markets… they are shackled with–

The Tyranny of Markets Served… It’s at this moment that companies must realize that one of two outcomes is inevitable: 1.) Their business is on a slide to irrelevance… 2.) Their business is unsustainable, long-term…