Simple Economics In Action

Salt Whistle Bay, Mayreau, is a tiny island in the Windward Islands of the Southern Caribbean, It's about as big as 4 or 5 football fields in either direction at best. As I write this, it is hosting a dozen sailboats with crews representing a number of different countries who are here for the night.  

The real fun is watching how a group of enterprising local competitors have organized themselves into what appears to be a successful,economic system without, I suspect, anything written down or enacted into law. The economy is broken into two main market segments 1) about a dozen Individual "boat boys" with brightly painted designs who dart about providing a variety of services to incoming and moored boats and 2) four or five on-shore "beach shacks" which offer island drinks, grilled food, and some with extras such as T-shirts, brightly colored towels, etc.

The first market interaction occurs when one of the "boat boys" spots a boat that looks like it will turn into the bay. He rushes out to greet an incoming boat. His first sale is to entice the captain to follow him to a mooring ball where assists in tying up. He gets a modest tip for the contribution. In most cases he will the proceed with the "upsell" to come to dinner at one of the beach shacks to which he is affiliated. The next boat in will be approached by someone else so it is clear that they devised a system of "ups" similar to car dealerships and real estate offices. It also appears that when such a transaction occurs the boat becomes their customer so the others lay off.

The next market interaction is usually the "boat boy" who comes by to collect the fee for using the mooring ball. Several other individuals will come by with an offering such as ice, baked goods, T-shirts, garbage collection, or fresh fish. Sometimes a small boat will come in to sell jewelry or other goodies not offered in the bay.

Beach shack "operations" require a whole team, of course. Someone goes out to check the lobster traps. Someone catches fish. Someone goes to town (or comes out) to deliver food and supplies for the evening's dinners. Presumably, these product offerings can be sold to multiple beach shacks or just gathered for their own use.While tiny in scope the beach shacks still seem to employ cooks, bartenders, waitpersons and clean-up help. Naturally any of the team can cover multiple roles even though there seem to be enough people involved to cover each job. One of the more outgoing, (perhaps one of the "boat boys" from earlier in the day), also handles helping customers each their dinghys or goes to get them from their boat, handling music, etc.

We are currently here for our third evening in the last five or six years and the joy is to see that on each visit we can see the upgrading of quality, service, and complexity of activities. The boats and motors are newer and more substantial, the onshore facilities are becoming more substantial, and the sophistication of the workings of "the marketplace" are increasing.

So what's the point?  Why a blog?

To me, this economic model clearly demonstrates how people who have opportunities can marshal their entrepreneurial instinct and drive, learn how to sell and cooperate for mutual benefit, and invest back into growing their businesses. They don't seem to need entitlements, government supervision, executive management or MBAs to make it happen. I wonder how much more of such creativity and drive can be unleashed in our business and communities if we get out of people's way and simply open the doors to opportunity?

Discover Your Own Resourcefulness

creative solution“Entrepreneurship is the pursuit of an opportunity without regard to the resources currently controlled.” –Prof. Howard Stevenson, Harvard Business School, 1983

In my last post, I shared about our work with The Hunger Project Mexico leaders, especially around the opportunity in being bold and taking on big challenges.  Since that time a client offered me the above quote on entrepreneurship.

I am going to propose that Professor Stevenson’s wonderful definition be expanded to include Cultural Creatives and everyone else who considers themselves change agents or aspires to bringing forth meaningful change of any kind.

Committing to an opportunity “without regard to the resources currently controlled” requires courage. There is “good news and bad news” associated with such a bold action. The moment you commit, several discouraging thoughts, which will seem very, very real, will flash before your eyes:

1)  I don’t know how

2)  I’m scared to death

3)  I’m insufficient

4)  I’ll never be good enough fast enough to pull it off

At that moment you have two choices:

1)  Slip to the periphery and gesture

2)  Surrender to team and strategy

Behind door number one, “slip to the periphery” is “looking good,” avoiding embarrassment, finding good excuses etc., while behind door number two, “surrender to team and strategy” is the willingness to stand in the gap between the known and the unknown, continually exploring for “what’s missing, that if put in place will move us toward our goal,” and also probably more than a few sleepless nights.

So where is the good news in boldly committing you ask? It will eventually produce extraordinary results. It will provide you with great satisfaction and a much richer sense of yourself.  It lies in discovering or reconnecting to your own resourcefulness – that’s the best news of all!

An excellent example of “door number two” leadership is Bill Ayer, CEO of Alaska Airlines. During a time when all the major airlines have lost tens of billions and eventually gone bankrupt, Alaska has become a leading innovator and a profitable business whose stock price has increased 300% since 2008. As a regular passenger, I have only great reviews for every aspect of my interactions with them. (For a more complete review of Alaska’s current success click here.)

In 2003 Alaska chose “cost per available seat mile” as a key measure of its success.  Their cost at the time was 8.73 cents. They committed to 7.25 cents, which would save $ 300 MM. To quote Mr. Ayer, “That was one of those things where we didn’t know how we were going to do it, but we said to ourselves, ‘that’s what we need to do. A good company would look at that.”

Given all of the cost issues faced by the airlines, including fuel costs rising 35% last year alone, Alaska has “only” hit 7.6 cents in 2011. Meanwhile they’ve gone from being one of the worst on time airlines to the best in the country last year.

Are you ready and willing to “go for it” and to discover your own resourcefulness?  If not, what are you waiting for?