Zero Sum Concepts…

The Game...

The Game...

One of the concepts of this blog is to raise discussions around viral aspects or those which move in nonlinear ways both up and down as it’s here where Zero Sum fits in.  As from a systems think point of view it is Zero Sum which gives truth to the adage of what goes up must come down as it says a system is finite thus subject to system wide resistance.  So what am I trying to get at here, well to make it a bit easier lets try and represent it as such with a simple equation and promise it won’t make your eyes glaze over so here it is:

(Product Price) = (Price Paid for Product)

What so big about this as the price of something is what you pay, however what this shows is this transaction forms a closed system as the result of this redistribution can be expressed as the following:

(Revenue Received) = (Product Exchanged)

Here you see each side has flip flopped as the product changes hands for sale because of the profit contained in (Revenue Received) many folks say this is not Zero Sum.  However the argument which I contend as a retort would be to restate the above equation as:

(Cost of Goods Sold + Profit) = (Product Exchanged)

So in short we can say: (Cost of Goods SoldProfit) = Total Costs as keep in mind profits are paid out in one shape fashion or form so they become a cost.  Also while we are looking at the transaction as a discreet function whereas we can also look at these in aggregate and this is where we see how Zero Sum affects the viral aspects of a distribution as this in actuality is the rate of change within the system as in simple terms can be said to be:

[+Inventory Count] = [-Inventory Purchased]

So if we start out with say 12 units in inventory and 1 unit per month is sold, then this is a [flat] linear trend and stock will be depleted in 12 months.  Now if we where to sell one unit the first month and then double every month thereafter, the inventory will be depleted in less than four months. So the “fall” in the viral scenario is further then the linear example as well as shorter (faster) in time.

So why is this important, the simple answer can be found in the adage the bigger they are, the harder they fall.  This is also why it’s important to understand the role of bureaucracy as it’s said to be the governor of business because this will limit the viral abilities of a business as you don’t see start ups like Facebook™ with a large amount of “bureaucracy” underpinning the system.

Thus the implied rate of redistribution within a Zero Sum system will allow for prediction of both the duration of the viral cycle as well as the intensity of it.  By understanding this concept we can now endeavor to create more viral cycles which is inevitable out of the “connected age” because noted the distribution is driven by [-Inventory Purchased] and not the units delivered so it’s the “act” of pressing the “buy” button which is more important than the UPS box on your door step…

Advertisements

About Joseph Campbell

As a strong believer in the fact that "people work for people", it has been a life driver to better to understand the complexities of the various aspects which drive efficiency within this axiom, especially the concepts of leadership. Supporting this, I have been fortunate enough to having experienced this as leader on a global basis over the last decade and half. During this time it has been clear there are three core drivers being Life, Leadership and Economics.
This entry was posted in Economics... and tagged , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s