Markets are the most powerful man-made force shaping human civilization. There are no better means to manage the human exchange of ideas, capital, or resources. Even the most powerful entities respond to market forces. During the past 20 years I have led, or been part of, the teams that have built and launched 13 electronic markets around the globe, giving me a deep understanding and appreciation for their function in human society. Here’s how markets have the power to shape a sustainable future.
A Fundamental Mechanism
Specialization within and between societies has enabled human civilization to achieve remarkable progress. From early hunter/gatherer societies to our current globalized economy, people have developed expertise and skills that benefit themselves or their groups, be it tribe or corporation. Today we have such occupational diversity as doctors, musicians, business executives, professional athletes, teachers, farmers, manufacturers, etc. All of these would be impossible without specialization.
To specialize in one occupation, a person must forgo specializing in others. Thus, for the utility of specialization to be realized, people must exchange their production. As an example, farmers provide food for doctors. In return, doctors keep farmers healthy. But how much food must be exchanged for medical care? Fundamentally, an Exchange requires the ascertainment of relative value of goods and services. Herein lies the essential function of a market.
Expansion in Scope and Scale
Some of the earliest markets involved specialized production based on local resources. Groups that lived near the ocean traded shells and fish with groups that lived inland in exchange for animal products or minerals that weren’t available near the coast.
From those early examples have evolved an astonishing diversity of markets in scope and scale. Securities exchanges are quintessential examples. Now digital commerce has led to freelance boards, ride-hailing apps, in-game virtual goods exchanges, and even a vintage sneaker exchange. Notably, some of the most prominent and valuable companies in the world, such as Amazon, eBay, and Shopify, operate or enable digital markets. For product leaders, opportunity lies in extending the power of markets by enhancing their information content to create new incentives and align commerce with customers’ values.
The Power to Shape the Future
People and organizations respond to incentives, and markets are a powerful force for generating incentives. Consider the dearth of gluten-free products available 10 years ago compared with a veritable cornucopia today. People made choices that were good for them individually, and as aggregate demand grew, a new market developed. The “market” then went further to enhance the available information with certified gluten-free products. The power in this simple example is available to product managers to harness, and in the process, shape an optimistic future.
U.S. consumers spend $557B/month on goods and services and preference for sustainable products drove 50% of CPG growth from 2013-2018. The incentive of that revenue, properly directed, can drive positive outcomes. According to the 2020 Edelman Trust Barometer, 56% of respondents felt capitalism does more harm than good. In fact, no institution (government, business, media, or NGO) was seen as both trustworthy and competent. Markets are well suited to fill this gap.
Product leaders can design markets that enable consumers to better understand where and how products and services are produced, building trust. Markets can, in turn, aggregate individual preferences for fair trade goods and services, more sustainable manufacturing and supply chain practices, and cleaner energy. If designed correctly, ethically managed companies can benefit directly from the alignment of these preferences and the derived aggregate revenue.
Product managers can use the power of markets to enable consumers to access goods and services that improve their lives, while also aligning their purchases with their values. Such markets can create revenue incentives for companies to respond with products and services that cater to consumer values, creating a virtuous circle.
Markets are central to our modern civilization. Now, they have the power to create a more ethical and sustainable future.
Matt Trudeau’s follow-up piece, The Power of Markets: Game Stop and Beyond, is now live on Products That Count. Read it here.
About the speaker
Serial entrepreneur, adviser and investor with experience building successful, disruptive technology startups. Industry speaker and panelist. Domain expertise in regulated financial markets, market structure, trading technology, electronic marketplaces and exchanges, blockchain and distributed ledger technology, cryptocurrencies and crypto assets. International experience in North America, Latin America, Europe and Asia spanning product, strategy, operations, and business development. 12 market/exchange launches in multiple jurisdictions (N America, Europe, Asia) and asset classes (equities, futures, precious metals, cryptocurrencies).