The First Law of Recipronomics

You may be asking, “What does this strange word mean?” As you probably know, economics is the social science that explains the production, distribution, and consumption of goods and services. Reciprocity refers to a shared state of mutual dependence, action or influence. So, recipronomics combines the two to focus on the social outcomes of economic behaviors through their cooperative relationship.

You likely remember Newton’s Third Law of Motion from high-school. The basic principle of this law is that every action has an equal and opposite reaction. This is a great model to explain the predictable response of the physical world to force. A modification of Newton’s Third Law of Motion becomes the First Law of Recipronomics which is a simplified exploration of human behavior expected from stimuli, in this case economic actions. If you watch the news, listen to the radio, talk to friends or have access to the internet you are aware that we are in the midst of a serious (r)evolution. This is rich ground to explore the economic and social interactions that brought us to this point and figure out where we go from here.

The actions of a handful of individuals in positions of power with short sighted greed and self-interest have contributed to the global financial crises. Of course there are many influences into the 2008 economic meltdown and following massive mortgage problems and bank failures, two names in the financial services sector illuminate the spectrum of scandal: AIG and Madoff. The economic impact of the meltdown has been tightened credit markets, low consumer confidence and extensive layoffs. Rising unemployment combined with reduced law enforcement budgets has lead to increased crime. What are the expected equal and opposite reactions to this? Outrage, desperation and in some pockets increased kindness and generosity reaching out to those who are suffering. A significant point of outrage has been AIG executive bonuses from government bailouts. Individuals are facing serious financial troubles and those who contributed to creating the troubles continue to profit (at their expense, again), in what world does that make sense? Apparently to some it does, however the short term gains are heavily outweighed by the long term ill will they create. What if Madoff had dinner every evening with those whose lives have been affected by his Ponzi scheme to hear their story? Even better, what if the would be Madoff’s listened in on these conversations? I am sure behaviors would change.

CONSIDER: Every business has had to make adjustments to the current economy. There have been a lot of cut-backs and re-organizations that have been necessary to allow businesses to continue. As your business has adjusted, how much consideration has been given to the long-term effect of your decisions (both the decision itself and the implementation) on your employees, customers, partners and other stakeholders? For example, if you asked your employees to make sacrifices did they have options on how to proceed that allowed them to feel valued and a part of the solution in the process or were the sacrifices dictated from the top without employee buy-in? How do you expect employee loyalty to be affected when the economy picks up? Consider for all relevant stakeholders from their perspective.