Economics of Commerce Economic of ommerce The New

$ ¢ The New

Adam Smith

The Wealth of Nations

Adam Smith

Father of Modern Economics

Ronald Coase Nature of the Firm

Ronald Coase

Total Cost of Ownership

Total Cost of Ownership

Coase received a Nobel Prize in Economics in 1991

A Word or Two about Negotiating Pricing

Robert Solow Nobel Prize 1987

Robert Solow

Economic Wealth Is Driven by Innovation

Innovation Matters

Robert Solow earned a Nobel Prize in 1987

Labor & physical capital 13%

Innovation & Technical

Change 87%

John Nash Nobel Prize 1994

John Nash

Grow The Pie vs. Fight Over It

Win-Win Thinking is Steeped in Research…

Command

Cooperate

Cooperate

Command

Buyer

Sup

plie

r

10

“Adam Smith was wrong….”

“Adam Smith said, ‘The best results comes from everyone in the group doing what is best for themselves.’

That is incomplete.

The best result will come from everyone in the group doing what is good for himself and the group. It is the only way we all win.”

-  John Forbes Nash

A Beautiful Mind

Source: A Beautiful Mind

Oliver Williamson Nobel Prize 2009

Oliver Williamson

Transaction Cost Economics

Style Matters: Be Credible, Not Muscular

“Muscular buyers not only use their suppliers, but they often ‘use up’ their suppliers and discard them. “The muscular approach to outsourcing of goods and services is myopic and inefficient.”

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Williamson received a Nobel Prize in Economics in 2009

Steven Levitt Author, Freakonomics and Super Freakonomics

Steven Levitt

Photo Source: http://www-news.uchicago.edu/releases/05/050428.levitt.shtml

The Power of Perverse Incentives

Perverse Incentives Are Real

“One of the most powerful laws of the universe is the

law of unintended consequences. This

applies to schoolteachers, realtors, crack dealers, expectant mothers….. ”

Perverse Incentives….

Dan Ariely Duke University

Dan Ariely

The Importance of Trust

Perverse Incentives Are Real

“We are adept at rationalizing

our pettiness”

Changing the Game

So just how do the world’s best redefine winning in business relationship?

Photo by Alison Levine

First and Foremost, They Have a Vested Mindset

And They Follow Five Simple Rules

Which One Do You Want Me To Share Today?

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•  P&G (Real Estate/Facilities Management)

•  Microsoft (BPO) •  McDonald’s (Supply Chain) •  U.S. Dept. of Energy

(Environmental Services) •  State of Minnesota Dept. of

Transportation (Construction)

Contact Me with Questions!

kvitasek@utk.edu www.vestedway.com