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What is "Baumol Cost Disease"? (Baumol' s Cost Disease)
The Baumol cost disease is a phenomenon proposed by the American economist William Baumol. After dividing the economy into two major sectors, he found that the prices of the commodity sector continued to decrease with technological development and economic growth, while the prices of the service sector continued to rise.
For example, the prices of refrigerators, air conditioners, washing machines, mobile phones and cars are getting cheaper, but at the same time, the price of listening to a concert or lecture is getting higher and higher.
How do companies change during the epidemic prevention period? Only to become a new winner after the recovery!
Enlightenment of "Baumol Cost Disease" to Managers
Thirty years ago, in the hair salon downstairs, the maximum cost was 30 yuan; for an electronic watch, the asking price was 1,200 yuan. But today, when we went downstairs to cut our hair, the barber would charge 500 yuan for only a few cuts, and only 600 yuan for an electronic watch online.
Why do some things become more and more expensive, but some things become cheaper and cheaper? This phenomenon is called "Baumol Cost Disease".
Senior Editor of The Economist Ryan. Ryan Avent explained that with the development of economy and technology, the productivity of some industries has increased a lot. For example, the Automobile Industry Society makes higher-quality cars at a low cost and at the same time makes more cars.
But as far as the service department is concerned, the waiter in the restaurant has not changed from serving 6 tables an hour to 600 tables; the barber can’t help 6 people at the same time; the dentist can only deal with one mouth at a time.
However, because of the dramatic increase in productivity, the remuneration of the commodity industry has increased; if the remuneration of string musicians does not increase with it, string musicians will change to become software engineers, and no one will perform string music.
In other words, the increase in productivity in the "commodity" industry also increases the opportunity cost of personnel in the "service" industry. Therefore, the remuneration of the service industry must increase in order to retain people, just like today’s string quartet has no difference in productivity compared with 100 years ago (the time it takes to perform a Mozart piece is the same), but today The salary of string musicians is higher than 100 years ago.
Therefore, in these service industries where productivity growth is slow or not even growing, wages will usually gradually rise, which is also reflected in the selling price.
What are some examples of "Baumol Cost Disease"? How to avoid it?
Do you feel the contradictions of the "parallel world" around your life?
On the one hand, technological products have become more and more powerful, but their prices have continued to decrease. TVs are getting bigger, mobile phones are getting faster, movies and music are more and more choices, clothes are getting cheaper, and there are more choices in life, which makes us feel more and more wealthy.
However, on the other hand, it feels lacking. Shopping has become cheaper, repairs have become more expensive, shampoos have become cheaper, haircuts have become more expensive, etc. In addition, parents’ education bills have also become thicker, schools, talent classes, babysitters, tutors, etc. .
One of the reasons for the imbalance is related to the "Baumol cost disease."
So, how to avoid Bowmore's cost disease?
Although Baumol believes that there is no cure for cost disease. And in the next 30 years, services related to the quality of life will be changed and expensive, and mass-produced goods will become cheaper and cheaper.
However, as artificial intelligence technology matures, robots are likely to replace part of the work, which means that technology will continue to improve the production efficiency of goods, and at the same time, there are opportunities to transform the service sector.
Therefore, the main topic of future technology is how to "innovate in the service industry", such as education, medical care, and government agencies. Whoever can reduce the labor cost of the service industry may be more valuable.
But after all, some working machines are difficult to replace, and most people will not be willing to spend thousands of dollars to listen to a concert performed by robots. The "Baumol cost disease" may be difficult to cure.
LINE may be the first informal and inexplicably "digital work platform" adopted by most Taiwanese companies. I think this may be far beyond the imagination of the parent company of LINE. LINE is not designed for real-time communication and collaboration at work. It lacks basic project management functions such as file management, calendar management, assignment of roles, etc. However, regardless of the size of the company, it can be seen that "Lai" will relieve all worries.
The popularity of LINE reflects the lack of awareness of "information flow management" within the organization in Taiwanese companies.
There are only a few companies that clearly regulate the principles and timing of employees' use of email, instant messaging software, work collaboration software, and meetings and discussions, causing internal information to flow around the organization. Useful messages are mixed together and become noise.
The root cause of the LINE pandemic is that company managers are too obsessed with "personal efficiency"-in order to ensure that their instructions can be quickly disseminated and receive immediate feedback from subordinates, what is faster than LINE group messaging? By looking at how many "reads" there are, you will know how well the message is delivered. There is nothing more at ease than seeing all members "read"! As a result, many managers did not realize that in order to maximize their own efficiency, they disrupted other people's schedule planning, resulting in overall inefficiency.
Above, I call it the lack of literacy in using digital tools. In the process of digital transformation, managers and employees lack the literacy in the use of digital tools. In addition to common problems such as inefficiency and full of information security vulnerabilities, it also allows managers to over-magnify their desire for control, causing the younger generation of workers to hate this kind of work environment.
Especially for those companies that rely on small, fast-reacting teams to respond to changes in market demand, every sudden and vague LINE command is undermining the autonomy of the team.
There are a lot of problems with LINE, so let's try the new tool! There are many excellent instant communication platforms and collaboration platforms specially designed for team work in modern times, such as Slack, Monday.com, Asana... etc. These online platforms provide tools for managing tasks, tracking projects, setting time limits, and teamwork. They can be widely used in R&D, sales, product and customer management and other operational activities.
The clean and simple visual design allows members to list all project deadlines through the timeline, use the calendar to record items, and evenly distribute work... so that the entire team can instantly grasp the progress of the project. It is even easier to find members who are behind schedule, or "free riders", to make the team status transparent.
Some platforms have special functions for upper-level managers and stakeholders to follow up on projects. In addition, coupled with video conferencing, the problem of remote collaboration is solved.
Everything is so beautiful, it seems to be the antidote to eliminate the chaos of LINE. However, before your company executive says to introduce these new-generation platforms, please sort out the current internal information exchange methods in the company, and review the literacy of the members in the use of digital tools. When importing these tools, be sure to make them complete and complete. Solid education and training. Otherwise, we often see that these new tools have become digital relics, and everyone has returned to the embrace of LINE.
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