The Economic Value of Self-leadership

Would you like to be worth more?
Would you like to leverage the effectiveness of your people?

Assuming your answer is “Yes”, the ‘how’ to do these things emerged from a chance meeting between two people, passionate about their topics.

My passion is about how we can lead ourselves and positively influence others. Bart Remes, an Economist, is passionate about the insight that what human beings do, want, see, expect, believe and create is what determines the value of corporations and markets.

Bart explained to me that in mainstream economic theory, people don’t matter – well not individuals anyway. In Macroeconomics decisions are made of large aggregated numbers, and even in Microeconomics it is assumed that 1) people always make rational decisions and 2) have all the market information they need to make those decisions.

In my experience these two assumptions are ludicrous. When you talk to or observe people you quickly realize that people are not logical, they are psycho-logical! People act for a large number of emotional reasons, some of which are completely irrational. And, when do people have all the information? The recent BREXIT vote for the UK to leave the European Union is a great case in point.

“The best argument against democracy is a five-minute conversation with the average voter.”  – Winston Churchill

As a leaders of ourselves and others this situation presents up with a huge opportunity to leverage efficiency and effectiveness. Just as a mineral in the ground has no value until it is mined and transported to the market, human potential is almost worthless unless it is directed towards focused and purposeful action.

This is where Self-leadership (Bryant & Kazan 2012), how people influence themselves to achieve their objectives, meets the praxeology of Austrian Economics (Hazlet 1946). Praxeology is the study of human action. Action means purposeful behavior and not  reflexive behavior.

Purpose, Intention and Decisions

When we have a purpose we have a long term goal. A purpose often drives and intention, a specific will to act. Problems arise because 1) people often have unclear goals or intention, and 2) when they choose to act, the means they choose my not be effective.

Which is why there is a maxim, “The road to hell is paved with good intentions”.

To increase effectiveness, we need to make better decisions about what actions to take, but before we examine human decision making, we need to consider some insights into human nature:

1. People want more even if they don’t need it
2. People prefer more than less
3. People want it now rather than later
4. Things have no intrinsic value; people assign value to things

Points 1 to 3 are self-explanatory. Just consider the success of the fast food industry and the phenomenon of ‘up-sizing’.

Point 4 is interesting because we have been ‘brainwashed’ to believe in a fixed price. A crude example for how variable the value of a thing is would be if you had and a million dollars and glass of water – which would you give away?

As you read this article in your office or home, the answer is obviously the glass of water. However, if you were dying of thirst in a desert and you were asked to make the same choice, your answer would be different.

People make decisions everyday – but are often unconscious about the values that they are placing on each choice.  A self-leader checks their decisions by asking:

1. Do I have all the facts?
2. Am I weighting the evidence equally or ‘cherry picking’ the facts that I like?
3. What do these facts mean? Could they mean something else? Am I considering the facts in the right context?
4. What am I assuming? What if this assumption wasn’t true?
5. What conclusions am I making?
6. What do I believe? Am I being prejudiced or biased?
7. What is the correct action to take?

( From Self Leadership – How to Become a More Successful, Efficient, and Effective Leader from the Inside Out, page 47)

If we train ourselves and our people to make better decisions our purposeful actions will be more efficient and effective.

Value and Price

Homo-Sapiens have dominated this planet through their ability to trade. We created money to overcome the limitations of the barter system and facilitate trade over vast distances.

For something to be money it must have no use, and its only value is what it can be exchanged for. And as we have already discovered, value is all in the mind. An example would be, indigenous people signing away land in exchange for beads. In addition, value changes with time, place and supply. So value is decided at the moment of exchange.

So here’s how you increase your real and perceived value and leverage the value of your team:

1. Increase output
2. Increase timeliness
3. Increase accurate decisions
4. Decrease mistakes

So what price do you put on yourself, your leadership, your product or your service?

Insights

Even with access to the Internet and a Google search – nobody has access to all the market information and so decisions are based on limited and, or local knowledge.

At any moment – an individual (the ‘man on the spot’) can have special knowledge of circumstances that are not known to others. But, if that individual is constrained by a lack of autonomy, imposed or of their own choice, then no purposeful action will be taken. This lack of action could cost the organization or cost lives as in the case of the Piper Alpha oil platform explosion.

At the same moment the individual may be unaware of events beyond their horizon that actions could impact. It is therefore important that leadership communicate the larger purpose and direction that they want actions to go.

Economics solves the problem of this lack of complete information by assigning a price to each resource. As supply goes down, the price goes up. If quality reduces so does the price, unless the supply is limited.

Self-leaders are more valuable because they take responsibility get as much information and use their autonomy to make decisions to take purposeful action.  Self-leadership empowers people to adapt to the current circumstances whilst maintaining a strategic focus towards the larger goal.

Now put a price on that!

Related posts:

Self-leadership meets Economics Leadership Qualities – Do you have them? THE HUMILITY BARRIER – Are you sabotaging your own success?