The Markets to redesign
Recently a friend came by and we talked about academic life and what we want to achieve so I thought I’ll blog about it.
There are 3 markets I wish to redesign in my lifetime. The first, which many who follow my work know, is to do with personal data, which, to be honest, is not a redesign issue, but that the market doesn’t exist. With so much personal data collected as we move into IoT and so many sets of personal data sitting in every corporation, privacy and security/vulnerability risks is making personal data an externality that is fast becoming a negative one. That externality could be best internalise into a market of its own but there are many complex legal, technical and ownership issues to resolve before it can happen. The HAT, after 3 years in research , is finally rolling out the capability so hopefully the market will be formed in due course.
The second, is the manufacturing business model. This has irked me for awhile. I felt that in a consumer driven world, the durable things we use every day should be owned; but the things we use over a period (e.g. Baby bassinets) could be leased and the things we use once in a while could be shared. However, as long as manufacturers earned more from consumers buying ownership, they will never have an incentive to build things to last, to reuse materials, build things in a different way. So all the talk about sustainability and being green is disingenuous. The fundamental business model clearly isn’t aligned towards it. What I wanted to do is to redesign the market so that manufacturers earned more from shared things than they earned from owned things. This is possible, because if you think about the people who want a hole in the wall (to use an old marketing example) there are probably more people out there who want holes in walls, who might be willing to pay for holes in walls, than can be fulfilled with the drills sold and owned. In other words, with the right economic model (e.g. Revenues based on usage), latent demand for use could well supplant revenues from drill ownership. Of course there are complexities to solve and it’s both a coordination as well as an information asymmetry problem but in an age of digital platforms, drones and deliveroo people transporting stuff around town, they can be solved. So a bunch of us went and did something about it. We applied for a grant to prove and prototype it – summary of the grant bid can be seen here. If we win this, it might be fun to set in motion something that might really help this planet by redesigning and realigning the incentives in the manufacturing market of durable goods.
The final market I hope to redesign in my lifetime is the pharmaceutical market. To explain this in its simplest form, how can we incentivise pharmaceutical companies to profit more from well people than from sick people? This actually means an integration of two major markets. The market for Heath and life insurance and the market for drugs. You can imagine if pharmaceutical companies took revenues from well being insurance when a child is 7 and if that is scaled, how the funds could be used to fund their research and innovation but they are incentivised to ensure the child is well, so that drug use is reduced.
Of course it is simplified, and the reality is often very complex, but technology is making many things that were impossible before now possible which is what applied market design economists like me spend a lot of time thinking about. Alvin Roth is a great inspiration for many of us, so if you want to know why he won the nobel last year, read here. Or read the article from the man himself on the art of designing markets and how he redesigned the kidney marketplace. The only lament I have is that there are so few who choose to study this field, and even less willing to apply to the real world. Alvin Roth is a great inspiration because he is not only theoretically strong in economics, he was willing to apply his knowledge to change markets.
