Happiness and Income Inequality: closely connected

 

     The image shown on this posting is from a study by Harvard Business Review researchers. It graphs the "overall well-being" of people in a country versus the income inequality of a country. Another way to compare is to use the "happiness index" of countries versus a listing of "income inequality" (this listing is actually for income equality -- to save me the need to reverse the list) for the countries. There is one outlier (Israel) but, otherwise, the top 15 countries on the happiness index (except for Iceland which was not listed in the happiness index that I found) were the same as the most income equal countries. I am not a statistician but I'm pretty sure that is very significant; minimum of 13 at the best of both lists.

     So, why should this be? The HBR researchers had their own ideas as shown in their paper. I prefer to take the approach of going into greater detail of what the lists mean. The income inequality list uses an index called the Gini index. The higher the number, the greater the inequality. However, a simpler way (which is part of the Gini index) is to check the concentration of wealth in a country.

     To make it easier, let us say that the country of TGT (target) has 100 people. That will mean that each 1% represents one person. If 1% (one person) of the population controls 20% of the wealth, that is very out-of-balance. This would mean that the remaining 99 people have 80% of the wealth -- or an average of .81% for each of the remaining 99 people. The person at the top would control 24.7 (20 / 0.81) times as much as each of the bottom 99 people.

     But, it is actually worse because the distribution of wealth is in an exponential distribution. If the top one person controls 20% of the wealth then it is likely that the next four people control another 20% of the wealth. Thus, the top five people control 40% of the wealth and each of the remaining 95 people controls 0.63% of the wealth -- or the top person controls 31.7 times as much as each of the bottom 95 people. Ah, But it doesn't stop there with an exponential spread. It would be likely that the next 10 people would control another 20% of the wealth. We now have 15 people controlling 60% and the remaining 85 people controlling 40% of the wealth. This equates to each of those 85 people controlling 0.24% or the top person now controls 83 times as much wealth as each of the bottom 85 people.

     So, who cares? How does this affect the happiness index? If that 0.24% is enough to meet all of the needs of those 85 people then it probably doesn't (but remember that the exponential spread has not stopped -- the bottom 20 people probably have VERY little money). But how realistic is that? It may be true that money doesn't buy happiness but having enough food, clothing, shelter, and hope is a very important ingredient towards being able to be happy.

     And that is the basic idea. The more that the wealth is squeezed into the "hands" of fewer people, the more people who are left with too little. The happiness index is based on the happiness of all 100 of the people of TGT. The greater the squeeze (concentration of wealth at the top) the greater number of people who don't see a way to easily live, let alone be happy with their lot.

     Ok, so who cares if people are happy? Ah, that is a philosophical and morality question and that does not have a single answer for everyone. Personally, I would greatly prefer (and am willing to have much less excess beyond what I need) to have more people happier. But, that is not a universal outlook.

     Beyond the philosophical and morality aspects, there are practical aspects. Lots of unhappy, desperate, people may eventually reach the point where they don't feel they have anything to lose trying to redistribute (possibly violently) the wealth so they can live. Also, that concentration of control does not inherently mean that that top 1% are all going to wisely make use of their economic control. Right before the Great Depression, income inequality was at its highest level within the past 100 years. Coincidence? Maybe -- I can't juggle the multiverses to find out but it is certainly suggestive and, looking at the Gini chart (yellow dots) shows that income inequality has already bounced back up to the level of about 1940 -- considered to still be part of the period of the Great Depression.

     Maybe not everyone cares about happiness for all but most would prefer to avoid another economic collapse. And when control of so much is in the hands of so few, it only takes a couple of mistakes for an avalanche of despair to happen.

Evolution: Change, Mutations, and Leaps

 

     Organisms change. They may be living or a business but they do change. The word "evolution" has a rocky history and is certainly not approved by all people. But I don't know of a better word which encapsulates the process of continuous change to fit the environment. So, evolution it is.

     Since the period of time that Charles Darwin took his journey in the Beagle and Gregor Mendel worked with his peas (and others unrecognized before, and after, them), people have noticed that things change. Not just geological change with volcanoes, floods, earthquakes, and other changes to the earth -- but changes to life. Moths change color to adapt to pollution in the air. Birds change their migration paths due to changes in the Gulf Stream current or whether El Niño is in effect. Foxes start having white fur when their range is pushed up into colder, snowier, territories.

     Changes in life take place at the genetic level. With the Human Genome Project, CRISPR, and other continued understanding, and manipulation, of the genetic code, exploring the mysteries gives us more answers. (Although, like almost every other area of knowledge, each answer generates multiple new questions.) One thing that has been found is that the genetic code has duplications, or redundancies, that appear to each facilitate the same growth process (often protein creation). Another thing found is that there are dormant sections that don't appear to do anything. How both of those work, and why they exist, are part of the continuing set of new questions.

     We recognize change when it affects behavior, or appearance, or some other quality that we can notice. Before it reaches that stage there are probably changes to the genetic code that are NOT observable. The only thing we can really say about such changes is that they are not immediately fatal. If the changes were fatal, then they would not propagate to the next generations. Once these non-fatal changes accumulate to the point of being noticeable, then the next step of winnowing is how it affects survival in the environment.

     Note that human technology has changed, and continues to change, how this survival mechanism works. We have more people needing glasses, or other physical aids, because we now have the technology that allows people to use their other attributes and still survive with their challenges of birth. Being severely myopic in the 16th century while living in the forest was likely soon fatal. It isn't a big thing in modern society.

     Each change in the genetic code is an aspect of mutation -- having something appear which was not there before. We also have changes in the individual genetic pools due to haploid combinations -- receiving different genetic material from the female and from the male and combining the material.

     When changes accumulated to start showing blue eyes rather than brown, they were noticeable. But sometimes the changes are VERY noticeable and these are leaps -- or quantum jumps in evolution. The changes were proceeding under the surface but now they surface. Although it is rarely (if ever) as dramatic as those presented within the "X-Men", once noticeable it can be considered a small change or a large leap.

     As a parent of two children on the autistic spectrum, I have read a lot of the (often) contradictory information that exists. One thing that appears to be (often) true is a change in the neurological configuration of the brain. Some groups call this, and the behavioral challenges often associated with it, a "disease" but I don't look at it that way at all. It might be an evolutionary jump -- such as suggested in the books "Darwin's Radio" and "Darwin's Children" by Greg Bear. Certainly, advances pushed forward by people of history who are thought (perhaps erroneously) to be on the autistic spectrum lend weight to that theory. These are people such as Albert Einstein, Anthony Hopkins, Isaac Newton, and Nikola Tesla.

     As for business. Changes can be deliberately encouraged or the result of smaller changes under the surface. Just as in genetics, smaller changes (which are non-fatal) can accumulate until something very different shows up.

Normal: A non-universal word

 

     In Japan, a well read feature in the newspaper used to be (I do not know current status -- it may be the same) to give the results of a survey of habits and methods. For example, do you brush the top teeth first or the bottom teeth first? Do you brush in a clockwise manner or a counter-clockwise manner or up and down? Do you wear socks to bed? Do you put your right sock on first or your left? Things like that.

     A Japanese cousin came to the US with a friend in the 1980s and they had a guidebook -- a standard guidebook that most Japanese tourists used. It had a checklist for each tourist destination for them to check off as they did, or saw, an event. If they met another Japanese tourist, they would compare checklists.

     Some cultures value the homogeneity of the group more than others -- but all have some degree of concern about "normal" behavior. This goal of conformity is not applied equally. In the UK, an unusual person of "upper class" is considered to be "eccentric" while working class people find the label of strange or crazy applied to them.

     So, normal is primarily a matter of blending in -- when it matters what others think about you. In many countries, being rich means NOT caring about what others think about you. In class-stratified societies, that will apply to the higher level classes.

     What is the value of being considered "normal"? Well, by definition, you are a part of a larger group who are more-or-less similar to you in thoughts and behavior and thus have a ready-made support group. If you are part of the primary "normal" group, then most people will be in that group and it will feel quite comfortable.

     It is also quite possible to be part of a non-primary "normal" group. The primary group, once again by definition, will consider you to be "different", "crazy", "abnormal", possibly even "bad", but -- similar to the primary group -- you will also have a group of people more-or-less similar to you upon whom you can rely for support and verification.

     Of course, this leaves the ones who are quite different and do not have any easily reached support group. But, within that scattered group of individuals they can still consider themselves to be "normal".

     What about those who are truly aberrant -- defined by an agreement within the groups of professional psychologists -- who may not have any support for their behavior? As long as their behavior only affects themselves, there is no harm in considering them to be in their own individual group of "normal".

     (It is a totally different thing if their behavior affects others or intrudes upon others' abilities to live their lives.)

Decluttering: When Less is More

 

     Once upon a time (about 8 years ago), I wrote about something I called "the houseboat principle". In sum, it was the idea that -- on a houseboat -- every time you brought something onboard you had to get rid of something. Otherwise the houseboat would eventually sink. Just like within newspaper/media topics and fashions, some ideas float back to the surface on a periodic basis.

     As part of our ongoing downsizing to prepare to move into a more permanent retirement  place, we continue to strive to eliminate the excess. However, excess is difficult to define and even more difficult to do something about. Why?

     The true core reason (I believe) is an underlying fear of change. There are excuses. These include "I might use that again in the future", "I paid a lot of money for that", and "I remember when I got that, it was at a store with great aunt Lulu".

     For different people, reasons for reluctance will vary. I fall primarily (I believe -- hard to clearly see oneself and our motives) into the "I might use that again ..." category. I can successfully argue myself out of the other categories. I have already spent the money so I won't be getting it back -- and it makes no difference whether I have given it to someone else who did NOT pay for it. I have recently recognized that taking a photo of something that triggers a memory can provide a much simpler, and less space consuming, trigger for the memory -- thus, I can take a photo and get rid of the object.

     As I said, I fall into that category of "I might use it again". And the hardest part is that it is SOMETIMES true. I have picked a book, that I last read 20 years ago, off of the shelf and read it again. I may actually make use of that pipe wrench I purchased for a plumbing repair 15 years ago. I have had to repurchase items that I know that I have given away in the past years. I have dozens of cables -- some of which would only be useful on equipment that hasn't been made in 20 years -- but I did need one ONCE. All true. Relevant? I am not sure.

     I have boxes of things in the garage that I have not opened, and accessed, for 25 years. How likely am I to use those contents again? Do I even know what exists within the box?

     But why? Why bother? There are people who are quite content to keep renting storage facilities for the next batch of overflow materials. For us, the prime reason is knowing that we will have less space in the future. But that also means less to move -- saving time, energy, and money. It is also difficult to argue with the likelihood that you can find something more easily looking through 30 items than looking for it among 300 objects -- no matter how well organized (even in electronic files).

     How about you? Do you have boxes you haven't opened in 10 years? Are you running out of room? Did you need a loan to afford a sufficiently large moving truck? What advantages are there for you to have lots of stuff around that you don't use? What advantages can you see in NOT having them around?

Daily Encounters: Remote/Hybrid thought work and the water cooler

 

     One of the things that gets mentioned a lot as the downside of people working remote, or hybrid, is how do people get to connect, discuss, brainstorm, etc. on an impromptu basis if they aren't face-to-face? This seems to be a very scary question for many managers and executives.

     Well, yes. Change is scary for most people. Change means things don't work the same, they can't be approached the same, new skills may be needed.

     In the old schema, groups met around the "water cooler" (figuratively speaking -- it might be snack machines or the company cafeteria). People had impromptu discussions in the restroom. During face-to-face meetings, people speak up and others can use facial expressions and reading of body language to get immediate feedback. Someone is not around? Put a post-it on their monitor so it must be removed first (no guarantee that they'll actually read it). Walking down the hall and seeing someone reminds you of their expertise and a problem you currently have and you discuss it. Of course, it is much different if the need is to physically work together in the laboratory or out on a construction site.

     Yes, these old scenarios worked for those for whom it did work. And they are the familiar, comfortable, situations in which you expect to communicate.

     But, guess what? These scenarios "worked" because those were the interactions being evaluated. People have diverse communication styles. An introvert may find it very difficult to ask a question in a meeting -- and wouldn't even think about asking someone, whom they met in a hallway, a question. What if you are a different gender and you would not be welcome entering the restroom to join that discussion? Some become invisible, because of personality or because of cultural biases, within a meeting. Certain people -- extraverts and alpha employees -- find it easy to put their ideas out into the pool. But not all.

     The basic reality is that the old ways don't work universally well. Yes, they do work -- for some (in some companies, possibly many). But there are many for whom they don't work and never have.

     "But that's the way it's always been done." A fact -- and impossible to contradict. But it does NOT mean that it always worked well or that it worked for everyone.

     Within all these scenarios, we are talking about communication. How can everyone be heard and acknowledged? How can people notice others and ask those questions, or have a discussion, to speed up work or start on the path to the next bleeding edge product? Perhaps new remote/hybrid viewpoints can be of great help in re-examining our communications and making them better?

     We seem to be at a point of business where we have various Cxx positions that are created, change, and disappear. I will not say that yet another executive is needed but someone, or some small group of people truly familiar with the company, its products, and the way it works needs to constantly examine how people interact and how can it be improved. Some methods are most easily used face-to-face. Other methods are independent of location. It does not work to force ALL to use the same methods and conduits. People are unique. They learn differently, think differently, and communicate differently.

     There must be alternative conduits encouraged and facilitated. As such are utilized, location becomes less important.

Performance Evaluation: Does location matter?

 

     One aspect of remote/hybrid work that is of concern to a number of companies and/or their managers is "how do I know my teams are doing their work"? This is more of an emotional question than it is a quantitative question. The work is the same, the people on the team are the same, the objectives are the same. Evaluation of work -- while perhaps requiring use of different skills and methods -- remains the same whether in the office, remote on a desert island, or a hybrid of home and office.

     Evaluation is composed of two parts -- commitment and results. A commitment is something that is agreed to by all parties. One party CAN state what the end result, and time frame, should be but, without agreement by all parties, no reasonable evaluation can be made. (Perhaps, within this type of situation, the evaluation can only be made about the person, or team, mandating the commitment.)

     Once upon a time, I was given a project to do, with time frame, for something that had not been done before. After three weeks of research, it was obvious that the work could not be done in the original time frame. I reported this fact to my manager who was terrified to tell his manager (this person had most of the laboratory terrified -- whether they reported to them or not). I got the project done well and on time according to my revised estimates. My evaluation was not good. It was not a reasonable evaluation. A good way to destroy morale and effectiveness within an organization.

      One vital part of the commitment, to which ALL parties agree to, are the set of acceptance criteria. This is used to evaluate results. If the results satisfy the set of acceptance criteria then it was done well. If they do not, then deficits need to be evaluated to determine what the team could have done better or could do better in the future knowing such information. In this part, communication is key. Delays can be worked with -- but only if all parties are aware of the delay. Technical problems can be worked on with adequate communication and allocation of resources. With proper communication, there is no one "to blame" but it is possible to determine how well teams, and individuals, did within the process.

     Note that, within the above description, location of people and teams does not arise. That is because the location is not important. Nor is the process important -- waterfall, agile, lean six sigma, ... Communication is important. Honest evaluation and discussion is important. Location is not important.

     This applies to known current projects. What about future projects? Brainstorming? And, within current projects, how is communication facilitated, to keep the various people and teams working well with one another. That is another topic.

Remote/hybrid work: When change is forced upon industries

 

     The recent pandemic hit the world hard. There were the horrible direct effects of death and lingering illness. A colleague lost his mother and an uncle to the disease and many others grieved. But there were also many indirect effects. Industries that were associated with travel ground to a halt. Most industries found themselves in the position of being required to learn how to work remotely.

     Remote work was not created by the latest pandemic. Remote workers have existed for a long time. It has long been used and discussed but, without impetus to management for change, little had changed over the years.

     Within the "cottage industries" (textiles made an extensive use of such), people in their own homes would be assigned work that they were expected to make of a certain quality within a given time. The cottage industries extended the square footage of the factories by making use of a network of physical spaces.

     Beyond the cottage industries, a certain degree of remote/hybrid work has existed for many other areas that require, or allow, movement from place to place as part of the job. These job categories include customer support, article writing/journalism, sales, and other mobile-requisite tasks.

     Prior to the latest pandemic, however, little shifted from year to year.  The recent pandemic forced most businesses into a remote/hybrid situation. Forced change usually means difficult, and uncomfortable, change.

     What were the results? Some industries had travel an integral part of their business and they were hit hardest. Factories, which required people to be present, had difficulties. Newly created (not the ones that had already been in existence) remote education had very erratic results (my 3 sons' colleges were quite inept at handling such). Restaurants shifted to delivery but suffered from personnel problems. Many industries in which the product wasn't physical shifted to a "cottage industry" model. But the economy survived -- it did not all collapse. Most businesses found that they could survive, and some even thrive, with a remote workforce.

     Survival does not necessarily mean thriving. Could the company do as well, or better, in a remote situation? In some cases, the answer is yes as measured by output and revenue. What about long-term? Can they continue to grow, innovate, and produce in a remote situation? What about a hybrid situation? Is that an improvement or does it end up with some benefits, and some problems, of each?

     There isn't a single answer for companies. Much of the overhead pain of transition has already been taken. It is a good time for serious analysis and discussion; it is unlikely to be beneficial to try to quickly retreat to old models.

     An important part of evaluation and consideration is feedback on how well the process is working. In my next blog, I will talk about factors on judging success.

The Peter Principle: Levels and Ceilings

 

     Lawrence J. Peter published his "The Peter Principle" back in 1969. It was considered, in part, "tongue-in-cheek". Not fully serious. But, like the Dilbert views of management, there is still a lot of truth to the idea. At the base, this principle says that a person will rise to a level in which they are no longer competent. If taken to extreme, this says that a lot of positions within management will be filled with non-competent people. The only competent ones would be the ones still in the process of rising to their own, individual, levels on incompetency.

     In order to weigh the realities of this, it is important to understand the reasons people get promoted and how they actively try to achieve promotion. People get promoted because of time, connections, rewards for accomplishments, and demonstration of required skills. People actively achieve promotion primarily via self-visibility and networking.

     The factor of time is especially important within strongly bureaucratic organizations. Government positions are often of this nature. There are strictly defined employment "levels" and it is expected that people will rise from one level to the next within a specific range of years. Thus, some rise more quickly and others more slowly but all are expected to rise in a steady fashion. This has some merit in that it is possible to gather applicable experience as years progress (it is also possible to avoid gathering experience and, instead, make use of methods of avoiding actual work).

     Connections can include nepotism but it also can include general networking. In the case of general networking, it usually means being brought in to a position from outside the company rather than being promoted into it. Within certain types of businesses, having a large active personal network may be considered to be an attribute useful to the company and a factor for promotion.

     The factor of awards for accomplishment seems to have merit. A promotion usually includes an increase in salary, perks, and title. With these, an increase in authority and recognition usually occurs. The problem with this route of promotion is that the skills, for which the person is rewarded, are not necessarily the skills needed in the position to which they are promoted.

     The other major path for promotion is demonstration of required skills. This requires active participation by current management -- preferably the person to whom one reports. Tasks are delegated, skills learned, and eventually the person can "step into the shoes" of the person to whom they report. These required skills can be obtained in other ways but recognition, and rewarding, of such becomes more difficult without active management participation.

     The factor of time just requires a calendar and the ability to check it occasionally. Other paths require that the person be noticed. This varies a lot between different work cultures. In some cultures, a person can explicitly self-promote -- "see what I've done, can you assign me to that, are there any positions opening up for promotion?". Doing this can be difficult for many people. In other cultures, active self-promotion can be counter-productive as it can be seen as not being part of the team.

     So, with these ways of being promoted, what about the "Peter Principle"?  Both time and awards have considerable danger of the person not having the skills needed for the level to which they are promoted. Developing the skills SHOULD, inherently, mean that the person is qualified for that next level, It often may do such but there is also the possibility that the skills learned are not the skills needed for continued promotion.

     With such caveats, it looks like the Peter Principle can still often take place. There is nothing wrong with a person hitting a ceiling -- as long as they are qualified for the position in which they rest and if they are not actively prevented from acquiring the skills, experience, and ability to continue to rise. The latter often occurs within company cultures and may make it difficult for the culture to change or to accept all those who can positively contribute to the value of the company.

Clients vs. Customers: just words or a real difference?

 

     Most languages have a fluid vocabulary. A word can mean something in one year and -- in another year or ten years or fifty years -- have a different meaning. Sometimes the meaning can even flip; a "good" word can become a "bad" word. Some languages, such as French, have monitoring organizations to attempt to control the language. Of course, people will use language as they will no matter what the dictionary says.

     When my business partner and I had our company, one of my many hats was as head of client support. This was quite apart from customer support. Most of our clients included repeat business over a span of ten to fifteen years. We did not want to sell them something that would fill our pockets but not meet their needs. I like to think that this was, at least in part, because of our desire to do "the right thing", but it was also looking at the relationship from a long-term point of view. A client, for whom we did our best, became a referring client and a long-term, repeating, client.

     We had an excellent percentage of repeat business -- around 90% of our clients either referred some other company to us or purchased more products at a later time. And, within the world of software, people that we worked with at one company often moved to another company and, when need arose, they thought of us to supply their needs.

     This did not always work out, of course. We had clients who "disappeared". They had problems and, instead of reaching back out so we could work with them to eliminate the problems, they huddled together and failed. I'm sure that we all know both individuals and companies who take this path. In one case, this happened but it happened deliberately because they wanted a scapegoat for poor product decisions that they had made.

     90% is still a good record for a company. But what about customers? Would treating them as customers have really made a difference? It depends. If a person uses both words as largely synonymous then there is no difference. But if a customer is a one-time transaction and a client is an ongoing relationship then there is definitely a difference.

     More than thirty years after having co-founded the company, I am still in touch with some of our client companies and people who have worked with them. We are no longer actively supplying product -- but we can still offer suggestions, and advice, when asked.

     There have been no regrets that we approached each company as a client.

Odds are for the future: a brief chat about statistics

 

     Something happens. Something unexpected. A person near you says "what are the odds of that happening?" Well, since it has already occurred, the answer is 100%. Without a parallel universe, the chances of it NOT occurring no longer exists.

     In statistics, this situation is expanded by the concept that the past has no bearing on the future. If the odds of something occurring are 5 to 1, then after the event has occurred in the past then the NEXT odds of something occurring are still 5 to 1.

     Every time you flip a coin (with a fair, properly balanced, coin) the odds are 50% heads 50% tails (yes, with that very small possibility of landing on edge left out). If you toss a coin and get heads seven times in a row then the next time you toss it the odds are still 50% heads/50% tails.

     Now, if you anticipate the future, you can determine the odds of getting heads seven times in a row (1/2 * 1/2 * 1/2 * 1/2* 1/2 * 1/2 * 1/2 == 1/256) for the future. But every time you flip the coin, the odds for that flip remain the same.

     The phenomenon of people expecting the past to affect the future exists in many people -- good luck/bad luck. It exists in all addicted gamblers (the scientific gamblers are a different matter). That lucky streak just HAS to affect the future. (It doesn't.) I had an uncle who won the state numbers lottery (not a huge amount at that time -- but significant) and he put the money all back into the lottery system until he no longer had any net winnings.

     There are situations where the odds do change with time. This is true for actuarial tables. Your odds for living to a certain age changes with each year you live. If you live until you are 75, your odds of living until 85 (10 more years) are better than the odds of you living until 85 from the age of 55 (30 more years). But, be assured, the insurance company has it well planned out such that, on average, they are not going to lose money. Those tables require ignorance of the future to follow the actuarial odds. Robert A. Heinlein's story "Life-line" indicates a way to beat the system -- but it may be the only one.

     There are also situations where the perceived odds -- what we think exists -- are not the same as the statistical odds. Professional gamblers are aware of these situations and, by gambling calmly and without emotion, succeed in taking advantage of them -- over the long run. This also happens in other areas of investment and helps certain investors increase their likelihood of beneficial returns.

     All venture capital firms rely upon both experienced analysis and spreading their risks. Five investments of 10K still gives a good profit if two are totally lost, two give back 15K each, and one brings back 30K.

     "May the odds be ever in your favor."

Back to basics: Supply and demand

 

     The economic theory of capitalism has, as one of its basic aspects, the idea of supply and demand. This blog may be "old news" to many -- but not to others.

     The amount of product (supply) at a given price tries to reach a balance of demand and willingness/ability to pay. Under many conditions, this works as a self-maintaining mechanism. There are quite a few cases -- sometimes called "edge conditions" -- in which it does not work well. These cases include newly introduced products, pandemics, shortages, monopolies/cartels, and other cases where the balance gets thrown off rapidly.

     No company wants to sell a product below the cost needed to manufacture and provide. However, there are cases where this may be to their advantage. One is when demand has gone down so much (temporarily or permanently) that they have the cost of storing a large amount of inventory from which they don't expect a profitable return on investment. Another is as a "loss leader" -- making the price attractive to attract potential buyers of other, higher profit, items (often done by grocery stores). The final one mentioned here is that of forcing the competition to quit. A company with "deep pockets" (money available in reserve) can force their competitors to stop making competitive products. Usually this is legal but will often leave widespread bad feelings.

     Newly introduced products will require development, marketing, and promotion. The creator of the products hopes that these costs will be covered by eventual sales. But, at the beginning, they will likely need to sell below cost while building a market. When Honda introduced the higher-end Acura line, they priced the cars very close to that of their Honda line -- increasing the price as the brand-name recognition developed.

     Pandemics are special cases where both shortages and surplus can exist -- even at the same time. When most people stopped driving and stayed at home, the need for gasoline plummeted and the price of gas went down (not to the same extent). But fewer trucks on the road, and ships and trains moving product, and fewer people to staff the fields and factories can (and did) lead to shortages.

    Shortages indicate less supply than potential demand. In addition to pandemics, it can be part of a situation where production is reduced on purpose (oil, for example), because of disease (bird diseases causing reduction in chicken numbers), because of environmental problems (droughts, floods, unexpected hot or cold temperatures, ...), and deliberate reduction in cases where there is little competition (arson of facilities and other methods). There is usually no inherent requirement to raise prices when supplies are not enough to meet the demand. But, with only some product available to a larger set of potential consumers, how is the final market determined? By lottery (this does happen for certain products -- like the PS5, for example)?

     More often, the company increases the price. The higher the price, the fewer people want/are able to buy the product. At some price, those willing and able equal the amount of product. Record profits can be made and the supply and demand balance. For optional products, this works well. For required items (such as food), lower income people are greatly penalized. Note that, for longterm production shortages,  it is expected that other companies will start manufacturing (not true if it is caused by limited resources) and the competition will force prices back down as the supply increases.

      Monopolies and cartels allow companies to control the supply and price directly while eliminating (through agreements, buyouts, or less legal methods) competitive pressures. In the US, many laws were enacted following the Great Depression hoping to bring such under control.  A desire to increase or decrease such laws and the proactivity of enforcement of such laws depends upon current political vision. Other than those laws, business practices and prices are (in the US) controlled solely by the companies.

     In theory, the number of products at a particular price will (eventually) balance against the number of people willing and able to purchase at that price. But there are many detours around theory.