Tuesday, January 5, 2016

Moving Targets

Think of the economy as a river. A river is water that is moving from a higher elevation to a lower elevation. If anything gets in its way, the water moves around it or, eventually, through it. There’s no thought process involved, or the act of a higher power. Water is driven by gravity to find the lowest ground it can.

Economies are likewise driven to be efficient. Producing the largest quantity at the lowest price. Why? Because human beings demand it. There is almost no end to what human beings want, and therefore producers want to produce as much of something as they can, and consumers, who have so many desires, want to pay as little as possible. Ultimately, the marketplace is where consumers and producers meet in the middle.

Hoover Dam, photo by Ansel Adams
Human beings can erect dams to manipulate the flow of water. Note that I said manipulate, not stop. The water cannot be stopped. Hoover Dam forces water through channels to spin dynamos, but it doesn’t stop the water from flowing. Other dams force the water into fields to irrigate crops, but they do not stop the water.

Likewise, human governments can erect regulations, taxes and other such things to manipulate an economy. They can make something artificially cheap or expensive, but eventually the market will work around those artifices to put that product at the “natural” market price.

I’ve recently read an article about innovations in healthcare. The supply of healthcare is, like a river, finding a way around artificial impediments. Because the old way of delivering healthcare, via individual doctors and surgeons, has been made artificially expensive with cost-sharing “health insurance” and government mandates, producers and consumers are finding a way to “meet in the middle” with medical groups, do-it-yourself treatment aided by handheld computers (let’s stop calling them cell phones – they’re really so much more), health clinics, etc. At the moment, the victim of this market-driven innovation is medical office space. Medical office space was designed to serve the old market of doctors and patients. At the moment, it is being negatively impacted by the change in healthcare delivery – a change initiated not by the free market, but by large public and private institutions.

Will we, at some point, return to a more traditional model? Perhaps. As healthcare delivery moves away from the very institutions that sought to dominate it, they will have to adapt or die. In the meantime, the medical office will have to adapt to the new way of doing things. It may do this by clever redesigns to serve medical groups and health clinics, or by re-purposing itself to other uses.

Thus the ebb and flow of commerce continues. Keep this in mind when dealing with developers and building owners. The consumer (in this case the potential tenant or buyer) is always a moving target, and forces much larger than they are in the driver's seat. Spend some time understanding the macro-economy to better understand the micro-economies you deal with when you represent a landlord or tenant.

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