Hello everyone. I wanted to write this article in order to let some of you in on a little secret that many of the successful players utilize. This ideology is how some individuals are able to accrue enormous profits and turn-overs. It is also not immediately apparent like some other common tips such as “teamwork” and “specializing”. No, what I’m talking about, is Ordered Effects.
So what are Ordered Effects? Ordered Effects are the fallout of certain decisions we make, and how they impact the environment around us. People are normally highly aware of first order effects. I buy your Computer, I receive a computer and you receive 630ish. Simple enough. I will most likely hunt around for the cheapest computer I can find because that will allow me to save the most money and therefore profit the most? Right?
Let’s take this computer scenario a bit farther into Second Order Effects. Let’s say that I am a chip salesman. Vendor 1 sells his computers for 630ish each. Vendor 2 sells them for 660ish each. My initial instinct may be to buy from vendor one because cheaper, right? However, vendor 2 buys his chips from me whereas vendor 1 buys them from somebody else. By purchasing from vendor 2, I am increasing my own profits because I know he will replenish his stock by purchasing my chips. Make sense? Good. Because next we are going to talk about Third Order Effects.
Second Order Effects aren’t too hard to plan for. Obviously we want to support the vendors that buy from us because that promulgates our own sales. But what if I wasn’t a chip trader, but a wood trader? Wood has nothing to do with computers, right? Who I buy my computer from shouldn’t matter, right? Once again, wrong.
It all goes back to that supply chain. The computer vendor has to get chips from Supplier 2. Supplier 2 uses my wood to dig his gold for his chips which he sells to Vendor 2. By purchasing from Vendor 2, I am benefiting myself in the long run, because the Third Order Effect is that I am part of the supply chain for that computer.
It goes deeper then that. There can be fourth, fifth, even sixth Ordered Effects. Understanding how everything weaves together is how many of the skilled players form their trade alliances in order to maximize their profits. By carefully examining the Ordered Effects and understanding where your product fits in, you too can begin to make even greater profits and hopefully land your name on the leaderboard.
Best of luck to everyone and I hope my article was helpful to a few, if not many.