The Fear Greed Curve

I can't take credit for the following concept, and I can't quite remember who said it previously. However, it makes such sense, and is far more understandable to the average person than supply-demand. The world economy is driven by the fear-greed curve.

Gasoline Prices got you down. Want someone or something to blame. It is so easy to blame big, nasty corporations who want to rip of consumers, neighbors across the continent, and even the world, who are driving gas guzzlers, or the Bush administration for not taking some action (the action would depend on your political point of view.)

However, I propose that the real culprit is the natural way of mankind. We are driven by many things, but two of the most powerful are fear and greed. The major corporations are afraid to invest in new equipment, exploration, etc., because they are afraid the price will come back down to $12 a barrel. However, as the price stays high, some of the competition (be it companies or countries) get greedy, and try to increase market share by lowering their price. Some then become fearful that they will lose market share or end up with mountains of inventory, so they lower their price also.

As the price goes up, the greed factor also plays in. Some companies or countries artificially raise the price to see what the market will bear, and are all too willing to take advantage of shortages, real or imagined. This only works for a while, because at some point, somebody is going to start adding capacity to maximize profit (greed.)

Your customers act the same way on a smaller scale. If you realize that these emotions underly some of their thinking, it may effect your strategy for dealing with them. Think about it. Comment about it.