What’s a tiddler? I had to look it up. It’s a very small fish or, in the case of an article I recently read in The Economist, it’s the “little guy”. The little guy is thriving in, of all places, a segment of the investment banking industry. The Economist reported in the December 6-12 issue that small investment banks are now taking away merger and acquisition (M&A) business from large financial institutions.
This is quite a change from when consolidation and large institutions were once considered unstoppable, according to The Economist. In the midst of too-big-to-fail, the smaller firms are earning more trust with more personal relationships. Meanwhile the larger firms, including “the disastrous amalgam of Citigroup”, are struggling with involvement in too many financial areas, resulting in conflicts of interest.
What’s significant about this development is it’s not only a solution for too-big-to-fail — because these small firms can fail and not burden tax payers — but a potential trend for business. Investment banking is pretty far removed from a discussion about co-ops, but a focus on smaller organizations can offer economic alternatives as do co-ops. If a lesson is being learned in the investment banking industry, then perhaps there is a broader trend.
This is good news for anyone interested in a new economy. Small provides social benefits. Although these small investment firms earn large profits, and reported by The Economist because of it, a smaller size can benefit the organization, the customer, and society. And if we think small and more locally, there might not be large profits, but the payoff can be community development. “No great private fortunes can be gained from small-scale enterprises, yet its social utility is enormous,” says E. F. Schumacher, a pioneer of smaller economics who wrote Small Is Beautiful in 1973.
Making economies more local is likely to have a more small-scale focus but not radical change. Bill McKibbon states in his book Deep Economy: “Shifting our focus to local economies will not mean abandoning Adam Smith or doing away with markets. Markets, obviously, work. Building a local economy will mean, however, ceasing to worship markets as infallible and consciously setting limits on their scope.”
A leader in fair trade, Equal Exchange, the co-op often extolled in this blog, provides support for small farmers. Their motto is Small Farmers, Big Change. Starting in 1986, Equal Exchange has been challenging large agribusiness. Equal Exchange is now working with 40 small farmer organizations worldwide. They are part of a movement of alternative traders that seeks to preserve small farms in the food supply chain. As their website states, benefits result as Schumacher suggests: “Our longstanding relationships allow us to secure the best crops, while continuing to develop innovative programs in collaboration with co-ops, from crop diversification to women’s leadership development.”
So, we’re seeing tiddlers distrupt markets. How far will it go?