Business Daily from THE HINDU group of publications
Tuesday, Oct 17, 2006
Columns - E-Dimension
Fundamental principles of economics can be written on one page
What is the most important thing to do if you want to be a Nobel laureate in economics? "To be male," says Milton Friedman, judging from the past. "Only one female candidate met the standards the English economist Joan Robinson, who has since died," adds the 1976 economics laureate, in one of the essays included in the fourth edition of Lives of the Laureates from Academic Foundation (www.academicfoundation.com).
Friedman is topical, because of the similarity of his work with that of this year's Economics Nobel winner, Edmund S. Phelps. Both had criticised the Phillips Curve in the late 1960s. While Friedman laid stress on the role of inflation expectations, `Phelps emphasised that causation runs from unemployment to (unanticipated) inflation,' informs http://nobelprize.org.
Find Joan Robinson on www.economyprofessor.com. The site informs that in 1979, she became the first female fellow of King's College.
"Her lack of a Nobel Prize has been considered one of the saddest `oversights' of the modern economics profession or one of the most outrageous cases of deliberate neglect," rues the site. But adds defiantly, "The real `prize' is better than any Nobel." What's that? "While other prominent economists drop into obscurity, her legendary works have maintained their analytical and inspirational hold on economics."
Robinson not winning the prize "may well have reflected bias but not sex bias," postulates Friedman. On that there can be eternal debate. So too, there can be `oh-no's to the second and third generalisations of his - viz. being a US citizen and going to the University of Chicago. Yet, the 18 essays included in the book are engagingly readable.
William Breit and Barry T. Hirsch have edited these from the autobiographical lectures delivered by the laureates in Trinity University, San Antonio. In one of the many anecdotes that Friedman narrates, he speaks about a project on "the development of high temperature alloys for use as the lining of jet engines and as blades of turbo superchargers". His group worked on `the statistical design of experiments'. Friedman used `multiple regression' to relate `the strength of an alloy at various temperatures to its composition' and found that `a hitherto untried alloy would be far stronger than any existing alloy'.
But the strength of the finding had to be tested out. This meant hanging `a heavy weight on a specimen of the alloy', putting it `in an oven heated to a high and stable temperature', and measuring `how long it took for it to break'.
Friedman describes: "The best of the alloys at that time were breaking at about ten or twenty hours; my equations predicted that the new alloys would last some 200 hours. Really astounding results!"
Fine, but what did the test show? Alas, the samples broke in two to three hours. "Ever since, I've been very sceptical of the economic forecasts that people like myself and others make by using multiple regression equations," reads the moral of the story.
"The public has the impression that economists never agree. They have the impression that if three economists are in a room they will get at least four opinions," states Friedman. "That is false," he says. "If scientific issues are separated from policy and value issues, there is widespread agreement among economists, whatever their political views."
Friedman concludes his essay by declaring that economics is `a fascinating discipline'. He explains how: "What makes it most fascinating is that its fundamental principles are so simple that they can be written on one page, that anybody can understand them, and yet that very few do." Blessed, if you can count yourself among those few.
Where do great ideas come from?
After that expedition into Nobel insights, let us continue the search for brilliance, and find `why the most original minds in business win'. For, that's the theme of Mavericks at Work, by William C. Taylor and Polly LaBarre, from HarperCollins (www.harpercollins.co.uk). The success takeaways include these: `Being different makes all the difference. Nobody is as smart as everybody. Great leaders are insatiable learners.'
Do you have a vocabulary of competition that is unique to your industry, ask the authors. They cite as example Commerce Bank, which publishes a dictionary of `Commerce Lingo'. It has gyan such as, `one to say yes, two to say no'. Means?
"All employees can say `yes' to a customer, but must first check with their supervisor before saying `no'."
The essence of `retailtainment' that they practise is "the art of engaging customers and creating moments of magic so that every customer leaves Commerce with a smile."
In a chapter titled `ideas unlimited', the authors ask, "Where do great ideas come from?" Where else but from `big thinkers, the eccentric genius, the inspired founder, the visionary CEO'? No, it isn't necessary that the top man has to be `the smartest guy in the room', aver the authors. A `defining' responsibility of a 21st century leader is "to attract the best ideas from the most people, wherever those people might be."
Therefore, the most powerful indicator of a company's future share of the market is "its current position in the talent market for that industry." The key questions are: "Is it attracting more than its fair share of the best people?" plus "Is yours the kind of organisation that smart people are eager to work with? Is it a magnet for brainpower, wherever those brains may be located?"
Capturing the value
Read about TopCoder, `a for-profit, all-business twist on Linux and Apache' writing `sophisticated software for blue-chip clients such as ABB, Philip Morris and ING'. The company has, as members, about 75,000 programmers from 190 countries. TopCoder works this way: It signs a contract to build a computer application, and then "divides up the application into a collection of discrete software components, and then turns its members loose to create the code in an open-source style."
The company's CEO, Jack Hughes, says, "Everything we do is designed to allow software designers and programmers to capture the value they create. We are enablers of the individual."
The first-ever `India Code Jam' of Google was organised by TopCoder in 2005, one learns. It attracted 14,000 first-round registrants, recount the authors. "There was plenty of prize money at stake, but the 50 finalists won something even more valuable job offers from the hottest company in the world."
With `lots of smart people customers, engineers, rank-and-file enthusiasts' entering the organisation, what gets unleashed is more of `bottom-up innovation', while top-down arrogance grows less. `Open style of leadership' means you `walk in stupid every day' the way Dan Wieden, an advertising legend, puts it. "It's the hardest thing to do as a leader, but it's the most important thing. Whatever day it is, something in the world changed overnight, and you better figure out what it is and what it means."
Charged-up reads, even as the week hurtles towards Diwali.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | The Hindu ePaper | Business Line | Business Line ePaper | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2006, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line