Booz & Company’s “Thought Leader Interview” Series: Sylvia Nasar

Sylvia Nasar (Photo: © John Blais)

Here is the introduction to an interview of Sylvia Nasar by Rob Norton as part of “The Thought Leader Interview” series featured by strategy+business magazine, published by Booz & Company. To read the complete interview, check out other resources, sign up for free email alerts, and obtain subscription information, please click here.

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The renowned author discusses how the great economists uncovered the basic truth about progress, prosperity, and productivity, and the reasons you should be careful which ideas you listen to.

Many of the powerful forces that help business, hurt business, and shape our civilization today stem directly from the theories formulated by economists in the past, put into practice in the real world. That is the subject of Sylvia Nasar’s new book, Grand Pursuit: The Story of Economic Genius (Simon & Schuster, 2011). And yet, as Nasar would be the first to acknowledge, the field of economics has suffered from a lack of respect since its formative years; Scottish essayist Thomas Carlyle dubbed it “the dismal science” in 1849. Today, when economics makes headlines, it’s typically as a whipping boy (“Why Economists Failed to Predict the Financial Crisis”) or as part of a sales pitch (“Prominent Economists Support Changes to Medicare”). Add the fact that economics has been delivered to undergraduates over the past 50 years in an off-putting package of mathematical equations and unintuitive charts, and it’s no surprise that most people tend to see it as a difficult subject producing dubious results.

But economics has in fact made profound contributions to our understanding of how society functions. Nobody has done a better job of bringing its story to life than Sylvia Nasar. Launching into her narrative via Charles Dickens and Jane Austen rather than Adam Smith and David Ricardo, she shows how some of the most important ideas of modern times came together in London in the mid-19th century, as Britain entered an era of unprecedented economic growth — the first time in human history that the living standards of average people began to rise significantly. The key insight around which the book revolves is that business productivity drives economic and societal improvement, and the book’s narrative shows us how an idea like that can be developed, debated, and accepted over the decades as empirical evidence mounts and the scholarly consensus builds.

Along the way, Nasar rights some perceptual wrongs of conventional economic history. One hero of the tale is British economist Alfred Marshall (1842–1924), who hasn’t always gotten the respect he deserves. Grand Pursuit reveals what Karl Marx was wrong about (practically everything) and why (intellectual laziness); it paints rich portraits of neglected thinkers such as prototypical feminist Beatrice Webb (1858–1943), who formulated the idea of the social safety net in the 1890s, and American economist Irving Fisher (1867–1947), who presciently discovered portfolio theory, countercyclical monetary policy, and index numbers, as well as inventing the Rolodex and founding the company that became Remington Rand. Nasar also provides carefully reported assessments of the achievements of such better-known economists as John Maynard Keynes, Friedrich August von Hayek, and — the last in her line of profiles — Amartya Sen, whose work she sees as pointing to new directions for the field.

In Nasar’s view, economics has progressed to the point where it can explain definitively how to avoid the kinds of economic catastrophes that produced the Great Depression. All the nations that have grown steadily in recent years, she believes, are following the basic economic playbook that began to take shape as Marshall visited the factories of Britain’s Industrial Revolution, whereas countries that ignore those lessons are doomed to failure. But the dismal science has less to say about how to balance the roles of governments and markets or how to determine the optimal level of taxation. As examples, she cites the United States and Sweden, two countries with very different policy and fiscal profiles, but very similar — and enviable — standards of living.

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To read the complete interview, please click here.

Sylvia Nasar, a former economist herself and a writer for Fortune and the New York Times, is the author of A Beautiful Mind (Simon & Schuster, 1998), the best-selling biography of mathematician and game theorist John Nash, later adapted into a hit Hollywood film. She is also the John S. and James L. Knight Professor of Business Journalism at the Columbia Graduate School of Journalism. She discussed her research and conclusions with s+b at Booz & Company’s New York office in May 2011.

How to Know Which Kind of Mentor You Need

Here is another valuable Management Tip of the Day from Harvard Business Review. To sign up for a free subscription to any/all HBR newsletters, please click here.

Mentors help you advance in work and life. But don’t wait for someone to take you under his wing. Seek out people who can help you. The first step is to figure out which mentor will best meet your needs:

The co-mentor. This can be anyone—a colleague, a friend—who needs you as much as you need him. Find a co-mentor if you have a specific skill to learn and something to teach in return.

The remote mentor. This is someone outside your organization who can offer objective advice. You may need a remote mentor if you are looking for a fresh perspective and you’ve already exhausted closer resources.

The invisible mentor. You don’t have to have a personal relationship with this mentor. You learn from observing and following her example.

Today’s Management Tip was adapted from Guide to Getting the Mentoring You Need. To check out the 43-page booklet and join the discussion, please click here.

Also, you may wish to check out the new book, Management Tips from Harvard Business Review, by clicking here.

 

Mass Affluence: A book review by Bob Morris

Mass Affluence: Seven New Rules of Marketing to Today’s Consumer
Paul Nunes and Brian Johnson
Harvard Business Review Press (2004)

Lead, Follow, or Get Out of the Customer’s Way

Nunes and Johnson help to increase our understanding of an especially powerful trend in contemporary marketing: creating or increasing demand for customized products or services that have been mass-produced primarily for affluent consumers. This is a complicated subject in that, as recent research clearly indicates, many of these same products and services also appeal to less affluent consumers. This is precisely what Michael Silverstein and Neil Fiske discuss in Trading Up: The New American Luxury in which they refer to “products and services which possess higher levels of quality, taste, and [key word] aspiration than [other] goods in the [same] category but are not so expensive as to be out of reach…[trading up to products and services which] sell at much higher prices than conventional goods and in much higher volumes than traditional luxury goods and, as a result, have soared into previously uncharted territory high above the familiar price-volume demand curve.”

According to Nunes and Johnson, what is needed is “an approach that considers the facts about mass affluence and delivers a comprehensive view of how companies can change their marketing strategies to capture the value created from greater consumer affluence. That is why we wrote this book; that’s what we’re attempting to provide.”

Indeed they do, and with discipline and eloquence. Their material is carefully organized within four Parts: The New Rules of Positioning, The New Rules of Designing Offerings, The New Rules of Customer Reach, and then a final section which responds to the question “What’s Next?” Then in their Epilogue, Nunes and Johnson share their observations and suggestions with regard to “Reenvisioning an Industry” (i.e. the jewelry and watch business), applying to it the “seven new rules of mass marketing” previously introduced and discussed in the first chapter.

Long ago, Warren Buffett suggested that price is what we charge and value is what the buyer thinks it’s worth. I was reminded of that as I read Part One in which Nunes and Johnson explain “The New Rules of Marketing.” These are not their rules nor are they even rules per se. Rather, they are strategies that the competitive marketplace has already determined are more appropriate to new realties. For example:

Old Rule: Avoid middle-market positions between low-cost and premium.
New Rule: Seize the new-middle-ground position, above the rest of the conventional offerings and below the ultrapremium solutions. (Please see Figure 2-1 on page 33.)

Old Rule: Produce less-expensive versions of luxuries to sell to the masses.
New Rule: Introduce new models of ownership that make a wealthy lifestyle, and even real luxuries, affordable to the masses.

According to Nunes and Johnson, traditional mass marketers can “play by the new rules” (i.e. can capture the spending of the moneyed masses) without sacrificing the former core mass market. How? Give customers the chance to spend more by offering new premium versions, adding on product upgrades and differentiated service levels to existing offerings. Also, honor customers with the recognition they desire by creating status levels that richly reward willing-to-spend customers in all of the ways they wish to be recognized. Also, offer the right price to each customer by using effective pricing to achieve differential margins based on qualities that aren’t intrinsic to the offering. Customers may not always be right but, ultimately, their perceptions ARE market realities.

They are asking different kinds of questions now. For example, “What does this [watch, handbag, dress, set of golf clubs, etc.] say about me?” Moreover, they are less concerned about a luxury item’s purchase price than they are about ROI that includes enhanced self-esteem in their own eyes as well as in others’. New realities do indeed require different (if not “new”) strategies by which to respond to them. Nunes and Johnson offer several in this book, anchoring each within a context of relevant information and appropriate examples. Well-done!

Those who share my high regard for this book are urged to check out James H. Gilmore and B. Joseph Pine’s Markets of One: Creating Customer-Unique Value through Mass Customization, the aforementioned Trading Up, James B. Twitchell’s Living It Up: America’s Love Affair with Luxury, Virginia Postrel’s The Substance of Style: How the Rise of Aesthetic Value Is Remaking Commerce, Culture, and Consciousness, Gerald Zaltman’s How Customers Think: Essential Insights into the Mind of the Market, Joseph Epstein’s Snobbery: The American Version, and Bill Stinnett’s Think Like Your Customer: A Winning Strategy to Maximize Sales By Understanding and Influencing How and Why Your Customers Buy.

 

“Don’t Be So Stupid, Stupid” – A Reminder For Those Seeking Talent

Bumblers keep creating crises that didn’t need to happen.
George Anders, The Rare Find:  Spotting Exceptional Talent Before Everyone Else

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Have you ever done anything stupid?  OK – maybe you haven’t.  But I have.  And, I suspect, if your answer is not “yes,” then you are either a liar, or you’ve got a pretty unrealistic view of your own life history.

I think that one way to describe the challenge of life is this:  quit being so stupid!

As I read The Rare Find, my mind drifted back to an idea I read from Neil Postman.  (Postman is probably best known for his book, Amusing Ourselves to Death).  In his essay The  Educationist as Painkiller, he ponders the purpose of education.  And his conclusion, simply, is that education can’t make a person smart — but it can keep a person from being so stupid.  (The essay is available in pdf format here).

Neil Postman

Here are a few quotes from Postman’s essay:

This is the strategy I propose for educationists—that we abandon our vague, seemingly arrogant, and ultimately futile attempts to make children intelligent, and concentrate our attention on helping them avoid being stupid.
The educationist should become an expert in stupidity and be able to prescribe specific procedures for avoiding it…
…everyone practices stupidity, including those who write about it; none of us is ever free of it, and we are most seriously endangered when we think we are safe. That there is an almost infinite supply of stupidity, including our own, should provide educationists with a sense of humility and, incidentally, assurance that they will never become obsolete.
stupidity is reducible…
Stupidity is a form of behavior. It is not something we have; it is something we do.

So, why did I think of this essay as I read The Rare Find?  Partly because of this:  after massive amounts of money spent developing processes for finding and hiring the right people, every book and article I read seems to say that we have not gotten very good at it.  And that includes hiring all up and down the organizational ladder.  (As I write this, RIM {BlackBerry} just replaced its two CEOs with a new “savior.”)   And the statistics pretty much prove this.  Here’s a brief summary from Anders’ book:

In 2010:  only 18% of HR Managers say they are “winning the war for talent.”  All the rest stated they were either “losing ground” or “stuck” with a process that was not successful in identifying exceptional talent.

So, we make stupid hires; and then those people hired do stupid things.  Avoiding such stupidity would be a great, massive step forward, and save a boatload of money and a whole lot of anxiety and despair.  And as the quote at the top of this post affirms,

Bumblers keep creating crises that didn’t need to happen.

The Rare Find provides one remedy:  part of this stupidity is that we trust our “gut” way too often, when our minds, if we could simply focus them, would scream out some much needed warnings.  The Rare Find describes just how hard it is to actually listen to a job candidate, to actually look at work and life history, and then to avoid being “wowed” by the pizazz of a person’s personality.

In other words, if we could focus our minds, we might not make such stupid decisions – in hiring, and in our own life, at work, and everywhere else.

Maybe “don’t be stupid, stupid” should be our mantra…