Economics in One Lesson

While not really classified as a leadership book, Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics elaborates on one lesson which is of great importance to leaders.

Henry Hazlitt explains his one lesson as this: "The art of economics consists in looking not merely at the immediate but at the longer effect of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

I would contend this lesson is as applicable to leadership as it is to economics. Hazlitt believes his lesson requires a long, complicated, and dull chain of reasoning. He thinks such a chain of reasoning is difficult for many people to follow and so they give up. They are looking for the short, immediate, and visible result.

Such a view will lead to bad economic decisions. I believe it will lead to poor leadership decisions, as well.

Throughout Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics, Hazlitt illustrates time and again how economic policies that consider only the immediate effect on one group of people have detrimental effects for the long term on most other groups of people.

His examples are stunningly simple, yet, evident in every day life all around us. Hazlitt's insights clarify many of the apparent inconsistencies I see in organizational and government policies. Rather than inconsistencies, these are merely the natural outcomes of short-sighted thinking intended to positively impact one interest group.

Hazlitt explores the apparently unintended consequences of taxes, tariffs, price-fixing, rent control, minimum wage control, unions and inflation. None of them appear appealing under his instructive review. Even the groups who benefit in the short-term from such policies are seen to suffer in the long-term.

The lesson for leaders is: Consider the likely long-term impact of your decisions on all groups.

Power Shift: Alvin Toffler

Scanning my bookshelf for a volume I recently read, I spied Powershift: Knowledge, Wealth, and Violence at the Edge of the 21st Century by Alvin Toffler. My eyes rested on the book and I recalled the foundational concepts I learned from reading it.

One key paradigm I adopted after reading this book I have used nearly everyday of my life, both consciously and sub-consciously. Buried deep in the buried deep in the middle of the book (p. 285, I still have a bookmark inserted here) in a chapter titled "Meta-Tactics," is a brief discussion on the use of data and statistics. Here, Toffler states these four points which have been pivotal for me:

1. Smart people demand to know more about the sources and reliability of the data upon which information, knowledge, and conclusions are built.

2. Smarter people take into account the channels through which the data and information flowed and who might have had a chance to "massage" them.

3. The smartest people do both of the above, and also question the assumptions and even the deeper assumptions upon which the superficial assumptions are based.

4. Finally, imaginative people, whom Toffler suggests may be the smallest group of all, question the entire frame of reference.

These four principles have provided me life changing insights into how and why I do things and how and why others act as they do.

Powershift: Knowledge, Wealth, and Violence at the Edge of the 21st Century was first published in 1990. I bought it at a used bookstore about five years later. It's still as applicable today as it was 20 years ago when it was first published.

The premise of the book is that power is shifting. In the early days of man, physical power was most important. You could control people and things using your physical strength.

Later, with advent of wealth, power could be purchased. Now the person with money could purchase and use the physical strength of others to control and rule over people and things.

Eventually, knowledge became power. The person with knowledge could manipulate situations to gain wealth. Think "insider trading."

Toffler desires to help us understand how the world operates today where knowledge is power. He claims knowledge can be used as a substitute for land, labor, and/or capital. In addition, knowledge saves time.

Most important is knowledge about knowledge (see the four points above).

Two-thirds of the book is devoted to understanding how to create, store, retrieve and manage "knowledge about knowledge" for competitive advantage.

Interestingly enough, at the end of the book Toffler provides the reader 25 foundational assumptions upon which the book is built. For example, "20. Knowledge is even more maldistributed than arms and wealth. Hence, a redistribution of knowledge (and especially knowledge about knowledge) is even more important than, and can lead to, a redistribution of the other main power resources."

The Bibliography contains 592 sources. In addition, the end of the book Notes section is over 40 pages long. Highlighting the quality of the research that is evident through out this book!