Richard Rumelt: recommendation

Transcript context

…That is an amazing insight. Is there anything you find most rich and valuable in terms of history periods, empires, stories that you find most connects as an analogy? Is there anything you find consistently is useful or is it just read as much as you can and you'll often find something in there? Yeah, the further back we go in history, the leaner. It's less rich. The best histories are written by the people at the moment it's happening or very soon after. History books and things like that are someone's opinion. But our own history here in the United States, we have pretty good documentation about what went on in the Indian War, why we had these big cycles of economic growth and then depression. We had depressions in 1840 and after the Civil War and there was another huge panic depression in the 1890s. [inaudible 00:49:26]. A lot of people don't even know that these things happen. How did they happen? And of course everybody knows about the Great Depression of 1929, 30's, but go back and how did that happen? When did that happen? And you'll hear professors opine about why it happened, but there's no agreement. The biggest economic fact of the last 150 years, you don't know why it happened. Go back and you can go online and look at the Wall Street Journal of the New York Times from that era and start in September of 1928 and just look at the front page every day, which I've done, and you can see it unfold and it's a surprise to everyone. There goes, well, Ford just laid off the people, but it's temporary. They'll hire them back. This economist says, well, it's a temporary this. It'll come back. And it gradually gets worse and worse and worse and there's no understanding of it. There's not a lot of analysis. And so you got Milton Friedman saying, oh, it's monetary. They didn't loosen up the money supply. You got other people saying things. But put yourself back at that moment in time and see what people saw and realize that no one understood what was happening and to form their own opinions. That's the diagnosis skill or that's the feeling. Now, let's suppose you fall off a boat. You're on a cruise ship and you fall and you're now in the ocean. It's terrifying and it's confusing and there's waves and there's water and I don't want to drown. And you look around and you see, oh, here's a floating piece of wood. Let me grab it. Wow, that feels a lot better. That's how it feels when you look at a confusing situation and the first idea of how to understand it comes to mind. Oh, yeah, I've got this piece of wood. Now I'm not drowning. But is it right? The most important intellectual tool we have is to think again, to say, okay, I came up with this diagnosis because I thought this and I thought this. Is there another way to look at this situation? Is there a bigger piece of wood over there than I can grab onto? That's the hard thing. When I looked at the Great Depression what I saw is the [inaudible 00:52:35]. So if you look at capital goods, most capital goods that the public buys, the adoption curve goes up like this, it peaks, and it declines and then it comes back up again. Because there comes a point where everybody who can afford one has got one, and then the new sales drop off. And in my mind, that's what I saw. peaks, and it declines and then it comes back up again. Because there comes a point where everybody who can afford one has got one, and then the new sales drop off. And in my mind, that's what I saw. 1929, everybody could afford a car, had a car, and the auto industry began... First signs of the Great Depression were in the auto industry. So that was my play that I read. Now I don't see anybody else writing about that, but that's the exercise and to exercise your mind about trying to understand complex situations. It's best to go back. You don't have to [inaudible 00:53:34] to the great Depression, but you can go and try and find situations that other people have to deal with and look at as much data as you can and to practice that. That's what education should be in a business school. It's not. They teach theories now because it's so much easier to teach a theory than intellectual structure.…

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