Finance Book

The development of management theory exists on a continuum where each new insight leads to either an updated theory or a new theory. Yet as society changes we often falsely assume that older theory has no bearing in modern life. We seem to forget that these theories are based in basic human needs that don’t change. What does change is the expression of those needs and how we go about fulfilling them.

Reviewing old management theory is important because these older theories often are simpler and cut to the problem more quickly. They don’t jumble up all the relevant information with educated ramblings. They prefer to get to the root of the matter so that great understanding can happen. The more understanding we have the better ability we have to achieve our business goals.

Let us take Adam Smith as one example. Adam Smith, around 1776, observed that human beings tended to conserve energy and in so conserving energy they had to have a challenge or motivating force. In his work entitled An Inquiry into the Nature and Causes of the Wealth of Nations he wrote, “In every profession, the exertion of the greater part of those who exercise it is always in proportion to the necessity they are under in making the exertion.”

What does that mean? It means that we don’t like to exert energy fulfilling a need. However, we will exert energy based on the necessity of fulfilling a need. For example, if we really want something bad enough we will be willing to exert enough energy to achieve it. Have you ever met someone who was motivated in life? It is probably from a need to be recognized and appreciated.

As this need becomes stronger we are more likely to exert additional energy. Let us say that you were a tribesman from some African village. If you aren’t that hungry you probably won’t work that hard. Yet as you get closer to starvation you will exert more energy hunting, fishing, and getting more food. The same principals can be applied to housing (big houses), money, dating and more.

Nearly a hundred years later Henry George, around 1898, states this disposition of men to seek the satisfaction of their desires with the minimum of exertion is so universal and unfailing that it constitutes one of those invariable sequences that we denominate the laws of nature.”

George is proposing a law of nature that energy exertion is dependent upon the intensity of the need or desire. Apply this concept to your business. Employees aren’t likely to work very hard if the majority of their needs are fulfilled. For example, if they don’t have drive to achieve more than an average employee they aren’t likely to work that hard. Some employees have no desire to achieve (need) and are not going to work hard to maintain the status quo. Recruit people who want to succeed in life and you will get more work out of them.

By: Murad Ali

Okay, so the other day a good friend of my at our Think Tank asks me if I had read any good economic books lately, not a question anyone would generally ask, after all, why would anyone go out of their way to read an economics book? Well, I am one, and the book I recommended to him, is one I would also recommend to you:

“Econopower: How a New Generation of Economists is Transforming the World” by Mark Skousen; Published by John Wiley and Son, Hoboken, NJ; 2008.

This book demonstrates how everything we see, buy, own, do and dream of is indeed governed by economics. Our decisions, our religions, or politics, is all about economics. Education, science, history, law and finance, he show evidence of the reality that economics is the way we do, whether it is about the individual, the leaders, societal changes or the movement of America at a national level. Even more interesting is the fact as the author shows that the US is exporting these ideas, the same ideas initiated by Adam Smith.

Health Care, Education and even crime all are governed by economic theory in one way or another, perhaps even without reading this book you can understand the similarities through a little thought and understanding. This author takes that and develops it into a deep and interesting researchical study of all we are, all we have built and all we think that we know.

And just to let you know this author is no dummy, he formerly was an analyst for the CIA, wrote for Forbes Magazine, past President of the FEE (foundation for economic education), he also has a PhD in economics from George Washington University. The man has credentials and the information in the book and the thinking and philosophy is extremely interesting and worthy. I recommend this book to anyone.

By: Lance Winslow