Product Details

• Amazon Sales Rank: #206364 in Books
• Published on: 2006-04-06
• Binding: Paperback
• 272 pages

Synopsis
This is the essential book on why some businesses fail...and how to avoid it. From the best-selling author of "The Death of Economics" and "Butterfly Economics", this is a ground-breaking look at a truth all too seldom acknowledged: most commercial and public policy ventures will not succeed. Paul Ormerod draws upon recent advances in biology to help us understand the surprising consequences of the "Iron Law of Failure". And, he shows what strategies corporations, businesses and governments will need to adopt to stand a chance of prospering in a world where only one thing is certain.

Customer Reviews

MIsses the mark
Ormerod's central idea in this book is that conventional economic theory does not explain why firms fail. By "conventional economic theory" he seems to mean Marshallian microeconomics together with general equilibrium theory. The fault lies, he says, with unrealistic assumptions about utility-maximising behaviour in perfectly competitive markets. (Wow! Who would have thought? ROTFL)

He then goes on to examine models of extinction in biological systems and failure of firms in economies and shows they both exhibit a power law of failure. Further he discusses, without mathematics, some simple stochastic models of extinction and failure and shows that they are a good match to reality. Eventually the nub of his argument is reached. Some stochastic models of enterprise failure are accurate under certain assumptions about the behaviour of economic actors - but these assumptions are quite different from the assumptions made in conventional economics. In particular they are not consistent with the conventional assumption that economic actors are have perfect knowledge and it is the absence of perfect knowledge that dooms any form of planning, micro- or macro-economic to ultimate failure.

Astonishing! ROTFLMAO

It is patently obvious that the assumptions of conventional economics are wrong. Various economists have said as much several times in the latter half of the last century. Ormerod even quotes 2002 Nobel Laureate economist Vernon Smith's words, "We do not understand why markets work as they do." That nobody can possess the perfect knowledge assumed in the perfectly competitive market was pointed out in the 1940's by Hayek. Schumpeter also criticised unrealistic assumptions in the same vein. IMO, anyone wanting to explore these themes would be better off reading Hayek's "The Road to Serfdom".

On a more positive note, Ormerod's comparison of biological and economic systems is interesting. It provides a taster of the comparatively new interdisciplinary field of complexity theory. Alas, however, a taster is all that you get. The book would be IMO much the better for some material setting such comparisons in the broader complexity theory context. I suspect that he eschews this because it would require more mathematics than he was prepared to put between the covers (presumably because any sight of maths puts potential purchasers off). This, IMO, is intellectual timidity. The stochastic models that he describes are actually quite easy to understand (I recall playing with similar models in third form maths!). A few more diagrams and the odd spot of algebra (relegated if necessary to an Appendix) would IMO be a significant improvement. The overall length of the book could then be kept the same by a robust precis of the rest, which IMO takes twice as many words as necessary to say what it does. I also agree with the reviewer who thought the final chapter a big let-down.

Overall, for me, this book lacks balance and for that reason alone misses its mark.

A really, really long winded explanation of basic probability theory
prehaps its just me, but this book seemed to be 246 words of long words and little substance. The first half was a weak critique of economic theory. The second half was a very very long explanation that the bigger an extinction (both in biology and within the economy), the less likely it was. i remember learning a similar thing in primary school so came as no great shock.

poor.

counter intuitive findingings
Paul has written a fascinating and entertaining book on the probability of failure and develops what he calls an extinction model. As a strategist working within large corporations I found the application of these ideas to the world of work a novel and practical use of the 'extinction factor'.

He goes on to examine the factors that prevent extinction, one major finding was that only a small increase in the application of knowledge and information (5%) in the formation of Strategies will improve survival chances by 40%. Further improvement towards 10% and survival chances increase exponentially. The book uses many cases to explain how this is achieved.

One other counter intuitive finding was mild tendencies at the individual level within organisations create marked differences at the level of the corporate system as a whole. This has enormous implications for the world of organisational development.

I now use many of the statistics and contexts Paul provides in material I use with senior executives.

Excellent book.