Wednesday, January 5, 2011

Why Not ? By Barry Nalebuff and Ian Ayres

Why Not?

- How to use everyday ingenuity to solve problems big and small

By Barry Nalebuff and Ian Ayres

I am recounting an interesting story by Robert Fritz of The Path of least resistance fame on Thomas Edison. Circa 1878, when Edison decided to create the electric light, it was already well known that electricity could produce light. The task before Edison was to find the material that would not burn out and instantly consume itself. He began reading everything that had been written on the subject, and it is reported that he filled two hundred note books with jottings and diagrams. All scientists before him had followed a certain process. They looked for substances that would reduce resistance to the electric current, but they had found none that would produce an electric light. Instead of following the same process and limiting himself to producing the results he already knew, he tried the opposite. He tried for substances that would increase the resistance to electric current. After testing countless materials, he settled for carbonized element and placed it in vacuum bulb, thereby creating the familiar incandescent lamp.

He followed the famous maxim of Jacobi “invert”. This book is all about looking at various situations in a different light. It is worth a serious read – some of the episodes do offer some actionable insights. For the purpose of commentary, I would take only two stories and their general tools approach.

1: Penguin story: Adelie Penguins congregate on an ice floe and they all want to dive in to the water to feed on the fish. But, no one wants to dive first just in case a leopard seal or an orca is looking for lunch. Each Penguin stands on the edge and acts as if it is going to jump first. The problem is that, there is no great advantage of being first. Once it is clear the first one is not eaten, rest of the group jumps in no time as fast followers. By the way, even if the first one is eaten, it is still safe for others to jump in as the seal is already fed.

Like Pharma, first mover should have some advantage by law; else more penguin postures would happen rather than real acts. For example, the first one who does the price cutting does the customer a great help. The firm must be protected in order to prevent others from imitating for a while so that, some advantage in volume or market share happens for the first mover. At this point, no country gives such protection since patents have to be “non-obvious”. The authors even go to the extent of citing some of the new laws that have to be patented for a while – what they mean is that, when a state or province enacts a new law which breeds a better business environment, other states quickly copy it which renders the first mover’s efforts relatively ineffective.

2: Paying the polluter story: This is my most favorite one. Imagine a classic nuisance dispute between a polluting factory and nearby complaining resident. When it goes to court, it makes two basic decisions. First, if the resident has basic entitlement to stop the pollution. Second, if yes, how can it be protected by injunction or compensation if pollution occurs. Now, you get a 2by2 matrix.

Who owns the initial entitlement to control whether pollution occurs


Pollution allowed without compensation

Pollution prohibited without compensation


Pollution allowed with compensation to resident



Now, you can see the missing category – “pay the polluter!” While it sounds alarming, there are some cases where it makes sense. Visualize a polluting factory that is located in no man’s land. But let us say, after 3 or 4 decades, habitation develops around that area. At that time, it is not fair to sue the polluter – worse yet, ask them to pay. Here, it is equitable to pay the factory folks to move out. They cite a case on these lines.

As to the four problem solving tools, authors cite them as four provoking questions. We will discuss one here.

1. What would Croesus do (WWCD)?

2. Why don’t you feel the pain?

3. Where else would it work?

4. Would flipping work?

WWCD is an interesting concept. King Croesus was incredibly wealthy and hence even today the expression “as rich as Croesus” exists. When trying to solve the problem, authors first advise you to imagine a solution not having any constraints – and then start working towards the solution. Howard Hughes, for example, wanted to watch specific films on T.V. whenever he felt like. Nearly 50 years back, there is no V.C.R, hence he bought the T.V. Station and asked the station General Manager to play the movie he wanted. While it may sound preposterous as a solution, the solution trajectory is on track. Come to think of it V.C.R. or today’s PVR is nothing but low cost personalized T.V. Station. In short, first make it possible, and then make it easy and affordable.

I enjoyed this book fully as it gave me subtle flips to various scenarios. Authors’ focus on symmetry is engaging - unless, one comes for the Antoni Gaudi‘s school of thought which does not subscribe to symmetry.

Thanks for reading thus far.