Good to Great - James C Collins (Harper Business, 2001)

A big ideas management book that attempts to identify the basis for some companies' market success.  [658]

I cannot really recommend this book.  I question the methodology and I question the conclusions.   I have the sense that the methodology depends on "survivorship bias" the way books like The Millionaire Mind do.  That is, we choose a group of "winners" and ask how they differ from others.  Although one may identify a difference, it is a great leap to argue that that difference is necessarily the critical factor.  Further, it must be shown that the identified factor is both necessary and sufficient for success.  That is, no firm which also had this same factor must be seen to fail and all that do must succeed.

Further, I do not accept the criterion for identifying winners.  Collins appears to use stock prices as his guide.  Although there may be a justification for this, it also must ignore random stock price movements; in any such cohort, there will always be a winner regardless of the cause.  (Just as any competition among individuals tossing coins as to who can toss the most "heads" will certainly produce a winner.)  I am not convinced that stock total returns tell the whole story sufficiently to play the critical role they do in this study.  

As a final note, this book was published just 15 years ago.  The title would imply a certain durability over that period of the firms that made the "great" category.  Of the eleven companies in the list, one - Circuit City - went bankrupt and disappeared within five years of publication.  A second "winner" is Fannie Mae, about which nothing more need be said since eight years ago.  I will agree that Walgreens and Wells Fargo have shown continuing strength, but the list is now wrong at least 20% of the time.

This is a management book aimed at CEOs.  Even if its conclusions are valid, it is unclear how this helps 99.9% of the potential readership to make the fundamental changes needed in their place of employment.

This book is not recommended - except for those who wish to compare the other winners against their current track record.

Exit, Voice, and Loyalty - Albert O. Hirschman (Harvard University Press, 1970)

Societies build systems and entities to meet social and individual demands.  What do we know, or what can we hope to know, about how members of society react when those constructs fail to meet their goals?  The answer may be beyond economic reasoning.  [302.35]

In this book (written in the late 1960s), Hirschman contrasts two ways of resolving customer dissatisfaction with performance by an organization. 
These are 1.) the way economics see the solution - exit, as in buy from another seller, and 2.) the way political science does - voice, as in protest or complaint. 

In the past forty years, the intellectual and policy trend has been to interpret more and more social issues as fundamentally questions to be addressed by market-based analysis.  We now generally take market solutions as the answer to almost any public policy issue.  We do so even when the basis for a market analysis is weak or provides no guidance.  For example, even if a perfectly competitive market exists, using it as the basis for analysis provides no information about how outcomes or products might be improved.  A firm with higher costs or a defective product should, according to the competitive model, immediately loses all customers and ceases to exist.  Nothing can be done.  Further, in those situations not characterized by the idealization known as a competitive market, forcing the analysis to rely on that model can miss critical aspects of the problem.  It is in the most acute case, a pure monopoly, that a different approach is called for.  Most such monopolies are often thrown into the hands of governments to manage, such as school systems and utilities. The author reminds the reader of the value of the alternate analysis and its broad applicability in many cases where markets may fail.  The author attempts to analyze the means by which customers may respond to failure to deliver satisfactory outcomes: by exit or by voice and how loyalty may impact those decisions.  

The book is worth reading as a reminder of the complexity of public policy and our responses to organizations.  It provides a useful counterexample for mindless application of microeconomic principles to situations that cannot support the required assumptions.  (It should be noted that Kenneth Arrow endorsed this book.)

The book is recommended for anyone concerned about public policy who can accept a noneconomic analysis.

Deluxe: How Luxury Lost Its Luster - Dana Thomas (Penguin Books, 2008)

A history and criticism of the transformation of luxury goods from its traditional role of social demarcation based on quality and design to another mass market niche driven by advertising, cost control, and mass market appeal. [338.47]

Luxury goods are, in general, no longer the province of ateliers and small, family-run factories.  The old houses of Chanel, Dior, and particularly Vuitton, represented the tradition of well-made goods in the Parisian market.  Globalization, however, has created a market beyond the capacity of the old production system and with a potential for great profit from sales to rising elites worldwide.  Only corporations can procure the financing and capacity needed to meet this demand, but corporations have a different focus than the traditional family atelier.  The great fashion houses and designers have been democratized through the development of corporate marketing that stresses brand awareness and packaging.

As conglomerates have taken over old houses, cost control has become critical.  This has moved many workshops to China and other emerging markets and placed their goods on assembly lines next to pedestrian goods.  It has led to the development of the outlet mall where goods are sold that were made specifically for the outlet shop.  It has led to the creation of cheap goods, such as tee shirts and key rings, bearing only the trademark or logo of some fashion house.  The intent was to widen the market to households who could not justify the expense of traditional designer goods; now, they too can buy into the dream.  And, of course, the growth of a mass market for luxury brands has encouraged counterfeiting. 

Now one may ask oneself if the appeal of the product lies in its exclusiveness, its quality, or its solely its brand marketing.  The clearest sign of decline must be that for many goods, the distinctiveness of the product is not necessarily to be found in the quality of materials and workmanship or execution of design, but in the label which has moved from inside the item to the outside for all to see.

I found this book irresistible and as I read on, it radically affected my views on luxury goods. 

It is strongly recommended.