ECON 101: Comparative Advantage: Or, why it still can be ok to be worse at everything

I was talking with a friend recently, the kind of person who is just good (and often really darn good), at just about everything. Successful in their career, well-respected in their industry, good-looking, model family life, knows how to cook/fix/find just about anything.... you get the idea.

We probably all have a friend or colleague that fits that description, maybe even going back to childhood perhaps where the memory of our high school nemesis that was just a little better than us at sports and in class and with the ladies (or guys), always just ticked us off to no end.

No matter what the activity or subject or context, this person was just better.  At everything. And it can easily be pretty annoying.David Ricardo - 'He amassed a considerable personal fortune'

Until you recall (or learn for the first time as in the case of the high school me), the Law of Comparative Advantage. Let's do a quick ECON 101 review:

In economics, comparative advantage refers to the ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another. Even if one country is more efficient in the production of all goods (absolute advantage in all goods) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies.

The idea of comparative advantage has been first mentioned in Adam Smith's Book The Wealth of Nations: "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage." But the law of comparative advantages has been formulated by David Ricardo who investigated in detail advantages and alternative or relative opportunity in his 1817 book On the Principles of Political Economy and Taxation in an example involving England and Portugal. In Portugal it is possible to produce both wine and cloth with less labor than it would take to produce the same quantities in England. However the relative costs of producing those two goods are different in the two countries. In England it is very hard to produce wine, and only moderately difficult to produce cloth. In Portugal both are easy to produce.

Therefore while it is cheaper to produce cloth in Portugal than England, it is cheaper still for Portugal to produce excess wine, and trade that for English cloth. Conversely England benefits from this trade because its cost for producing cloth has not changed but it can now get wine at a lower price, closer to the cost of cloth. The conclusion drawn is that each country can gain by specializing in the good where it has comparative advantage, and trading that good for the other. 

This Business Insider piece from the weekend spurred me to think about Comparative Advantage (and what can happen when really powerful and attractive companies like Google are powerful enough to essentially ignore the 'law' in many respects), a look at some of the worst aspects for working for such a desirable employer.

Among the chief complaints raised about life at Google was that their hiring standards are so high and that fact, combined with seemingly everyone wanting to work for them, that many, many sort of mundane positions are staffed with over qualified, exceptional, and often wasted talents. 

Here is an example of how that plays out:

There are students from top 10 colleges who are providing tech support for Google's ads products, or manually taking down flagged content from YouTube, or writing basic code to A|B test the color of a button on a site."

Adam Smith's law of Comparative Advantage, if Google cared about such things, would probably tell them that it was relatively inefficient for them to try to be the best at everything, that more or less, they should focus on those elements where their advantage in the market (for talent in this case), was the greatest compared to their competition, and let the wanna-bees fight it out over the rest.

But I don't really care about Google, I care about you, (I am a giver that way). We both know what it's like having to deal with that person who is just better at everything than we are.

It is tiring.

It is frustrating.

And often, we will simply give up and move on to something else when we really should have stuck with what we loved.

Everything is comparative. If you get a job at Google you are probably going to feel dumb much more often than you are accustomed to feeling.

Note: I had a recent piece over on Fistful of Talent that looks at this topic a little more as well. 

Have a great week!

PODCAST - #HRHappyHour 170 - Driving Performance with Technology

HR Happy Hour 170 - Driving Performance with Technology

Recorded Thursday August 15, 2013

This week on the HR Happy Hour Show, Steve Boese sat down with Tom Porter, Director of Human Resources and Administration, Kawasaki Motors Corporation, U.S.A, and David Ludlow, Global Vice President of Product Marketing, HCM Solutions for SAP and SuccessFactors for an interesting and informative conversation about how HR Technology can help transform organizational performance, and impact and change the actual culture of the organization as well.

At Kawasaki, Tom led an ambitious project to drive consistent performance management, goal setting and alignment, and more broadly - to get the organization much more focused on demonstrable and measurable performance measures.

Tom shares some of the project drivers, the organizational imperatives, and perhaps most importantly some of the lessons learned and critical success criteria that need to be in place for any HR Technology projects to truly deliver on their promises.

You can listen to the show on the show page here, on iTunes, (just search in the podcasts section for 'HR HappyHour'), and using the widget player below, (email and RSS subscribers will need to click through).

Popular Business Internet Radio with Steve Boese and Trish McFarlane on BlogTalkRadio

I won't spoil it for you, but rest assured that openness, transparency, and true partnerships between customer and supplier are key, and both Tom and David offer some excellent pieces of advice for any organization on the path towards technology implementation and transformation.

It is a really informative and 'front lines' kind of conversation that sheds some light on an organization that has done and continues to do what many others only aspire towards.

Thanks to both Tom and David for taking the time to share their insights!

My resume is spotty and I don't interview well, but...

Everyone in HR/Talent/Workforce land has bee ALL OVER the recent piece in the New York Times that featured a conversation with Google's head of people operations Laszlo Bock and dug into some of the data-driven insights about hiring, management, leadership, and overall talent management at one of the world's most innovative companies. 

By now you've seen or read the headlines, or 'tweetable' moments from the piece. 

College GPA doesn't matter. College degrees may not matter as much as we've always thought. The classic Silicon Valley 'brain teaser' type interview questions like 'How many golf balls would fit into the Empire State Building?' serve the interviewer's ego much more than they serve to help identify talent. And finally, with rare exceptions, most managers are really bad at interviewing, or said differently, at 'spotting talent.'

Everything in the Bock/Google piece seems kind of intuitive, and kind of validates what probably lots of HR/Talent folks have thought all along - but were or at least felt kind of powerless to to butt up against. 

Posting job specs that say things like 'Bachelor's degree required, MBA preferred' or 'Ten years progressive experience in exactly the same field/industry/discipline that we are currently hiring for, culminating with five years performing exactly the same job somewhere else that we want you to do here', are much more the norm that the exception. Most of us can't, like Google seems to have been able to, 'prove' that college GPAs and specific degrees are not that relevant and predictive of performance so we are kind of forced back into what we feel, or think, or what is most easily defensible when a 'bad hire' occurs.

"Well, he had a 3.7 from MIT in Electrical Engineering - he should have been able to hack it here." You get the idea.

Create rigorous (and potentially exclusionary) enough job requirements and then you're covered - anyone who actually meets those specs and for some reason doesn't turn out to be successful in the organization - well that is their fault not yours. I get why that is comforting to organizations but in the long run, and as eloquently described by Google's Mr. Bock, really doesn't help the organization in finding (and unearthing) the talent they need to thrive.

Recently, I had a conversation with an old friend - an accomplished professional, the holder of an advanced degree from a great institution, but who has had some career ups and downs over the last few years.

While we were talking, one thing specifically stood out to me. He said, 'Sure my resume has a couple of gaps, and once I had to take a job that I was really overqualified for just to keep the bills paid , but I tell you, my main problem I think is that I am just not great at interviewing. Let me in there, give me a chance to show what I can do and I will be fine - but the show, the performance, the song-and-dance that interviews seem to be, well, I just don't do that well at them.'

Our pal Laszlo at Google, for all the data-driven insight that he is applying towards the hiring process isn't advocating scrapping interviews, and my friend here probably wouldn't benefit too much from ditching the kinds of criteria he'd always relied upon - like the 'right degree'.

But I do think the key take away from the Google experience is that questioning long-held beliefs about what makes for a good candidate (and a good hire), is more important than ever. 

For your shop it might be degrees, or years of experience, or 'nailing' the interview. Whatever criteria you have, maybe it's time to take a closer look to see if that criteria does more than simply week people out, but rather actually helps to identify people who will succeed, while not unnecessarily casting people aside.

Listen to your CEO. On Twitter

A couple of days before he made bigger news by getting fired, then penning a cheeky letter to the troops letting them know what just happened, then-no-former Groupon CEO Andrew Mason, perhaps knee-deep in a frustrating Email session posted this Tweet: 

Possible to write a gmail script to autoreply & bounce emails longer than fifty words?

— Andrew Mason (@andrewmason) February 25, 2013

Perhaps an extreme approach to dealing with Email and message length overload, but entirely out of the realm of useful utilities. We hate and need Email at the same time. I'd say for 99% of the people reading this post, Email is the single most important means of communication in your professional lives.

Don't think so?

Just try to go a day, week, month without Email. You can't do it.

You can forget Facebook or Twitter or LinkedIn (at least until you need to look for a new job), literally for weeks and weeks and it probably won't really matter. Try that trick with email and you will probably get fired, lose business, or get reported to the police as a missing person.

But the point of this post isn't another 'email is horrible' riff, rather it is to call out a response to the former Groupon CEO's tweet, from a Groupon engineer no less, that was sent exactly one hour and one minute after Mason's original Tweet:

@andrewmason got something working: gist.github.com/rboyd/5027691 -- just customize variables to suit and schedule to run on a timer.

— Robert Boyd (@rboyd) February 25, 2013

Pretty amazing and awesome, and perhaps instructive as a clever method of sucking up getting the bosses attention in this new Age of Social Media. I have no idea if before he was ousted at Groupon if Mason had any kind of relationship, or even knowledge of Mr. Boyd - but let's pretend for a moment that they did not, and Mason (at that time), was the CEO and Boyd was just one of the rank-and-file staff working away, and personally invisible to Mason.

What better way to get on the big bosses radar than answering his Twitter question, within an hour, with a solution that works - and in the middle of the night?

Just another item to add to your bag of tricks as you try and climb up, over, or around the corporate ladder. If your CEO is on Twitter you ought to follow him/her. And maybe just maybe you can help your own career in the process.

If you need something ask for it. For that very thing.

The author and academic Dan Ariely (of 'Predictably Irrational' fame) posts an occasional Q&A or 'advice' type column on his blog. Last week's column titled 'Ask Ariely: On Begging, Bad Waiters, and the Facebook Blues' included a reader question about a situation most of us have probably encountered, but with a slightly different twist that made it interesting.

Here is the original reader question:

I was recently approached by a panhandler who asked me for 75 cents, and I gave him the money. I was late for my train, so I didn’t have time to stop and try to understand why he chose 75 cents. But I wonder: Do you think the 75-cent request could be a “market tested” amount, one that yields a higher overall level of “donations” than asking outright for a buck or more?

Ariely's reply was more or less in agreement with the reader - that perhaps the panhandler had 'found' a donation amount that would yield the most success, but then Ariely also added this observation that I found really apt and probably instructive:

"asking for general help is unlikely to be as effective as asking for exactly what we need"

The notion being that the ask for 75 cents rather than the more general 'Hey pal, can you help me out with a little donation?', connects more directly, can be evaluated more rapidly, and when you think about it, is probably more effective over the long term.

Why the direct ask for 75 cents would be more effective seems to me to narrow down quickly to the fact that it asks less of the giver, not in terms of actual money, but in terms of time spent in the process and the mental and emotional cycles required to reach a conclusion. It is a really simple request - 'Can you give me 75 cents?' vs. a much more complex and nuanced question of 'Can you help me out?'

This difference in directness and its impact on effectiveness those of us with children probably understand - it generally seems much easier to narrow a kid's options, spell them out as plainly as possible, and be very, very, clear about expectations and consequences. But as we head to work and deal with 'adults' - they could be peers, partners, staff members, bosses, etc. - we sometimes have to lose clarity and expand focus out of respect, deference, or just wanting to treat people like grown-ups.

I had a friend who managed about 20 or so hourly production workers in a sort of light industrial setting. The work was connected through a kind of loose workflow, meaning if one worker was late arriving by a few minutes it would not stop production, but could become a minor irritant or impediment to productivity if the lateness persisted.

Naturally, there were always issues with staff arriving late - weather, personal things, car trouble - you name it.  But whenever the lateness issue needed to be addressed, my friend the manager often started with a kind of friendly 'Hey, we really need you to make the effort to get in a little earlier' and explained the impact on the rest of the team (workflow, morale, etc.). It was only when an individual's lateness persisted that he had to call in HR, have a sit down meeting with the employee and spell out the expectations and consequences in detail - 'We need you here and ready to work at 8:00AM or you will be fired'.

Usually, not always, the person kind of straightened up after that, and the lateness issues went away. You could argue it was the threat of getting canned that did the trick and not the explict 'ask' that drove the behavior change, I suppose.

But after hearing my friend relate the more or less same story a few times over the years I wonder if he had cut right to 'You need to be here at 8:00AM' rather than making a more vague - 'We need you here earlier' would have been more effective.

Note: If you liked the post, please send me 75 cents.