Raymond Fisman

Essentially, Freakonomics for management and organizational economics. Combines interesting counterintuitive insights with a wide sampling of academic literature. Entertaining for sure, and well written. My complaint is the same as when I took management, which is that much of the book seems to focus on simple casual stories that purport to teach lessons but some of those alleged causations seem questionable (but to the authors' credit, they admit that occasionally in the book).

Much of the show more book is a review of your typical management class (from the dreaded product, function, and matrix structure to the importance of corporate culture [the informal rules that govern when no one is watching] and the difficulty of compensating unmeasurable products of teamwork), but it's useful to have it in one place. I liked the book's opening discussion of Coase's paper on the existence of firms, which justifies the entire project of corporate structures in the first place. I've never read the paper fully myself, so it was gratifying to see it explained somewhere (firms are formed because there's transaction costs to acquiring goods and services on the open market, but once the firm grows to a certain size, there's counter balancing costs of coordination/monitoring). Much of the book's thesis is that the firm represents a "second best" solution to tradeoffs and frictions in reality. For example, the book had an interesting justification for golden parachutes (to encourage management to make the firm a desirable acquisition target). Or how the chain of management filters information upwards for specialized decision makers at the cost of lost information. The tension between performance and risk control. Or that where standardization/coordination is especially important, sometimes innovation needs to take a backseat.

I liked in particular the chapter on CEOs, which is the section I learned the most from. While I had heard of some of the explanations for their pay before (from a famous article by Jensen on performance pay to the natural positive feedback consequences of using comparable salaries), the chapter included a lot of interesting explanations and studies. For one, the chapter discusses the added value of CEOs (a small percentage of billions is still hundreds of millions), and the nature of competition for good management. I found the study tracking the use of CEO time fascinating (turns out they spend most of their time in meetings to get a feeling of the outside environment). I laughed at the study that looked at market price reactions to the sudden death of CEOs (some companies fell 10% in response, while another rose 20%!). I also enjoyed the studies that looked at the impact of interlocked boards (where CEOs are sitting on each other's boards) and strategic use of comps in setting CEO salaries. Unsurprisingly, interlocked boards paid their CEOs more and there was some minor strategic choice of comps to increase CEO salaries.

The portions I found satisfying throughout the book were the somewhat tangential studies measuring interesting intuitions. For example, there was an interesting study measuring the cut in salary people were willing to take to work for a job they "believed in" (20%-50%) by comparing salaries of those who were skilled enough to make large salaries in private sector jobs but took lower paying non-profit or governmental jobs. There was a long chapter on an interesting experiment introducing modern management principles to indian textile mills, which showed the added value of management in keeping monitoring/coordination costs low (a bit self-serving and probably won't convince those who really dislike management). I was not surprised but still impressed by a study that showed that even for churches, there arose sophisticated incentive design which compensated pastors by measurable targets (converts) and even seemed to account for less desirable stealing of other co-denominational church members (sheep stealing). Finally, I enjoyed the last chapter on reforming the FBI post 9/11, which tried to apply some of principles discussed in the book to a complicated real life situation (to split the crime fighting/intelligence functions or not [synergy or loss of focus?], to centralize or de-centralize information flow [lack of information sharing v. encouraging groupthink?]). show less

As Raymond Fisman and Edward Miguel explain at the beginning of their book, there are two main currents of thinking among those who opine on the wisdom of foreign aid: the "poverty trap" view, which holds that aid must be injected to end a vicious cycle in which inability to save leads to disaster in lean years, and the view that more such aid is simply sending good money after bad, straight into the hands of corrupt officials to be funneled away or otherwise wasted. Fisman and Miguel aim to show more look at corruption and violence in developing countries to determine how prevalent such evils are, how they are caused, and how they can be prevented--and, therefore, what the best way, non-ideologically-speaking, of raising up poor nations might be.

The funny thing about corruption is that it tends to exist out of sight--at least, out of sight of official statistics and public measurements. No one reports the bribes he takes on his income tax returns. So Fisman and Miguel have to come up with creative means of measuring corruption of various types, and this is the most fun part of their book. Economic Gangsters is completely accessible to the general reader, with virtually no economic jargon or concepts more difficult than "incentives matter," but it perfectly captures the exciting, puzzle-solving nature of this kind of academic research.

Fisman and Miguel's biggest, and most important, suggestion is the basic one that foreign aid and other solutions to developing-nation poverty be studied and implemented in an evidence-based manner. Without experimental data it's very difficult to determine whether a particular program is actually effective or not (or cost-effective or not). Randomized trials, like those carried out for developing medicines, are rare in the field of poverty reduction. But sometimes they are carried out. For example, local democratic control of public works projects is often touted as an antidote to corruption and skimming of funds. But in Indonesia a test was conducted to compare road building under local control, the thread of a federal audit, and no corruption prevention. Local control did little better than the control group, while those projects that were audited involved significantly less stolen money.

The authors adhere to their intention to remain non-ideological, and their interest is clearly in going where the evidence leads them. Unfortunately, large-scale economic experiments are often impossible and unethical, so some things can never be tested. But those interested in solutions that actually work should use what information they can. Economic Gangsters provides some of that information, and an interesting look at how to find it. It also tells some great stories about the incentives economic gangsters respond to, the strange circumstances that sometimes create these incentives, and how governments and other groups can play with them to aim for better outcomes.
(More at http://www.bibliographing.com/2008/10/06/economic-gangsters-by-raymond-fisman-an... ) show less

This book is about ten years old, so most of the research done has been concluded and/or superseded. However I am happy that I read it at this juncture in time after moving to Kenya, because it has many historical references about this country.

The book makes a good case for the thesis that development is possible wherever governance is generally good and free of corruption. It cites many examples about the effect of corruption in Asia and Africa and gives examples of places where development show more and change worked despite the scourges of poverty and war (Vietnam and Botswana). There are also many examples of failure, like Iraq. The authors also give some evidence that economic hardships may be one of the underlying reasons behind civil wars, witch killings and even genocide.

I found the history, the stories and the economic experiments fascinating. This book, however would be more useful as reading material, as it often cites numbers and statistics that I would like to see and ponder black and white. These are hard to grasp fully when listened to. show less

This book answers "Why do we have organizations?" and shows the trade offs that are required. Using examples from the Methodist Church to The Army to Al Quaeda (which in fact required T&E reports) to Proctor & Gamble it shows that effectiveness in what a group can accomplish is often off set by reductions in efficiency and creativity.

It doesn't use the word, but it shows that an organization is not a problem, but a polarity. Each chapter deals with a different aspect of this. They cover show more topics such as:
Creativity, job descriptions, what does a CEO do, Management, Organziational Culture, Command and Control, matrix organizations, Centralization vs Decentralization.

A very high level, strategic and useful piece of work. show less