This Week on Survival Leadership

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Monday, January 16, 2012

Jobs War: Post #4--Behavioral Economics

The War of Behavioral Economics
a. American “world” Wars: The fight of the Greatest Generation in World War II saved Americans from domination (political and economic) by Japan and/or Germany. The Baby Boomers won the technical and economic war (1970s-1990s) through the tech revolution, and the Internet and entrepreneurship saved the country again. Now it’s up to the Gen X and millennials (with backing and help from Boomers) to keep the U.S. economic engine powering forward—especially by way of entrepreneurship and innovation. But if you have to pick one, go for entrepreneurship.
b. Classical economics is about measuring the “transactions” of life. Behavioral economics is about the state of mind (the intent) that precipitates those choices. And those states of minds are connected—think Twitter, Facebook, and Linkedin. The author tells a compelling story of this linkage that led to the fall of the Tunisian government and eventually Egypt (the Arab Spring). The chain reaction (with modern reporting…think Twitter) of such intentions and states of mind isstaggering. Gallup now studies the behavioral economics—the states of mind before transactions that get counted by classical economists—in about 100 key areas (including job creation, global migration, health, community, etc.). The author argues that behavioral economics is the “New Secret Weapon.” Look toward guys like Daniel Kahneman (Princeton) and Richard Thaler (Univ. of Chicago).
c. Entrepreneurship and Innovation: The core of GDP growth is job creation. And at the core of job creation is entrepreneurship and innovation. Americans have the “freedom” edge on the Chinese…freedom of speech, choice, etc. But leaders need to consider the states of mind of their consumers. Behavioral economics: Decision making is 70% emotional and 30% rational. America requires a 5% or better GDP growth pattern to thrive, grow new jobs, and sustain its economic leadership in the world. This kind of growth comes only from small and medium-sized companies. And the best place for growth is cities.

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