Economies of Scale vs. Economies of Scope

Henry-Ford

Wikipedia defines economies of scale as reductions in the average cost (cost per unit) associated with increasing the scale of production for a single product type, whereas economies of scope refers to lowering the average cost for a firm in producing two or more products.

The notion of economies of scale dates back to the 1700s and a renowned Scottish philosopher and economist*, and was behind Henry Ford’s drive to create a car at the lowest cost possible. Economies of scope is based on work done in the late 1970s and was behind many of the large conglomerates that were formed in the 1970s and 1980s in the United States.

While I have no problem understanding and believing in the power of economies of scale, I am not so convinced of the benefits of economies of scope.

I think economies of scope encourages a proliferation of products, which creates complexity, which creates additional costs.

From a personal standpoint, economies of scope can lead to spreading yourself to thin, and not taking full advantage of your strengths.

While there are certainly several examples of companies, and people, who have taken advantage of economies of scope, I think such examples are the exception rather than the rule.

Nike, by one estimate, has over 400 separate styles of sports shoes. That’s economies of scope in action, and no one can argue with the success Nike has had.

James Patterson, the New York Times best-selling author has written thrillers, non-fiction, young adult, and children’s books, a great example of economies of scope. After all, if you’re already in the habit of writing, whey not try to expand in to some new styles?

But I like the approach of this American industrialist who is quoted as saying, “People can have the Model T in any colour – so long as it’s black“.**  That’s economies of scale in action, and no one can argue with the success Ford had in building a car for the masses.

And there are not many people who can accomplish what Patterson has done, and I don’t think they should try. For every James Patterson there are probably dozens, if not hundreds, of authors who are successful concentrating on just one form of writing, and bringing pleasure to millions through such writing. And as they do more of their type of writing, they get better at it. That’s the power of economies of scale.

So while being a person whose expertise spans a significant number of different subject areas*** may be helpful when playing Jeopardy, I think in the long run it is better to focus on what you do best so that you can become the best.

*Who is Adam Smith?

**Who is Henry Ford?

***What is a polymath?

Fear of Falling vs. Fear of Failing

fear of failure

Last week I wrote about how fear of falling is a serious health concern, particularly for the elderly. Such a fear prevents them from living their life to its fullest, and often becomes a self-fulfilling prophecy.

There are ways to deal with such a fear. One approach is to improve your balance so as to minimize the chance of falling. Another way to deal with the fear of falling is to build up your muscular and bone strength, along with your resiliency, so that if you do fall, the consequences are not as devastating. In addition, it is helpful to have a team of therapists and others supporting you through your recovery if you do fall.

I think some parallels could be drawn between the fear of falling and the fear of failing.

The fear of failing is a serious problem that prevents people from trying something that might not work but has the potential to help a person fulfill their purpose and to possibly make a difference in the world. It can also become a self-fulfilling prophecy in that you become so worried about failure that you avoid it at every opportunity, and when you back on your life, you realize that the not trying itself was the true failure.

But just as there are ways to deal with the fear of falling, there are ways to deal with fear of failing.

One approach is to teach yourself as much as possible about the endeavor you are considering.  If your goal is to become an artist, learn as much as you can about your art and what it takes to succeed as an artist in that field. If your goal is be a writer, then practice your writing as much as possible, and learn from other successful writers.

This approach is analogous to the balance training used to combat the fear of falling. Both are designed to minimize the possibility that the failure actually happens.

However, there is still the chance despite all of your learning that your venture could fail. This is where the other type of training comes in, the type of training that will minimize the impact of a failure.

There is a big difference between investing one million dollars in a failed venture versus investing one thousand dollars in a failed venture. There is a difference between having a manuscript rejected that you spent 10 years working on versus one that you spent 3 months working on.

By failing on small ventures, you realize that the cost of failure is not devastating, and you learn how to recover from such failures.

It’s similar to strength training; you don’t start out trying to bench 200 pounds if you’ve never lifted before. You build up, you reach plateaus, you have setbacks, but over time you  keep getting closer to your goal. The result is increased confidence in achieving your goal and learning how to deal with setbacks.

In addition, it’s helpful to have a support team to turn to when there is a failure. Such a support team could consist of successful  people who initially experienced failure (that’s probably every successful person), as well as just friends and family to lend moral support when you do fail.

So just like there are formal programs designed to alleviate the fear of falling, it seems to me one could design a similar program to alleviate the fear of failing.

And the sooner one starts either program, the less likely the fear will become a self-fulfilling prophecy.

 

 

The Difference Between Walking Away and Quitting

walkaway

 

Seth Godin’s blog today was about the difference between commitment versus technique.
I agree 100% with the value of teaching commitment, but I also believe it is just as important to teach the value of knowing when to walk away from something you may have committed to.
Part of what it means to be a creative artist is to dive willingly into work that might not work. And the other part, the part that’s just as important, is to openly admit when you’ve gone the wrong direction, and eagerly walk away, even (especially) when it’s personal.
Making a commitment to something is hard, but walking away could be even harder. Walking away is essentially an admission of failure, whereas making a commitment creates only the possibility of failure. And who likes to admit failure, despite the many lessons that can be learned from failure?
But walking away is not the same as quitting, as giving up on your dream. Walking away shows that you’ve got the courage to admit that the path you had chosen to achieve your dream was not the right one. Walking away shows that you are willing to leave the safety of the familiar path and look for a new one in pursuit of your dream. Walking away is recognizing the role that sunk costs play in decision making, that it’s always about looking forward and keeping your eye on the best way to achieve your dream. Quitting means giving up the pursuit of what you were meant to do.
So yes, it’s important to teach the difference between commitment and technique, but it’s equally important to teach the difference between walking away and quitting.

Teaching, Curiosity, and Nursing Homes

einstein bike

Today I had the opportunity, along with two other teachers, to observe and evaluate another faculty member’s teaching.

After the class, the three of us met to discuss what we had just observed and to gather data for our written report. While I’m not at liberty to share anything about our classroom visit, one item that came up during our discussion really struck me.

We all indicated how much we enjoyed these opportunities to sit in on another teacher’s class. It was nice being on the other side of the classroom for a change, and learning something new.

During the discussion, one of the team members, an Economics professor, told us how several years into his career he decided to pursue his interest in real estate by enrolling in a series of real estate courses, and then went on to actually invest in a couple of properties. The other team member, a Management Information Systems professor, expressed her desire to take a course in Constitutional Law. And yours truly, an Accounting professor, told the story of how a few years ago he went back to community college to pick up a degree in Health and Fitness and then opened a personal training studio.

What we all shared in common was a passion for learning; perhaps that is what attracted us to academia. (It also looks like we shared an ability to get slightly off the task at hand!)

In my case, there is some evidence indicating my passion for learning. One of my top five strengths, as identified by the Strengths Finder 2.0 assessment, is learner. (I plan to write about this assessment at a later date.)

I can’t imagine ever wanting to stop learning. The number of issues that I am curious about far outstrips the number of years I have left to learn about all of them. Plus, I am confident that issues I’ve never thought about, or can’t even envision right now, will likely be ones that I will want to learn about at some point in the future. (flying cars perhaps?!)

But I don’t think a love of learning is restricted to those who teach. I think we are all naturally curious, and if that curiosity starts to fade, then perhaps so does the quality of one’s life.

I’ve spent a lot of time as a visitor at nursing homes over the past few years, and it seems like there is little learning going on. I see a lot of people sitting around just watching TV or simply staring off into space. While I fully realize that a person’s condition at a nursing home may limit them from doing a great deal of things, I am sure that there are many nursing home residents who would welcome the opportunity to learn something new.

Perhaps nursing homes should post the following quote from Albert Einstein for everyone to see, residents, workers, and visitors:

“I have no special talents. I am only passionately curious.”

Nursing home residents may have lost many of their talents, but as Einstein points out, it doesn’t take anything special to be curious. But being curious can be something special.

Favorite Commercial of the Week: Dear Sophie

dearsophie
Google has put together some great commercials over the years, but this one from 2011 is probably my favorite.
Dear Sophie is designed to showcase the variety of products that Google offers, and is successful in that regard.
Like many effective marketing messages, the commercial tells a story. In this case, Dear Sophie is a Gmail account a new Dad has set up in his daughter’s name, and to which he posts messages commemorating special days in Sophie’s life. The first email starts with the day Sophie was born and includes a photo of Sophie as a newborn. Subsequent emails include a variety of photos and videos tracing Sophie’s progress through her younger years. The emails enable Google to highlight Google products such as Picasa for photos and Youtube for videos. There is also an email that uses Google Maps to show Sophie where she lived for her first 4 years. All of these tools are shown within the Google Chrome browser.
There is beautiful instrumental music playing in the background and it seems to go so well with the video that you would have thought the music was made just for the commercial. But the music is actually from the song Sort Of by Ingrid Michaelson, and it’s hard to go wrong with any Ingrid Michaelson song.
I like to show this commercial to my students and tell them my wife and I wish something like this was around while our children were growing up. It seems like a great way to capture, save, and organize all of those special childhood moments. Perhaps it may inspire one of them to create something similar a few years down the road.
The commercial is also successful at getting to the viewer emotionally, another characteristic of an effective promotion. I still get a lump in my throat when I watch this commercial.
So to me, the 90-second video is a winner. By the end of the commercial, you know what company is behind the video, you’ve gotten a glimpse of some of the company’s products and how to use them, there’s pictures of babies, there’s humor, there’s cool technologies, there’s great music, and there’s likely to be a tear rolling down your cheek when it’s over. I don’t come close to accomplishing any of that in a 75-minute lecture!
If you’d like to see a couple other great Google videos, here are the links: Reunion and Parisian Love.
How can you not love Google after watching these videos?!

I (Don’t) Hate Christian Laettner

laettner

ESPN had a great 30 for 30 documentary last night about Christian Laettner, the former Duke basketball star.

The title of the documentary was “I Hate Christian Laettner”, and focused on some of the reasons why Laettner was so despised while he was at Duke, and is still hated by many fans over 20 years later.

There have been several good online reviews of the show, here are a few:

You’ll still hate Christian Laettner after ESPN’s excellent ‘I Hate Christian Laettner’ doc

The latest 30 For 30 takes a too-cute approach to one of college basketball’s best villains.

While live tweeting his documentary, Christian Laettner apologizes for stepping on former opponent.

I’ve always admired Laettner, and part of it is my admiration for those who excel at what they do. I wrote about this earlier.

Laettner was highly competitive and wanted to be the best, and pushed his teammates to want the same. He also never shied away from the big moments, as evidenced by his infamous shot in the closing seconds against Kentucky, in what many consider to be the greatest college basketball game ever.

I think part of the reason for the negative attitude toward Laettner is jealousy. But it’s not necessarily jealousy over his basketball skills or his fame or his success, but just the fact that Laettner was willing to put himself on the line. He was willing to take the chance that he might fail, willing to show that he cared.

Many people are so worried about failure that they avoid putting themselves in situations where such an outcome is possible. But the result is that such an individual will never experience true success either. And when they see someone who is not controlled by such fear, it strikes deep. They lash out, hoping that such a person will fail,  thus proving their point.

And so Laettner was just such a person; he wasn’t controlled by fear. Now I’ll admit that he wasn’t perfect. When he purposely stepped on the chest of an opponent in the previously mentioned Kentucky game, it was one of worst things I’ve seen one player do to another.

But despite his flaws, he was willing to keep moving forward, He was able to ignore the constant criticism, even hate, that he received everywhere he went. In fact, he seemed to thrive in such environments.

Many of us may think that we could never survive under such scrutiny, but in reality, very few of us would ever experience such animosity.

Laettner had some very real reasons if he wanted to shy away from limelight, but he chose not to. Most of us don’t have any legitimate reasons for avoiding the possibility of success.

Seth Godin talks about this in his book The Icarus Deception. While too much hubris may not be good, timidity is not the solution, and can be just as damaging.

Godin follows this up with his latest book, What To Do When It’s Your Turn.

Laettner knew what to do when it was his turn, when the game was on the line. Do you?

And I think the following exchange of tweets that took place during the airing of I Hate Christian Laettner captures quite well what Laettner was all about; he simply loved what he did.

 · Mar 15

I was among those who hated . Not anymore. That gave me a huge appreciation for his methods & greatness.

. I hope you came away with how much I love the game

Let the Madness Begin!

NCAA Basketball: Big East Tournament Final-Villanova vs Xavier

For the sports fan, it’s one of the best times of the year – March Madness.

My school, Villanova, is one of the prominent teams in this year’s tournament, having earned a number 1 seed after winning the Big East championship. The campus is buzzing with excitement, and I am sure it will be pretty easy to find a place to study in the library on Thursday when Villanova plays Lafayette.

While I have not seen any reports on what happens to student productivity during the NCAA tournament, there have been studies on what happens to worker productivity, and it is startling.

The Chicago outplacement firm Challenger, Gray & Christmas recently issued a press release based in part on Bureau of Labor Statistics data, which puts the effect of the NCAA men’s basketball tournament into stark relief. It found that employers could lose up to $1.9 billion in wages to the more than 60 million Americans who are in the office solely to watch games and devour bandwidth!

But instead of trying to stop such a loss of productivity, it is recommended that firms embrace the excitement that comes with March Madness. It may be a great opportunity to improve morale and to foster a sense of community. Free food and time away from work can do wonders for employees’ attitudes.  And research has shown that happy employees are more productive employees.

Some firms may want to use March Madness as a time to invite customers, potential customers, and members of the local community to office parties where everyone can watch the game together, in a fun atmosphere. If any business is conducted at the time, that would be a bonus. Such parties are more about building long-term relationships.

So if workplaces can’t overcome the allure of March Madness, you can imagine what it is like on a college campus that has a team in the tournament. There will be a lot of missed classes, and even for those who attend class, there will be a lot of glances at smartphones.

So while I am quite excited about Villanova’s chances, I must admit I’m also relieved that I’m not teaching on Thursday. Accounting is no match for March Madness.

Go NOVA!

Who’s Your Clarence?

Clarence Odbody, Angel Second Class, is one of the most memorable characters from the classic movie, It’s a Wonderful Life.

Clarence is charged with showing George Bailey how meaningful his life has been, despite George’s wish that he had never been born.

Clarence then goes on to show George what the world would have been like if had never been born, and George starts to realize what a positive impact he has had on others.

I think many of us go through life wondering if what we do makes a difference. Wouldn’t it be nice if we each had our own Clarence, someone who could actually show us the impact we have had on others?

But perhaps instead of waiting for our own personal Clarence to arrive, we can just make a commitment to do work that matters and  have confidence that we are making a difference.

And if you’re still looking for a Clarence, there’s nothing stopping you  from being  Clarence. Show and tell someone else you know that their life has meaning, that the world is a better place because of who they are and what they do.

And that may be one of the best ways we can make a difference; after all, Clarence is the one who earned his wings.

 

Happy Birthday Mom!

irish_you_a_happy_birthday_greeting_card

Today is my mom’s 89th birthday.

We just finished spending  the night doing what we do every Friday night, having pizza at her house while watching TV (usually the news followed by Jeopardy followed by Wheel of Fortune).

But despite the familiar routine, it was still a special day.

Over the course of the day she got to see several of her grandchildren, and received phone calls from the others. She even got to see one of her nine great-grandchildren.

As I watched and listened to her interact with them, it was clear that family was the center of her life, and just seeing and hearing from them was the best present she could have received.

She has always shown nothing but unconditional love for her grandchildren, and it is obvious that it has been returned to her in spades.

And while she struggles to hear what people are saying, sometimes just eating pizza and watching TV, surrounded by your loved ones, sends a message loud and clear.

Happy birthday mom, we love you!

Kids Say the Darndest Things

How Long Does It Usually Take You to Settle Your Class Down?”

kids-say

I should have taken the question as a warning, instead I just treated it as a question from a curious middle-school student.

It happened this past summer as part of a day long boot camp for students from low-income neighborhoods in Philadelphia who were interested in entrepreneurship. The students would be running their own businesses later in the summer, and Villanova had developed a partnership with some community groups to teach the students some basic business concepts.

I had been asked to give a 45-minute class on how they could use business tools such as break even analysis to help them manage their businesses as well as how a simple accounting system could help them keep track of their sales and expenses.

The students were organized into two groups by grade level. One group would be high school students and the other group would be middle-school students. Every student was also given a calculator as part of the bootcamp, which we thought would come in handy for some of the hands-on exercises.

The first group I taught was the high school students, and I thought it went quite well. We managed to get through most of the items I had planned to discuss, and the students were engaged the entire 45 minutes (as were the chaperones who had accompanied them), asking some great questions and answering the questions I asked of them.

(The only negative aspect of the class was my apparent ignorance of how much some things cost. I was using an example of a lemonade stand, and going through the list of supplies they would have to purchase to get started. I mentioned that they would need to buy a pitcher to mix the lemonade in, and I mentioned that such a pitcher would cost about $20. I might as well have said $2,000 based on the students and chaperones response. They started asking me if I had ever heard of a dollar store or a thrift shop. I then went on to mention the need for paper cups, and so I said let’s assume you buy 100 cups for $30. The bursts of laughter came even faster this time. I made a mental note to do a little basic research next time…)

Following that first class, there was about a 15-minute break while the students switched classrooms, had a snack, and we got ready for the next session. And despite my ignorance of how much things cost, I must admit I was feeling pretty confident, given the success of the first class.

While the students were filtering in, I tried to talk with a few of them, asking them who their favorite Philly sports team was and if they had any ideas for a business yet. As I was talking to one of the middle school students, he casually asked me “How long does it usually take you to settle your class down?”

Now I must admit that has never been a issue I have had to deal with, in fact it is a question I never even thought about. My first thought was that he just wanted to learn a little bit about how college works, since this was his first time on a college campus.

I explained to him that college students come to class ready to learn, and as soon as class begins every one quiets down. I asked him if getting his class to settle down was an issue at school, and he replied that it was sometimes, and I saw a few students around him nodding their heads in agreement.

I told him that we wouldn’t have to worry about it for our class. After all, I thought to myself, there was no problem with the first group, there would be chaperones present, and I was apparently a master teacher who commands instant respect and has never had a problem getting a class to settle down (hubris is a wonderful trait :) )

I realized later (too late) that he probably wasn’t really asking a question, but issuing a warning.

I also realized a college professor is no match for a class of middle school students.

I knew I couldn’t deliver the same lesson to the middle school students I had given to the highs school students, and I thought I had adjusted my expectations accordingly.

I wanted the students to get some practice with the calculators, thinking this would get them involved with the lesson and keep them busy. So my first question asked them to calculate what the cost per cup is if they bought 100 cups for $30.

It was at that point that things started going downhill, and quickly. The students felt no need to raise their hands to give an answer, preferring to just shout out responses.

I heard one student yell “$3,000”, and I could see how they got that answer, and explained what his mistake was. Another student said $3, and once again I was able to explain what her possible mistake was. But when one student yelled out $7,000, I wasn’t sure if I was dealing with someone who didn’t know how to use a calculator,  someone who did not understand basic math concepts, or a class clown.

Anyway, what I thought was a simple question that would take less than 30 seconds to answer turned into an almost 10 minute discussion. But we got through it, and I tried to move on.

It was about this time that the first student got up to use the restroom. Since I had no true authority over these students and didn’t want to prevent a student who actually had to use the restroom from doing so, I said nothing. I also thought that monitoring such behavior was more the role of the chaperones. I then looked around the room and noticed that there were no chaperones for this class. Where had they all gone? Again, it should have been another warning sign.

It was just a few minutes later when I lost complete control of the class.

Apparently one of the chaperones had fallen out in the hallway, and several members of public safety had rushed over to see if she was OK and what help she needed.  Now I’ll be the first to admit that someone dressed in a police uniform and carrying a nightstick and a walkie-talkie is a lot more appealing to a 12 year old (OK, to anyone) than accounting, and so it did not take long for all of the students’ attention to be drawn to what was happening out in the hallway. Suddenly, almost every student needed to use the restroom.

That essentially brought my class to an end, and when I looked at my notes, I realized I had accomplished nothing that I had planned to do.

It had taken less than 45 minutes to bring me back to reality, to bring me down from the high I had experienced from teaching the older students to the outright failure I experienced from teaching the younger students.

But all was not lost. I learned one important lesson – there can’t be many jobs tougher than being a middle school teacher, so a tip of the hat to all of you for a job well done. You have my utmost respect, and I will never complain about my job, or my students again.

By the way, the cost per cup in my example was 30 cents per cup. A few days later I was walking through Walmart and found a pack of 100 cups for less than $6. Lesson learned…