Archive for November, 2009

Outliers

Wednesday, November 18th, 2009

Book review: Outliers: The Story of Success by Malcolm Gladwell.

Gladwell has taken what would be a few ordinary blog posts and added enough eloquent fluff to them to make them into a book. There is probably a good deal of truth to his conclusions, but the evidence is much weaker than he wants you to think.

For his claim that 10,000 hours of practice are needed to become an expert, he doesn’t discuss the possibility that the causality often runs the opposite way: having the talent to become an expert creates a desire to practice a lot. He gives at least one example where the person seemed to lack expertise before getting the 10,000 hours of practice, but it’s not hard to imagine a variety of immaturity-related reasons why that might happen without the amount of practice causing the expertise.

I’m confused by his claims about how much practice he thinks the Beatles had before becoming successful. He points to somewhere between 1,200 and 1,800 hours of practice they had by late 1962 (which is about when Wikipedia indicates they became successful in the UK). Gladwell seems to say they weren’t successful until they came to the US in February 1964. He implies that they had 10,000 hours of practice by then, but I don’t see how he could claim they had much more than 3,000 hours of practice by then. So calling the 10,000 hour estimate a rule appears involve a good deal of exaggeration.

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Capitalism with Chinese Characteristics

Wednesday, November 11th, 2009

Book review: Capitalism with Chinese Characteristics: Entrepreneurship and the State by Yasheng Huang.

This is the most insightful book I’ve read so far on the Chinese economy. Most commentators only look at the most readily available data, but Huang dug through many obscure detailed records that were less likely to be manipulated.

The most important point of the book is to show that the widely held view of China as having gradual, steady improvement since 1978 is wrong. There was a dramatic political change in 1978 that allowed the rural parts of China (which still account for a large part of the economy, and where entrepreneurial culture had not been stamped out by communism) to prosper. Then starting in 1989 urban-focused leaders stifled rural businesses, causing stagnation there until 2002, when leaders more friendly to rural business gained power and allowed fairly healthy growth to resume.

Meanwhile urban areas have been dominated by crony capitalism which produced a good deal of gdp growth through massive state-directed investment in large companies, especially in the 1990s. This growth has produced fewer benefits to the average person than gdp numbers would lead us to expect.

Most of China’s success has been due to private enterprise. Beliefs that state-run businesses have produced growth are partly due to confusing reports about which companies are private.

I’m fairly impressed by the documentation of the changes in the rural political climate, but since the author seems to be the only one reading his sources of data and since it would be very time consuming to check them, it would be easy for errors to go unnoticed. For urban issues, he appears to be overstating the importance of problems that are not unique to China.

He partly clears up the puzzle of China doing better than should be expected for a country whose legal system doesn’t provide much rule of law. He provides evidence that some of the most important successes depend on British law imported via Hong Kong. But he doesn’t provide enough evidence to tell us how important this effect has been.

He leaves unanswered many questions I’d like answered. Why did government policies undergo these changes? Is the surprisingly reported steady gdp growth mostly the result of manipulated statistics? How much of the growth has been an investment bubble, and how much is sustainable? How did entrepreneurial culture survive communism in rural China so much better than in other countries?

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