A New Economics

🚀 The Book in 3 Sentences

A bit of a challenge to the old way of thinking of economics. Edward Demming is a classic within process thinking and system thinking. He challenges compition as a driver of success and highlights collaboration instead.

🎨 Impressions

A very interesting book, I found Edward Demming thoughts to be repeated a lot in other sources, so this was intersting.

I had some flashback to Zen & The Art of Motorcycle Maintenance and Robert Pirzigs reflections on quality.

✍️ My Top Quotes

• What is quality? The basic problem anywhere is quality. What is quality? A product or a service possesses quality if it helps somebody and enjoys a good and sustainable market. Trade depends on quality.

• Have we been living on fat? Some countries live in part by export of nonrenewable materials such as oil, coal, iron ore, copper, aluminum, scrap metal. These are temporary blessings: they can not last forever. To live on gifts, credit, or borrowed money is not a long-term solution, either.

• One of our best exports, one that brings in dollars, is materials for war. We could greatly expand this income but for moral reasons. American aircraft have about 70 per cent of the world market, and bring in huge amounts of dollars. Another important export is scrap metal. We can’t use it, so we sell it. The Japanese paid us about 18 cents for the metal in the microphone that I use in lectures. We buy the metal back from them in the form of a microphone for $2000,possibly$1800—value added!

• People are asking for better schools, with no clear idea how to improve education, nor even how to define improvement of education.

• A letter to the London Times, 7 July 1990, displayed the fact that 23 per cent of the cost of running a hospital in the United States goes for administration, against only 5 per cent in the United Kingdom.

• Ranking is a farce. Apparent performance is actually attributable mostly to the system that the individual works in, not to the individual himself.

• The aim of anybody, under the merit system, is to please the boss. The result is destruction of morale. Quality suffers.

• Another example is pressure that he exerts to hold on to a naval base in his state, when Congress has decreed national reduction in naval bases. Can you blame him? Reelection depends on his success to hold on to a naval base in his state, regardless of what is best for the nation as a whole.

• She discovered (e.g.) that the people engaged in design and redesign of product or service did not talk to the people engaged in consumer research. To talk with them might suggest to the management that we don’t know our business here: we had to ask for help from those people in consumer research. Let there never be any suspicion that we don’t possess knowledge necessary for our work.

• Mr. H. R. Carabelli of Michigan Bell Telephone Company remarked to me that a company could have the best Product engineer, the best manufacturing engineer, the best man in the country in marketing, yet if these men do not work together as a system, the company could be swallowed whole by the competition with people far less qualified, but with good management.

• A system is a network of interdependent components that work together to try to accomplish the aim of the system. A system must have an aim. Without an aim, there is no system.

• Interdependence. The greater the interdependence between components, the greater will be the need for communication and cooperation between them. Also, the greater will be the need for overall management.

• Information is not knowledge. We are today in possession of instant communication with any part of the world. Unfortunately, speed does not help anyone to understand the future and the obligations of management. Many of us deceive ourselves into the supposition that we need constant updating to cope with the rapidly changing future. But you can not, by watching every moment of television, or by reading every newspaper, acquire a glimpse of what the future holds.

• I repeat here Norb Keller’s famous statement made on 8 November 1987 in a meeting in General Motors: “If General Motors were to double the pay of everybody commencing the first of December, performance would be exactly what it is now.”

• A bonus for high rank in the ranking of people, teams, divisions, regions, brings demoralization to all the people concerned, including him that receives the bonus.

• Systems of reward now in place may actually be overjustification. Monetary reward to somebody, or a prize, for an act or achievement that he did for sheer pleasure and self-satisfaction may be viewed as overjustification.

• You can not plan to make a discovery.—Irving Langmuir

• As I use the term here, the job of a leader is to accomplish transformation of his organization. He possesses knowledge, personality, and persuasive power

• A manager understands and conveys to his people the meaning of a system. He explains the aims of the system. He teaches his people to understand how the work of the group supports these aims.

• He helps his people to see themselves as components in a system, to work in cooperation with preceding stages and with following stages toward optimization of the efforts of all stages toward achievement of the aim.

• A manager of people understands that people are different from each other. He tries to create for everybody interest and challenge, and joy in work. He tries to optimize the family background, education, skills, hopes, and abilities of everyone.

• He is an unceasing learner. He encourages his people to study. He provides, when possible and feasible, seminars and courses for advancement of learning. He encourages continued education in college or university for people that are so inclined.

• He is coach and counsel, not a judge.

• He understands a stable system. He understands the interaction between people and the circumstances that they work in. He understands that the performance of anyone that can learn a skill will come to a stable state—upon which further lessons will not bring improvement of performance. A manager of people knows that in this stable state it is distracting to tell the worker about a mistake.

• 3. Personality and persuasive power; tact

• He will study results with the aim to improve his performance as a manager of people.

• He will try to discover who if anybody is outside the system, in need of special help. This can be accomplished with simple calculations, if there be individual figures on production or on failures.

• He creates trust. He creates an environment that encourages freedom and innovation.

• He does not expect perfection.

• He listens and learns without passing judgment on him that he listens to.

• He will hold an informal, unhurried conversation with every one of his people at least once a year, not for judgment, merely to listen. The purpose would be development of understanding of his people, their aims, hopes, and fears. The meeting will be spontaneous, not planned ahead.

• He understands the benefits of cooperation and the losses from competition between people and between groups.

• Don’t beat your children for low grades. The Washington Post for 16 November 1990 told us that 110,000 children in Baltimore carried home with their report cards a printed plea from the School Board to parents not to abuse their children for low grades. Baltimore officials said that they have no statistics on report-card violence. But Peggy Mainor, a child-abuse prosecutor and member of the city’s advisory Commission for Children and Youth, said the increase in abuse cases reported immediately after grades are issued has been “enough to catch our notice.”

• One necessary qualification of anyone in management is to stop asking people to explain ups and downs (day to day, month to month, year to year) that come from random variation—Brian Joiner, 28 July 1992.

• The most important use of a loss function is to help us to change from a world of specifications (meet specifications) to continual reduction of variation about the target, through improvement of processes.