Archive for February, 2014:

It grew faster than America, it was richer than Germany, so why did Argentina stumble?

February 15, 2014

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One of the most popular topics in my lectures, as evidenced by popular vote, is the root of national success — why are some countries more successful than others? I usually start by asking the audience to suggest some answers. Turns out that almost everybody has a homespun theory: “Japan is successful thanks to its culture” or “The US is successful because it is innovative”. But these theories, as compelling as they may sound, are usually limited.

It’s easy to explain something after it happens. But the ability to explain things before they happen — the ability to predict — is the mark of a good theory. Most explanations we hear are truisms: maybe good for explaining the present, but not the future. So what’s a good explanation of national success? A good theory would explain not only a country’s present success, but also predict if the good times will continue. A good theory would also do the opposite: predict which currently humble countries are set to rise.

In my lecture, we draw on the examples of Korea, Spain, and Argentina, relying on the research of Prof. Mauro Guillén and others. Argentina is a particularly powerful example. A century ago, it seemed destined for success: “Its economy had grown faster than America’s over the previous four decades. Its GDP per head was higher than Germany’s, France’s or Italy’s. It boasted wonderfully fertile agricultural land, a sunny climate, a new democracy”, as The Economist reminds us.

If we can understand what made Argentina grew and what stunted the country, we may be able to understand why some countries are more successful than others. We may also be able to predict which will be successful in the future. We may be able to take action today to make our country more successful for longer. The Economist details the facts. See if you can use them to craft a good explanation.

Raymond Weil: An entrepreneur against the odds

February 6, 2014

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Entrepreneurship is a young person’s game, they say, but Raymond Weil was 50 year old when he founded his watch company — Raymond Weil Genève. The Swiss watch industry was not flourishing, either. It was disrupted by cheaper technology, initially dismissed as inferior by the giants of the Swiss watch industry.

Raymond Weil (photo: Raymond Weil USA)

Swiss watches have been around for centuries. A tight cluster of manufacturers, assemblers, and marketers perfected the mechanical technology that made the watches synonymous with accuracy and dependability. In the 1970s, Switzerland controlled half of the world watch market, making watches largely by hand, competing on mechanical sophistication, and charging steep prices for perfection.

Then, Seiko of Japan and Hamilton of the US commercialized a new timekeeping technology, based not on springs, cogs and gears — but on quartz crystals. The new watches were extremely accurate, battery-powered, and much cheaper. From their dominant position, the Swiss makers dismissed the new technology. But consumers did not. Soon, Swiss watch sales were ravaged by low-cost quartz watches, primarily from Japan. Switzerland counted 1600 watchmakers in 1970. By 1983, only 600 remained.

Many would have avoided such a shrinking industry, but not Raymond Weil. In 1976, amidst the turmoil, he founded a new watch company that bore his name. He knew that he could not compete in low and mid-level watches — these were overtaken by the quartz technology. Instead, he focused on luxury watches, which is sold in prices that ranged between $500 and $4000. High-end luxury timepieces went for $20,000.

Rather than focusing on function or technological sophistication, Weil stressed design and heritage. The watches were gracefully crafted, and carried the “made in Switzerland” label. Realizing that technology is no longer a selling point, he did not shy away from the quartz technology, deploying it together with the more traditional spring powered, cog-and-gear watches.

Jasmine, a quartz women’s watch (photo: Raymond Weil Genève)

In 1983, with the traditional watchmakers in ruins, a new Swiss manufacturer appeared — Swatch. It stressed design; it competed on price. It eventually saved the Swiss watch industry, and it did so by furthering Mr. Weil’s notions of design and heritage.

Raymond Weil died at 87 on Jan. 26, 2014 in Geneva. A New York Times obituary is here.

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