Economist magazine. Ormerod has previously written several books on socio-economics, including The Death of Economics (Faber and Faber, 1994) and Butterfly Economics: A New General Theory of Economic and Social Behaviour (Faber and Faber, 1999).

From About this book: "Failure is all around us," asserts Ormerod. For every General Electric–-still going strong after more than one hundred years–there are dozens of businesses like Central Leather, which was one of the world's largest companies in 1912 but was liquidated in 1952. Ormerod debunks conventional economic theory–-that the world economy ticks along in perfect equilibrium according to the best-laid plans of business and government–-and delves into the reasons for the failure of brands, entire companies, and public policies. Inspired by recent advances in evolutionary theory and biology, Ormerod illuminates the ways in which companies and policy-setting sectors of government behave much like living organisms: unless they evolve, they die. But he also makes clear how desirable social and economic outcomes may be achieved when individuals, companies and governments adapt in response to the actual behavior and requirements of their customers and constituents.

Issue"> TechRevu Why Most Things Fail : Evolution, Extinction and Economics
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Why Most Things Fail : Evolution, Extinction and Economics by Paul Ormerod
Review by Ernest Lilley
Pantheon Economics  ISBN/ITEM#: 0375424059
Date: 28 February, 2006 List Price $24.95 Amazon US / Amazon UK

Links: Website /

Why Things Mostly Fail is the latest bit of economic sociology for the layman by Paul Ormerod, former head of the "economic assessment unit" at the Economist magazine. Ormerod has previously written several books on socio-economics, including The Death of Economics (Faber and Faber, 1994) and Butterfly Economics: A New General Theory of Economic and Social Behaviour (Faber and Faber, 1999).

From About this book: "Failure is all around us," asserts Ormerod. For every General Electric–-still going strong after more than one hundred years–there are dozens of businesses like Central Leather, which was one of the world's largest companies in 1912 but was liquidated in 1952. Ormerod debunks conventional economic theory–-that the world economy ticks along in perfect equilibrium according to the best-laid plans of business and government–-and delves into the reasons for the failure of brands, entire companies, and public policies. Inspired by recent advances in evolutionary theory and biology, Ormerod illuminates the ways in which companies and policy-setting sectors of government behave much like living organisms: unless they evolve, they die. But he also makes clear how desirable social and economic outcomes may be achieved when individuals, companies and governments adapt in response to the actual behavior and requirements of their customers and constituents.

Though stiffer sledding than say, Freakonomics or other popular examinations of economics, Why Things Mostly Fail does tackle a tougher slope. Instead of a breezy collection of stories about how thinking like an economist can make sense of the world, he says just about the opposite. Why do things mostly fail? Because the future is uncertain, bad things happen outside our control, and nobody lives forever.

Not that he says this in simple terms. The book is written for the lay world, but not targeted at the masses by any means. There is a smattering of mathematics invoked and at one point the author points out that "...the readers of this book can probably be divided into two groups: those for whom the previous statement is obvious and those for whom it is not."

He goes on to say that there will be borderline cases, but he's right. It doesn't stop the book from being useful for those who don't have an intuitive feel for logarithmic relationships, but one does have to steel oneself against the fear of mathematics.

Once one has done so, the book contains a cogent critique of the way economics looks at things, pointing out largely that notions like the market's "perfect knowledge" to set pricing actually bear little relationship to how things really happen. What does happen appears to be more mindless, no matter how smart one may be, because the world is just too complex to understand, and those who do understand it are constantly distressed by the way humans refuse to take advantage of perfectly obvious bits of game theory to their individual or mutual advantage.

The main focus of the book is on extinction events. Not just why one species or company comes to an end, but why such events seem to come in cycles of varying magnitude. Asteroids or innovative technologies? Perhaps in the case of the dinosaur, posits the author, but not so likely in the case of corporations. External events don't seem to hold the key nearly so much as internal ones. The relationships each business has with the others around it appears to matter more than the outside world. Though everything ultimately comes to an end, the robustness of a human enterprise is more likely a function of maintaining a healthy balance between competition and cooperation than what's happening to the system as a whole.

Unfortunately he gets to this revelation fairly late in the book and doesn't have enough time left to explore it, perhaps leaving this to another book. There's a lot of useful and interesting stuff in here, and we're introduced to a number of people and ideas that I'm looking forward to pursuing, like the works of Ricard Solé, whose interests go beyond simple extinction theory in economics to gene networks, the origins of language and more. The upshot of the book seems to me to be that the importance of connections between "agents" is underestimated and the impact of the outside world overestimated. Businesses can, and do, change direction in response to events, as the inability to tie major extinction events to massive business die-offs indicates. What determines the magnitude of the die-off in response to an insult to the system appears to be the robustness of the population, which varies on its own schedule.

Why Most Things Fail is worth reading if you're interested in understanding the world thought the eyes of the socio-economist, but while it takes the world of classical economics to task and describes the nature of the world as the author sees it, it does not offer much, if any, insight into what the goals of business should be, or how to achieve them. Extinction seems fairly inevitable for the individual, but how does it affect the group? Could it be a good thing in its own right? Though the author touches on these notions, I'm looking forward to a future volume that explores them in some depth.

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