One of the single most important elements of industrial efficiency and technical progress is the concept of "division of labor." The original thesis behind division of labor was stated succinctly by Adam Smith in Wealth of Nations, with his classic description of the pin factory, where each task was divided into standardized steps to be completed more cost-efficiently by different people and machines. When an analogous principle is applied to nation-states we get the theory of comparative advantage, which underlies the benefits of free trade. Both division of labor and comparative advantage presume that people can perform separate tasks and then trade with each other for mutual benefit. Trading is critical. Without trading, among people and nation-states alike, progress is stunted.

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What if we could change the income tax so that it taxes low incomes instead of high incomes? Suppose, for instance, that everyone had to pay 100% of their first $15,000 of income to the IRS, and only after this could they keep any money they earned. Of course, this would provide a terrible disincentive for people to work - it might even make it impossible to find people willing to take minimum wage jobs, which pay about $15,000 a year. No one would want to impose such a tax.

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Although unemployment rates continue to remain high and some market sectors, such as real estate, have not yet rebounded, most corners of the economy continue to gain strength. As corporate financial performance improves, many CEOs are focusing on expanding product sales or diversifying into new markets.

That type of thinking is a common knee-jerk approach most decision-makers often make in the early stages of an economic recovery. Ultimately, however, it's a misguided methodology.

Continue reading "Customer Strategist Orkun Oguz:
Striking a Customer-Centric Strategy Through the Upturn" »

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