NOVEL SOLUTIONS
Fun With Economics I
SHEA GIBBS, SENIOR EDITOR
f you love business books by big personalities
touting catch-all ideas—think Jack Welch, Chet Holmes, Peter Drucker—you can probably pass on Secrets of the Moneylab. But if you’d like to learn a few business lessons drawn from experimental methods, go ahead and pick up the bestseller by Kay-Yut Chen and Marina Kravosky. In the book, a behavioral
Casting Scale
Relevance to Metalcasters Technical Diffi culty Self-Help Fluff Bottom Line
economist (Chen) and jour- nalist (Kravosky) set out to detail the lessons learned from what is a fairly young fi eld of economic inquiry: experimen- tal economics. Chen is a leader of Hewlett-Packard’s “Mon- eylab,” a richly funded center through which the company runs scientifi c experiments to test the way people will act in business situations. Kravosky is a journalist who has set out to help the economist chronicle what the lab has learned and then turn those lessons into actionable business practices real world companies can use. T e result is a collection of experimental conclusions,
often presented alongside real life business examples. T is can lead to some canned, no-duh and clichéd assertions, but it can also lead to some profound insights and good reminders. For example, the authors
suggest that “for a manufac- turer of complex products, such as cars or computers, one way to use risk pooling in managing inventory is to use standard parts across multiple products.” While this is a well-
known fact of doing business, it’s a strategy most metalcasting job shops have all but entirely dismissed. Many will say this is by necessity—the metalcasting industry can’t (or won’t) attempt anything like standard- izing inventory. But one of
60 | MODERN CASTING March 2011
the reasons you might read Secrets of the Moneylab would be to remember to ask your- self if you want to do things diff erently than they’ve ever been done in our industry. Secrets of the Moneylab
off ers lessons in, among other things, purchasing, human resources, pricing and inven- tory maintenance—all things important to the metalcaster. T is will keep some in the industry interested in the
occasional gem the book off ers, even when it feels like it is tailored more to consumer-based business models. Chen and Kravosky take some pains to remind readers
they do not intend to make business owners go out and start performing the types of experiments HP does in the Mon- eylab. Rather, business owners are to learn from the experi- ments the lab has already conducted. As much as anything, the book is designed to force you to examine the way you make decisions. “You may never run a controlled experiment or even
Metalcaster’s Translation
hire an outside expert to do it for you, but we hope you’ll at least begin to question all-or-nothing thinking, seek data to challenge your hunches, track distribu- tions and not just aver- ages, watch hidden costs, question one-size-fits-all advice, and harness the big power of small chang- es,” the authors write. Before you pick up
“Most of us aren’t in the insurance business. But we can all use the principle of insurance to profi t from other people’s risk aversion.” Translation: You can
add value to your product by assuming some of the risk your customer takes when doing business with a metalcasting supplier, for example by guaranteeing zero scrap rates or just-in-time delivery.
Secrets of the Moneylab, rec- ognize that it is by-and- large an economics book. T e writing can be choppy and diffi cult at times, and you may fi nd there are an inordinate number of examples for each con- clusion reached. But the payoff s are more than standard bits of puff ery— they’re scientifi cally tested bits of puff ery.
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