The Economist - USA (2020-02-01)

56 Business The EconomistFebruary 1st 2020

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Bartleby From the cradle to the Grove

M

any peoplehave a favourite book

that they like to hand out to friends

and colleagues, ranging from Doris

Lessing’s feminist bible “The Golden

Notebook” to Ayn Rand’s libertarian saga

“The Fountainhead”. The chosen tome of

Dominic Cummings, a special adviser to

Boris Johnson, Britain’s prime minister,

is rather more specialist. It is “High

Output Management” by Andrew Grove,

the late chairman of Intel, a chipmaker.

As management books go, Mr Cum-

mings made an excellent choice—

Grove’s text is clear, practical and free of

both pomposity and jargon. Any manag-

er could benefit from his insights into

issues such as planning and perfor-

mance reviews. The book has been pop-

ular in Silicon Valley ever since it was

first published in 1983.

But how much use will the book be to

British civil servants, or indeed any

government official? At Intel, Grove’s

goals were clear: to produce the most

powerful, reliable microprocessors at the

lowest possible cost. The market rein-

forced efforts to meet these goals every

day. A competitor might always produce

a better, cheaper product (hence the title

of another Grove book, “Only the Para-

noid Survive”).

Even though they involve manage-

ment, governments are not businesses.

They are rarely engaged in manufactur-

ing. The services they offer are not usual-

ly being provided in a competitive mar-

ket. And the outputs they produce are

notoriously hard to define.

Take the provision of welfare bene-

fits. A government might choose to aim

at a whole range of targets. The provision

of benefits at the lowest administrative

cost; ensuring that no genuine claimant

goes without food or shelter; reducing

fraud; making the application system as

simple and transparent as possible; setting

the level of benefits so that applicants are

encouraged to seek work; and so on. Some

of these targets might be incompatible

with others. Politicians may choose to

prioritise one but they will come under

pressure if they fail to meet another: if

fraud rises, say, or if claimants are left

destitute. So civil servants may be forced to

chase all the goals simultaneously (more

like the modern-day notion of “stakehold-

er capitalism” than the shareholder focus

Grove represents).

Nor can one rely on everyone to pursue

the targets that politicians set. In the 1980s

the British government changed the defi-

nition of unemployment in a number of

ways that reduced the claimant count. But

the result was a rise in the number of

people on sickness benefit. The doctors

who attested to the sickness claims were

not under the direct control of ministers.

Many were sympathetic to claimants at a

time of rapidly rising joblessness.

The theme which runs through Grove’s

book is the “breakfast factory”: a restau-

rant that serves the customer with an egg,

toast and coffee in the most efficient

fashion. But running a government is a

lot more like operating a café where

some customers are vegan, others are

gluten-intolerant, some want mint tea,

and the staff treat the enterprise as a

workers’ co-operative and (possibly to

their boss’s dismay) refuse to take money

from patrons.

Where Grove does on occasion stray

into public policy, it is easy to see where

his approach falls short. He compares the

way that American embassies assess

visas with manufacturers testing compo-

nents. The vast majority of visas are

processed without fuss, so why not test a

sample rather than every single applica-

tion, and reduce the time wasted by staff

and applicants? Politicians would be

extremely reluctant to take such a line, in

case a single terrorist entered the coun-

try on an unchecked visa. Grove’s analy-

sis of America’s criminal-justice system

suggests that the main constraint is a

lack of prison places. At no point does he

consider whether, in a country which has

long locked up more people proportion-

ately than anywhere else, prison is the

most effective way of dealing with crime.

This does not mean that government

can learn nothing from business. But the

idea that businesspeople will automati-

cally translate their success into govern-

ment has been proved false by a host of

examples, from Silvio Berlusconi in Italy

to Rex Tillerson, head of ExxonMobil

turned America’s secretary of state. They

pull levers and find that nothing moves

the way they expect.

It won’t do civil servants any harm to

read “High Output Management”. But it is

not a road map for managing govern-

ment. At least the officials can be grateful

for small mercies: Mr Cummings isn’t

making them read “The Fountainhead”.

Business lessons may not always apply to government

Many of the duds used to end up on the in-

ternet, sold cheaply on sites like Yoox and

Saksoff5th.com (though labels now see

more potential to sell online at full price).

None of this will be enough to get rid of

an outmoded collection—or diminish the

pile of unsold items that analysts expect as

a result of the coronavirus, which will force

Chinese travellers to cancel shopping trips.

To really shift stocks, brands now look to

outdoor malls that group together “factory

outlets”. The likes of Bicester Village, an

hour’s ride from central London, resemble

what a Chinese tourist thinks a quaint

European village ought to look like, crossed

with an airport shopping concourse. The

shops are full of the stuff famous brands

could not sell at full price elsewhere. Goods

typically sell for 70% of high-street prices.

The concept is booming. Out of an esti-

mated €281bn in personal-luxury sales last

year, €37bn were in such physical off-price

stores, according to Bain, a consultancy.

The figure has shot up by 85% in five years.

But using the outlets for anything beyond

liquidating inventory—for example by

stocking them with cheaper, second-tier

collections—is a way to dent a brand’s ca-

chet permanently, warns Mr Solca. Best to

keep only the most questionable styles and

weirdest sizes in stock, and to push a

brand’s real aficionados to Regent Street or

Avenue Montaigne.

Two things may come to the rescue of

exasperated inventory liquidators. The

first is the rise of second-hand-clothes

sales online: expect to see many “used”

frocks on offer that are in fact brand new.

The second is “up-cycling”, when an un-

sold dress gets trimmed, combined and

dyed into a new fabulous outfit. For luxury

brands, these two trends are unmissable. 7