Building prosperity

I’m not an expert on every low- and middle-income economy, but my personal toolbox for solving difficult challenges relies on theory, which helps us get to the core of a problem. Good theory helps us understand the underlying mechanism driving things.

Consider, for example, the history of mankind’s attempts to fly. Early researchers observed strong correlations between being able to fly and having feathers and wings. Stories of men attempting to fly by strapping on wings date back hundreds of years. They were replicating what they believed allowed birds to soar: wings and feathers.

Possessing these attributes had a high correlation—a connection between two things—with the ability to fly, but when humans attempted to follow what they believed were “best practices” of the most successful fliers by strapping on wings, then jumping off cathedrals and flapping hard. . . they failed. The mistake was that, although feathers and wings were correlated with flying, the would-be aviators did not understand the fundamental causal mechanism—what actually causes something to happen—that enabled certain creatures to fly.

The real breakthrough in human flight didn’t come from crafting better wings or using more feathers, even though those are good things. It was brought about by Dutch-Swiss mathematician Daniel Bernoulli and his book Hydrodynamica, a study of fluid mechanics. In 1738, he outlined what was to become known as Bernoulli’s principle, a theory that, when applied to flight, explained the concept of lift. We had gone from correlation (wings and feathers) to causality (lift). Modern flight can be traced directly back to the development and adoption of this theory.

But even the breakthrough understanding of the cause of flight still wasn’t enough to make flight perfectly reliable. When an airplane crashed, researchers then had to ask, “What was it about the circumstances of that given attempt to fly that led to failure? Wind? Fog? The angle of the aircraft?” Researchers could then define what rules pilots needed to follow in order to succeed in each different circumstance. That’s a hallmark of good theory. It dispenses its advice in “if/then” statements.

As a business school professor, I’m asked hundreds of times a year to offer opinions on specific business challenges in industries or organisations in which I have no special knowledge. Yet I’m able to provide insight because there is a toolbox of theories that teach me not what to think, but how to think about a problem. Good theory is the best way I know to frame problems so that we ask the right questions to get us to the most useful answers. Embracing theory is not to mire ourselves in academic minutiae but, quite the opposite, to focus on the supremely practical question of what causes what—and why? This approach is at the core of this book.

This is an extract from Clayton M. Chirstensen's The Prosperity Paradox published by Harper Business