Travelling to other branches to knowledge on and off is a rewarding exercise. Great minds belong to everyone. A reading of ‘The Invisible Hand’ by Adam Smith yielded some very basic and practical management mantras for me. It is amazing to see how great minds think simply and plainly. Adam Smith draws his conclusions from simple observation of economic activity. He watches economic efforts of countries, groups and individuals with a fresh outlook. His vision is his own; he is not burdened by who said what. That is the joy of reading this all time classic.
||One person lives on the co-operation and assistance of thousands of others whom s/he does not even know. What does it prove?
Adam Smith is not speaking to a very learned scholar of Economics. He is speaking to the common person who keen to know things. Many observations are universal in nature. For example, ‘The great affair, we always find, is to get money... To grow rich is to get money; and wealth and money, in short, are, in common language, considered as in every respect synonymous.’ (P 20-21)
There is no problem at all in getting what Smith is saying. As we say about English, ’It is easier to write difficult English but difficult to write easy English’; so it seems to be true with Adam Smith also.
The first principle for good management of affairs is division of labor. Smith points out through various examples the importance of network. When we divide responsibilities, productivity increases; the quality of the produce also increases. It leads to three things, specialization, time management, and use of machines. Division of labor creates highly specialized individuals, who are extremely good in one work and not in others. It saves valuable time. It promotes use of technology and machines. Interestingly, Smith talks of the business of thinking just as any other trade. ‘In the progress of society, philosophy or speculation becomes, like every other employment, the principal or sole trade and occupation of a particular class of citizens. Like every other employment too, it is subdivided into a great number of branches, each of which affords occupation to a peculiar tribe or class of philosophers; and this subdivision of employment in philosophy, as well as in every other business, improves dexterity and saves time. Each individual becomes more expert in his own branch, more work is done upon the whole and the quantity of science is considerably increased by it’. (P 10)
Smith is not ready to give gentry any special place. The great ones exist because the simple ones silently work. ‘Compared, indeed, with the more extravagant luxury of the great, his (the labor’s) accommodation must no doubt appear extremely simple and easy; and yet it may be true, perhaps, that the accommodation of a European prince does not always so much exceed that of an industrious and frugal peasant as the accommodation of the latter exceeds that of many an African king, the absolute master of the lives and liberties of ten thousand naked savages.’ (P13)
Smith was writing this in the eighteenth century!
The most famous doctrine of ‘The Invisible Hand’ comes when Smith talks about the interdependence of the human beings. No human being is complete in her/himself. Every human being necessarily needs others in order to live, survive and thrive. One person lives on the co-operation and assistance of thousands of others whom s/he does not even know. What does it prove? It proves that we help others in order to help ourselves. There is self-interest in helping others. Only beggars depend solely on benevolence of others. ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love and never talk to them of our own necessities but of their advantage. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens.’ (P16) And then he goes on to prove that even a beggar does not depend entirely on the goodwill of others. Smith’s rationality is amazing. He catches an idea and goes on and on till the idea reaches its fullest point. He thrashes the idea of charity. We can see the foundations of present Western civilization and thought.
Like a skilled warrior, Smith jumps from one frontier to the other. He comes hard on the idea of a ‘born genius’. It is the necessity of circumstances that creates a carpenter or a philosopher. Smith is totally convinced about it. The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause as the division of labor. The difference between the most dissimilar characters, between a philosopher a common street porter, for example, seems to arise not so much from nature as from habit, custom, and education’. (P 17)
Our work in life comes not from our born talents but from what falls in our lap from the division of labor in society. There are different talents because difference is required; therefore it is created. Society needs persons of different specialized orientations of mind; therefore it cultivates and promotes them. Human beings need various occupations which one person cannot handle. ‘...the most dissimilar geniuses are of use to one another.’ (P 19) Smith’s theory explains everyone- painter, musician, peasant, porter, and philosopher!
The purpose of all economic activity is to produce revenue; for the individual and for the state. It all comes down to generation of money. As the book progresses, the context of Britain and Europe becomes more and more obvious. Nevertheless, gems of thoughts continue to drop in. A nation’s worth is often measured in terms of gold and silver stocks it has. Smith takes the discussion to the more sophisticated level of balance of trade among nations. Import and export ought to be balanced. Just as Malthus had said that Nature would only accommodate permissible number of people on its dinner table, Smith goes on to say, ‘The general industry of the society never can exceed what the capital of the society can employ.’ (P55)
Adam Smith goes on to describe the relation between individual economic interest and the societal economic interests. ‘...the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.’ (P 56) Individual and social goals are complementary. As the book progresses, Smith dwells more and more on uselessness of regulations and restraints. Regulations can give short term results to limited business houses but cannot be good for the society in the long run. Smith does not like monopoly. He says that while manufacturers are very conscious of the fact that no industry of the same type should come around them; farmers never mind other farmers cultivating the same seeds in the next farm. There should be natural flow of commerce among nations. Artificial balancing harms all parties involved.
Nuances apart, ‘The Invisible Hand’ is a great reading for the common reader. The common reader can see how a founder of a new branch of knowledge thought so simply and how the ideas really shaped. The vision of Adam Smith is simply practical. He views things from the point of view of economic necessity. He is deeply democratic in his spirit. He does not believe in any hierarchy of labor. All labor is equally important. Often, the foundations of great work are laid down by simple hands. The idea of dignity of labor is inherent in the words of Adam Smith.
If we wish to draw mantras of management, we can certainly do so. A good manager would always minutely divide the task at hand. S/he would employ expert hands at different levels. S/he would respect everyone involved in the project and would never discriminate on the basis of type of labor. A good manager would fully know the work at hand. S/he would be fully aware of the expertise required. The importance of efficient networking can never be forgotten. Life itself is a chain. One who understands the chain and values it; is a good manager. The importance of time is again paramount. Time management is absolutely vital for multiplying output. Use of technology at appropriate places is fundamental to efficient management. A great idea to be remembered all the time is ‘help others to help oneself’. It is self-interest that guides us to be of use to others. Above everything else, individual and societal interests are complementary.
Many of these ideas can indeed be contested. But as always, they present a side of the truth. These ideas may not be the whole of the truth; but they certainly represent one aspect of reality. For people of literature, the book is a fantastic reality-check. Soaked in emotions and fragrance of natural beauty, a literature lover finds a counterpart of the thought process. Variety of thought exists because it is needed.
Smith, Adam. 2008. The Invisible Hand. London: Penguin.