Lessons from scrabble on how we can be rich

It’s Sunday and this week’s discourse is based on the gospel of a prophet of developmental economics, the renowned Venezuelan, Ricardo Hausmann of Harvard.

Once upon a time (vaguely in the 1970s), Ghana and Thailand were at approximately the same level of economic development.

Ghana then went on to double its investment in education versus its Siamese peers.

Yet 49 years later, every Thai person is four times richer than the average Ghanaian.

So why are some countries richer and some poorer? In the 1700s when Adam Smith wrote The Wealth of Nations, the richest country in the world was Netherlands, which was about four times wealthier than the poorest.

Today, the distance between Malawi and Canada is a multiple of 250.

EDUCATION

The acceleration, divergence and lacuna between the fortunes of nations in the past 200 years cannot merely be explained by the fact that one country was full of PhDs and citizens of the other had only elementary education.

It turns out that #SchoolIsNotSoUseful. And that there is such a thing as too much education.

Now, don’t get me wrong. I am by no means advocating for a regression to illiteracy. However, formal schooling may not be as important beyond a certain point. Not as important as learning hands-on skills.

Not all knowledge can be transmitted in a classroom through the internet. You may succeed in finding a recipe for beef pilau or even the most cost-effective flights to take for your upcoming Dubai trip, but you may not be able to treat your toothache without visiting your dentist, who trained for many years, to alleviate your pain, despite your frequent visits to the WebMD site.

This aspect of tacit knowledge in a society is what Prof Hausmann calls know-how.

POTENTIAL

If you assume each person’s brain has a finite capacity to store know-how and at maximum each human brain can store up to one ‘person-byte’ then the collective know-how of a country is determined by the cumulative ‘person-bytes’ it possesses.

If you play Scrabble, another metaphor for this is how many tiles a country has (aka ‘person-bytes’) and therefore how many different word combinations it can come up with.

Thus the well-endowed have a more diverse and larger store of Scrabble tiles, meaning they can make both simple and complex products — from clothes to furniture to antibiotics to aircraft.

Using this measure, Germany is the Scrabble world champion and could potentially make the highest potential scoring word in the game: Oxyphenbutazone. (This word is worth an incredible 1,458 points compared to a less well-off nation’s double-digit scores.)

You may ask — but surely the theories of comparative advantage tells us that each country should specialise.

SKILL SET

So if France is really good at growing grapes in the Bordeaux Valley then it should focus on exchanging wine for Kenyan Arabica coffee beans or some other goods.

Wrong. Breaking News: #CountriesProsper-ByMakingMoreThings. For which they need more complementary skill sets and knowledge diffusion.

And it’s not so easy to codify what is in people’s brains or to move people who may want to stay put because of family or simply because they don’t like change.

And so knowledge clusters have developed in geographical concentrations. Voila! #SiliconValley.

And then there is the story of #BangladeshTextileIndustry whose explosion is nearly all traceable to some Bangladeshis who went to South Korea to work in the textile industry and on their return to their home country, spawned the massive garment industry.

INDUSTRIES

Now that the secrets of getting ahead have been revealed, maybe we should all have dropped out of high school and started as interns somewhere. But where?

Even if we wanted to become a maker of Rolex watches in Kenya, we cannot because we don’t have a watch-making industry.

Of course if we had sufficient resources, we could give incentives to some Swiss folks to emigrate and teach us how to make timepieces.

The traditional drivers of growth, according to conventional theory, education, or land, (mostly unskilled) labour and capital — don’t matter as much.

We could learn a few lessons from the success of other countries. These include Value Know-How and its transferability.

CENTRES OF EXCELLENCE

It’s the division of knowledge rather than the division of labour. Second, 'Love Thy Neighbours' Uganda, Tanzania, Ethiopia.

We are more likely to develop centres of excellence among those we are closer to and can exchange ideas.

Third: learn German, move to America…or other more developed economy and then come back with new skills?

Greek philosopher Pindar once said: “Learn what you are and be such.” We need to grow our capabilities and intuitive knowledge in order to grow our riches.

The author is the managing partner of C. Suite Africa, a boutique management consultancy. [email protected]