Malcolm Gladwell and your Personal Finances

Malcolm Gladwell and your Personal Finances

Malcolm Gladwell's book The Tipping Point is a popular read at the moment, gracing many of the world's best seller lists. What exactly is Gladwell talking about and what is there to learn from a financial perspective about this "talk of the town"?

Anybody who is looking for an insight into why certain goods and services take the market by storm, and others of equal or in some cases better quality and value do not, will find some very good theoretical answers in Malcolm Gladwell’s The Tipping Point.
 
Before picking up a copy of any of Gladwell’s works, I had fallen into the trap of assuming that material of which all my friends are familiar and in most cases have read is just mass-produced baloney. I’d put the Robert Kiyosaki series in that pile.
 
My view of Gladwell and his works was also skewed by a scathing article in the New York Times written by Steven Pinker which to be frank pulls Gladwell apart. In the article Pinker refers to Gladwell as, “the indefatigably curious journalist” and claims his stock in trade is “counterintuitive findings from little-known experts”. He also draws attention to the generic nature of the design of Gladwell’s books, describing him as “a brand”.
 
Most embarrassingly, perhaps, Pinker points out a basic error in Gladwell’s work, that of the eigenvalue, a basic mathematical concept in algebra which is spelled incorrectly as “igon value” in Gladwell’s book. Such an error is theoretically unforgivable but at the same time is like refusing to drive one’s car because there is a small dropping on the windshield. I've read copious amounts of books that are riddled with punctuation and spelling errors. While this is unprofessional it's by no means reflective of the author.
 
Regardless of such preconceptions I decided to pick up Tipping Point and concluded it last week. The book is mainly about the factors that push trends or items to “tip” – akin to going mainstream. The first example Gladwell uses is that of Hush Puppies, a small boutique footwear company which increased sales exponentially after a bunch of kids in midtown Manhattan caused the brand to “tip”. Various other examples are used such as crime in New York City, which decreased exponentially after certain events occurred, as well as the spread of syphilis in Baltimore which piqued after environmental and economic conditions deteriorated.
 
Gladwell also explains the various players in such phenomena, such as Market Mavens. These are people who are not your normal shoppers and are always on the lookout for a better product. Once they find it, they usually know somebody who is classified as a Connector, and this person is responsible for the dissemination of such information to the market. It’s these two, amongst others, that are required for something to “tip”.
 
Having only now read Tipping Point it’s safe to say that I concur with both Pinker and Gladwell in a number of areas. I think Gladwell provides a good perspective that is relevant to anybody who is trying to assess what the next big thing is, in terms of a popular product. There are some similarities between Gladwell’s theory and that of Black Swan, a theory by Nasim Taleb that explains the consequences of extremely unlikely events.
 
I do however sit on the fence as to whether or not this theory of Tipping Point is actually a value-add. I think a lot of Gladwell’s ideas are novel and entertaining but I would not go and restructure my business strategy or my personal finances based on his ideas. Having read Gladwell, I do not think it’s largely down to luck and Market Mavens and Connectors whether or not a good sells or a certain event occurs.
 
The crux of the matter is that events are unpredictable and the effect events have on the future is uncertain. Having only read Tipping Point, I don't think I would progress to his other best-sellers in a hurry, such as Outliers and Blink. I’m much more inclined to use the ideas of Taleb and Jim Collins, in his book Good to Great: Why Some Companies Make the Leap… and Others Don’t.
 
I understand Gladwell’s book is not meant to be a guide to success. I am however conscience of the fact that realistic and practical advice often outweigh the abstract and theoretical “magic” of hypothesis and feel there are better books out there. Perhaps I need to read the rest of Gladwell’s work, but for now I’m happy to browse my bookshelf for more practical titles.

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Comments

  • Sol Nasisi

    February 20, 2010

    I have a story about this book. When I was in business school I was shopping for a camera and bumped into my marketing professor at Best Buy. He started listing off the different qualities of the camera and why I should get an extended warranty, etc. He was very knowledgeable and happy to share his info.

    A few years later I was reading the Tipping Point and who was in it but my Professor. He was used as an example of an information maven. I have to say Gladwell was spot on in that characterization.

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