B000U5KFIC EBOK (56 page)

I have tried to demonstrate today, and indeed by the example of my life, that it is neither inevitable nor advantageous for soft-science educational domains to tolerate as much unidisciplinary wrongheadedness as they now do. If I could somewhat fix my many gross deficiencies, so can they. There is clearly a better way, quite feasible to trod. And, if this is so, there is an ethos, also from Dr. Johnson, that is applicable. Please remem- her the word Dr. Johnson used to describe maintenance of academic ignorance that is removable through diligence. To Dr. Johnson such conduct was "treachery."

And if duty will not move improvement, advantage is also available. There will be immense worldly rewards, for law schools and other academic domains as for Charlie Munger, in a more multidisciplinary approach to many problems, common or uncommon. And more fun as well as more accomplishment. The happier mental realm I recommend is one from which no one willingly returns. A return would be like cutting off one's hands.

In a long career I have assimilated various ultrasimple general notions that I find helpful in solving problems. Five of these helpful notions I will now describe. After that I will present to you a problem of extreme scale. Indeed, the problem will involve turning start-up capital of $2 million into $2 trillion, a sum large enough to represent a practical achievement. Then I will try to solve the problem, assisted by my helpful general notions. Following that, I will suggest that there are important educational implications in my demonstration. I will so finish because my objective is educational, my game today being a search for better methods of thought.

My first helpful notion is that it is usually best to simplify problems by deciding big "no-brainer" questions first.

The second helpful notion mimics Galileo's conclusion that scientific reality is often revealed only by math, as if math was the language of god. Galileo's attitude also works well in messy practical life. Without numerical fluency, in the part of life most of us inhabit, you are like a onelegged man in an ass-kicking contest.

The third helpful notion is that it is not enough to think problems
through forward. You must also think in reverse, much like the rustic
who wanted to know where he was going to die so that he'd never go
there. Indeed, many problems can't be solved forward. And that is why
the great algebraist, Carl Jacobi, so often said: "invert, always invert." And
why Pythagoras thought in reverse to prove that the square root of two
was an irrational number.

The fourth helpful notion is that the best and most practical wisdom
is elementary academic wisdom. But there is one extremely important
qualification: you must think in a multidisciplinary manner. You must
routinely use all the easy-to-learn concepts from the freshman course in
every basic subject. Where elementary ideas will serve, your problem
solving must not be limited, as academia and many business bureaucracies are limited, by extreme balkanization into disciplines and subdisciplines, with strong taboos against any venture outside assigned territory.
Instead, you must do your multidisciplinary thinking in accord with
Ben Franklin's prescription in Poor Richard: if you want it done, go. If
not, send."

If, in your thinking, you rely entirely on others, often through purchase of professional advice, whenever outside a small territory of your
own, you will suffer much calamity. And it is not just difficulties in complex coordination that will do you in. You will also suffer from the reality
evoked by the Shavian character who said: "in the last analysis, every profession is a conspiracy against the laity." Indeed, a Shavian character, for
once, understated the horrors of something Shaw didn't like. It is not usually the conscious malfeasance of your narrow professional adviser that
does you in. Instead, your troubles cone from his subconscious bias. His
cognition will often he impaired, for your purposes, by financial incentives different from yours. And he will also suffer from the psychological
defect caught by the proverb: to a man with a hammer, every problem
looks like a nail."

The fifth helpful notion is that really big effects, lollapalooza effects,
will often come only from large combinations of factors. For instance, tuberculosis was tamed, at least for a long time, only by routine combined
use in each case of three different drugs. And other lollapalooza effects,
like the flight of an airplane, follow a similar pattern.

It is now time to present nay practical problem. And here is the
problem:

It is 1884 in Atlanta. You are brought, along with twenty others like you, before a rich and eccentric Atlanta citizen named Glotz. Both you and Glotz
share two characteristics: first, you routinely use in problem solving the
five helpful notions, and, second, you know all the elementary ideas in all
the basic college courses, as taught in 1996. However, all discoverers and
all examples demonstrating these elementary ideas come from dates transposed back before 1884. Neither you nor Glotz knows anything about anything that has happened after 1884.

Glotz offers to invest $2 million, yet take only half the equity, for a
Glotz charitable foundation, in a new corporation organized to go into the
non-alcoholic beverage business and remain in that business only, forever.
Glotz wants to use a name that has somehow charmed him: Coca-Cola.

The other half of the new corporation's equity will go to the man who
most plausibly demonstrates that his business plan will cause Glotz's foundation to he worth a trillion dollars 150 years later, in the money of that
later time, 2034, despite paying out a large part of its earnings each year as
a dividend. This will make the whole new corporation worth $2 trillion,
even after paying out many billions of dollars in dividends.

You have fifteen minutes to make your pitch. What do you say to Glotz?

And here is my solution, my pitch to Glotz, using only the helpful notions and what every bright college sophomore should know.

Well Glotz, the big "no-brainer" decisions that, to simplify our problem, should be made first are as follows: first, we are never going to create something worth $2 trillion by selling some generic beverage.
Therefore we must make your name, "Coca-Cola," into a strong, legally
protected trademark. Second, we can get to $2 trillion only by starting
in Atlanta, then succeeding in the rest of the United States, then rapidly
succeeding with our new beverage all over the world. This will require
developing a product having universal appeal because it harnesses powerful elemental forces. And the right place to find such powerful elemental forces is in the subject matter of elementary academic courses.

We will next use numerical fluency to ascertain what our target implies. We can guess reasonably that by 2034 there will be about eight billion beverage consumers in the world. On average, each of these
consumers will be much more prosperous in real terms than the average
consumer of 1884. Each consumer is composed mostly of water and must
ingest about 64 ounces of water per day. This is eight eight-ounce servings. Thus, if our new beverage, and other imitative beverages in our new
market, can flavor and otherwise improve only 25 percent of ingested
water worldwide, and we can occupy half of the new world market, we
can sell 2.92 trillion eight-ounce servings in 2034. And if we can then net
four cents per serving. we will earn $117 billion. This will be enough, if our business is still growing at a good rate, to make it easily worth two
trillion dollars.

A big question, of course, is whether four cents per serving is a reasonable profit target for 2034. And the answer is yes, if we can create a
beverage with strong universal appeal. One hundred fifty years is a long
time. The dollar, like the roman drachma, will almost surely suffer monetary depreciation. Concurrently, real purchasing power of the average
beverage consumer in the world will go way up. His proclivity to inexpensively improve his experience while ingesting water will go up considerably faster. Meanwhile, as technology improves, the cost of our simple
product, in units of constant purchasing power, will go clown. All four factors will work together in favor of our four-cents-per-serving profit target.
Worldwide beverage-purchasing power in dollars will probably multiply
by a factor of at least forty over 150 years. Thinking in reverse, this makes
our profit-per-serving target, under 1884 conditions, a mere one fortieth of
four cents or one tenth of a cent per serving. This is an easy-to-exceed target as we start out if our new product has universal appeal.

That decided, we must next solve the problem of invention to create
universal appeal. There are two intertwined challenges of large scale:
first, over 150 years we must cause a new-beverage market to assimilate
about one fourth of the world's water ingestion. Second, we must so operate that half the new market is ours, while all our competitors combined are left to share the remaining half. These results are lollapalooza
results. Accordingly, we must attack our problem by causing every favorable factor we can think of to work for us. Plainly, only a powerful
combination of many factors is likely to cause the lollapalooza consequences we desire. Fortunately, the solution to these intertwined problems turns out to be fairly easy, if one has stayed awake in all the
freshman courses.

Let us start by exploring the consequences of our simplifying "no-
brainer" decision that we must rely on a strong trademark. This conclusion automatically leads to an understanding of the essence of our
business in proper elementary academic terms. We can see from the introductory course in psychology that, in essence, we are going into the
business of creating and maintaining conditioned reflexes. The "CocaCola" trade name and trade dress will act as the stimuli, and the purchase
and ingestion of our beverage will be the desired responses.

And how does one create and maintain conditioned reflexes? Well,
the psychology text gives two answers: (1) by operant conditioning, and
(2) by classical conditioning, often called Pavlovian conditioning to
honor the great Russian scientist. And, since we want a lollapalooza result, we must use both conditioning techniques-and all we can invent
to enhance effects from each technique.

The operant-conditioning part of our problem is easy to solve. We
need only (1) maximize rewards of our beverage's ingestion, and (2) minimize possibilities that desired reflexes, once created by us, will be extinguished through operant conditioning by proprietors of competing
products.

For operant conditioning rewards, there are only a few categories we
will find practical:

1. Food value in calories or other inputs;

2. Flavor, texture, and aroma acting as stimuli to consumption under
neural preprogramming of a man through Darwinian natural
selection;

3. Stimulus, as by sugar or caffeine;

4. Cooling effect when man is too hot or warming effect when man
is too cool.

Wanting a lollapalooza result, we will naturally include rewards in all
the categories.

To start out, it is easy to decide to design our beverage for consumption cold. There is much less opportunity, without ingesting beverage, to
counteract excessive heat, compared with excessive cold. Moreover, with
excessive heat, much liquid must be consumed, and the reverse is not
true. It is also easy to decide to include both sugar and caffeine. After all,
tea, coffee, and lemonade are already widely consumed. And it is also
clear that we must be fanatic about determining, through trial and error,
flavor and other characteristics that will maximize human pleasure while
taking in the sugared water and caffeine we will provide. And, to counteract possibilities that desired operant-conditioned reflexes, once created by us, will be extinguished by operant conditioning employing
competing products, there is also an obvious answer: we will make it a
permanent obsession in our company that our beverage, as fast as practicable, will at all times be available everywhere throughout the world.
After all, a competing product, if it is never tried, can't act as a reward
creating a conflicting habit. Every spouse knows that.

We must next consider the Pavlovian conditioning we must also use.
In Pavlovian conditioning powerful effects come from mere association.
The neural system of Pavlov's dog causes it to salivate at the bell it can't
cat. And the brain of man yearns for the type of beverage held by the
pretty woman he can't have. And so, Glotz, we must use every sort of decent, honorable Pavlovian conditioning we can think of. For as long as we are in business, our beverage and its promotion must be associated in
consumer minds with all other things consumers like or admire.

Such extensive Pavlovian conditioning will cost a lot of money, particularly for advertising. We will spend big money as far ahead as we can
imagine. But the money will be effectively spent. As we expand fast in
our new-beverage market, our competitors will face gross disadvantages
of scale in buying advertising to create the Pavlovian conditioning they
need. And this outcome, along with other volume-creates-power effects,
should help us gain and hold at least 50 percent of the new market everywhere. Indeed, provided buyers are scattered, our higher volumes will
give us very extreme cost advantages in distribution.

Moreover, Pavlovian effects from mere association will help us
choose the flavor, texture, and color of our new beverage. Considering
Pavlovian effects, we will have wisely chosen the exotic and expensivesounding name "Coca-Cola," instead of a pedestrian name like "Glotz's
sugared, caffeinated water." For similar Pavlovian reasons, it will be wise
to have our beverage look pretty much like wine, instead of sugared
water. And so we will artificially color our beverage if it comes out clear.
And we will carbonate our water, making our product seem like champagne, or some other expensive beverage, while also making its flavor
better and imitation harder to arrange for competing products. And, because we are going to attach so many expensive psychological effects to
our flavor, that flavor should he different from any other standard flavor
so that we maximize difficulties for competitors and give no accidental
same-flavor benefit to any existing product.