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Books: Why Not?

Why Not? How to Use Everyday Ingenuity to Solve Problems Big and Small by Barry Nalebuff and Ian Ayres

As readers of their Forbes column know, Nalebuff and Ayres have a long history of suggesting quirky and unconventional ideas. In this book they show us how, with easy writing and plenty of examples. How do you ensure you don't forget your keys? Did you know a variation of the solution makes European hotels more energy efficient? Can you buy insurance to protect against a drop in your home value? How nice would it be if you didn't have to pay your mortgage for a month - especially when the shopping season depletes your wallet. How can you get your health insurance company to treat your life as if it were worth a million dollars? Sometimes the answers are real world solutions, sometimes they are simply interesting ideas. This is a book about problem solving - or as the authors put it, problem solving with a purpose. They want you to not only think in new ways, but also come up with solutions that could help society or seed new businesses. Their approach to problem solving is based on two perspectives: looking for problems in search of solutions, and solutions in search of problems.

 Each of these lead to two basic question tools which form the foundation of this book. What would Croesus do? Why don't you feel my pain? Where else would it work? Would flipping it work? The first tool under problems in search of solutions (what could Croesus do) starts with the idea that you have unlimited money to solve a problem. This enables the birth of bold and outrageous solutions that could eventually get downsized to practicality. Working with this line of thinking the authors hit upon a novel idea. Why not have a fixed-rate mortgage that automatically refinances if interest rates fall? While it seems like a loser at first, more thought shows how it can work and, in fact, there is at least one company that actually does it.

Why don't you feel my pain, goes after misguided incentive systems. If health insurance companies also provided your life insurance, they would have a huge incentive to keep you alive, right? If we don't get all-you-can-drive gas for cars, why do we get insurance that doesn't vary much by how much we drive? Why not have pay-as-you-drive insurance that charges you based on exactly how much you drive? That would be fairer to those who drive less and prevent them from subsidizing those who drive more. Some insurance companies have already started to test these ideas.

The second major perspective in this book is to look for solutions in search of problems (i.e.) find a good existing solution and see if it has other applications. The first tool here is, where else would it work? Consider that charitable donations have to be made in the previous calendar year to count for the next year's taxes. But contributions to an individual retirement account can be made till April 15th and still count. This is done to encourage saving. Wouldn't you want to encourage charitable giving also? So, why not do the same for charitable contributions? Airplanes have black boxes, so why not cars? As it turns out, tests have shown that just knowing that there is a box can change driving behavior, making it safer.

The last tool in the book is trying things the other way around - would flipping it work? Several interesting ideas are mentioned here including making telemarketing companies pay customers for listening and having consumers pay to not watch advertisements on network television. My favorite one involves monkeys and peeling of bananas.

The last third of the book is devoted to helping the reader become a better thinker by solving problems and puzzles using the tools presented before. A case study is also included about a company (Honest Tea) that one of the authors helped found. Even if this book were not practically useful, it is fun to read. The fact that it is so useful is a great bonus.  The website for this book contains, among other things, an Idea Exchange where people suggest and vote on new ideas.

Barry Nalebuff is the Milton Steinbach Professor of Economics at the Yale School of Management. Among other things he is an expert in the application of game theory to business and politics and in October 1991 he used that knowledge to argue that a Clinton-Gore ticket would have the best chance to beat President Bush. Ian Ayres is the William K. Townsend Professor of Law at Yale Law School. He is most recently the author of Super Crunchers: Why Thinking by Numbers is the New Way to be Smart. The title of this book was selected by running an experiment.


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Guest Tuesday, 26 May 2020

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