Be Grateful to Your Competitors

The McKinsey Quarterly has a feature asking why poor countries, to a depressing degree, remain poor:  Their answer is the "Power of Productivity."

But wait, don't we already know how to help poor countries?  Let's look at the record.  After World War II, the IMF, the World Bank, et al., spent 50 years and untold billions investing in infrastructure, capital assets, educational and health reforms, etc.—but to negligible effect.  Then, following collapse of the Soviet Union, reformers focused on macroeconomic factors such as minimal government deficits, low interest rates, free trade, price decontrol, and privatization.  These nostrums were applied to, among others, Argentina, Brazil, India, Mexico, and Russia itself.  Yet none of those countries is threatening to become the next Germany or Japan.

How about education?  Didn't the superior Japanese educational system get credit for Japan's accelerating productivity in the 1980's (especially against the painful comparison with the US' relatively insipid performance)?  While a high-quality education is devoutly to be desired for many reasons, the evidence is of little linear correlation with higher productivity as a worker.  If the product US high schools turn out is so inferior to its Japanese counterpart, why do Japanese-owned car factories in the US Sunbelt achieve 95% of the productivity of factories in Japan?  For that matter, how can illiterate Mexicans be world-beaters in productivity at construction sites in Texas?

So what does this have to do with law firm management, already?  McKinsey concludes that the only effective spur to higher productivity in the long run is truly unfettered competition.  So the moral is:  Don't bemoan the fact that your competitors are getting better, smarter, faster, and more global all the time.  In the long run, it will make you and your partners richer.