1986, THE SPACE SHUTTLE CHALLENGER EXPLODED shortly after take-off, killing all seven astronauts aboard. The cause of the explosion was the failure of one of the rubber O-rings—essentially rubber bands—that helped to seal the joints in the shuttle’s booster rockets. The O-rings served as gasket seals, like washers in a faucet, there to ensure that burning fuel didn’t leak out. It was too cold the morning of the launch, so the rubber O-rings became too rigid to maintain the seal and the burning rocket fuel escaped, heating the shuttle’s massive external fuel tank and creating the fatal explosion. The failure of one O-ring was enough to cost the lives of all seven astronauts.Read more at location 2139
it is the smallest of failures that can cause the greatest of losses.Read more at location 2145
Harvard economist Michael Kremer saw the O-ring story as a tale of tragedy, but he saw something else as well: he saw a parable that might help explain why workers in some countries are so much more productive than quite similar workers in other countries.1 Kremer’s O-ring theory assumed that some kinds of projects are like the space shuttle—in which any one failure can lead to disasterRead more at location 2145
why the janitors and executive assistants at top law firms earn more than people with the same jobs at ordinary law firms, why small differences in the average skill of workers across countries can cause massive differences in productivity across countries, and why the richest countries tend to produce entirely different goods than the poorest countries.Read more at location 2150
In an O-ring economy, the clichés are true: a chain is only as strong as its weakest link; for want of a nail a battle can be lost.Read more at location 2159
business owners will naturally—by an invisible hand—put highly skilled workers together on the most valuable projects and put lower-skilled workers together on the less valuable projects.Read more at location 2160
that’s an O-ring sector of the economy: since one mistake can destroy most of the value,Read more at location 2178
Here is one modern example of an O-ring production method that we’re all familiar with: moviemaking. Why do award-winning directors team up with award-winning cinematographers and get a musical score by elite composers such as Ennio Morricone or John Williams or Hans Zimmer? Why do the best tend to work with the best—and the not-quite-best with the not-quite-best? Perhaps it’s all just ego, but at least some of the time it’s surely the production company—the people with financial skin in the game—insisting that the famous director team up with the famous cinematographer rather than the famous director’s buddy from film school.Read more at location 2180
There’s a bigger lesson behind these tales of vases and movies: O-ring thinking gets us away from addition and pushes us toward exponents—when doubling a small number still yields a pretty small number, but doubling two small numbers—and then multiplying them together—can yield a huge number.Read more at location 2190
O-ring technologies produce products that are delicate, fragile, and easy to break.Read more at location 2194
The lawyers working on a billion-dollar corporate merger are probably working with an O-ring technology, in which one typo can mean a $100 million lawsuit down the road,Read more at location 2195
if you’re having open heart surgery it’s probably a good idea to have the best nurses, the best cardiologists, and the best anesthesiologists together in the same room. On a routine appendectomy you’ll rarely see that combination:Read more at location 2196
The longer the chain of production, the easier it is to break the links.Read more at location 2205
If your laptop’s battery and screen and eight other critical pieces each work 99 percent of the time, you’ve only got a 90 percent chance of a working laptop. The longer the chain of production, the bigger the exponent, and the bigger the payoff to finding even slightly more reliable workers.Read more at location 2208
sometimes you can just throw enough person-hours at a problem and things will work out reasonably well—lawnmowing comes to mind, or perhaps routine food preparation or run-of-the-mill divorce paperwork or grading homework in an introductory economics course.Read more at location 2210
it shows how small differences in worker skill—along any dimension—can lead to big differences in who works together, what they produce, and how much they earn.Read more at location 2214
There’s another reason to think that when workers are on team projects, we’ll see a lot more output when the best are paired with the best: because workers inspire and motivate each other, for good and for ill. Humans pay attention to what’s going on around them, and tend, even unconsciously, to imitate the behaviors they see.Read more at location 2221
Berkeley economists Alexandre Mas and Enrico Moretti did something else with that information: they checked to see if workers became more productive when they were put onto a shift with the top clerks, and if they became less productive when put onto a shift with the weaker clerks.3 Perhaps it’s no surprise that on average clerks rose (or descended) to the occasion:Read more at location 2227
Perhaps this is little surprise: swimmers and runners and athletes of all types know that you’re a bit more likely to train harder when you’re in the presence of stronger athletes.Read more at location 2237
And remember: on a team, we are, each of us, potential motivators. So the bigger the team, the bigger the motivational side effect.Read more at location 2243
academic management researchers have run dozens of studies checking to see if higher-average-IQ teams are more productive than lower-average-IQ teams.Read more at location 2245
Unsurprisingly, the average IQ of team members does indeed predict team productivity across about two dozen studies.Read more at location 2248
My presumption is that the question of which IQ score matters most—the team high, team low, or team average—will vary from task to task. The more O-ring the process the more that the weakest team member’s IQ score will matter.Read more at location 2250
theory of endogenous network formation, associated with Stanford’s Matthew Jackson.8 Jackson’s theory of networks starts with the obvious points that some human relationships are more valuable than others and that relationships are expensive to create.Read more at location 2265
Once one starts thinking about the value of connections, of relationships, it becomes obvious that cognitive skills are going to be a key ingredient in building good networks. Remembering the names of distant acquaintances, recalling the time that the company found someone to supply those specialized hard drives at the last minute, figuring out that Carlos in accounting has just the skill set that Marjorie in the executive suite was looking for in an executive VP—these are all skills that will be more common among people with higher IQ scores.Read more at location 2271
You know the game of Telephone: kids sit in a circle, the first person whispers a slightly complicated phrase such as “The kittens go to the vet at 5 p.m. Sunday” into the ear of the child on her right. That child whispers what he hears to the person on his right, and so on around the room, with small errors accumulating until the first kid is finally told “The kids go to the Fabian Soap Derby.” Corporations, government agencies, nonprofits—all are playing games of Telephone on a daily basis. Personally, I’d love to see a study of whether higher-IQ teams are better at Telephone than teams with average IQ.Read more at location 2277
working memory is one of the better predictors of IQ,Read more at location 2282
The results of such a study would matter for creating successful organizations. One of the great insights of sociology is that in most organizations, the informal networks matter as much as the formal organization chart: things get done because of healthy networks, healthy cultures, healthy information flows. Teams with high test scores tend to have the skills to create these cultures, networks, and flows.Read more at location 2283
informal networks are like a campfire: every hot ember heats the other embers. Networks are yet another IQ multiplier.Read more at location 2287
when two people have more in common—perhaps they’re on the same football team, trying to win the FIFA World Cup—A will tend to speak clearly to B. When they have no common interests—perhaps they are strangers, or even nations at war—A will speak in gibberish to B.Read more at location 2302
Sobel and Crawford prove that even if two players have an infinitely large language at their disposal—infinite numbers or words or even multiple languages—a rational player A who shares only a partial common interest with his fellow player B will use only a partial set of the messages at his disposal. He’ll speak in a stilted language.Read more at location 2305
In the rich countries we see politicians talk this way all the time: there are only a few “policy stances” a senator can take, and she’s considered either a “moderate,” a “conservative,” or a “progressive” with maybe a handful of other options. Even though she might hold sophisticated, nuanced views on Shakespeare or the Qing dynasty or the best way to train for a marathon, once she switches to her role of senator the subtlety drains away and she is reduced to speaking in clichés. Part of the reason for speaking in clichés is because that’s what voters can most easily remember—voters pay little attention to politics most of the time, so branding is importantRead more at location 2308
Sobel and Crawford’s finding: when two people in any kind of short-run interaction have diverging interests, both sides know that any statement gets taken with a grain of saltRead more at location 2316
But I want to push beyond the formal model to suggest that people with high average test scores are more likely to convert a game of conflict into a game of cooperation.Read more at location 2320
Two reasonably intelligent people getting divorced certainly face a zero-sum game when it comes to how they split up the retirement savings.Read more at location 2323
part of the power of memory, part of the power of being able to recall obscure facts, is the power to remember interests the couple still have in common: “Oh, there’s a day care right between our two houses,” “Here’s an investment company that doesn’t add on fees when we split our retirement plans in half,” “I read about a job online that might be a good fit for you.” There’s at least the opportunity to think win-win.Read more at location 2324
It’s that the memory skills and other traits that higher-IQ individuals tend to have are useful in searching out win-win possibilities,Read more at location 2329
first chapter of Adam Smith’s second book, The Wealth of Nations,Read more at location 2333
Economists have reacted in different ways to Smith’s observation: Marx looked at the pin factory and saw workers alienated from the craft process, for instance. A second way to look at the pin factory is to see an O-ring process at work, in which one weak worker means you’re making pounds of shoddy pins each day. A third way is to see peer effects when a talented new worker ever so subtly inspires others to work just a little bit harder.Read more at location 2339
Production is a team effort, and teams with better-than-average memories, better-than-average social intelligence, and better-than-average job skills can become vastly more productive than even a slightly less-skilled team.Read more at location 2343
