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The Idea Man Sounds Off
SOM's Nalebuff: Why 'everyday ingenuity' isn't the exclusive province of geniuses
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Business New Haven
12/22/2003
By: BNH
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Monkeys peel bananas from the bottom up. That's because they think about the problem of eating the fruit differently than humans. Thinking differently is what Barry Nalebuff is all about. The Milton Steinbach Professor of Economics at the Yale School of Management is the co-author (with Yale Law School prof Ian Ayres) of the just-published Why Not?: How To Use Everyday Ingenuity To Solve Problems Big & Small (Harvard Business School Press, $27.50). The book has a companion Web site, www.whynot.net. The Rhodes Scholar previously penned Thinking Strategically: The Competitive Edge in Business, Politics & Everyday Life (with Avinash Dixit) and Co-opetition (with Adam Brandenburger). Nalebuff, 45, is also co-founder and chairman of Honest Tea, a beverage company.
What was the idea that became this book?
[Ian Ayres and I] wanted to share our enthusiasm and excitement about new ideas. We also wanted to show that this is not something that's beyond the ability of everyday people. We wanted to help shake off this Dilbert cynicism that is so pervasive and rekindle a little optimism.
One of the most arguable assertions of your book is that 'innovation can be taught.' Please explain.
The proof is in the pudding. If you use these tools - turning things around, looking for translations - they actually help people find new ideas.
I know what you mean by 'turning things around' - e.g., who sets the price: the seller or buyer? But what do you mean by 'translations'?
A translation is saying, 'It worked in this context; where else could it work?' Taking the April 15 deadline for IRAs and asking, Would that also work for charitable contributions? Saying, We have 24-hour checkout for car rentals - why not for hotel rooms? We have vitamin water for people - what about making that available for pets? People have come up with all sorts of interesting 'flips' [on the whynot.net Web site]: For example, eating bagels and cream cheese, put the cream cheese down side to your tongue. You get a real burst of cream-cheese flavor when you do it that way. Ideas like that are what let Heinz and Hunt's to turn their ketchup bottles upside down. Another one: I have parental controls on my AOL account for my kids. Why can't I do something similar to that on a cell phone, so they could only use the phone [for example] two hours a day, or not after 10 p.m. on weekdays?
One of your ideas became a business: Honest Tea. How is the company doing?
We are now one of Inc. magazine's fastest-growing companies in America; we're No. 117 on the [Inc. 500] list. So, so far so good. Another idea - home-equity insurance - we've made real in Syracuse, N.Y. [Nalebuff was involved in creating a non-profit that sells equity insurance to homebuyers in upstate New York. It insures homeowners against a loss in the value of their homes]. In terms of the auto-adjusting fixed-rate mortgage is something we're talking with a bank about making happen. So progress is actually occurring with many of these ideas.
Why has the concept of home-equity insurance not caught on more widely commercially?
We have talked with many commercial [insurance] providers, and our goal remains to get them to provide this. For [their part], they weren't convinced there would be [sufficient] demand. The project in Syracuse actually shows that consumers understand it, they get it, they're willing to pay for it - and it works. There are still some kinds to work out, though, before it's ready for prime time. But this product really works best on a national scale because [a potential underwriter] wants diversification. You don't want to be exposed just to Syracuse risk - you want some New Haven risk, some Orange County [Calif.] risk, some Las Vegas risk, some Orlando risk. But before you go and create a national product, I would certainly advise you to get some experience doing it in a few places. And that's what's going on right now.
How is running an actual business differ from thinking about running a business?
You don't have to deal with stupid mistakes when you think about running a company. You don't have to deal with a labeler that breaks down. You don't have to deal with someone who sends you the wrong product. You don't have to deal with a distributors who says, 'I need to make $5 a case.' So while one can forecast, the reality of how slow people move in some businesses is how things are.
Has American business in recent years become less innovative or open to change?
Not in the slightest. It may be ingenious, but not less inventive. For much of the late 1990s there was unbelievable inventiveness, much of it [related] to the Internet. For the first time ever, 20-year-olds could start businesses based on an idea, resulting in an explosion of innovation. We learned a few things from that. One is that a great idea is not the same thing as a great business. Also, all the focus on technology [obscured] some of the simple ingenuity ideas that aren't so high-tech but that might [make] great businesses. After [the terrorist attacks of September 11, 2001] there really was a retreat - people were no longer looking to do things differently and better; they were looking for a return to where they were. It's very hard to be expansive and optimistic when you are feeling defensive. The good news is that we're beginning to come out of our shell a little bit.
I understand that you recently recommended to the CEO of Nissan installing MP3-ready stereos in cars. How did he respond?
It was kind of fun grilling him. He gave some kind of lame answer - they're looking for high-tech solutions instead of low-tech solutions. You know, why don't we have a [regular AC] power plug in a car? [Auto makers] say the power supply is not strong enough. But wait a minute - today we're using the cigarette lighters to convert into [electric devices]. So it's the same amount of power - they're just making us spend more money [on AC converters].
I understand that you're thinking of making an innovation board game called 'Balderdash.' Tell us about it.
The general idea would be that people would be asked a question such as, 'Invent a better radio,' or 'Solve the problem of late-night phone calls.' Then teams would work on coming up with a solution. Then the other teams would evaluate who's done the best job of taking apart problems and coming up with an answer. We plan to ask people through our Web site [www.whynot.net] to help us refine the design of this game. But it would be a game to try to solve real-world puzzles where there isn't necessarily a single correct answer - e.g., 'Invent a new beverage.' In my view, vitamin water for dogs would get a lot of points.
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