4/2/12: Why Nations and Companies Fail (or Choose Not to be Great)

Posted on Apr 2, 2012

In April’s first Morning View, Bill Rayburn and Bob Dorsey applied what they learned in two books — Why Nations Fail (by Daron Acemoglu and James Robinson) and Great By Choice (by Jim Collins and Morten T. Hansen) — to the mortgage industry.

Bob Dorsey: The premise of Why Nations Fail is that nations thrive or fail to thrive because of the institution’s being either extractive, pulling money out of the economy and protecting the powers that be, or inclusive — trying to get a lot of people in the country to participate. Also, Why Nations Fail explains the concept of creative destructionism- a constant process of tearing down the old and building up the new.

Bill Rayburn: A lot of that applies to companies. In Great By Choice, Collins and Hansen talk about companies that had huge growth rates and did very well over a short period of time. It’s not these companies you want to emulate, but companies that have sustained growth year after year. The book calls it a “twenty-mile march.” We have some players in the mortgage business that have sustained growth, growing year after year after year.

Takeaways from both books

Dorsey on Why Nations Fail:
1. You’ve got to embrace creative destructionism. It’s critical.
2. You’ve got to have institutions that are inclusive instead of extractionary.
3. Politics has to be in place before the economics can be in place. You’ve got to have the structure before you can have the right economics.

Rayburn on Great by Choice:
3. You’ve got to have sustained growth to be an outperformer.
2. You’ve got to have a preparation, which means a reservoir of cash.
1. Dorsey does not have all the answers.