Exploring the Invisible Hand – ‘The Tipping Point’
(originally published in Avenue magazine, August 2005)
By Ron Odom
Anyone taking a class in basic economics, or studying it on their own, will inevitably encounter Adam Smith’s concept of the “invisible hand.” Smith, the eighteenth century intellectual father of laissez-faire capitalism, maintained that this invisible hand was what guided people in a free society to pursue their own self interest and maximize their personal contribution to the economy. The idea is almost always explained in these very broad, general terms because it relates to that equally amorphous social phenomenon called “the market” and the “forces” that make it work.
The concept is compelling because, like E=mc2, it is a simply stated explanation for a profound idea. However, unlike Einstein’s famous equation, we cannot go back and examine, in definite terms, the underlying logic that the Invisible Hand idea is based on. It is a generally accepted idea and, to take the “hand” analogy a bit further, few have attempted look at its anatomy and explain what the hand is made of and how it works, at least not to a popular audience. Recently however, Malcolm Gladwell has provided an explanation in his book The Tipping Point: How Little Things Can Make a Big Difference.
Gladwell is a former business and science writer for the Washington Post and is currently a writer for The New Yorker. His book is an examination of the genesis of ideas, fads, products, and social change and now they spread, grow, and attain popularity. Disease epidemics are the metaphor he uses to explain The Tipping Point and how ideas and products propagate themselves. For the epidemic to occur a “tip” must take place, a moment when the product or idea suddenly breaks through to the public’s consciousness and spreads.
The first example provided is the resurgence in popularity of Hush Puppies in late 1994 and early 1995. The etiology, the science of causes or origins, begins in New York City where Hush Puppies executives are informed that the classic shoes had suddenly become hip in the clubs and bars of downtown Manhattan. People were going to small Mom and Pop stores were the shoes were still sold and buying them.
By the fall of 1995, the shoes caught the attention of fashion designers in both Hew York and Los Angeles and were being sought by celebrities. Sales of the shoes had risen from a low of 30,000 pairs in previous years to 430,000 and in the words of one designer, “It was total word of mouth.” The next year Hush Puppies won the prize for best accessory at the Council of Fashion Designers.
This first story constitutes the biggest mystery of the book, as Gladwell asks, “How did it happen? Those first few kids, whoever they were, weren’t deliberately trying to promote Hush Puppies. They were wearing them precisely because no one else would wear them. …… How does a thirty dollar pair of shoes go from a handful of downtown Manhattan hipsters and designers to every mall in America in the space of two years?”
The bulk of the book is organized as an explanation of each of the three rules of the Tipping Point; the Law of the Few, the Stickiness Factor and the Power of Context. The Law of the Few holds that any given epidemic is initiated by a relatively few who have unique qualities to make things happen. In elaborating on this Gladwell invokes the idea of six degrees of separation to explain how certain key people are able, through their special connections, to transmit ideas to the rest of us. These people are the Connectors who have “a special gift for bringing the world together.”
Mavens are another important group. They are the dedicated collectors and distributors of market information, letting others know what’s a good buy or a rip off, what’s hot and what’s not. They are “price vigilantes” who will complain to the manager or owner if they feel the price of something is too much, or if advertising is misleading. They are savvy shoppers who keep the marketplace honest. They are not shills for any company or service, they are average people like you and me. Moreover, Gladwell tells us, economists “have found them in every walk of life and in every socioeconomic group.”
Persuaders are the third important group of “the Few.” They are salesmen, but not necessarily in the conventional sense. Selling may not be their actual job, but their personality may be such that they are very persuasive in convincing others of an idea. They have an intuitive way of getting others to emotionally cooperate. Sometimes this also has to do with the relative position of the persuader especially if they occupy a position of authority or respect in the mind of the persuaded. Another factor is “mimicry”, an automatic human reflex to mirror the emotions of another person. If shown a picture of a smiling face we are prone to smile back, if we see someone hit their thumb with a hammer we grimace, mimicking their emotional state. As the author puts it, “Emotion is contagious. In a way, this is perfectly intuitive.”
The Stickiness Factor is a set of traits or qualities that an idea or product has that make it irresistible. Here the author uses the example of children’s television shows like Sesame Street and Blue’s Clues and examines just what it was that made them “stick” with kids. In explaining this Gladwell introduces a variety of psychological theory and case studies about the way information is retained by people and the impact it makes depending on just how that information is presented.
The Power of Context has to do with how the surrounding environment influences people’s behavior and the decisions they make. This last theory is the most fascinating part of the book, especially for students of sociology, criminology, economics and history. In fact, Gladwell uses the Broken Windows theory developed by criminologists to support his own. In short, the theory maintains that depreciated physical surroundings (broken windows, abandoned decrepit buildings, and graffiti) have the effect of creating a feeling anarchy or helplessness that in turn promotes further depredation and an endless spiral of hopelessness.
Gladwell discusses the 1984 Bernhard Goetz subway shooting in New York and the reduction in the city’s crime rate from then to mid 1990s to illustrate the idea. Beginning in the mid 1980s, a concerted effort was made to clean up the city’s subways and this campaign contributed in part to the reduction in crime. It was Broken Windows in reverse, improving the environment improved people’s mentality. Attitudes “tipped” in a positive direction.
The Power of Context means that people are acutely sensitive to their environment and are alert to cues from their surroundings that trigger certain behaviors. This goes for criminals as well as consumers whether their environments promote muggings, shootings, or the buying of a novel like Divine Secrets of the Ya-Ya Sisterhood. Here, as in the rest of the book, the author weaves together both real world examples and theory from psychology and sociology. Taken together, all of the above ideas work together to produce tipping points and explain why certain things just seem to “happen” in life.
Even with all of the theory and historical examples that back it up the Tipping Point is still, inescapably, just conjecture. Gladwell doesn’t claim that his thesis is the explanation of how ideas spread, only one explanation among others. However, his use of history, psychology, sociology and anecdotal evidence to support his theory makes sense and lends credence to the idea. Even though the book does not deal solely with economics, the implications of the Tipping Point are obvious for both producers and consumers in the market. No one can doubt the power and influence of large corporations and their marketing blitzkriegs, but Gladwell’s book suggests that changes in fads, fashions, and tastes often occur almost spontaneously on a grassroots level. We are often manipulated, but we are not necessarily mindless automatons taking in anything and everything that “big business” offers us. We do discriminate. Even Bill Gates doesn’t own one of everything and he probably has some CDs in his music collection that you wouldn’t be caught dead listening to and vice versa.
The Tipping Point is an answer for questions like; Why did Brittany Spears become more successful than say Aaron Carter? Why did more people prefer VHS over Beta, or even Laserdisc? Why is Hershey a more popular candy bar then a Zero? Remember Pop Rocks? There was no national advertising campaign for it, just like there was no national public warning that promoted the urban myth about how eating it and drinking Pepsi would make your stomach explode. Yet both the candy and the myth, respectively, caught on and spread in popularity.
Malcolm Gladwell is suggesting that the answers behind this phenomenon have more to do with individual and collective decision making, both deliberate and unconscious, by society and less with the machinations of “the Man.” The book is fascinating and insightful and it illustrates that at least part of the invisible hand’s anatomy is us. More profoundly, we get a glimpse into its functionality as well. The Tipping Point doesn’t present a unified theory of anything, but for anyone wanting an increased understanding how the world works it is definitely worth reading.