I've read two great books in the past few weeks. One is about management and institutional design. The other is about personality and social psychology. I believe that the theories presented in the two books are related.
Charles G. Koch, in The Science of Success: How Market Based Management Built the World's Largest Private Company, describes how his company has grown exponentially by harnessing its human capital through a culture that encourages experimentation, differentiation of individual skills, understanding of opportunity costs and divisions of labor, and transparency. In a sentence, his view is that successful companies maintain growth by focussing on what and how they produce economic value. In economists' jargon, "value" here means allocative efficiency.
Carol Dweck, in Mindset: The New Psychology of Success, describes how an individual's attitude toward hardship or adversity has dramatic long-term consequences for personal development (of skills and relationships). The "fixed mindset" manifests as a need to achieve short-term goals for validation of the individual's self-conception as successful. The "growth mindset" manifests as a need to be challenged and see improvement over the long-term regardless of whether particular short-term goals are met.
The affinity of these two theories is rather startling. Individuals demonstrating Dweck's "growth mindset" would flourish in a company implementing market based management. It would not be unreasonable to say that one way to live the "growth mindset," would be to apply market based management to one's day-to-day decisionmaking.
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