Ideas often come from unexpected quarters. Last week, Ricardo Hausmann came to the World Bank to talk about his work on economic complexity. I missed the seminar, but afterwards read his Atlas of Economic Complexity: Mapping Paths to Prosperity. (I had actually already looked at the stunning – but rather confusing charts – of his coauthor Cesar Hidalgo after reading Tim Harford’s great new book Adapt: Why Success Always Starts with Failure.)
On the face of it, the Atlas of Economic Complexity doesn’t have a lot to do with the topic of this blog post – whether World Bank staff are under-specialized. But bear with me, and I hope I’ll convince you otherwise.
A reinterpretation of Adam Smith
Hausmann and his colleagues take a new – and very graphical – look at what international trade reveals about a country’s wealth. Products, they argue, embed knowledge. The knowledge underlying some products is rather basic, and can be mastered by one individual. Other products embed a lot of very complex knowledge that no single individual could ever hope to master.
Giving a modern twist to Adam Smith’s idea that the secret of the wealth of nations lies in labor specialization, Hausmann and his coauthors argue that the key to the division of labor is that it gives us access to a quantity of knowledge that none of us would be able to hold individually. The secret to a successful economy is that “it weave[s] vast quantities of relevant knowledge together, across large networks of people, to generate a diverse mix of knowledge-intensive products. Simpler economies, in contrast, have a narrow base of productive knowledge and produce fewer and simpler products, which require smaller webs of interaction.” Just to make sure the reader has really got the point, they add: “Because individuals are limited in what they know, the only way societies can expand their knowledge base is by facilitating the interactions of individuals in increasingly complex webs of organizations and markets.”
As knowledge accumulates, it needs to be parceled out across more and more people. The constraint is not “explicit” knowledge, which can easily be transferred from one person to another and one country to another, but rather “tacit” knowledge which is costly to acquire and costly to transfer. So people specialize, each person acquiring a limited set of deep skills and a limited number of chunks of deep knowledge – the key is to make sure these skills and knowledge are mutually coherent so the person can function effectively. But a successful economy needs not only people who know how to do things, but also people who know who these people are (“know-who”) and people who know where they are (“know-where”).
What’s the relevance of this to the World Bank?
On the face of it, the World Bank is a highly specialized place. It has five networks, each subdivided into several sectors. The majority of people work in and are affiliated with (or “mapped”) to just one sector. The boards of these sectors are responsible for overseeing the professional development of their staff complement, deciding promotions, and setting broad priorities in terms of skill mix – how many economists there should be relative to specialists, operations officers, communications officers, and so on.
But my sense – this comes in part from my experience sitting on four sector boards – is that the Bank’s staff are becoming less specialized, not more specialized as Hausmann’s diagnosis of a successful economy might lead us to expect. Following Hausmann’s logic, we would expect to see just one or two Bank staff knowledgeable about topic X, another one or two specializing on topic Y, and so on. And given the global reach of the Bank, its sheer size, and its pulling power (it attracts very bright and able people from across the world), its staff would be global experts – not household names perhaps but certainly people who command a solid global reputation.
There are, of course, some such people, but my sense is they’re becoming fewer and fewer. The trend, it seems to me, is away from specialization. Staff are increasingly expected to be able to do high-quality analytic work, task-manage lending operations, and lead policy dialogue with governments. There’s been a consequent blurring of profiles – economists are expected to have the sector-specific knowledge of a specialist, and specialists are supposed to acquire the economics of an economist. Both are expected to acquire the operational skills of an operations officer. And they’re expected to play these roles across multiple topics within their sector, often simultaneously. At promotion time, boards seem to look increasingly favorably on the all-rounder.
The trend away from specialization is evident too in the institution’s approach to “knowledge management”. There’s a growing frustration that knowledge flows too slowly around the Bank. The frustration is greatest over the slow flow of tacit knowledge. The institution’s rotation policy is a response to this frustration – unable to transfer tacit knowledge around the Bank as quickly as it would like, the institution has resorted to transferring people from one region to another every five years.
Applying Adam Smith to the internal organization of the World Bank
This is all a far cry from Hausmann’s reinterpretation of Adam Smith. By analogy with the Hausmann diagnosis of a successful economy, we’d expect to see an institution that calls itself “the knowledge bank” to be encouraging an ever higher degree of specialization by its staff. Staff would specialize in a specific discipline but also within it. One staff member might become a world expert on the economics aspects of some particular issue in the field of education. She wouldn’t work on one region – rather she’d work across the world, being brought in to build a particular component of a project, or to contribute to or lead a particular part of a broader study. She would become a global expert in her niche area. She wouldn’t be expected to task-manage a lending operation.
That job would be done by someone who would specialize in putting together a project and a project team – he would have specialist knowledge of the nuts and bolts of assembling a project, but would also have the necessary “know-who” and “know-where”. He might specialize regionally – getting a successful project assembled in Latin America takes a different set of skills, knowledge, contacts, and cultural sensitivities than is required in, say, South Asia. Or rather than specializing regionally he might specialize by type of project or lending instrument – he might specialize in program-for-results operations while someone else might specialize in development-policy loans.
A different set of people might specialize in policy dialogue and related activities, knowing the tricks of a successful policy engagement and knowing which technical specialists to draw on at the right time. The project specialists and policy-dialogue specialists would need to acquire knowledge specific to their task, but also to be good connectors of topical knowledge and of the people where this knowledge is stored. It calls for strong task-management and interpersonal skills, as well as an ability to think creatively about resolving issues. Of course, it would be inefficient for the project specialist or the policy-dialogue specialist to acquire too much knowledge about specific topics in development. They would need to know enough to see which pieces are required at a particular moment, and how they fit together. By the same token, it would be inefficient for someone who specializes on a particular development topic to acquire much more than a smattering of knowledge on other development topics, even ones that might appear to an outsider to be closely related to their specialty.
This would translate into an entirely different set of human resource management considerations and conversations. In contrast to market economies where specialization emerges through a process of trial and error with survival depending on success in the global marketplace, an institution like the Bank would need to do some corporate thinking on who plays each of the various roles. Knowledge management would look different too. Efforts to extract and spread tacit knowledge would be recouched and likely limited to two distinct types of knowledge-sharing: deep technical exchanges among the relatively few experts on the particular topic, with an emphasis on exchanges with experts outside the institution; and “lite” bite-sized knowledge-sharing activities to keep the project and policy-dialogue specialists sufficiently knowledgeable to be able to keep connecting together disparate pieces of knowledge and the experts holding this knowledge.
Some parting questions
I’d be curious to know how knowledge-based institutions that are subject to market competition organize themselves. Do they operate the type of model I sketched above? If they do, are there reasons why an international organization should opt for a different approach? Is the Bank really becoming less specialized? If it is, does it matter?