The Theory of Comparative Advantage

Economics is called the "dismal science" for reasons obvious to those who have studied it. Supply and demand curves, marginal costs, and incomprehensible instructors were all part of my Economics 1a and 1b experience. There was, however, one principle that I did comprehend: the Theory of Comparative Advantage.

The theory holds that individuals, investments, resources, etc. are best put to use in those activities where the economic returns are highest. The textbook example goes like this: If the best lawyer in town is also the fastest typist in town, where is the lawyer's time best spent: typing or practicing law? The answer is obvious, especially in view of the huge legal fees generated by some recent malpractice awards.

What does some obscure economic theory have to do with the jewelry business? Actually, quite a lot. It has been my experience that many manufacturing and retail jewelers spend a great deal of time on "things" related to—but really outside of—the business of buying and selling jewelry. Manufacturers attempt to become designers. Some also think that because they run a few ads in consumer magazines they are marketers with a consumer brand name. Retailers become so enamored with using computer systems that they lose sight of their ultimate business objectives.

Part of this syndrome can be attributed to the entrepreneurial nature of the people in this industry. Jewelers are mechanically curious and want to know how things work. But the larger problem is that we have big egos, and we carefully watch our turf to make sure everyone knows who's in charge.

Everyone is concerned about the economy's direction over the next six months. We fret about interest rates, the stock market, unemployment, and other obscure stuff from Economics 1a and 1b … when we should be focusing on what truly is important.

During the past five years, we've all been swept up in the technology revolution. We have e-mail, voice mail, laptops, and desktops, and we're online 24/7 with the Internet. These tools are wonderful—as long as we keep them in perspective.

Already, e-mail is eliminating personal assistants. Voice mail has eliminated talking directly to a human being (except by accident). And computers hypnotize us for too many hours every day of the week.

Cost containment, efficiency, and good use of resources are good practices as long as they don't turn managers into administrative assistants and merchants into meeting attendees. "Management" means "getting things done through others." I think we're managing less because we've allowed cost cutting to replace creativity. We have let efficiency experts tell us that voice mail is more efficient even though it's less personal.

The jewelry business is a personal business at every level … across the counter and across the country. Restore that personal attention to the people who determine the success of your business: your employees and your customers. And remember that your comparative advantage has a lot more to do with people than with technology.