The death of Paul A. Samuelson, the first America Nobel Laureate in economics, is a sad but expected loss. He was 94. In receiving the Nobel Prize in 1970, Samuelson was credited with converting the field of economics from one that ponders theory about behaviors unintelligible to the common person to one that solves problems. This is economics that answers questions about cause and effect with mathematical precision and logic.
Samuelson developed the tools and equations that changed his field. He was also a leader who at the Massachusetts Institute of Technology recruited a premier collection of economists, many of who were also awarded the Nobel Prize in economics including Lawrence R. Klein, Paul Krugman, Franco Modigliani, and Joseph E. Stiglitz.
I was personally affected by him, as I imagine many of you were, by using his widely used textbook, “Economics,” first published in 1948. What was arguably a more important contribution from Samuelson was his breakthrough Ph.D. thesis, “The Foundation of Economic Analysis,” that taught professional economists how to understand their jobs by using quantitative analysis.
Why should we honor this man? On a global basis, we should appreciate that he advocated the ideas pioneered by John Maynard Keynes, the British economist who in the 1930s developed the theory that economic cycles need a boost from government spending or tax cuts to more quickly balance themselves. Samuelson supported these ideas that explain when government intervention is required, not solely relying on the assumption that private markets are self-balancing.
But a more important reason to honor Samuelson is his contribution of applying analytics. During his early career, mathematics had already been employed by social scientists, but Samuelson brought analytics into the mainstream of economic thinking by revealing how to derive reliable theoretical predictions from simple mathematical assumptions.
Why is this relevant to enterprise performance management? It is because the relentless application of analytics gets to the heart of getting the elusive improvement from each of the performance management methodologies – whether it be the correlation of key performance indicators (KPIs) in a strategy map to micro-segmentation analysis to determine which types of customers to grow, to retain, and to require – and the optimal amount of spending for each customer micro-segment.
Enterprise performance management is not just about monitoring dashboard dial needles – it is about moving them. Analytics provides the thrust.