This is a remarkable book.  The title betrays the scale of its ambition, yet the scale of its achievement comes close to matching it.  There are thought-provoking ideas on almost every page.  The breadth of the author’s reading and the wide range of sources on which he draws is extraordinary.  And it is chastening for an academic to recognise that it comes, not from a scholar in a university, but from someone who has spent most of his career in the consulting firm of McKinsey.

       It is, however, as the author engagingly acknowledges in the preface, a Sunday morning rather than a Monday morning book.  By this he means that if you are looking for hints to improve your business right now, you should look elsewhere (or, better still, realise there that no such generic recipes are available).  This book is written to change the way you think, and may do just that.  It will remain on my bookshelf, not just for its own contents, but for the trails it provides to other sources of information new thinking.

       The book divides into three parts.  The first is a comprehensive review of the ways in which new ideas from outside the standard traditions of business strategy and – especially – economic theory are changing and will change the way we think about the world.  This is an area in which it is necessary to tread warily.  The ground is populated by charlatans who proclaim the irrelevance of conventional thinking they do not understand and exaggerate the novelty of their own approaches.

       But Beinhocker is a sure-footed guide.  The discussion embraces five major headings.  The first is dynamics – the development of disequilibrium, dynamic, non-linear systems.  Then a chapter on agents considers how people use inductive rules to make decisions, sometimes mistaken ones, under conditions of imperfect information and contrasts this with conventional concepts of rationality. Under the heading ‘agents’ Beinhocker analyses the ways in which players in the market economy interact with each other.  Emergence is the process by which macroeconomic patterns are established by lower level behaviours and interactions.

       Finally, these strands are pulled together by a chapter on evolution.  Darwin’s dangerous idea – that an adaptive environment might create more complex and effective structures than any designer could achieve – is finding increasing applications outside biology.  The failures of socialist planning demonstrate the superiority of the evolutionary spontaneous order of the market economy over the designs of centralised planning. 

What is true at the level of the economy as a whole is equally true of the individual business, but these implications for business organisation are not widely understood.  You would still get the impression from business magazines – even Management Today – that large organisations are the creation of their founder and an expression of the will of their CEO, rather than the result of a successful match between organisational characteristics and external environment.  General Electric and Siemens, Exxon and Toyota, are the production of adaptation rather than design.

       Taken as a whole, this section of the book is a comprehensive critique of economic theory as it has developed over the last fifty years.  Many critics assert that modern economics is detached from the real world, too mathematical.  Beinhocker believes the first of these but not the second.  The mathematics of the methods he advocates, which he describes as complexity economics, is harder than the mathematics of the optimisation models of the standard paradigm, which is why these developments have largely been undertaken by physicists rather than economists.

       The central section of the book is the most original, and for me the least convincing.  In it Beinhocker sketches a general theory of wealth creation, in which entropy, rather than equilibrium, is the main concept economics should borrow from physics.  Beinhocker relates his ideas to those of Nicholas Georgescu-Roegen, a remarkable Rumanian émigré regarded as genius by some and crank by many.  History has been moving towards the latter verdict, and Beinhocker’s arguments are powerful enough to make me reconsider that evaluation, but not yet powerful enough to persuade me to change it.

       In the last part of the book Beinhocker reviews implications of his analysis for business and society, looking at strategy, organisation of financial markets and the political sphere.  This discussion is at its best when Beinhocker interprets the rise of Microsoft as an episode in adaptive strategy:  at its worst when he succumbs to what I imagine is pressure from his publisher to provide that list of handy hints for people too busy to read the book.   The ‘ten commandments of culture’ are predictably banal:  be honest, be open to outside thinking.  The whole point of the book is that management is not a process which could ever be described in this way, and on these pages Beinhocker has let his readers down by giving in to the demands of his publicist.

       If you want that kind of checklist, give this book a miss.   But if you want confirmation that economics and management today are intellectually exciting, you must read it.  It is unquestionably the most important business book of the year.