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Choose your parents wisely

By Nicholas Gruen - posted Friday, 3 March 2006

Recently Eddie McGuire became CEO of the Nine Network. The Council of Australian Governments (COAG) agreed to renew efforts to improve early childhood development, as part of a big new economic reform program. And Nobel Prize winning economist James J. Heckman from the Nobel Prize studded Chicago School of economics visited Australia.

The link between these disparate bits of news? Let me explain.

With vastly increased computing resources and increasingly sophisticated techniques, researchers like James Heckman have been extracting precious clues from the available data about what governs social and economic success.


The best advice they can give you is ... choose your parents wisely. And not for their money, but for their upbringing.

Heckman argues that families provide crucial developmental building blocks that inculcate intellectual and “non-cognitive” skills, like motivation, dependability and social skills. And these skills hugely influence success or failure throughout life.

Money finds its grubby way into the picture. But, the way Heckman tells the story, it’s not so much that parents’ money buys their kids the good life. It’s rather that parents social and economic success is built on their own diverse skills - both intellectual and social. They’re then in a position to pass their success onto their children because, as studies demonstrate, they tend to provide richer environments for their children’s’ early skill development.

In Heckman’s slogan “Skill begets skill; motivation begets motivation. Early failure begets later failure”. And the phenomenon runs through generations as much as it runs through individuals’ lives.

Eddie McGuire would agree about the importance of non-cognitive skills. Eddie’s appeal doesn’t lie in his IQ, book learning, or the tests he’s passed. But you can depend on his drive to succeed. They say he’s the best networker going: that he can work a room like there’s no tomorrow. His skills helped make Collingwood Football Club the most heavily sponsored sporting club in Australia - non-cognitive skills that is.

I doubt I’m telling you anything you don’t know but motivation and people skills matter hugely wherever you are in the workforce. Having spent time with Australia’s CEOs at the Business Council I can tell you that, although most are bright (though few are brilliant), it’s their appeal as managers, motivators (and manipulators?) of others that gets them those crazy salaries, not being their firm’s best accountant or lawyer.


It’s the same near the bottom of the workforce. US females with high “non-cognitive” skills virtually never drop out of high school whatever their results.

Heckman’s message is confronting because, if families rather than social institutions like schools dominate the action, they perpetuate intergenerational inequality so it’s that much harder to engineer a fairer society.

He argues that far too much relative policy effort goes into schools, job training and prisons when the damage - in early childhood - has already been done and it’s very hard to undo. For instance Heckman finds that the financial costs of hiring teachers to lower class sizes exceeds the benefits.

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First published in The Courier-Mail on February 15, 2006.

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About the Author

Dr Nicholas Gruen is CEO of Lateral Economics and Chairman of Peach Refund Mortgage Broker. He is working on a book entitled Reimagining Economic Reform.

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