Chapter 3. Pal’chinskii’s Principles

Emerging or advancing economies, (of the kind I’ve spent most of my working life in) are no stranger to uncertainty, change or even collapse. Yet, as the short 21st century has shown us all, uncertainty, change and potential collapse is a “fundamental and irresolvable characteristic of [all] our lives⁠”[1]. It is something we all need to become better at dealing with.

Rather than ignoring uncertainty — by trying to make better predictions with bigger data, or embracing other illusions of certainty like following “best practices”⁠ — we need to start learning from it. The global response to CoVid-19 helps explain why. In 2002–3 many Asian countries had to deal with another coronavirus outbreak (SARS). What they learned enabled them to adapt better to CoVid with significantly better outcomes than many countries in other parts of the world [⁠2]. The richest learning can come from studying those countries that have had to deal with the most uncertainty. Russia is one of those countries. So, here’s the story of the most famous Russian that even most Russians have never heard of — Petr Pal’chinskii⁠[3] — and his lessons for how to act in uncertain times.

Petr Pal’chinskii was a bright, confident and almost absurdly honest engineer. In 1901, at the age of 26, he was sent to the Don Basin to study the on-going modernisation of its coal mines. He gathered data on everything he could and discovered a huge gap between investments being made into new technology and a lack of investments being made into the living and working conditions of the miners. He reported back to the government in St.Petersburg that real modernisation requires investing in the workforce as well because, he argued, technology investments are worthless if the workforce is either unable or unwilling to use them. Improving living and working conditions for miners — so they are both capable and motivated to use new technology productively — would generate far greater returns than just investing in technology alone.

Pal’chinskii’s report created a huge political scandal in St.Petersburg and the young engineer was eventually exiled to Siberia because of it. A few years later he escaped and found himself in Europe. His approach to seeing technical problems — such as the modernisation of industry — in their social and economic contexts was better received there. Owners of the major ports in Amsterdam, London and Hamburg accepted his ideas that loading and unloading ships more economically required more than just better cranes and warehouses — it also needed workers with the right skills and incentives to do the job. Those who implemented his ideas enjoyed significant productivity gains. Pal’chinskii wrote his methods up in a four-volume study and toured Europe to spread his ideas and the fame of the still young Russian grew.

Fig. 8: Petr Pal’chinskii at a trade fair in Turin, Italy (1911)

Peter Pal’chinskii at the exhibit he arranged for a manufacturing and mining trade fair in Turin, Italy, in 1911. Above the mine shaft entrance is the Russian mining engineers’ symbol. Source: The Ghost of the Executed Engineer

In 1913 Pal’chinskii, now famous, received a royal pardon and returned to Russia where the embattled Tsar and his government had launched a modernisation drive (mainly to conserve royal power in a time of political turbulence). Pal’chinskii was offered an influential role as a government adviser, yet his absurdly honest nature meant he continued to be controversial. He criticised the government’s over-focus on “disruptive technologies” and noted witheringly that “graduates of Russian engineering schools think that every problem is a purely technical one, and they assume that any solution that incorporates the latest science is the best solution”[⁠4]. Despite being an avid reader of the latest foreign technical literature himself Pal’chinskii was not looking for “solutions” that could be copied unthinkingly as he knew that context mattered as much as the technology. He read in order to find guiding principles that could make technologies work successfully in Russia. If decision-makers learned to do this, Pal’chinskii argued, Russia would become a competitive force globally.

Following the October 1917 revolution and (as part of the fallen government) a short spell in prison Pal’chinskii was again invited to advise the new Soviet government on its new modernisation program. But this was the time of ‘gigantism’: Huge prestige projects such as Dneprostroi (a major hydroelectric station), Magnitostroi (a major steel mill) and the White Sea Canal (connecting the Baltic and White seas) and Pal’chinskii criticised these projects fiercely. They would only improve productivity, he argued, if there was an abundance of both highly-skilled workers and cheap energy locally. But both were lacking and this meant success was highly-doubtful. Instead Pal’chinskii proposed an alternative model of modernisation based on an awareness of local conditions. It was guided by three simple rules of thumb — what we might call ‘Pal’chinskii’s Principles’[⁠5]:

In 1926 the persistent Pal’chinskii published ground-breaking research to support these principles. He proved that the most efficient and productive enterprises of the new Soviet Union were not those with the latest equipment but those that were utilising their workers best. Therefore, rather than trying to make grand fixes with gigantic one-off projects, he argued for a better use of the biggest “non-utilised force” the Soviet Union had — it’s eighty million workforce. In comparison to this, Pal’chinskii again argued, “all the other great natural riches of the country paled in significance”[⁠7]. Utilising this correctly, he predicted, “will bring more fruits than anything else⁠”[8].

Unfortunately, for the brutally honest Pal’chinskii, his criticisms were out of step with his time and in 1928 he was arrested and, the following year, executed. Yet, his principles can serve as a valuable guide for us today in how to find our way in an uncertain and unpredictable world.

1 Quoting Boyd in ‘Science, Strategy and War. The Strategic Theory of John Boyd’. Frans P.B. Osinga (2007)

2 China and Vietnam were some of the Asian nations with the most cases and deaths from SARS. Yet their outcomes with CoVid-19 were amongst the best in the world:

(Cases/deaths per million Feb 2022)

China 74/3

Vietnam 23,337/386

Global average 49,900/735

UK 257,225/2,304

USA 230,928/2,756

3 Based on the book ‘The Ghost of the Executed Engineer’ by Loren R Graham (1993)

4 The quote continues:

“No wonder Russian engineers are unequipped to deal with the competitive world-and that Russian technology cannot compete in the world market even though it is protected by high tariffs.”

‘The Ghost of the Executed Engineer’. Loren R Graham p.14

5 Coined by Tim Harford in his 2011 book ‘Adapt: Why success always starts with failure’. p25

6 Because everything breaks eventually

7 ‘The Ghost of the Executed Engineer’. Loren R Graham p.97

8 ‘The Ghost of the Executed Engineer’. Loren R Graham p.38



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