Tag: Growth

Capitalism and Externalities

Capitalism and Externalities

Posted on by jabittan
Capitalism has come under fire in the recent years in ways that I would not have predicted as I completed my college degree and entered the workforce. For so many years the idea of capitalism has been central to the American story and to American identity. It may not be perfect, but it has always been held above other economic systems as the best option available. However, recently, people have taken a new look at capitalism to ask if it can be maintained without the plundering of others. Can there be a reasonable sense of equity or equality within a system of capitalism? And in the United States, do we really have a meritorious system of capitalism, or is the American system of capitalism overrun with grift and graft?

 

Allowing people to flourish based on their own talents, allowing people to pursue their own interests, and to accumulate wealth can be a good thing, but it can also be done to excess. Like alcohol, chocolate cake, or Netflix, our pursuit of wealth can essentially be an addiction, and the costs can be born on all of society, not just on ourselves. Our actions and the systems and structures within which we operate have unintended consequences. These consequence, or externalities, can be positive or negative. Within capitalism, positive externalities include new technologies that improve our lives, more efficient markets which minimize waste, and hopefully more goods and wealth for everyone. But negative externalities related to capitalism include pollution, corruption, and extractive processes that harm individuals, communities, and environments.

 

In Letters From a Stoic, Seneca writes to his friend Lucilius, “I myself pray rather that you may despise all those things which your parents wished for you in abundance. Their prayers plunder many another person, simply that you may be enriched.”

 

Seneca is acknowledging that when one person gains resources, often times it is at the expense of another person. The goal of capitalism is for our economic system to be positive sum, meaning that everyone is better off in an exchange – a state known as a Pareto Efficiency. However, this is not always the case. Seneca sees exchanges, or maybe more precisely the accumulation of resources and wealth, as zero sum, meaning that there is a fixed amount of stuff, and that anything that one person accumulates is taken away from another person. This, in my opinion, is where so much of our discontent in the United States and across the globe with capitalism lies.

 

Seneca may not always be correct. There may be Pareto Efficiencies out there and there may be situations in which capitalism builds a positive sum economic system. But it does seem like moderation in our approach to capitalism and wealth accumulation is warranted. At a certain point, for us to have more necessarily mean that we are extracting wealth and resources from other places. Mining, logging, and cattle grazing can have damaging effects on local environments and communities, even if they do help develop industry or increase GDP in the places we take resources from. Beyond a certain level, continuing this trend is likely to make our lives marginally better, while potentially making the lives of others much worse. We should constantly ask ourselves if we are nearing that point, and try to limit our need for more stuff and more wealth when we are at sufficient level where the marginal gain for us is meaningless and effectively just plunders others for our own enrichment. It seems reasonable if we should ask whether limitless growth is really possible, or if capitalism ends in a state of plunder, in which nothing is left for a sustainable existence for everyone.
Scale versus replication

Replication Versus Scale

Posted on by jabittan
I used to work for a healthcare tech company based out of San Francisco, and the word scale was almost a mantra. Whenever we did anything, from a small policy to the introduction of a new product or service, the question was always, will this scale? It is an important and crucial question for a growing organization. Before anything was introduced, we always considered the future, whether the new process would work if we had more customers, more covered lives, more emails, and more work. If the amount of effort, oversight, and individual contribution was too high, then we new we were not looking at something that would scale. We needed processes where the amount of additional work would be negligible as we grew, that was the key to scale.

 

For many organizations, however, scale isn’t necessarily the most important goal. Instead, the focus is on replication, to grow and expand in new spaces, new markets, and new products. Replication is something different than scale. While scale sought to reproduce the same outcome, the same process, and the same expectations in all settings, replication takes a slightly different approach to the same end goal. We still want the same successful outcome, but the goal doesn’t include having mirrored consistency in approach with diminishing marginal effort for each new customer. Replication is adaptable to changing local conditions.

 

Dave Chase describes it like this in his book The Opioid Crisis Wake-Up Call, “Replication varies from application to application; scalability seeks to apply the same things everywhere. This distinction is a subtle but absolutely critical success factor.”

 

In retail, social media, and chain restaurants, scale is crucial. You want every coffee you order at Starbucks to be the same, regardless of whether you are at the first Starbucks in Pike Place, or a brand new Starbucks in a Las Vegas suburb. You want your eggplant Parmesan at Olive Garden to be the same today and next month, and social media companies want everyone to have the same account set-up and access settings so that it is easier to manage all the companies, individuals, and organizations that create accounts. Scale makes things consistent, reduces administrative burden, and keeps costs down.

 

Replication is more adaptable from region to region, setting to setting, and industry to industry. The goal might be very similar, say to reduce healthcare costs, but the organizations and spaces might vary dramatically, say from nursing homes to companies offering remote medical second opinions. What Chase argues is that many healthcare organizations shouldn’t get too caught up on scale, and should focus more on replication. Hospitals can learn from nursing homes and replicate the approaches they take to improve patient adherence to medication regimens, knowing that there is some overlap and some divergence in their patient populations. Health plans can replicate patient education models that hospitals find successful, even though the patient education from the health plan will take place in a different form and space.

 

Scale dictates what should be done to create exact copies of a process with diminishing marginal costs, but replication is necessary when dealing with multiple confounding variables in dynamic and ever changing spaces. Scale might be needed for economic success at national and multinational levels, but replication provides the flexibility and creativity needed for success when a cookie-cutter model can’t be followed.
Developing Self Esteem

Developing Self-Esteem

Posted on by jabittan
One of the reasons I write this blog is because I believe that we need deeper conversations about minor aspects of our lives. I think we need to be more considerate about what is truly important, and we need to think more deeply about how we can remove some of the less important things, so that we spend more time engaging with what is meaningful. I want to pull out the crucial ideas within the aspects of our lives that go overlooked and that are under-discussed so that hopefully someone can have a more thoughtful conversation about these important topics.

 

One topic, which came to mind from Sam Quinones’s book Dreamland, is the development of self-esteem for adolescents. I’m not a parent, so I am sure that I am missing some important points here and I’m sure that my perspective is limited, but from my experience and observations I feel  confident to say that important conversations about meaning, value, and expectations are not taking place with adolescents. What I’m thinking about now is how parents, coaches, and people in society can help young people develop a sense of self-esteem aligned around meaningful values that help make the world a better place.

 

Quinones quotes Ed Hughes, the former executive director of The Counseling Center in Portsmouth, OH, “You only develop self-esteem one way, and that’s through accomplishment.” Quinones himself is critical of parenting in the 90’s and 2000’s writing, “Parents shielded their kids from complications and hardships, and praised them for minor accomplishments – all as they had less time for their kids.”

 

The critique that Quinones and Hughes make is that parents have gone through great lengths to give their kids everything and to try to ensure that their children are never bored, never unhappy, and never potentially harmed – either physically or mentally. The result, according to Quinones and Hughes, is that children are unprepared for real life. They lack self-esteem because any accomplishments that they have are minor, and were parent assisted or directed. Many kids did not struggle on their own, did not learn from mistakes, and were propped up with empty praise. This left them feeling bored, empty, vulnerable, and inadequate, which made drug addiction all the more likely.

 

What I hope we can do, not just as parents but as a society, is talk about real opportunities for taking meaningful actions in our lives. I hope we can back away from terrible work schedules and the pursuit of ever more money and consumer goods, and move toward a society which encourages real interaction and contribution toward involvement and engagement. This can be done starting with our youth, with the opportunities we provide them to be engaged in something meaningful, and with the conversations we have with them about what is important in life.

 

If we don’t have these conversations with our youth, if we don’t help give them opportunities to do something meaningful, then they will look to TV, celebrities, and our own actions to determine what is good and important. Often that will be the same empty vision of happiness presented in our consumer culture focused on buying products and showing off our wealth. Quinones and Hughes would likely argue that this is only going to exacerbate our loneliness, emptiness, and the potential for drug use and despair.

Trying to Improve Others?

Posted on by jabittan
We spend a lot of time criticizing other people and trying to change those around us, and that energy might be misplaced. Instead of spending so much time thinking about others, worrying about their decisions and choices, and trying to get them to act differently, we should look inward, and consider if we are living up to the standards we are trying to set for someone else.

 

In his book How to Win Friends and Influence People, Dale Carnegie writes, “Do you know someone you would like to change and regulate and improve? Good! That is fine. I am all in favor of it. But why not begin on yourself? From a purely selfish standpoint, that is a lot more profitable than trying to improve others-yes, and a lot less dangerous.”

 

Carnegie seems to suggest that we should be thinking about how we can help other people become better versions of themselves, but that we should first focus on making ourselves the best version of who we are. The gains that we will see in life will be greater if we focus on self-improvement rather than trying to change others. By focusing on ourselves we can improve our effectiveness, ensure we are engaging in the world in a meaningful way, and become more self-aware of the things we could do better. All of the gains in these areas will help us be the kind of role model that other people can look to when they try to make their own lives better.

 

It is through starting with ourselves that we can have an impact in the lives of others. Once we have made meaningful changes in who we are and what we do, once we have established habits of greatness, we can share what we have learned with others and provide them with advice regarding the things we have done to become successful, more engaged in the world, and more connected to the people around us. This will help us to change people and further the positive impact we have on the world. It all starts, however, with changing ourselves first.

Prioritizing Complacency

Posted on by jabittan
I studied political science during my Masters degree at the University of Nevada, and an important thing that we discussed in our classes early on is to think of a country by thinking of its voting constituents. Governments are ideally representative of all people in a society, but in reality, they are representative mostly of the people who vote for them. If you want to understand a society, think of its most likely voting groups, and their preferences and values are the ones you are most likely to see expressed in public policy.

 

Tyler Cowen, an economist at George Mason University understands this and writes about it in his book The Complacent Class. Cowen recognizes that the voters matter because they influence the elected officials who make decisions, and voters are more likely to elect people who are like themselves. The class of voters in our country now, and the class of elected officials, Cowen argues, is relatively homogeneous, especially in regards to complacency. He writes,

 

“So overall, America is building its core culture and norms and politics more and more around people and families who just aren’t that mobile across the generations and who have a relatively static and stratified sense of how things work, which indeed is a pattern they see in their own lives. In other words, we are building our core norms and culture around the complacent class, even though some very different tendencies exist in the America of today.”

 

Our biggest voting block in the US is older, whiter, wealthier, more likely to be retired, and less likely to move across state borders in a given year than the general public. Those who can vote consistently, participate in town halls, and write letters to elected officials are the ones who have more time to spend tracking politics and attending events. They are more likely to have been rooted in a specific community for a longer period of time, and are more likely to have more wealth, equating to more vested interests in maintaining a status quo.

 

Our key electorate, is not a very dynamic group.

 

Cowen contrasts this group with immigrants, who have less free time, are likely to be working more to earn more, and are more likely to have dynamic lives that include moving from one place to another, starting a new business, or trying a new approach to something that has existed before. Additionally, younger generations show similar patterns of more dynamic lifestyles than our main electorate.

 

However, many immigrants cannot vote if they have not obtained citizenship, and younger people are less likely to vote and less likely to have a strong sense of what is happening in government, especially local government in a new region they have moved to.

 

So in the end, the strongest voice in our politics is likely the most risk averse, homogeneous, and complacent segment of our population. The dynamic people that our country relies upon in order to push the economy forward and deliver new innovations is not prioritized in our government and public policy. The voices of those who benefit from the status quo are usually the loudest. Cowen is concerned, and I think rightfully so, that we may be headed in the wrong direction by deprioritizing the most dynamic segment of our population and over-representing the least dynamic people in our country. We will have to make big changes to address the challenges we face in our new globalized world economy, and that will require thinking dynamically about growth, the future, and life in general.

To Wear a Sweater or Not?

Posted on by jabittan
There is a story that I hear from time to time in different contexts. Depending on the context, it is framed as either positive or negative, with different ideas about what our future holds and how we should behave. The story manages to hit political and social identities, aspirations and fears for the future, and concerns over self-sufficiency and parochialism. The story is about a president who encouraged us to wear sweaters during the winter.

 

I’ll start off with the negative view, one perspective of which Tyler Cowen expresses in his book The Complacent Class. He writes, “Jimmy Carter put on a sweater and urged Americans to turn down the thermostat, representing a new era of lowered aspirations. In other words, the American response to economic adversity was to seek to restore comfort more than dynamism, and Americans pushed their culture in this direction all the more in the 1980s.”

 

Cowen’s critique is that as a response to inflation and oil insecurity from foreign oil dependence, Carter suggested we accept limitations and lower expectations. Our president at the time did not encouraging Americans to find new ways to make the world the way they want it. I think this critique is fair. Instead of imagining that the world could be better, that we could be comfortably warm and energy independent through new technology, the story suggest we should just deal with some level of discomfort.

 

I’ve heard others reflect on this story in a similar way. They criticize Carter for a defeatist attitude and for thinking small. People don’t like the parochial feeling of having an elitist person tell them to be tougher and to put on another layer rather than be comfortable but use more resources. Its easy to understand why someone might have the mindset that they deserve to run the heat, even if it is wasteful, because they worked hard to be comfortable and they can afford it.

 

I also think there is value to having our top political leaders signal that we can be more and that we can use science, technology, innovations, and a sense of purpose to make the world a better place. Perhaps encouraging us to keep the thermostats where they were, but also encouraging us to, as the line from the movie The Martian says, “science the shit out of this” would have landed us in a better place than where we are now.

 

But on the other hand, perhaps Carter was right. I have heard people praise Carter for being honest and realistic with the American public. I have heard people criticize Reagan, Carter’s successor, as being an out of touch elitist wearing a suit 24/7. I think people today desire a president like Carter who would signal that they were more in touch with America by turning down the temperature in the White House, making a personal sacrifice themselves before asking others to do the same.

 

Carter’s statement that we need to conserve resources and think critically suggest that we should not just use resources in a wanton fashion. This is a sentiment that climate activists today are trying to mainstream, and perhaps if we had listened more carefully to Carter, we could have shifted our technology to be more green, less resource demanding, and less polluting. After all, who are we to decide that the world should perfectly suit us for every moment of our existence? Isn’t a little discomfort OK, and isn’t it a good thing for us to recognize that the world doesn’t revolve around us? Is it better if we turn the thermostat down, put on a sweater, and pull out a board game to play with friends and family rather than crank up the heat and stare at our screens?

 

My takeaway from this story almost has nothing to do with the story itself. Whether we decide Carter was right probably has more to do with who we want to be, who we want the world to see us as, and what is in our self-interest than it does with whether we truly believe his attitude reflected and encouraged complacency. My takeaway is that events happen in this world, and we attach stories and meanings to the events that can be understood in different ways depending on our background and context. The narrative we create and attach to an event matters, and it shapes what we see, what we believe, and in some ways how we feel about the things that happen in the world. Think deeply about your goals, what you want to achieve, and how a narrative can help you reach those goals, and you will find the ways to tie that narrative into an event. At the same time, watch for how others do the same thing, and when you have discussions with others and want to change their mind, be cognizant of the narratives at play before you go about throwing statistics and facts at someone. Maybe a new narrative will be more effective than a bunch of economics and math.

A Public Purpose Mandate

Posted on by jabittan
In The New Localism Bruce Katz and Jeremy Nowak advocate for new governance structures to help encourage innovation and lead to dynamic growth for cities and metropolitan regions. Katz and Nowak believe that current structures and institutions are inadequate to respond to global challenges that demand multisectoral action, technological innovation, and network approaches to problem-solving.

 

One of the recommendations from the authors is to produce new systems and structures for the effective management, use, and development of public assets. The authors are critical of public management strategies that often lead to politicized decision-making and cronyism. At the same time, the authors don’t suggest that public assets should simply be sold to the highest bidder from the private sector for their own profit maximization. Public assets can play a huge role in city revitalization and growth if managed properly, and the authors recommend that cities and metros look to Copenhagen for examples of better public asset management.

 

The City of Copenhagen has created publicly owned private corporations for the management of public assets and economic development spaces. An insulated private company is responsible for maximizing public benefit through the use of the city’s assets. In regard to transferring this system to cities in the United States, the authors write, “The United States also has to come to terms with the fact that public assets can be effectively managed by the same private systems and principles that build private wealth and productivity, but with a public purpose mandate.”

 

We like to think that there are either public systems, like say the DMV, or private businesses. Our debates and discussions generally center around the pros and cons of each, with people trying to reach an impossible conclusion that one system is inherently better than the other. Katz and Nowak show that Copenhagen took a different path, looking at how a private corporation could be established with public ownership and an ultimate purpose of maximizing public returns rather than private financial returns. The result has been an entity that can think long term, coordinate with both public and private organizations for responsible and equitable growth, and make decisions that focus on improving the city of Copenhagen in a realistic way that responds to actual economic trends, pressures, and forecasts. This blend of public and private is more robust than either pure private development or public management. The result of finding a third path is a new structure that can actually address problems in rational manners and sidestep the pitfalls that are so common in American city governance.

A Fresh Take on Public Asset Management

Posted on by jabittan
An area that I did not understand very well, since I have no real experience with city government, from Bruce Katz and Jeremy Nowak’s book The New Localism has to do with the management of publicly owned assets. According to Katz and Nowak, public infrastructure, public land, and locally owned buildings and spaces are underutilized and the value of these assets is poorly managed. Part of the reason for this is that much of government is split and segmented. One agency has control over a piece of land, and another agency has ownership of another near by asset. This fragmentation makes it hard for the city government to consider unified programs or projects that would utilize both of the nearby assets in a uniform manner.

 

Another issue the authors discuss with public asset management is elected political officials holding veto power over the use of public assets. Daniel Kahneman in his book Thinking Fast and Slow describes our risk avoidance tendencies, and I think these tendencies can easily be viewed in our elected officials and their veto power. Elected officials, like everyone else, is more worried about potential losses than they are excited about potential gains from the use or sale of assets. What is worse with elected officials however is that they ware worried about the loss of an electoral base, and the loss of a job from decisions regarding the use of public assets.

 

The authors write, “The removal of the political class from public asset management has a salutary effect on democracy by transitioning politicians from asset gatekeepers to consumer and citizen advocates on behalf of public asset productivity and quality.”

 

Instead of having elected officials be the ones in control of public assets, the authors suggest transferring ownership to quasi-governmental organizations that blend public, private, and civic actors. The authors envision new forms of port authorities or development organizations that would control public assets with a focus on maximizing public benefit. Elected officials would then be responsible for helping develop innovative uses for public assets rather than being responsible for the failure of projects and programs that use public assets. This is the essence of the point  that the authors make in removing the political class from public asset management. A rational organization that controls such assets can defragment them, and put them to better and more productive uses.

Dynamic Economies

Posted on by jabittan

A lot of work from both the Brookings Institute and from the Mercatus Center at George Mason University comes across my radar. Oftentimes the perspectives of the two think-tank centers differ quite a bit, but one area where they align is on local economies. Brookings (a center-left think tank) and Mercatus (a Libertarian leaning academic quasi-think tank) both agree that local economies depend on dynamic innovation and thriving centers where people actually want to be. Both agree that attracting competitive companies and driving innovation requires investments in placemaking, not just tax breaks and financial incentives for firms.

Bruce Katz and Jeremy Nowak (both from Brookings) write, “A globally dynamic economy requires that any locality that wants to thrive must invest in the qualities of place that attract and retain residents and firms, in human capital, and in an enterprise environment that enables innovation and business growth.” Mercatus also suggests that places focus on infrastructure and development to attract firms and encourage people to move to them. Mercatus is likely to encourage this growth in an organic invisible hand manner, while Brookings is more encouraging of using the state to intentionally develop infrastructure and systems for growth and network development.

The important lesson is that economic growth and development require meaningful investments in infrastructure. Human capital is the heart of networks and the key to innovation and growth. In order to attract people and to attract companies that can compete in a globalized world, cities need to make themselves livable and attractive to young and dynamic people. Tax incentives are not enough to attract companies for the long term. A company that is willing to move for a simple tax break, is not a company that is in it for the long run. Stable companies that want to grow and develop in one place will want places that are interesting and offer the amenities needed for a thriving 21st century lifestyle. Companies that are looking to make long-term and winning investments need human capital, and in order to attract human capital they need dynamic places where people want to live and set roots.

Competing in a Global Economy

Posted on by jabittan
“While competing in this global economy requires new thinking, many cities continue to pursue zero-sum economic development strategies that subsidize stadia and steal businesses rather than incent innovation,” write Bruce Katz and Jeremy Nowak in The New Localism. Our world’s globalized economy scares a lot of people. Add to globalization new technological innovations and the automation of a lot of jobs, and we find threatened people, threatened cities, and threatened industries. The proper response to such threats is adaptation and change, but a more common human reaction is fearful recalcitrance. Rather than go through reinvention, rather than develope new skills, and rather than embrace new changes, cities, states, countries, and the people within them double down on the familiar and the known, using policy to entrench themselves in the familiar jobs of yesterday.

 

Katz and Nowak continue, “These strategies are rarely aligned with smart education and workforce strategies that give workers the technical skills they need to succeed in growing occupations. And reinvestment in neighborhoods, downtowns, and water-fronts still has a long way to go to make up for decades of disinvestment, depopulation, and decentralization.” 

 

Stealing jobs, offering tax incentives to get companies/sports teams to move, and passing policy which prevents companies from automating away common jobs is not a strategy built for success in a globalized world of changing technology. To be competitive in a world where companies can move easily, where ideas can take root anyplace, and where jobs and technology are changing the way we work, cities and governments need to find new ways to build human capital and new ways to get innovative ideas into the economy quickly. Approaching the world and the economy as a zero-sum competition prevents innovation and encourages the short term thinking that leads to the poor strategies mentioned above.

 

The only way to truly adapt to the changing globalized world is to innovate. Protectionism leads to eventual disruption and greater anger on the part of the people whose industry and jobs are being disrupted. Those who lose out to automation without any training or skill development to help them adapt are understandably frustrated, but the proper response is not to dig our heels into the dirt to pull back on innovation and change. The proper response is to embrace change and help people innovate and learn alongside new technology, new jobs/industries, and new institutions.