Scaling Local Networks

Scaling Local Networks

Dave Chase presents an interesting idea about local networks in his book The Opioid Crisis Wake-Up Call. Local networks, Chase explains, grew from the small groups and tribes that humans evolved within. The systems and structures that allowed for cooperation in small groups, have evolved into complex structures of institutions like government, insurance risk pools, and social media. Chase focuses on the health insurance side of these local networks, and considers whether scaling local networks is really the best thing for today’s societies.

 

Chase writes, “When local networks are scaled up, you add hierarchy, says Brookfield [Venture Capitalist Chris Brookfield], and this creates opportunity for theft and redirection.”

 

The idea from Brookfield that Chase is getting at is the idea that many of our systems were formed in small groups and tight communities where social accountability and trust were easy. Everyone knew each other, the community had many close ties and interactions, and it was not hard to keep track of personal debts and obligations. As societies grew, and as our cities, nations, and global structures became more complex, we brought along the same structures of the systems that served our evolutionary tribal ancestors well.

 

However, as complexity grew within those structures, the pitfalls of scaling local networks became apparent. There are too many transactions, too many opportunities for theft and fraud, and too few people who have real oversight and understanding of how the systems work. This allows for abuse of the system and for people to get away with cheating.

 

In healthcare it might look like increasing premiums year-over-year, without a clear explanation as to why premiums are increasing. It might look like unnecessary healthcare expenditures, unnecessary healthcare procedures performed and billed by providers, and opaque systems of approving or denying medical claims. No one knows anyone anymore, no one is accountable, and no one has a clear accounting of debts and obligations. Some outright fraud occurs, a lot of abuse of the system occurs, and even more common, a lot of fudging things and pushing boundaries takes place. Our healthcare insurance system is built on a structure and idea that doesn’t fit the complex high scale realities of the world we live in today.
How We Think About Our Digital Tools

How We Think About Our Digital Tools

In his book Deep Work, Cal Newport contrasts two types of approaches to the digital tools that we use and create. We have a lot of powerful social media and network messaging applications, and these tools and applications are often given to us, or seemingly forced onto us, without much choice on our end. If everyone we know is using Facebook, then we feel left out without it. If everyone in the office is using Slack for communications, then we feel that we must join in so that we don’t miss any important messages and updates. The tools we create put pressure on us to use them, even if we never wanted the tools to begin with.

 

Newport calls this standard approach to network tools the Any-Benefit Approach and he defines it this way, “You’re justified in using a network tool if you can identify any possible benefit to its use, or anything you might possibly miss out on if you don’t use it.”

 

We don’t want to be left out of conversations at the water cooler, so we download social media apps to talk about what other people have said. We don’t want to miss a message about something in the office, so we join all the Slack channels at work. We might get an early insight into something our favorite sports team is doing, so we install the Twitter app. We don’t think critically about whether we get a lot of value from these network tools, we only ask if there is some potential benefit we might receive from the tool.

 

Newport describes the opposite strategy for determining what network tools we use as the Craftsman Approach to Tool Selection: “Identify the core factors that determine success and happiness in your professional and personal life. Adopt a tool only if its positive impacts on these factors substantially outweigh its negative impacts.” 

 

With this frame, we don’t add twitter unless we think it is going to really make our lives better to know what our favorite sports stars are up to. We don’t install social media apps if we think we will waste time with them or if we think that we will become jealous looking at all the cool things others are doing. Rather than worrying about what we might miss out on if we don’t get the app, we worry about what we might miss out on if we lose time and attention to the app. We bring in new applications at work if they help us perform better, not if they help us stay up on office gossip or give us a few popular tidbits to chat about during our breaks. Switching to the Craftsman Approach to Tool Selection matters if we want to do meaningful work and be present with our families in meaningful ways.

The Complement of Networked Governance

The last few weeks I have been writing about governance ideas presented in Bruce Katz and Jeremy Nowak’s book The New Localism. One idea I have brought up multiple times is the idea of new institutions at the local level formed from networks of public, private, and civic actors. Katz and Nowak argue that these networks are crucial for the development of plans and strategies to help cities grow, adapt, and thrive in a globalized economy. New institutions include structures and frameworks that bring together public, private, and civic leaders who have the ability to mobilize energy, capital, and people to actually get things done, rather than to just talk about doing things.

 

Katz and Nowak are clear, however, that these new network governance structures are not something they suggest as a replacement to traditional government structures and agencies. In their book they write, “In the end, however, networked governance is a complement to functioning government, not a substitution. As responsibilities shift downward in societies, capable local governments become a necessary component of problem solving and leadership.”

 

I previously wrote about the ways in which our denigration of government in some ways create a self-fulfilling prophecy, where talented and motivated people are afraid of the stigma of government work and chose to work in the private sector, leaving government with less capable and dynamic talent. A lot of rhetoric says that government is the problem and not a solution, but Katz and Nowak show that government has to be part of the solution.

 

City and local governments create the structures that can organize private and civic groups. They create the forums through which stakeholders can deliberate and discuss the problems that people in the region face. Agencies play a role in ensuring that projects and programs taken on with the support of private and civic groups follow legal precedent and sound administrative practices in an equitable manner. Without a competent public sector, the plans from governance networks would have nothing to graft onto, and could not be implemented nor developed.

 

New governance approaches through networks are efficient and effective because they bring in the people who have the expertise in a given area and invite them to be part of a larger solution than just maximizing their bottom line. They engage community members and actors in place-making, helping the region grow in a way that will in turn benefit each member of the network. The network fills the gaps in public action and strengthens the weakest parts of the public sector. Together, a competent local government combined with the nimble and expert private and civic sectors has a great advantage in the field of problem solving.

Cities Building from Strengths

I really like the ideas presented in The New Localism by Bruce Katz and Jeremy Nowak because they provide a road-map for getting stuff done in a local context where our hyper polarized tendencies can be put aside. The ideas presented in the book focus on engaging local community members and groups to take real action against our most pressing challenges. It doesn’t simply present a best case scenario of local policy-making, but demonstrates real examples of local place-making alongside realistic decision-making.

 

Cities have the power to lead on many issues that we face today because of their abilities to create networks to pull people together. It is the strengths of cities that propels them to be the solution engines that they can be in our world today. The authors write, “Cities unveil and tap hidden strengths by aggregating public, corporate, philanthropic, and university stakeholders into networks that work together to tackle hard challenges and leverage distinctive opportunities.”  It is the people, the companies, the groups, and the local environment that allow cities to be diverse, dynamic, and successful in developing real responses to social, economic, and security threats. By understanding and connecting these resources, cities can build coalitions with the power and energy to transform cities in the face of obstacles.

 

Katz and Nowak continue (emphasis in original), “The best networks have a smart recipe:  Build from strength to address needs rather than build from needs to address strength. This enables cities to realize the full value of latent assets, whether they are sector based … or geographic …”

 

Cities cannot identify who they want to be, and then try to engineer the strengths that would help them bring about the transformations they want to see. Cities have to be able to honestly look at themselves and see what they can be. There is plenty or room for imagination and visionary leadership in this model, even if it feels limiting. Cities cannot invent strengths out of no where, but they can identify, coordinate, and combine the resources that produce existing strengths to further develop new industries and sectors, or to capitalize on existing advantages. Building from strengths takes the existing pieces and encourages them to grow, expand, and recombine in novel ways. It requires organic communication and networking along with new institutions to help streamline the decision-making process to implement the programs and policies to help propel cities forward.

Culture Busting

In The New Localism Bruce Katz and Jeremy Nowak call for culture busting among city leaders who want to find new solutions to pressing problems. One of the challenges we face is that in general, the public doesn’t understand governance well. We operate with set ideas about what governance is, who sets rules and regulations, and the roles that private companies, local community groups, and formal government agencies play. In the future, as problem solving becomes more local and as we try to tackle major challenges we will need to get beyond these simple models from our high school civics classes.

 

This is what Katz and Nowak call culture busting, “culture busting is a form of risk taking and a fundamental shift in understanding that many responsibilities in a city and metropolis lie with the community broadly rather than with the government narrowly.” The role of government, the role of businesses, and the role of everyday citizens needs to change if we are to truly address the big problems in our societies. If we want to tackle climate change, if we want to reduce healthcare spending, and if we want to spark economic development, we have to realize how interconnected all of the challenges we face are, and we have to develop a community focused action plan to make the necessary changes. Thinking that problem solving is the role of government or that economic development is purely a free market phenomenon will not help us jump to be dynamic leaders in a globalized economy.

 

Part of what culture busting calls for is more education around governance and part of it is a reemergence of community action. A major failure of suburban life is that we drive from our homes to our places of work or commerce, and rarely interact with anyone else along the way. We let others deal with problems unless they happen to be unavoidably right in front of our face. We might get out for a sporting event or a conference, but otherwise we are just as content to watch Disney+ at home. Culture busting replaces this individual isolation with networks that want to see real change and are willing to own part of that change.

 

Culture busting requires that we re-imagine what is possible for governments and redefine the role of businesses and civic organizations. It requires that we think about the challenges our communities face, and ask ourselves what resources and advantages do we have that we can use to make a difference. Rather than waiting for government to make a decision, it requires civic and private energy to clear the path and display a public will for government to direct resources in the direction that the populace already wants to move. It shifts leadership from government back to the people and aligns actors to make the community a better place.

A Complex Interplay

In the United States, we have a myth about the power of private industry. We believe that the private sector is robust, efficient, and always provides the correct and stable equilibrium needed to solve problems and provide us with innovation. We see free-market competition as the only legitimate way to advance and grow, with popular TV characters expressing ideas such as, “Capitalism: God’s way of determining who is smart, and who is poor.

 

Public action, on the other hand, is downplayed and typecast as an incompetent, greedy villain. Accepting aid from a public agency is seen in some ways as a cop out, or only as something that is acceptable for a short period of time as long as you are deserving of assistance by working hard, trying to be smart, and following all the rules that others lay out.

 

For those who have achieved success, this model fits nicely with the worldview that they would like to see and believe. It elevates them while framing poverty or economic distress as a moral failure.

 

As we move forward as a globalized society that is able to adapt to technological changes and new institutions, we will have to realize that this myth does not reflect the reality of public programs or the private sector. In The New Localism Bruce Katz and Jeremy Nowak write the following about their idea of dynamic new approaches to policy and governance,

 

“Successful network governance models show the complex and varied interplay of the public, private, and civic. The models eviscerate the cartoon version of an efficient private sector taking the place of an inept and incompetent public sector. Rather, network governance combines the entrepreneurial capacity and capital of business and philanthropy with the legitimacy and broader concerns of local government.”

 

Government and public institutions have an authority and responsibility that is hard for the private sector to replicate. Because government agencies don’t have a profit motive, they are able to focus on public priorities and concerns in ways that businesses cannot. However, because businesses have private capital available for investment, they can take risky bets and make investments that public sectors could not. Finding ways to merge the strengths and weaknesses of public and private sectors is crucial to develop networks that have the appropriate capacities to invest in the future and implement changes to help regions grow and advance.

 

Simply claiming that the private sector always provides the best outcomes or that the public sector is slow and bloated does not help us think about what is really needed for economic growth and development in the 21st century. Both sides need to be understood clearly and appreciated for their strengths and unique features. Future governance models will combine aspects of both the public and private sectors to get stuff done.

Place-making and Networks

One idea from The New Localism by Bruce Katz and Jeremy Nowak is that states and cities should not be looking to attract companies simply by offering tax breaks and by promising to streamline permitting. Bringing companies that can be enticed by these types of handouts is a good way to generate short-term positive headlines, but it is unlikely (especially on its own) to attract the kinds of companies that will help develop a city or metropolitan region into an attractive hub for other companies. For Katz and Nowak, what is more important than just getting a few companies to move in with tax breaks is engaging the business community that already exists, and working with civic and private sector leaders to invest in place-making.

 

A general problem we have faced in the United States over time is sustained disinvestment in localities. This has taken different forms at different times and has had serious conflicts for people living in disinvested places. For years, urban centers were ignored as people moved to outlying suburbs, and the result was a crack epidemic and a hollowing-out of many great American cities. Today, we are disinvesting in our suburban small towns and in former manufacturing hubs in the Midwest. The result has been an opioid epidemic and a spike in suicides. Simply convincing a company to move to an area that has been disinvested with some tax breaks won’t help solve our underlying problems and won’t help cities and people adapt to a dynamic globalized economy. What we are more likely to see in this strategy is the attraction of companies who are able to implement exploitative labor strategies that burn-out the people who have faced disinvestment and desperately need jobs.

 

“Networks must now ensure that their education and workforce development systems produce locally grown talent with the specialized skills that align with local advantages,” write Katz and Nowak. On its own, this advice is not very helpful. But when you think about what a network is and how cities can invest in existing networks within a region, you see that this advice is actually quite practical and represents a shift from the traditional thoughts of attracting companies to a region to produce jobs. Cities have to consider their advantages, such as ports, transportation lines, physical space, or educational institutions, and find ways to connect local business leaders, engaged civic actors, and other organizations in a way to get stuff done. Engaging to talk about problems and starting action for just a few months is insufficient – leaders need to be engaged in long term place-making – a committed effort to improve the region in a “rising tide lifts all boats” type of approach.

 

Katz and Nowak continue, “And they must also create quality places that not only attract and retain workers and companies with a rich set of amenities, but also provide a platform for the seamless and collaborative exchange of ideas.” The organizations and groups brought together in these networks cannot remain in individual silos. They need to be connected through new co-governing institutions that have the power and authority to make real decisions that generate meaningful investments in the places where businesses operate and where workers live. Without such long-term and permanent planning that gets stuff done, cities will meander along with incremental changes, or worse, will continue on a path of disinvestment that leaves their citizens vulnerable to despair and exploitation.

Cogoverning Within Institutions and Among Leaders

A great myth among the American populace is the myth of compartmentalization. We (or at least people who don’t study a specific area) tend to think that things are separate and distinct. The reality however, is that things are much more connected than we believe. I’m going to approach this idea from the standpoint of public policy, government, and the private sector, however we see this myth of compartmentalization in the way university departments are set up or in the way we want to have sports/entertainment separate from current political and social affairs. In the world of public policy, we like to think that there is government, and then there is business, and they are separate from each other.

 

This myth is slowly being dismantled in the United States at the level of local leadership in cities, businesses, and civic organizations. In The New Localism, Bruce Katz and Jeremy Nowak write about the new transformations we are seeing in local leadership and governance. They write,

 

“The current suite of supersized challenges and de facto devolution of responsibilities demands new models of networked governance and fundamental re-framing and refocusing of the leadership class in cities. The most effective local governance occurs in places that not only deploy the formal and informal powers of government but also create and steward new multi-sectoral networks to advance inclusive, sustainable, and innovative growth.”

 

Governance is no longer simply a government agency separate from the rest of the world. Businesses and public agencies are becoming more connected as the challenges, problems, and complexities of society increase. It is not enough for rules and regulations to be set in a compartmentalized way by a supposedly separate and outside agency.

 

Katz and Nowak continue, “The logic is incontrovertible: if cities are networks of institutions and leaders, then institutions and leaders should co-govern cities.” Leaders from business and civic organizations need to help govern alongside the agencies that set regulations. Government and business cannot be compartmentalized, and different sectors of business and public services cannot be compartmentalized. Cities are interdependent, creating networks that rely on each other to succeed. The risk here is that agencies will be captured by businesses and industry, establishing protectionist policies that help the business at the expense of the larger ambitions of cities and metropolitan regions. Katz and Nowak include suggestions in their book for new forms of quasi-governmental institutions which can translate the desires of businesses into public policy in a way that mediates the concerns of public agencies, businesses, and civic groups, helping further the inclusiveness of the decisions, rules, and regulations being put in place.

A New Kind of Problem Solving

Bruce Katz and Jeremy Nowak’s third highlighted feature of New Localism in their book The New Localism is that it, “reflects a commitment to a new kind of problem solving that is distinct from the uniformity of policymaking.”  American cities and metropolitan regions are leaders in innovation, diffusion, and development in the United States. The networks formed between university researchers, students, business and industry, government agencies, and local non/not-for-profits or charities help new research translate into real-world applications and eventually into new innovations. Crucially, this is not just true of new technological innovations. In medicine, material science, and communications technology we see new devices entering the market to change the ways we live, but outside these areas we are also seeing cities and metropolitan regions innovate thanks to dynamic networks and united stakeholders. New Localism is helping to drive new forms of governance, new forms of funding for local projects, and even new ways of engaging communities.

 

Katz and Nowak continue, “It adapts the risk-taking and attitude of individual entrepreneurs and investors to the collective sphere. It is experimental and tolerant of failure. It is the twenty-first century embodiment of Franklin Roosevelt’s words in his famous 1932 speech: It is common sense to take a method and try it. If it fails, admit it frankly, and try another, but by all means, try something.”

 

Government is frequently criticized for being slow and unresponsive. Rules and regulations take over, and creativity, customer service, and improvements seem to disappear. Without a profit motive, it is hard to see why governments should feel a pressure to move quickly and why they should feel a pressure to be highly responsive to the public. Free markets on the other hand (and especially tech start-ups), seem to operate on a model of, “move fast and break things.” They feel pressured to always up the design and innovate, although they also face a pressure to provide gimmicks and overstate their level of innovation and fast-breakiness.  New Localism helps by finding a way to establish more of a common ground between these two extremes.

 

New forms of social and civic organization can help create quasi-governmental structures that provide the regulation and oversight necessary to protect citizens, but businesses can find profit and reward from working closely with those structures to innovate in a way that actually solves the local problem. Funding from associations and foundations help reduce the risk that government agencies would otherwise face, again providing a new avenue to help encourage innovation and development while avoiding typical roadblocks in a standard policy making process. These new ways to solve problems are a direct result of new networks and local action to address challenges in a cohesive manner.

Ground Level Problem Solving

Bruce Katz and Jeremy Nowak, in their 2017 book The New Localism, argue that problem solving and policy solutions to our pressing problems will not be found at the national level as we move forward, but rather at the local level. Large, established, and nationalized organizations will be less able to take on the problems of our new economy and evolving societies, but smaller, more responsive, and more local organizations and arrangements can address these challenges.

 

The authors write, “problem solving close to the ground rather than policy-making from a remote national or state capital has the tangible benefit of customization. A local solution can be a more efficient use of resources since it is more aligned with the distinctive needs of a particular place.”

 

Cities and states across the nation have competing and conflicting problems. What might be a major challenge in your city may not be a problem at all in another city. The solutions that would work to address a problem in your city might be completely ineffective someplace else. Economic structures, environmental concerns, resources, and human capital will all shape how a problem can be addressed, and every city and metropolitan region in the nation has a different mix of these variables to use to address challenges.

 

Even within a state, conditions can be drastically different from one region or county to another. I live in Reno, Nevada, and we are having major housing challenges as we receive an influx of companies and employees from the Bay Area in California. Our housing challenges, and the resources we have to address our problem is completely different than the problems being faced in Las Vegas. Introducing policy on a state level to address the issues we face in Reno may cause entirely different problems in Las Vegas housing markets.

 

If you are not going to address problems purely with policy from a state legislature or from Congress, then you need to address problems with local stakeholders and organizations. This includes philanthropic organizations who can back projects that don’t have a clear ROI and would be risky for a government agency to support. Local problem solving also includes local businesses and organizations that can coordinate and align on development goals. Public agencies have a role to play by ensuring that expertise and resources are being used in a way that is consistent with state law and policy. Each group of actors can help coordinate and push different parts of the solutions that individually they could not propel forward. This is what allows local problem solving to be efficient, effective, and innovative in tackling today’s problems.