Why does government work so well? Huh?

In this post on EconLog, Bryan Caplan explores why government enterprises work so well.

He makes a good point.

I think the small-government types (like myself) can overplay disasters of government involvement and we lose credibility when we do so. So, I do think its helpful to recognize when government seems to be doing, at worst, okay.

On the flip-side, I think big-government types can overplay the successes of government enterprises.

But, I think much of this is explained to the extent of what level of government we are talking about and the dynamics of that level, to what extent it is bottom-up or top-down.

I discussed this in more detail in this post back in 2013. I think government enterprises that work pretty well are more bottom-up and the ones that don’t work so well are top-down.

That post was inspired by an apples-and-oranges comparison often made by government-types.  They say that fire and police departments are government, and work pretty good. Then they make the logical leap to use this to support that some Federal government enterprise will work.

The lapse in that logic is that fire and police departments, while government enterprises, operate at the local level. There are thousands of these departments, that operate rather independently of one another, across our country. This makes these enterprises operate much more like a bottom-up organization, than top-down. This allows these enterprises to benefit from the same dynamics of innovationism as businesses.

Why didn’t I think of that?

Immerse yourself in a game as you run with the Zombies, Run! app. On your run, you’ll get to pick up munitions for your base and outrun heavy breathing zombie herds.

What a fantastically creative way to shake up those boring trods and add some sprints and interval workouts.

Sometimes innovations seem so obvious. I’m amazed it took so long for something like this to emerge. Can’t wait to see what follows.

 

 

Innovation Clinic

In a recent issue, Forbes held a valuable camp on innovation.

First, I agree with what Leonard Schleifer, CEO of Regeneron (a drug research company), had to say about innovation in his Entreprenuer Clinic in Forbes.

I believe that companies rot, and they rot from the top down. Too often the keys to the kingdom are given to commercial folks who don’t value long-term research. When you don’t value something, you don’t get good results from it, and the bottom line is that then, all of a sudden, the long term becomes the short term, and you don’t have anything.

“Focus” is a dirty word for us, okay? It’s a big mistake to think that you can pick the very best thing that you should focus on and then ignore all the other things. Wouldn’t it be wonderful if we could pick only the things that work in our business? Amgen’s new CEO, I heard, said they only were going to work on the things that work. Good luck to him. We are just not that smart.

Second, the short description of the article, The Secret to Unleashing Genius, says a lot:

Companies suffer when the boss comes up with all the new ideas. Shrewd leaders build organizations that think for themselves.

I’ve seen my share of executive teams where the long-term turned into the short-term and they didn’t have anything and where they were never willing to admit that they are just not that smart.

I think realizing that, is the key that the “shrewd leaders” understand and why they build organizations that think for themselves.

However, in depressing news, Forbes had this article where Google appears to be headed the other direction in what Larry Page described as “more wood behind fewer arrows”.

Google previously had a rule that you could spend up to 20% of your time on side projects. Now they are pulling that rule back a bit. The author of the piece asks a good question:

Now that Google has put some rules  around “20% time,” the one day a week an employee spends on side projects, people are having a field day forecasting the end of innovation at the company that claims to “use their powers for good, not evil.” To those people, I ask one question: Can a company in today’s highly competitive environment survive if they allow 1/5th of their employees’ time to be devoted to work that has no clear alignment with the company’s strategy?

Her answer: “of course not.”  I think there’s a better answer: Google’s stock price. Apparently it has been working for them, so far. In the words of Leonard Schleifer, ‘good luck to him.’

Update: Brian Carney and Isaac Getz agree with my take on Google’s rule change in the Wall Street Journal.

Simple Rental Car Innovation

A new airport car parking/rental model? Instead of paying to park at the airport, while you are away, let this company rent your car out to someone in your hometown.

I love this observation from the company’s CEO:

“How does it make sense that there’s one parking lot at the airport where there are thousands of cars sitting there and people are paying for them to sit there and do nothing, and there’s another parking lot with thousands of cars owned by Hertz?” 18-year-old FlightCar CEO Rujul Zaparde said.

Of course, it can’t be that simple. Bureaucrats are having conniptions about it because it hurts their rent-seeking model.

Innovation is a discovery process

I also enjoyed this Wall Street Journal article about innovation and Thinking Inside the Box.

Yep:

How could business leaders rate innovation as so important yet feel so dissatisfied with their own organizations’ performance? Because what they really want to know is how: How do you actually generate novel ideas and do so consistently, on demand?

The article goes on to provide five suggestions for taking a different approach to innovation by taking an existing idea and doing things like removing essential elements, combining unrelated tasks, and so on. Less ‘pie-in-the-sky’ thinking.

They provide good real world examples of each. One such, under the combining unrelated tasks, was the online security measure where you have to type in the letters of a fuzzy image to prove you’re not a computer.

The unrelated task is that those images are old texts that haven’t been converted to digital format yet. So, as we all verify that we’re not computers trying to buy tickets to our favorite sporting events, we’re also helping someone digitize an old book.

Even though I found their examples interesting, I’m still skeptical that their recommendations would improve effectiveness in producing innovation on-demand.

I think there’s 20/20 hindsight bias in their observations. They key in on the innovations that work, but don’ts consider the innovations that used the same approaches and didn’t work.

What “works” isn’t obvious. Even the people who eventually get the most out of an innovation would never had guessed that they would find that value prop useful prior to its existence. The Sony Walkman is a good example:

Even Akio Morita, Sony’s chairman and the inventor of the Walkman, was surprised by the market’s enthusiastic response.

Here are the suggestions for innovation that I’d add to the authors':

Try stuff in the real market, even on a small-scale. It doesn’t have to be perfect or refined to the level of your other products to find out if you have something. The things that I’ve worked on that have worked were not pretty in their initial stages, but they still ‘moved some numbers’ and refining them didn’t seem to improve the effectiveness.

Don’t let your biases get in the way of trying something. Let the market test it.

I’ve seen too many things that are actually working get canned because someone with political clout didn’t like it. They didn’t like it because it wasn’t their idea. Or, they didn’t feel it ‘fit with the brand’, though customers did. Or, they simply relied on poor business analysis that focused on a negative trade-off and ignored the positives.

When people have ideas, encourage them to put their money where there mouths are to try to prove it out. Reward them handsomely if it works. Encourage them to try again if it doesn’t. Understand, failure is likely and not a sign of incompetence. Good baseball players strike out much more often than they hit home runs.

Alos, read Nassim Taleb’s trilogy: Fooled by Randomness, The Black Swan and Antifragility.  Then read F.A. Hayek’s The Fatal Conceit. And, finally, read Russ Roberts’, The Price of Everything.

After reading these, you may see the world differently. Innovation is not a planning process, it’s a discovery process.

Examples of how one company deals with the mountain of policy disincentives

Speaking of the mountain of disincentives we face from policy-makers past and present, this weekend’s Wall Street Journal features an interview with Carl’s Jr/Hardee’s CEO Andy Puzder.

Policy-makers act as if business managers will not respond to their disincentives and end up hurting the very people they are trying to help. Puzder illustrates one such action:

Mr. Puzder also expects fast-food restaurants to deal with ObamaCare by replacing workers with kiosks. “You’re going to go into a fast-food restaurant and order on an iPad or tablet instead of talking to a person because we don’t have to pay benefits for any of those things.”

While Mr. Puzder supports technological progress and the efficiency of tools like the iPad, he laments that “there’s a personal element that you don’t get from machines, and I think you’re going to lose that.” It’s also unfortunate, he says, because fast food is a “great level of job for people to enter the labor force.

The sci-fi geek in me wonders when they’ll come out with RoboCashiers. I’ve seen RoboBlackjack Dealers in Vegas. They are 3D animated ladies on big screen TVs that sense your movement and interact with you. Max Headroom, SIRI and Watson, for $500, can you run a cash register and make small talk? You could probably even program it so that the 3D image that appears would be one that the customer prefers.

I enjoyed Mr. Puzder’s comment on price strategy:

Mr. Puzder’s Journal visit comes while he’s in New York scoping out sites for new restaurants in the city. I ask him how he plans to deal with New York’s sky-high rents, a recent minimum-wage hike and labyrinth of regulations. “I went into a McDonald’s yesterday and a Big Mac combo cost $7.19 for a Big Mac, fries and a drink,” he says. “That’s how you deal with it.”

Here’s Puzder on why he doesn’t prefer building in California:

These days, California is one of the few states where the company isn’t looking to expand. “Like many businesses, we love California and would love to build more restaurants,” he says. But “California is not interested in having businesses grow,”

Consider how long it takes for one of his restaurants to get a building permit after signing a lease. It takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it’s 285. “I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California,” he says.

Mr. Puzder’s favorite California-bites-business story is a law that requires employers to pay general managers overtime if they spend 50% of their time on non-managerial tasks like working the register if they’re short-staffed, “which is what we pay and bonus them to do in just about every other state.” Since managers were filing class-action lawsuits against the company for not being paid overtime, “every retailer in the state basically has now taken their general managers and made them hourly employees.”

The managers hated the change “because they worked all their careers to get off the base to become managers…

Paperless Office

I’ve been hearing about the paperless office for decades. But, as technology was integrated into business, it seemed like more paper was generated.

One example: When we had meetings, we had to make copies of the presentation for everyone. We all took notes on those copies and then went back to our desks and refined the presentations based on the notes. Over the course of weeks, my paper recycling box would become stuffed with the remnants of this process.

I just noticed recently that has changed. We all have laptops, tablets and wi-fi that work pretty well. We have LCD projectors in most of our meeting rooms. We email the presentation to the meeting participants and we project it on the wall. So, meeting participants follow along on their own computer or on the projected presentation. We make notes, electronically, directly on the presentation.

I looked around at a meeting this week and noticed it. I went back to my desk and looked at my paper recycling box. I couldn’t find my paper recycling box. I haven’t needed it for months and I haven’t paid much attention.

Sometimes change happens and you simply don’t notice it.