Avoiding reality sometimes works

Good blog post from Clay Shirky about the Obamacare website (Thanks to Russ Roberts @ Cafe Hayek). Here are a few excerpts.

Shirky demonstrates another lesson from The Croods, on why executive paid him to collect information from their own employees. Here he describes an instance where he is with a company’s programmer in the presence of its executives (emphasis mine):

…the programmer leaned forward and said “You know, we have all that information downstairs, but nobody’s ever asked us for it.”

I remember thinking “Oh, finally!” I figured the executives would be relieved this information was in-house, delighted that their own people were on it, maybe even mad at me for charging an exorbitant markup on local knowledge. Then I saw the look on their faces as they considered the programmer’s offer. The look wasn’t delight, or even relief, but contempt. The situation suddenly came clear: I was getting paid to save management from the distasteful act of listening to their own employees.

Humility is not common in the executive suite.

On bottoms up vs. top down (trial and error, specifically):

The idea that “failure is not an option” is a fantasy version of how non-engineers should motivate engineers. That sentiment was invented by a screenwriter, riffing on an after-the-fact observation about Apollo 13; no one said it at the time. (If you ever say it, wash your mouth out with soap. If anyone ever says it to you, run.) Even NASA’s vaunted moonshot, so often referred to as the best of government innovation, tested with dozens of unmanned missions first, several of which failed outright.

Failure is always an option. Engineers work as hard as they do because they understand the risk of failure. And for anything it might have meant in its screenplay version, here that sentiment means the opposite; the unnamed executives were saying “Addressing the possibility of failure is not an option.”

Unfortunately, every once in a while, avoiding reality sometimes works. Sometimes people get lucky when they exclaim that ‘failure is not an option’ and actually create something successful. Those people can be dangerous.

Freakonomics discusses emergent order

The latest Freakonomics podcast, What do skating rinks, Ultimate frisbee and the World have in common? is worth listening to. It’s about emergent order.

It touches on several topics I write about here, like Why do you stop at red lights? It turns out that how we stay relatively safe on skating rinks is similar to why we stop at red lights.

I have a few comments about this podcast, so far.

They discuss the sport of Ultimate frisbee because it is a self-policing sport that is just now starting to use refs. They discuss that the self-policing has worked because of morality. I think it’s because of the Golden Rule.

I give former soccer player and ESPN analyst, Alexi Lalas much credit for pointing out that 80% of soccer is self-policed and refs become more important as the stakes go up. Good observation. I do think ‘morality’ or the Golden Rule is less likely to be observed as the stakes for violating it goes up.

I also be Lalas credit for humor. He introduces himself as a proud ginger who carries the mutant gene. As a fellow ginger, I found that funny.

They also talk to Senator Bill Bradley and they let him perpetuate a straw man. Bradley says that the Tea Party wants to get rid of government, then goes down the list of what government does. It’s a straw man because few people want to ‘get rid of government’. They just want to scale it back.

Bradley also provides a good example of what I’ve been writing about in my bottoms-up vs. top-down posts. Bradley makes the mistake I wrote about in the first of that series, he categorizes things as ‘government’ vs. ‘private’ rather than ‘bottoms-up vs. top-down’.

Bradley says there has to rules and authority, in sport and the world. What he doesn’t seem to appreciate is how those rules come about. He seems to think they come from the authorities. But, more often than not, they evolve out of playing of the game.

I still have a few minutes left to go in the podcast, but I was surprised to hear the economist, Steven Levitt, say he doesn’t know much about Hayek. I give Levitt credit for admitting it and not having a strong opinion about him. He sets a good example in that regard.

The Croods

I finally got around to watching The Croods with the family last night. I enjoyed it.

This animated feature follows a caveman family that has survived until now by fearing everything, including new ideas, as they encounter someone who has survived by using his brain to adapt to the world around him. Good timing, because the world is changing (earthquakes and volcanoes) and what has kept the Croods alive up until now doesn’t work any more. The new guy, Guy, helps them survive as the world changes around them.

In one scene, Guy introduces the Croods to fire. They are dumbfounded. What is it? Is a part of the Sun? Does it talk?

Guy tells them that he makes it, so the father, Grug, picks him up and tries to squeeze more out of him and injures him in the process. That was a clear case of mistaken cause and effect.

What I thought was funny about this scene is that reminded me of new managers, business consultants and politicians. They come into a business or elected office with the attitude that they know best and what has worked for them in the past will work for them here, not realizing that what has worked for them in the past was luck.

They create a plan forward to solve problems they have diagnosed, not realizing that what they believe to be the causes of the problems is based on their mistaken cause and effect.

They then seem bewildered when their solutions have the same effect as Grug trying to squeeze fire out of Guy’s body. Not only does it not work, but it ends up damaging the very thing that can help.

Emerging failure

Arnold Kling discusses the Obamacare website troubles here and here. I agree with his view. In fact, it ties in with my recent posts about bottom-up vs. top-down.

From the first post:

Start by asking why it is that Healthcare.gov is not as good as Amazon.com or Kayak.com. One answer is that the government is not good enough at deploying information technology. However, I think that is only a shallow answer.

The deeper answer is that when we look at Kayak and Amazon, we are seeing the survivors that emerged from an intense tournament. In this tournament, thousands of competing firms fell by the wayside. Competitors tried many different business models, web site designs, business cultures, and so on.

Healthcare.gov did not emerge from this sort of competition. It came about because Congress passed a law.

From the 2nd post:

The progressives are much less forgiving of the Obama Administration’s management failures than are the rest of us. Some of us saw the problem as baked into the law. It was pointed out that the law mentions the word “web site” over 130 times, which is an indication of how complex the requirements could be. I made my point that Amazon and Kayak emerged out of a tournament involving thousands of companies. I said that if Obamacare had been a private-sector start-up, its odds of success would have been less than one in a thousand. Others pointed out that in the private sector you usually start with a small, minimally-functional prototype, not with a full-blown, full-featured system. Still others pointed out that the features of Obamacare are so tightly interconnected that it required perfect execution, which was extremely unlikely.

The progressives (especially those over age 40) wanted instead to emphasize the fundamental management flaws, such as not having a strong executive in charge of the project. They insist that Obamacare could have worked. Clearly, to suggest otherwise was to cast some doubts about the progressive approach.

Round and round

This excellent post from Don Boudreaux, reminded me of my less worthy attempt at this in 2012.

This is the dynamic in a nutshell:

1. In a freer health care market, the costs of being unhealthy or uninsured is borne by individuals. This provides strong incentives to stay healthy and insured.

2. In #1, some people will still fall through the cracks. Some because of bad choices they made, but others because of unfortunate circumstances.

3. Attempts to solve #2 that involve anything other than encouraging people to make better choices creates moral hazards* that cause even more people to take less responsibility for their health and not buy insurance. This increases costs for those who pay.

4. The same compassionate people who wanted to solve #2 try — with no apparent awareness of this — reproducing the natural incentives in #1 to stay healthy and insured by dictating both. This appears in mandates that sound like, If we’re paying for you health care, then we have the right to tell you how to live your life.

We already see evidence of this in New York City with bans on salt, trans fats and large, sugary drinks. New York was already well down the Obamacare path, which is why New York City was one of the first areas in the U.S. to show signs of #4.

Here’s an example from Japan. I see evidence of this starting here. My employer, for example, is now collecting my BMI and waist size and will soon want to start tracking my exercise activity.

Of course, the First Lady’s efforts to reduce childhood obesity are also initial steps in the direction of #4.

*Moral hazard – A moral hazard is created when some measure taken to reduce risks, increases the risks people are willing to take.

One example of this can be seen in football. Wearing helmets sounds like a logical safety measure, but has resulted in players hitting each other harder and even taking measures (like doping on steroids to build muscle mass) to hit ever harder.

The link to the post about the BMI penalties in Japan provides an example of moral hazard in medicine.

The Wussification of America

Regular commenter Mike M requested that I start a thread on this topic.

How about the mutual fund industry’s decades-long guilt trip on parents to convince them that it is their duty to save for their children’s college education? Now many parents accept that duty as a given without question.

If college is one of the best investments, there should be no problem finding funds for that investment.

In fact, it would be quite the lesson in investing if students approached college as such rather than a free 4-years at the resort (as a visit to any college campus will reveal that they are now competing for kids not on academic credentials but on the amenities offered and sports affiliations).

It also may not hurt kids to have to work some while earning their degree.

Also, what’s up with bullying? What happened to the old saying, ‘sticks and stone may break my bones, but words can never hurt me.’ I found that to be quite an effective antidote to bullying and hazing.

Add what you like.

Bottom-up vs. Top-down: Don’t put all your eggs in one basket

This is the 3rd post in this series. Here are posts 1 and 2.

In post 1 of this series, I explained what I think are the key differences between top-down and bottom-up organizations and why it’s helpful to think in those terms, rather than other common organization characterizations like government vs. private sector.

At the end of post 1, I listed three reasons why I think bottom-up systems work better than top-down. In Post 1, I elaborated on the first reason. In this post, I elaborate on the second: No single point of failure.

This has been conventional wisdom for a long-time and you may know it better as the phrase, Don’t put all your eggs in one basket.

Why? Because you might drop the basket. This sage advice helps reduce the risk of breaking all the eggs should you drop that basket.

We use this advice when investing. No matter how much homework we do on a company, there are no sure bets. Best not to bet everything on one company.

We consider the advice when planning careers. We train for one career path, but we know it could be automated or outsourced, so it’s best to have backups.

Sports teams try not to bank too much on a single player. Great players are good to have, but they can get injured.

Engineers try to avoid single points of failure when designing systems. Bridges are designed with redundant supports, so they won’t fall if a single support fails. Systems without single points of failure save lives.

Bottom-up systems do not have single points of failure. Baskets can be dropped in such systems. Eggs will be broken, but there are plenty of other baskets to go around.

Why is this good? Because failure happens and it happens more often than success. We live in a trial-and-error universe.

Capitalism is a good example of a bottom-up system. When one business fails, there are others to take its place. It doesn’t take down the whole system. We survived Enron’s collapse, for example. It was not ‘too big to fail’.

Local government is also a good example of a bottom-up system. Local governments can and do fail. Detroit is failing, but it’s not bringing down the whole system. There are thousands more cities, counties and townships. 

School districts don’t yet have a single point of failure. Failing school districts do not bring down the whole system.

Though, school districts have moved toward becoming more top-down over the past few decades as a small group of folks in DC use taxpayer dollars to encourage school districts to deliver on what the folks in DC think is a good education.

This has moved accountability away from parents toward a central point of failure, the ‘common core’ curriculum.

Of course, ‘too big to fail’ is code for ‘single point of failure.’ If it is true that some organization has become ‘too big to fail’ (though I don’t think that was the case in the financial crisis), we should spend more time thinking about how we let a single point of failure crawl into our lives, much the same way the common core curriculum is doing now.

Bottom-up systems are not painless. Failure can be painful. But, bottom-up systems deal with pain and failure better than top-down systems.

Attempting to avoid pain and failure is one reason people advocate for top-down systems. Unfortunately, they soon learn that was a fairy tale.