Making a difference isn’t always romantic

Art Carden says well in his recent EconLog blog entry, You’re Not Pushing Paper Across a Desk. You are saving the world, what I tried to say in these two blog posts here and here.

Here’s Carden’s opener:

In my profession as an economics professor and through churches I have attended, I’ve been around a lot of people who want to “make a difference.” They almost inevitably equate “making a difference” with “working for a government or a non-profit organization like a church that is dedicated, at least in part, to helping poor people.” Rarely do I hear anyone say “I want to work in accounts receivable for a company that makes faucets–or worse, a company that just sells faucets and other sundries.”

But here’s the irony: I suspect that you will probably make a bigger, albeit harder to see, difference in the lives of many by working in accounts receivable for Amalgamated Faucets than you will on your two-week summer mission trip or in your career as a relief worker.

Carden goes on to explain:

Cleanliness, while not necessarily next to Godliness, is at least a few more steps removed from filth and the associated disease transmission. One quick and easy way to improve the lives of the people around you is to make sure you wash your hands carefully after using the restroom. By helping the faucet company run a leaner operation, you can help them expand and improve their faucet offerings. This in turn helps people wash their hands carefully. This in turn reduces disease transmission. Reduced disease transmission means less tragedy and higher productivity. It might not seem like much, but congratulations: by helping Amalgamated Faucet produce more, better, and cheaper faucets, you’re reducing the probability that someone, somewhere gets sick.

So few people recognize these benefits. Carden explains:

Is it romantic? No. Will people write books about you and give you humanitarian achievement awards? No. Will you be recognized in church? Sadly, almost certainly not.

Sadly, yes. Perhaps churches and other organizations should start recognizing these unseen and under appreciated deeds. That may be a new idea for a thread on this blog — how people make a difference by doing something that appears to be boring and regular.

I’m reminded of the story Mitch Albom told in his book, The Five People You Meet in Heaven. I don’t want to give too much away, but one of the people Eddie meets explains to him that his seemingly boring and unromantic job as an amusement park maintenance worker was valuable because he kept untold numbers of kids safe for all those years and he paid particular attention to that safety because of what happened between Eddie and this person.

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Rich people do good

I couldn’t agree more with Richard Branson and this post at Center for Free Enterprise Korea blog.  They write:

In his new book, Screw Business as Usual (Read an excerpt here), Branson suggests one can do good by doing good business, and places his faith in a new generation of entrepreneurs willing to blur the line between business and charity by doing both at the same time.

I wrote a similar opinion in this blog post in August about Warren Buffett:

In my opinion, Buffett and his net worth peers, do much better for the economy by continuing to invest their wealth in productive ventures that make products and services that we value as consumers and provide jobs for millions of people, than by handing it over to politicians to help sustain the bureaucratic, rent-seeking behemoth we know as government.

To understand this, you need to have a firm grasp of a couple basic assumptions.

First, most successful businesses people became successful by creating value for members of society.  Capitalism is a win-win game.  This is something that most people do not understand, even though they participate in it daily.

I buy a cup of coffee from Starbucks because, for whatever reason, I value that cup of coffee more than the $1.65 I give up, otherwise I wouldn’t buy it.  When I buy the coffee, Starbucks and I both come out ahead.  Also, the folks who work at Starbucks come out ahead.  This is how all voluntary trades work.

Starbucks didn’t twist my arm, put a gun to my head or otherwise force me to buy that coffee.  They merely invested in a store, hired some workers and started brewing coffee and hoped enough people would find it worth their while to come buy stuff so that Starbucks investment would be worth it.

Second, successful business people like Branson have a knack for finding ways of investing in and discovering things that members of society value.  In the process we all come out ahead.

A) Members of society get something that makes their lives a little bit better.

B) Workers get jobs.

Folks like Branson grow wealthy and then use that wealth, or lend it to others, to create even more of A) and B) and fund charities as well.

His success is proof he can benefit society.

What have politicians proven?

They have only proven that they can get enough votes to beat their competition in an election.  That doesn’t mean that they know how to invest our money for the benefit of society better than Richard Branson.

Once a politician is elected, they do not become magically endowed with powers to invest for the best benefit of society.  Even the very smart ones with degrees from places like Harvard don’t know.  If you think so, please look at the Harvard course manual and point me to the classes where you learn that stuff, because I want to take them.

Taking money away from folks like Buffett, Gates and Branson to give to folks like Barney Frank, Anthony Weiner and Harry Reid to spend doesn’t help us.  This is self-destructive, like cutting your nose off to spite your face.

Unfortunately, most folks don’t realize that they are cutting off their own nose.  They don’t realize that when they support large government and heavy taxation that they are trading away things like iPhones and Starbucks and the jobs these things produce for government bureaucracies.

When placing bets for the future, I’d rather have those with past successes and with their own money laying the chips on the table.

Bill Gates: Treating symptoms rather than causes

While reading a November Forbes interview with Bill Gates about his philanthropic activities, I had a few thoughts I wish he would consider.

In the interview, Gates explains his charitable efforts in public health and elimination of disease:

The logic was crisp and Bill Gates-friendly. Health = resources ÷ people. And since resources, as Gates noted, are relatively fixed, the answer lay in population control. Thus, vaccines made no sense to him: Why save kids only to consign them to life in overcrowded countries where they risked starving to death or being killed in civil war?

Gates is wrong on two accounts here.  Population control is not the answer and resources are not “relatively fixed.”

The western world enjoys the best standards of living ever on this planet not through population control, but by an abundance of resources that were developed and allocated through innovation and trade.  We’ve discovered how to use resources more effectively to sustain larger populations with a grand standard of living.

The true equation is:  Health = Freedom, innovation and trade.  Seeking ways to improve this equation is THE answer.

More from the interview:

In society after society, he saw, when the mortality rate falls—specifically, below 10 deaths per 1,000 people—the birth rate follows, and population growth stabilizes. “It goes against common sense,” Gates says. Most parents don’t choose to have eight children because they want to have big families, it turns out, but because they know many of their children will die.

“If a mother and father know their child is going to live to adulthood, they start to naturally reduce their population size,” says Melinda.

This doesn’t go against common sense.   It is common sense.  Too bad it took that long for him to figure that out and more unfortunate that he states it as if it’s some unique finding of his.  This is well-known from anyone who have given any thought to their own ancestry.  There are reasons why two to three generations ago the birth rate in my family was much higher than it is today.  One of those reasons is that there was a greater likelihood of death, so parents had more kids to improve their chances of keeping the family going.

What’s especially frustrating here is that the Gates’ only see part of the picture.  Low mortality rate is a result (or output) of something bigger than the availability of vaccines, it’s not an input to it.

Low mortality rates are a result of a wealthy society that derives from freedom, innovation and trading.

It’s no accident that free societies grow wealthy enough where vaccines and other things that save lives, like nourishment, shelter, low crime rates, drug stores, paved roads to get to the drug stores, indoor plumbing, hand soap, sanitary conditions, disinfectants, antibiotics, bandages and clean water aren’t that difficult to come by.

In the U.S., vaccines are usually cheap and plentiful.  Even the poorest families here don’t need a billionaire to give them a vaccine.

Would Bill Gates rather have societies that are dependent on his benevolence for addressing a part of the problem, or societies that could become self-sufficient in that regard and not only would he save lives from disease, but also make available all the other advances that help make our lives better?

I don’t fault the guy for wanting to make a visible impact.  Giving a vaccine to a child that otherwise wouldn’t have had it is good.

But, I think it’s important to recognize that this doesn’t address the root cause of why a child in a third world country has such a difficult time getting medical treatment that is plentiful and basic to children in first world countries.

And, think about what happens when Bill Gates’ money runs out.  Either more philanthropy will have to take its place or the conditions will return, because the root cause has not been addressed.  He’s creating a dependency.

So, what is this root cause?  It’s concentration of political power.

At a young age, I crossed the border into Mexico at Laredo, Texas and was befuddled by the drastic difference in the standards of living on the north and south side of that river.

This was an eye-opening test-and-control.  The difference in the standard of living didn’t derive from the richness of the soil, or the availability of natural resources or differences in climate.  Folks on the north and south side of the Rio Grande have all of this in common.

The only difference between the two was how political power was distributed.  Period.

If Bill Gates wants to make a lasting impact for third world countries, he could do no better than to find ways to de-concentrate political power in those areas.

That is THE answer to improve public health.  It also happens to be the answer to improving education.

This is from the same interview:

It wasn’t dissimilar from the formula that he was developing behind a multibillion-dollar push into education reform. In that case, he based his giving on this formula: Success = teachers ÷ students. Smaller class sizes would result in more attention per student and smarter kids.

But much as Gates loves elegant solutions, his greatest achievements have resulted from perseverance and adaptability. It took three versions to get Windows right, and the Xbox originally lost billions. He’s not afraid to challenge assumptions when they don’t work. And in education he’s had a clear reversal: Class size, it turns out, is not the best determinant of student outcome. Teacher quality is. So after spending a fortune, Gates shifted course.

Here again, Gates stops short of the root cause.  Teacher quality is important.  But, it’s an output, rather than an input.

High teacher quality is an output of a system that decentralizes political power and allows the users of the system to choose the best teachers.

In third world countries, political power is concentrated in the hands of the dictators and warlords who run those countries.  Similarly, in public education, political power is concentrated in the hands of teacher unions, school boards and the so-called “education experts” whose often incorrect preferences for how things should work subjugate the preferences of the people who directly use the system — the parents.

In both health and education, he would do well to look for ways to decentralize the political power bases, instead of reinforcing them.

Giving Thanks

With each passing year, Thanksgiving grows more important to me as I have come to better appreciate the things I should be thankful for.

In 2009 I posted a list of what I was thankful for.  Most of those still apply, but I might switch out the TV show LOST for Fringe and the Walking Dead.

Harvard economist Greg Mankiw suggests we be thankful for the principle of comparative advantage.  I agree and I am.

I’m also thankful for two observations and changes I’ve made in my own life in the last couple of years.

The first change is that I’m less concerned about failing.  It still takes some work, but it has allowed me to try new things.  Some of those things work.  Some don’t.  When one doesn’t work, I shrug my shoulders, try to learn something and move on.  When something does work, it can be amazing.

These things I try range from little things like blog posts here, to the way I say “hi” to others or make business presentations and other things I’ll mention later.

The second change is based on the old “it mattered to that starfish” story.  We’ve all heard this story many times.  A beach with thousands of starfish washed up from a storm.  A child throwing them back into the sea one at a time.  A perplexed adult asking the child why, there’s so many you aren’t possibly making a difference?  The child grabbing a starfish and throwing it back in and replying, I made a difference to that one.

Rather than trying to “change the world” I’ve been looking for ways to make a positive impact on the little world around me — in my family, with my friends and in my community.

A couple years ago a friend died.  He was involved in many charities and organizations.  I didn’t realize how many until I attended his funeral.  The list was impressive and documented.   I wondered if it was perhaps too much.  The thought occurred to me that maybe he should have spent more time taking care of his health than trying to build a legacy, so that he could have been around longer for his family and for (maybe fewer) of those organizations.

That led me to make some good changes and tough choices.  I find myself playing “pickup tag” with my kid and others at the playground. One group of kids dubbed me the “ninja dad” for my modest parkour ability.

I volunteered to coach my kid’s soccer team, which meant that he and nine others got a chance to play soccer, make new friends, learn how to win and lose and build some lasting memories.

I started a 5K run last year to benefit a charity that helps teach people to be self-sufficient and gives participants in the run an opportunity to run and be healthy.

Though I wanted to keep organizing it, I made a tough choice to pass off those duties to others so I could spend more time with my family and coach my kid’s soccer team.  I took a smaller role in the 5K, helping out however I could.  The first year had a good showing.  The number of participants tripled in the second year and looks like it’s on its way to becoming a solid annual fundraiser for the charity and a new tradition for participants.

I’ve been happy with these changes.  Many of these efforts will go undocumented.  It may not appear to others that I will have a substantial legacy.  That’s okay, because some kids on the playground may remember their game of tag with the “ninja dad”.

Happy Thanksgiving!

Reflexes

Our reflexes have been trained.  We no longer question or think about things.  We avoid disagreements and conflicts.

For Earth Day, Oprah had the mother of a green family switch places with the mother of a non-green family.

In one clip the father of the non-green family showed how he left the kitchen faucet running in the background because he “likes the sound” it makes and it relaxes him and helps him focus.

That was met with a reflexive gasp from the audience and from the people in my living room.  I even caught myself dropping my jaw in horror.  Then I started to think.

Why is that such a big deal?  Why did it seem like a big deal to me?

Then I remembered.  When I was in elementary school, I remember the campaign to “save water”.  I had been lectured many times to “not let the faucet run.”

But, as I got to thinking about it I wasn’t clear at all why it was so bad for this guy to let his faucet run.  Clearly, it violated a standard of etiquette that has been brainwashed into our heads.

But Oprah’s show was about how our actions can effect others and I’m not clear on how this man’s action of leaving the faucet running will effect others.

We have plenty of water in most places.  There is no shortage of it.  The guy pays for what he uses.  It’s cheap.  Sure, it takes some energy to clean the water and get it to his house.  The waste of that energy might be a valid argument, but the waste of the water itself?  Water isn’t wasted.  It’s recycled over and over again.

To those in the room that continued to exercise their brainwashed reflex by chastising me for my uncaring attitude, I pointed out to them they also had wasteful habits like leaving lights on rooms that were not in use, taking long showers sometimes more than once a day, watering their lawns, filling their backyard swimming pools, running their Slip-n-Slides in the summer time, visiting water parks, drinking only bottled water, using dishwashers and so forth.

I’m a big environmentalist.  I don’t like to waste resources and I’m frugal so I see no need to create unnecessary expense.  But, who am I to judge this guy for leaving his faucet on?

I’m open to considering why this is bad if anyone has a valid argument.  It might be.  But, none of the people who gasped, including myself, could come up with a reasonable argument for how his habit was any worse than our wasteful habits.

Bah Humbug

In Scroogenomics, George Will and Joel Waldfogel, author of a book by the same name, sides with me on a long running Christmas time debate. 

Gifts that people buy for other people are usually poorly matched to the recipients’ preferences. What the recipients would willingly pay for gifts is usually less than what the givers paid. The measure of the inefficiency of allocating value by gift-giving is the difference between the yield of satisfaction per dollar spent on gifts and the yield per dollar spent on recipients’ own purchases.

Christmas etiquette involves composing one’s face to feign pleasure when unwrapping an unwelcome windfall — say, a sweater of an appalling color and a style that went out of style in the 1940s — and murmuring “Oh, you shouldn’t have” without revealing that you mean exactly that. Price of the sweater: $50. Value to recipient: $0. Actually, less than zero, considering the psychological cost of the forced smile.

I was disappointed that Will did not mention Milton and Rose Friedman’s Four Ways to Spend Money in his column.  The value destruction of gift was covered by the Friedmans long ago as Category II spending. 

The value created with the purchase of the gift isn’t the value perceived by the gift recipient.  Rather, it’s the psychological value gained by the gift giver for satisfying “its-the-thought-that counts.”  Which, is usually unfortunate for the gift recipient.

One of my long held theories is that most problems can be traced back to a breakdown in a feedback mechanism.  With gift giving, we rarely get true feedback from the recipients as to the value of the gift.  We get polite “thank you’s”.  The truth comes later when the recipient doesn’t use the gift, returns or exchanges the gift, sells the gift in a garage sale, donates it to charity, re-gifts it or simply gives it to someone else.  But, the truth rarely makes it back to the giver.

One way to fix the feedback loop is to establish a ground rule before the gift exchange that the gift recipients give honest opinions about the the gifts.  Another ground rule could be that the gift giver would have to take back the gifts that the recipients didn’t like.  I believe these two adjustments to feedback would very quickly convert most gift exchanges to exchanges of money, gift cards or gifts that have more value to the recipients.

Whenever I’ve had this discussion with my family, I start hearing Bah-Humbugs.  They mistake my desire for a better gift exchange, where recipients get more value out of the process (which I thought was the point), for lack of generosity. 

There are times when I think gift giving can provide more value to the recipient than even the cost of the gift.  I’ll write about those in the future.

What is money?

“Would you like ketchup,” asked the man in the Burger King drive thru. 

“No thanks.”  I pulled forward then stopped to put the change in my wallet. 

My son asked, “Why are you stopping?”

“To put money away,” I said.

“What is money?”

Great question!  Nobody knows what gravity is or why the speed of light is the speed of light, yet those things are integral to our lives, much like money.  And, like gravity and the speed of light, so few people understand what money is. 

Money allows me to trade the value I create for my employer for things that I value. 

It’s easy to forget, or never learn, that the ability to trade for things of value is earned by creating value for others.  Many people expect to spend the value others create.  There’s only so much  of that to go around.