Bureaucrats v Innovators

Here’s a nice piece from the Wall Street Journal about bottoms-up and top-down recovery efforts in two tornado stricken towns, Tuscaloosa Alabama and Joplin Missouri. Apparently, Tuscaloosa is taking the top-down approach, while Joplin is more bottoms-up.

That means that in Tuscaloosa, city officials see themselves as the center of the redevelopment efforts. They want to redesign and rebuild the city to their liking. They want to be the heroes.

In Joplin, the approach is much more practicable. The city officials are doing their job — issuing permits and such — and then getting out of the way to let private citizens do their job.

Instead of encouraging businesses to rebuild as quickly as possible, Tuscaloosa enforced restrictive zoning rules and building codes that raised costs—prohibitively, in some cases. John Carney, owner of Express Oil Change, which was annihilated by the storm, estimates that the city’s delays and regulation will cost him nearly $100,000. And trying to follow the rules often yielded mountains of red tape, as the city rejected businesses’ proposals one after another.

“It’s just been a hodgepodge,” says Mr. Carney. “We’ve gotten so many mixed signals from the get go. The plans have been ever-changing.” Boulevard Salon owner Tommy Metrock, one of the few business owners to rebuild on Tuscaloosa’s main thoroughfare, McFarland Boulevard, says the restrictions created “chaos” as people put their livelihoods on hold while the city planned.

Joplin took a dramatically different approach. According to interviews with local business owners, right after disaster struck the city council formally and informally rolled back existing regulations, liberally waving licensing and zoning mandates. It even resisted the temptation to make “safe rooms” a condition of rebuilding.

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Bureaucrats and innovators, part two

This is from Peggy Noonan’s column in the Wall Street Journal today:

Then he turned to the rise and fall of various businesses. He has a theory about “why decline happens” at great companies: “The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesman, because they’re the ones who can move the needle on revenues.” So salesmen are put in charge, and product engineers and designers feel demoted: Their efforts are no longer at the white-hot center of the company’s daily life. They “turn off.” IBM and Xerox, Jobs said, faltered in precisely this way. The salesmen who led the companies were smart and eloquent, but “they didn’t know anything about the product.” In the end this can doom a great company, because what consumers want is good products.

I agree.  This reminds me of a few of my previous posts where I write about the secret of good business, bureaucrats vs. innovators and bureaucrats and innovators.

Jobs just uses the term salesman in place of bureaucrat and product engineers in place of innovator.

Salesmen stifle innovation by favoring their own projects and restricting other projects.  That lowers the chance that the company will discover something truly valuable for customers.

I’ve witnessed projects that showed early promise get nixed because they weren’t the saleman’s project.  I’ve also seen projects that show no signs of promise continue to get resources, because it is the salesman’s project.  The salesman can sell others (for awhile) that the project is working, even when all measures suggest it is not.

Bureaucrats and innovators

There are always tensions between these two types of folks.  There are a couple main sources of this tension.

The first source comes from how they view the world.  Bureaucrats focus on intentions and inputs, on how you do things.  Did you do them they way the bureaucrat liked?  Were your intentions good?  Did you put in maximum effort?

Innovators see all that stuff as nonsense.  They’re more interested in what resulted.  Did customers like that product?  Did it increase sales?  Did it make a significant impact? They care less about how it was done.  They don’t care if the person tried hard or not, as long as it was done right.

The second source of tension between bureaucrats and innovators comes from the bureaucrats’ inability to understand that they rely on innovators.  They don’t realize that their livelihoods depend on the results that innovators have produced, past or present (and sometimes, dangerously, future).

Bureaucrats don’t start successful companies.  They come after the company has been established.  They rarely add value to the company.  They live off the income that’s produced by the innovators who started the business.

Bureaucrats in government tax individuals of the income they generate in innovative activities and spend it on government programs (after taking their cut).

All wealth and income was generated by innovators.  As the previous two paragraphs demonstrate, usually that wealth is generated by the innovator first and then consumed by the bureaucrat at some later date.

Bureaucrats who don’t realize they are living off the wealth of past innovations may make the mistake of borrowing from potential future innovations.  That’s when things go bankrupt.