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The Age of Innocence
By David Books,New York Times, 5/17/12
The people who pioneered democracy in Europe and the United States had a low but pretty accurate view of human nature. They knew that if we get the chance, most of us will try to get something for nothing. They knew that people generally prize short-term goodies over long-term prosperity. So, in centuries past, the democratic pioneers built a series of checks to make sure their nations wouldn’t be ruined by their own frailties.
The American founders did this by decentralizing power. They built checks and balances to frustrate and detain the popular will. They also dispersed power to encourage active citizenship, hoping that as people became more involved in local government, they would develop a sense of restraint and responsibility.
In Europe, by contrast, authority was centralized. Power was held by small coteries of administrators and statesmen, many of whom had attended the same elite academies where they were supposed to learn the art and responsibilities of stewardship. Under the parliamentary system, voters didn’t even get to elect their leaders directly. They voted for parties, and party elders selected the ones who would actually form the government, often through secret means.
Though the forms were different, the democracies in Europe and the United States were based on a similar carefully balanced view of human nature: People are naturally selfish and need watching. But democratic self-government is possible because we’re smart enough to design structures to police that selfishness.
James Madison put it well: “As there is a degree of depravity in mankind, which requires a certain degree of circumspection and distrust: So there are other qualities in human nature, which justify a certain portion of esteem and confidence.”
But, over the years, this balanced wisdom was lost. Leaders today do not believe their job is to restrain popular will. Their job is to flatter and satisfy it. A gigantic polling apparatus has developed to help leaders anticipate and respond to popular whims. Democratic politicians adopt the mind-set of marketing executives. Give the customer what he wants. The customer is always right.
Having lost a sense of their own frailty, many voters have come to regard their desires as entitlements. They become incensed when their leaders are not responsive to their needs. Like any normal set of human beings, they command their politicians to give them benefits without asking them to pay.
The consequences of this shift are now obvious. In Europe and America, governments have made promises they can’t afford to fulfill. At the same time, the decision-making machinery is breaking down. American and European capitals still have the structures inherited from the past, but without the self-restraining ethos that made them function.
The American decentralized system of checks and balances has transmogrified into a fragmented system that scatters responsibility. Congress is capable of passing laws that give people benefits with borrowed money, but it gridlocks when it tries to impose self-restraint.
The Obama campaign issues its famous “Julia” ad, which perfectly embodies the vision of government as a national Sugar Daddy, delivering free money and goodies up and down the life cycle. The Citizens United case gives well-financed interests tremendous power to preserve or acquire tax breaks and regulatory deals. American senior citizens receive health benefits that cost many times more than the contributions they put into the system.
In Europe, workers across the Continent want great lifestyles without long work hours. They want dynamic capitalism but also personal security. European welfare states go broke trying to deliver these impossibilities.
The European ruling classes once had their power checked through daily contact with the tumble of national politics. But now those ruling classes have built a technocratic apparatus, the European Union, operating far above popular scrutiny. Decisions that reshape the destinies of families and nations are being made at some mysterious, transnational level. Few Europeans can tell who is making decisions or who is to blame if they go wrong, so, of course, they feel powerless and distrustful.
Western democratic systems were based on a balance between self-doubt and self-confidence. They worked because there were structures that protected the voters from themselves and the rulers from themselves. Once people lost a sense of their own weakness, the self-doubt went away and the chastening structures were overwhelmed. It became madness to restrain your own desires because surely your rivals over yonder would not be restraining theirs.
This is one of the reasons why Europe and the United States are facing debt crises and political dysfunction at the same time. People used to believe that human depravity was self-evident and democratic self-government was fragile. Now they think depravity is nonexistent and they take self-government for granted.
Neither the United States nor the European model will work again until we rediscover and acknowledge our own natural weaknesses and learn to police rather than lionize our impulses.
Jon: “I like the strategy your doing: Instead of having to find reasons to criticize Obama for things he’s done right, you find ways to claim those achievements as your own.
I know how we can really tie all this up. A few years ago, Mitt shared this touching childhood memory.”
Are Our Adults Learning?
By David Brooks, New York Times, 4/26/12
In 2009, we had a big debate about whether to pass a stimulus package. Many esteemed and/or Nobel Prize-winning economists like Joseph Stiglitz, Larry Summers and Christina Romer argued that it would help lift the economy out of recession. Many other esteemed and/or Nobel Prize-winning economists like Robert Barro, Edward Prescott and James Buchanan argued that positive effects would be small and the package wouldn’t be worth the long-term cost.
We went ahead and spent the roughly $800 billion. What have we learned?
For certain, nothing. The economists who supported the stimulus now argue the economy would have been worse off without it. Those who opposed it argue that the results have been meager. It’s hard to think of anybody whose mind has been changed by what happened.
This is not entirely surprising. Nearly 80 years later, it’s hard to know if the New Deal did much to end the Great Depression. Still, it would be nice if we could learn from experience. To avoid national catastrophe, we’re going to have to figure out how to control health care costs, improve schools and do other things.
Jim Manzi has spent his career helping businesses learn from experience — first at AT&T Laboratories, then as a consultant with Strategic Planning Associates and then as founder of Applied Predictive Technologies, a successful software firm.
In his new book, “Uncontrolled,” Manzi notes that many experts tackle policy problems by creating big pattern-finding models and then running simulations to see how proposals will work. That’s essentially what the proponents and opponents of the stimulus package did.
The problem is that no model can capture enough of the world’s complexity to yield definitive conclusions or make nonobvious predictions. A lot depends on what assumptions you build into them.
In “Uncontrolled,” Manzi looks at two celebrated model-building exercises. Larry Bartels of Princeton produced a model finding that presidential policies exercise the single biggest influence on income distribution. The authors of “Freakonomics” produced a model showing legalized abortions subsequently reduced crime rates.
Manzi argues that by slightly tweaking the technical assumptions in these models, you eliminate the headline-grabbing results. He also points out that regression models that try to explain crime rates have not become more accurate over the past 30 years. All this model-building hasn’t even helped us get better at understanding the problem.
What you really need to achieve sustained learning, Manzi argues, is controlled experiments. Try something out. Compare the results against a control group. Build up an information feedback loop. This is how businesses learn. By 2000, the credit card company Capital One was running 60,000 randomized tests a year — trying out different innovations and strategies. Google ran about 12,000 randomized experiments in 2009 alone.
These randomized tests actually do vindicate or disprove theories. For example, a few years ago, one experiment suggested that if you give people too many choices they get overwhelmed and experience less satisfaction. But researchers conducted dozens more experiments, trying to replicate the phenomenon. They couldn’t.
Businesses conduct hundreds of thousands of randomized trials each year. Pharmaceutical companies conduct thousands more. But government? Hardly any. Government agencies conduct only a smattering of controlled experiments to test policies in the justice system, education, welfare and so on.
Why doesn’t government want to learn? First, there’s no infrastructure. There are few agencies designed to supervise such experiments. Second, there is no way to conduct a randomized experiment to test big economywide policies like the stimulus package.
Finally, the general lesson of randomized experiments is that the vast majority of new proposals do not work, and those that do work only do so to a limited extent and only under certain circumstances. This is true in business and government. Politicians are not inclined to set up rigorous testing methods showing that their favorite ideas don’t work.
Manzi wants to infuse government with a culture of experimentation. Set up an F.D.A.-like agency to institute thousands of randomized testing experiments throughout government. Decentralize policy experimentation as much as possible to encourage maximum variation.
His tour through the history of government learning is sobering, suggesting there may be a growing policy gap. The world is changing fast, producing enormous benefits and problems. Our ability to understand these problems is slow. Social policies designed to address them usually fail and almost always produce limited results. Most problems have too many interlocking causes to be explicable through modeling.
Still, things don’t have to be this bad. The first step to wisdom is admitting how little we know and constructing a trial-and-error process on the basis of our own ignorance. Inject controlled experiments throughout government. Feel your way forward. Fail less badly every day.
The Creative Monopoly
By David Brooks, New York Times, 4/23/12
As a young man, Peter Thiel competed to get into Stanford. Then he competed to get into Stanford Law School. Then he competed to become a clerk for a federal judge. Thiel won all those competitions. But then he competed to get a Supreme Court clerkship.
Thiel lost that one. So instead of being a clerk, he went out and founded PayPal. Then he became an early investor in Facebook and many other celebrated technology firms. Somebody later asked him. “So, aren’t you glad you didn’t get that Supreme Court clerkship?”
The question got Thiel thinking. His thoughts are now incorporated into a course he is teaching in the Stanford Computer Science Department. (A student named Blake Masters posted outstanding notes online, and Thiel has confirmed their accuracy.)
One of his core points is that we tend to confuse capitalism with competition. We tend to think that whoever competes best comes out ahead. In the race to be more competitive, we sometimes confuse what is hard with what is valuable. The intensity of competition becomes a proxy for value.
In fact, Thiel argues, we often shouldn’t seek to be really good competitors. We should seek to be really good monopolists. Instead of being slightly better than everybody else in a crowded and established field, it’s often more valuable to create a new market and totally dominate it. The profit margins are much bigger, and the value to society is often bigger, too.
Now to be clear: When Thiel is talking about a “monopoly,” he isn’t talking about the illegal eliminate-your-rivals kind. He’s talking about doing something so creative that you establish a distinct market, niche and identity. You’ve established a creative monopoly and everybody has to come to you if they want that service, at least for a time.
His lecture points to a provocative possibility: that the competitive spirit capitalism engenders can sometimes inhibit the creativity it requires.
Think about the traits that creative people possess. Creative people don’t follow the crowds; they seek out the blank spots on the map. Creative people wander through faraway and forgotten traditions and then integrate marginal perspectives back to the mainstream. Instead of being fastest around the tracks everybody knows, creative people move adaptively through wildernesses nobody knows.
Now think about the competitive environment that confronts the most fortunate people today and how it undermines those mind-sets.
First, students have to jump through ever-more demanding, preassigned academic hoops. Instead of developing a passion for one subject, they’re rewarded for becoming professional students, getting great grades across all subjects, regardless of their intrinsic interests. Instead of wandering across strange domains, they have to prudentially apportion their time, making productive use of each hour.
Then they move into a ranking system in which the most competitive college, program and employment opportunity is deemed to be the best. There is a status funnel pointing to the most competitive colleges and banks and companies, regardless of their appropriateness.
Then they move into businesses in which the main point is to beat the competition, in which the competitive juices take control and gradually obliterate other goals. I see this in politics all the time. Candidates enter politics wanting to be authentic and change things. But once the candidates enter the campaign, they stop focusing on how to be change-agents. They and their staff spend all their time focusing on beating the other guy. They hone the skills of one-upsmanship. They get engulfed in a tit-for-tat competition to win the news cycle. Instead of being new and authentic, they become artificial mirror opposites of their opponents. Instead of providing the value voters want — change — they become canned tacticians, hoping to eke out a slight win over the other side.
Competition has trumped value-creation. In this and other ways, the competitive arena undermines innovation.
You know somebody has been sucked into the competitive myopia when they start using sports or war metaphors. Sports and war are competitive enterprises. If somebody hits three home runs against you in the top of the inning, your job is to go hit four home runs in the bottom of the inning.
But business, politics, intellectual life and most other realms are not like that. In most realms, if somebody hits three home runs against you in one inning, you have the option of picking up your equipment and inventing a different game. You don’t have to compete; you can invent.
We live in a culture that nurtures competitive skills. And they are necessary: discipline, rigor and reliability. But it’s probably a good idea to try to supplement them with the skills of the creative monopolist: alertness, independence and the ability to reclaim forgotten traditions.
Everybody worries about American competitiveness. That may be the wrong problem. The future of the country will probably be determined by how well Americans can succeed at being monopolists.
