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Relegate the State – A Modest Proposal – 2

Back on track.

Back on track.

Yesterday, I introduced the idea of relegating failed states out of the United States. So, how would the system work?

First, we’d have to develop a definition of what “success” really means. Such a definition might include a number of metrics such as educational attainment, employment, crime rates, justice system, health care, life expectancy and, perhaps, a citizen satisfaction index. It might also include some fairness metrics, aiming to understand how minorities fare within the state. It should also include a freedom index that measures how much citizens can do as they please.

There are probably many other metrics to include in the mix. Ultimately, we roll them all into a complex formula and calculate a number. Frankly, it’s not all that different from calculating a quarterback efficiency rating: a lot of stuff goes in, one number comes out.

We then rank the states and allow them to work on improvements. At the end of a decade, we relegate the bottom five – the least successful states. They are granted their independence and are no longer states within the United States.

The relegated states are, in a sense, liberated as well. They no longer need to worry about regulations emanating from Washington. They’re free to behave as they choose. Of course, they no longer receive subsidies from Washington, either.

The system allows for promotion as well as relegation. At the end of each decade, states that had been relegated could choose to apply for re-admission. We would need to develop rules and procedures to determine if they would be re-admitted and how they would be re-integrated. Fortunately, we have at least 20 years to work on the problem.

Ideally, the system would allow non-traditional states to apply for “promotion” as well. With Alaska and Hawaii, we’ve shown that states do not need to be contiguous. Let’s imagine that Wales wants to become a state within the United States. The city of Aberystwyth, Wales is actually much closer to Washington, D.C. than Honolulu is – so distance shouldn’t be a problem. If they can pass the success metrics, I’d be happy to have Wales join our union.

Like any other system, the devil is in the details. Working out the definition of success will take time. (On the other hand, identifying moocher states is quite easy). Plus, we would have to work out all the mechanisms of entry and exit. We could learn a lot from the experience of the European Union.

Despite the obstacles, I think this is a system that would appeal to many Americans precisely because it promotes American virtues, including:

Competition – states will actually have to compete with each other rather than lolling around on government welfare.

Responsibility and accountability – if you don’t do the work, you don’t get the benefits.

Incentives – states, for the first time, have the incentive to improve themselves.

Lower taxes — if giver states no longer have to support moocher states, we can significantly lower taxes.

Freedom – states are free to choose whether they stay or go. To leave the union, all they have to do is continue to fail.

It’s an all-American scheme that will reduce taxes while promoting the well being of our citizens. Let’s get started.

Relegate the State – A Modest Proposal – 1

You've been relegated.

You’ve been relegated.

I’ve always admired the European system of relegating athletic teams to lower divisions when they don’t perform well. The system creates much better competition while rewarding teams that do well and penalizing teams that fail.

Let’s say you own a soccer team in the “A” league, the highest level of competition. In addition to the “A” league, your country also has a “B” league, a “C” league, etc. Being in the “A” league provides a lot of privileges – greater attendance, television revenue, prestige, and so on. You have a lot of incentive to keep your club in the “A” league.

At the end of each season, however, the bottom three teams in the “A” league are relegated to the “B” league. At the same time, the top three teams in the “B” league are promoted to the “A” league. (The number of teams moving up or down varies from league to league). You have a very strong incentive not to let your team fall to the bottom of the standings.

In the American system, on the other hand, an “A” league team will always stay in the “A” league, no matter how poorly it performs. There’s no chance that my Colorado Rockies will be relegated to the minor leagues even though they stunk up the major leagues last year.

The American system creates a number of perverse incentives. There’s a clear incentive to lose games one year to improve your draft position the next year. Even if you have a crummy team, you still get to share in league-related income, like TV revenues. You don’t get the glory of winning a championship, but the financial penalties of failing are not very stiff. If you’re just in it for the money, there’s no real incentive to win.

The European system seems clearly superior. It creates greater competition, removes perverse incentives, and creates a system of accountability. You win, you’re in. You lose, you’re out. That seems much more American than European.

I’ve been wondering lately if we couldn’t apply a relegation system to the states of the United States. We have 50 states and some are clearly more successful than others. Even the failing states, however, reap huge rewards from remaining in the union.

In our current system, there’s no real incentive for a state to succeed. Even if a state fails, it still gets huge subsidies from other states. In fact, the greater the failure, the greater the subsidy. It’s a perverse incentive: the worse you do, the more you get.

In fact, some states – let’s call them moocher states – get a net benefit of billions of dollars from the federal government. These states pay a relatively small amount in federal taxes but get huge federal subsidies in return. There’s no incentive for such a state to invest locally. It would only reduce the federal subsidy.

The giver states, on the other hand, are penalized for their success. They see their moneys drained away to subsidize the moocher states. This reduces their incentive to continue to succeed.

So, what to do with the moocher states? Let’s set up a league table and rank states on their success. Every ten years, let’s drop the bottom five from the union. That will improve competitiveness, enhance local autonomy, emphasize responsibility and accountability, and erase perverse incentives. What could be more American than that?

Culture – Ambiguity and Anxiety

Dessert! Why wait?

Dessert! Why wait?

The future is uncertain. Eat dessert first.

If you act on this sage advice, you may well come from a culture that’s high on the Uncertainty Avoidance Index (UAI). As Geert and Gert Jan Hofstede have pointed out, the desire to avoid uncertainty varies dramatically from culture to culture and fundamentally affects how people think and behave.

The Hofstedes (father and son) study the influence of national cultures on organizational behavior. They write that there are five basic dimensions of culture: 1) power distance; 2) individualist/ collectivist; 3) masculine/feminine; 4) Uncertainty avoidance; 5) short-term/long-term orientation. I’ve written about the first three previously (herehere, and here). Today, let’s talk about uncertainty avoidance.

The Uncertainty Avoidance Index measures the degree to which a culture believes that what’s different is dangerous. Countries with high UAIs tend to be anxious about ambiguity and the future in general. They often establish laws, behavioral codes, religions, and technologies that reduce ambiguity. Countries with high UAIs include Greece (UAI = 114), Poland (93), Japan (92), France (86), South Korea (85), Israel (81), and Italy (75).

Countries with low UAIs tend to believe that what’s difference is curious. They are generally less rules-oriented and less anxious about the future. They tend to see the world as a relatively benevolent place and to give the benefit of the doubt to new ideas, situations, and people. Countries with low UAIs include the United States (46), India (40), Great Britain (35), Ireland (35), Sweden (29), and Denmark (23).

Uncertainty avoidance expresses itself in many different ways. Very generally speaking, families in affluent countries with high UAIs have fewer children than those in affluent countries with low UA indexes. People in high UAI cultures tend to be more stressed and rules for children are quite firm. People in low UAI culture tend to be more agreeable and more blasé about children’s play habits. They worry less about health and money.

Let’s say you want to market a product internationally, including both low and high UAI countries. Your message will need to be very different. In high UAI countries, consumers will want to know about the purity and cleanliness of the product. They also value expert opinion in their advertising. In low UAI countries, consumers tend to seek convenience rather than purity and prefer humorous ads.

Similarly, consumers in low UAI countries find used cars acceptable and are more likely to be do-it-yourself enthusiasts. They also tend to be early adopters of new technologies. Consumers in high UAI countries tend to prefer new cars and hire experts to do their home repairs. They’re also slower to adopt new technologies.

In the workplace, differences are equally pronounced. High UAI cultures emphasize the importance of rules – even those that are not obeyed.  They also prefer more structure, precision, and formality. Managers should be technical experts and tend to focus on daily operations.

Low UAI cultures have fewer rules in the workplace and value managers who are known more for common sense than technical expertise. Managers focus more on strategy than daily operations. Low UAI workplaces tend to be better at inventing new processes but high UAI workplaces are better at implementing them.

It’s a very interesting mix, especially when you combine uncertainty with masculinity, individualism, and power distance. To learn more, get the Hofstede’s book.

Failed Business Fads: Top 10

lucy kellawayLucy Kellaway has an excellent column in the Financial Times in which she identifies the top 10 failed management fads. (Click here). Somehow the article reminded me of fashion fads, like Nehru jackets and leisure suits, that have come and gone. I sometimes cringe when I see old pictures of myself.

I had to smirk at several of the management fads. I tried not to be my snarky, know-it-all self when the fads were in fashion but somehow I knew that they would never work. Now I have the warm satisfaction of knowing I was right all along.

There were, however, several fads that I actually believed in. In fact, I still do. So I’m distressed that Kellaway has declared them failures and asked us to bid them adieu.

I’m not tipping my hand because I’m interested in your opinions. Which of the fads have you experienced personally? Did any of them do any good at all? Is Kellaway right — are they all dead or do some of them still have legs?

Just leave your thoughts in the comments box below. In the meantime, I’ll be managing my employees by walking around them (or should I be walking them around?)

Should We Work?

What? I still have to work?

What? I still have to work?

Which of these two government policies is most appropriate for the next 50 years?

  1. Strive to reduce unemployment; aim for 4% unemployment.
  2. Eliminate the need to work; aim for 100% unemployment.

It’s a question we’ll need to wrestle with soon. It appears that we’re at the beginning of another great wave of job destruction. The last wave, starting roughly in 1980, eliminated or outsourced blue collar and clerical jobs. We used to have secretaries; now we have word processing software. We used to have factory workers; now we have robots.

The next wave will eliminate white collar jobs. This will happen in two ways:

Type 1 – through advanced communications and software support, a small number of “augmented knowledge workers” can do the work of thousands of traditional knowledge workers.

Type 2 – machines and systems will become smart enough to replace many knowledge workers.

I’ll illustrate with two examples from my life.

Type 1: The MOOCs. Massive Online Open Courses find very talented professors and augment them. With video, web, and online testing support, these professors can literally reach thousands of students. They give great lectures. (You should watch them). Why do we need other professors to cover the same material? A few professors can replace thousands. By the way, this will also accelerate the dominance of English.

Type 2: Automated Essay Grading. I’m rather proud of my ability to read essays and make useful comments that help students think more clearly and communicate more effectively. So what? Within the next few years, we’ll see software systems that can do almost as good a job as I can. OK … maybe they could do it even better since they never get tired. I’ve always thought that this would be a difficult task to automate because it’s “fuzzy”. But computers are mastering fuzzy logic even as we speak.

Much of what we call “knowledge work” is actually easier to automate than essay grading. Any process based on rules is fairly easy to computerize. Deciding which stocks to buy or sell is a good example. It’s just a set of rules. So today, “quants” and high-speed computers dominate much of our stock trading.

Diagnosing an illness may be another good example. Today, as many as 15% of diagnoses made by humans are wrong. But diagnosis is just a rules-based process. Surely, a computer can do better.

Within the next three decades, we may well reach a point where nobody needs to work. So what will we do? Good question. Perhaps we should ask a computer.

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