Saturday, May 19, 2012

Hell is other people?

L'enfer, c'est les autres, or so Sartre said in his cynical, left-bank way. Is it true? Let's pull just one view of the good life out of the a longer post on Maslow (below) again.


This in turn means that the good society is the one that has its institutional arrangements set up in such a way as to foster, encourage, reward, and produce a maximum of good human relationships and a minimum of bad human relationships. p105

A lot flows from this, if you accept it and think about it. For one thing, it means incentives to cooperate are fundamental to the good life. Few other questions would be more important than how we reward good human relationships.

But that is something we seldom do directly, except in the sense of restricting violence or outright prejudice.

Our market system is very successful at fostering certain kinds of productive relationships, of course. That is its supreme advantage. And as Steven Pinker argues, it may be that the development of trade helped subdue older traditions of cruelty and violence, as systems of mutual positive-sum exchange encourage peacefulness, diligence and honesty. Market pricing works better than older systems of communal sharing or authority tanking.

But we do little or nothing to promote good human relationships in any concrete way as an objective of policy. It is relegated to Oprah-style tv or the self-help industry.

it is not really taught directly in schools. The average high school is riven with cliques and lonely, unpopular kids and mean girls and the other horrors of teen life.

And we take for granted that there will be problems in organizations, and work is often unpleasanrt in terms of interpersonal conflict or subjection.

Take Robert Sutton's book on what he calls assholes in the workplace, which we discussed here. So much of the daily texture of peoples' lives is tied up with workplace relationships. On a day-to-day basis, how you feel when you arrive home from the office makes up much of how you live your life.

And everyone has seen examples of petty tyranny or small-minded power-mongering or self-interest. Sutton estimates at least a third of Americans have had involvement with seriously maladjusted colleagues. These "assholes" may be productive in isolation - but they destroy the culture, demean others, and weaken the organization.

Every organization has its pathologies and rigidities and time servers and screamers. Daily life at the office tends to be a series of political melodramas for many people. There is a surprising amount of tolerance for screamers, so long as they make their sales quota or targets. And every company has people who were promoted simply because they hit their target, not because they have any aptitude for managing others.

To be sure, over time the workplace has likely become more civilized. Intrinsic motivation works better than old-style carrots and sticks. And people do have more intrinsically interesting jobs to do in many fields, at least compared to the monotony of old-style auto assembly lines or agricultural work. Employees are challenged and use their skills, they enjoy the company of colleagues, and they may even have a sense of mission or calling or purpose in what they do.

But we take almost for granted how many jobs are not interesting or enjoyable, or are suffused with fear or humiliation or boredom.

Instead, public discussion largely revolves around the number of jobs, rather than what kind of jobs are created. Perhaps we have the question back to front. If we thought about what kind of jobs were created, the kind of incentives we have, and what people wanted, it might be easier to deal with labor market issues.

If we actually accepted Maslow's definition of the good life above, negative workplaces or organizations would be much more of a problem for society as a whole. The design of jobs and the workplace, and organizational culture in aggregate, would be linked to rewarding good human relationships - at least in part.

We would have some kind of metric to measure interpersonal relations or culture. Some companies do employee surveys, but most do not. And managers are more often promoted by focusing on the bottom line than how they handle relationships.

The best or highest-skilled companies may want to promote healthy work relations because they rely on creativity or cooperation, or because they want to retain staff. But many organizations do not care.

The point is that looking for ways to help people flourish and grow in the workplace is not something to pursue purely for instrumental reasons, because it may ultimately promote efficiency or the bottom line (although it may well do so). If we take the good society or good life seriously, there is a strong case that it IS the bottom line.


Gross National Loneliness


In the same way, 43% of Americans over 18, or 96 million people, are single. Many of them are single by choice, of course. But it may also mean loneliness is a much bigger problem in society than we generally recognize. And we generally leave it to relatives or religious groups to help, if any help is forthcoming at all. It certainly is not considered an objective of policy at national level to reduce loneliness.

Yet it is possible you could make more difference to the good society by just a few institutional innovations thart helped people find company, or made it easier to meet friends in person rather than on facebook, or reduced the number of divorces, than hundreds of billions of dollars of welfare transfers. Our allocation of resources may not make sense. We spend trillions on social security, but do little to help isolated elderly people find others to talk to.

Of course, good human relations is a subjective issue, and perhaps the last thing we would want is for the state or politicians to have an excuse to interfere in important areas of life in a way which might undermine human relationships. But should producing a maximum of good human relationships and minimzing the bad be an objective for society, as Maslow suggests? Surely the answer is yes.

And surely it is more important as the accelerating pace of economic change often disrupts the informal institutions and structures that do promote good relationships. Affluence may itself undermine prudence.

If people's needs are moving up the hierarchy, from material survival needs to problems of abundance, then we have to confront issues like the daily texture of human relationships more directly.


Change of Pace Photo



West Fourteenth St


Friday, May 18, 2012

"Hedonic" versus "eudaimonic" happiness"

This article in the Atlantic argues for a distinction between short-term, feel-good "hedonic" happiness and longer-term life satisfaction, or "eudaimonic" happiness. 

"Eudaimonic" well being, on the other hand, has to do with being satisfied with life in a larger sense; it's about "fulfilling one's potential and having purpose in life," explains Julia Boehm, who studies the relationship between happiness and health at Harvard. How autonomous or self-sustaining you feel, how interested you are in personal growth, the nature of your relationships with other people, whether you have a deep purpose in life, and your degree of self-acceptance are some of the variables that researchers try to measure to get a good idea of whether a person has eudaimonic happiness.
Pursuing more material goods like a bigger car or house instead of personal growth may actially make us more psychologically impoverished, the article says.

This study underlines the divide between what we may think makes us happy and what actually makes us happy - and, by extension, healthy. By getting in touch with your values and finding ways to give back, you might, unwittingly, be serving yourself. Doing things that just make you feel good won't cut it. "If you are living a full life," says Deci, "you will experience a lot of positive affect [emotions]. If you want to know something about living a meaningful life, just looking at subjective well-being is not enough." In other words, finding activities that have intrinsic value, and being a part of them - by doing work you believe in, volunteering, or helping out your community in other ways - is probably much more beneficial.
And it is quite similar to the "self-actualization" that Maslow talks about.


What Maslow gets wrong

I argued in the last post that Maslow does not devote enough attention to what purposes people actually have in reality. In fact, he rejects too much focus on purpose and striving altogether, in favor of "being" or self-expression.

Western culture generally rests on the Judaic-Christian theology. The United States particularly is dominated by the Puritan and pragmatic spirit, which stresses work, struggle and striving, soberness and earnestness, and above all, purposefulness. Like any other social institution, science in general and psychology are not exempt from these cultural climate and atmosphere effects. American psychology, by participation is overpragmatic, over-Puritan, and over-purposeful. p62-3

Sunny view of Human Nature


Instead, he takes a sunny view of human nature. There is little need to develop self-discipline or character, he believes , because people have a natural tendency to want higher needs. Their instincts are basically good.

If our noblest instincts are seen not as checkreins on the horses, but themselves horses, and if our animal needs are seen to be of the same nature as our highest needs, how can a sharp dichotomy between them be sustained? How can we continue to believe that they could come from different sources? Furthermore, if we clearly and fully recognize that these noble and good impulses come into existence and grow potent primarily as a consequence of the prior gratification of the more demanding animal needs, we should certainly speak less exclusively of self-control, inhibition , discipline, and so on and more frequently of spontaneity, gratification and self-choice. There seems to be less opposition than we thought between the stern voice of duty and the gay call to pleasure. At the highest level of living (i.e. of Being) duty is pleasure, one's "work" is loved, and there is no difference between working and vacationing. p60

Indeed, "lower" needs are weak and no threat to fulfilment of higher needs:

In the human being the preponderance of the evidence indicates that there are biological and heriditary determinants, but that in most individuals they are quite weak and easily overwhelmed by learned cultural forces. p90

There is no conflict or puzzles or cultural difficulties with our best impulses, either. Higher needs are innate and observable:

The recognition that humanity's best impulses are appreciably intrinsic, rather than fortuitous and relative, must have tremendous implications for value theory. It means, for one thing that it is no longer either necessary or desirable to deduce values by logic or to try to read them off from authorities or revelations. All we need to do, apparently, is to observe and research. Human nature carries within itself the answer to the questions: How can I be good; how can I be happy; how can I be fruitful? The organism tells us what it needs (and therefore what it values) by sickening when deprived of these values and by growing when gratified. p60
In all these ways we are a long way from older conceptions of virtue or character.

But he thinks there is still development and change in human nature over time (which is a little hard to reconcile with his suggestion that the higher needs are intrinsic, or that all we need to do is simply observe human nature):

We may agree with Aristotle when he assumed that the good life consisted in living in accordance with the true nature of man, but we must add that he simply did not know enough about the true nature of the human being. All Aristotle could do in delineating this essential nature, or inherent design of human nature, was to look about him, to study people, to observe what they were like. But if one observes human beings only on the surface, which was all Aristotle could do, one must ultimately wind up with what amounts to a static conception of human nature. The only thing Aristotle could do was to build a picture of the good man in his own culture and in that particular period of time. You remember that in his conception of the good life, Aristotle accepted completely the fact of slavery and made the fatal mistake of assuming that just because a man was a slave that this was his essential nature and therefore it was good for him to be a slave. p115, footnote

Perhaps human nature just hasn't had the chance to fully express itself yet. Of course this is all very midcentury liberal as well.

People will need steadily less "coping" behavior and more "expressive" behavior, he says:

The distinction between the expressive (non-instrumental) and the coping (instrumental, adaptive, functional, purposive) components of behavior has not yet been properly exploited as a basis for value psychology. p61.

All trees need sunlight and all human beings need love, and yet, once satiated with these elementary necessities, each tree and each human being proceeds to develop in its own style, uniquely, using these universal necessities to its own private purposes. p66

Also, coping behavior tends to die out unless rewarded; expression often persists without reward or reinforcement. One is gratification-bent; the other is not. p67

In fact, self-actualization sounds in his view at least a little like Buddhist ideas about enlightenment.

In the good life lived by the healhy person, thinking, like perceiving, may be spontaneous and passive reception or production, an unmotivated, effortless, happy expression of the nature and existence of the organism, a letting things happen rather than making them happen, as much an example of being as the perfume of a flower or the apples on a tree. p72

This just seems too passive, although there is a lot to be said for spontaniety. And admittedly Keynes, in his Bloomsbury way, was also highly critical of over-purposefulness in the essay which we looked at right at the beginning of this blog.

Interestingly, this is not a left-right difference. Indeed, the left can be extremely purposive, with its sense of an arrow in history. And radicals can emphasize struggle over "being", Recall that Sarah Ahmed, in her book The Promise of Happinesswhich we discussed here, rejected happiness in favor of the struggle of reform of society, of the "perhaps".

Maslow believes people will always have some degree of dissatisfaction -an anticipation of what we would later call the hedonic treadmill:

Finally, we mention again the little-understood facts that human beings seem almost never to be permanently satisfied or content and - deeply connected with this - that people tend to get used to their blessings, to forget them, to take them for granted, even to cease to value them. For many people - we don't know how many - even the highest pleasures may grow stale and lose their newness, and it may be necessary to experience loss of their blessings in order to be able to appreciate them again. p40

He does not fully develop what this might mean for "self-actualization" or the good life.


The Good Life and Relationships


But there are some things I do like in Maslow's discussion of higher needs. Another way to think about the good life is through relationships:

Any ultimate analysis of human interpersonal relationships (e.g friendship, marriage, etc.) will show 1) that basic needs can be satisfied only interpersonally and 2) that the satisfactions of these needs are precisely those we have already spoken of as the basic therapeutic medicines, namely, the giving of safety, love, belongingness, feeling of worth, and self-esteem. p97

This in turn means that the good society is the one that has its institutional arrangements set up in such a way as to foster, encourage, reward, and produce a maximum of good human relationships and a minimum of bad human relationships. p105

But self-actualization is also about resisting social pressure and other people's expectations:

In trying to figure out why all this was so, it seemed to me that much boiled down to the relative absence of fear in my subjects. They were certainly less enculturated; that is, they seemed less afraid of what other people would say or demand or laugh at. It was this approval and acceptance of their deeper selves which made ir possible to perceive bravely the real nature of the world and also made their behavior more spontaneous (less controlled, less inhibited, less planned, less "willed" and designed.) They were less afraid of their own thoughts even when they were "nutty" or silly or crazy.They were less afraid of being laughed at or of being disapproved of. p162

And it is about being able to see the world afresh for oneself:

Very frequently, it appeared that an essential aspect of self-actualizing creativeness was a special kind of perceptiveness that is exemplified by the child in the fable who saw that the king had no clothes on. (This, too, contradicts the notion of creativity as products.) These people can see the fresh, the raw, the concrete, the ideographic, as well as the generic, the abstract, the rubricized, the categorized and classified. Consequently, they live far more in the real world of nature than in the verbalized world of concepts, abstractions, expectations, beliefs and stereotypes that most people confuse with the real world. This is well expressed in Roger's phrase "openness to experience." p 160

The interesting thing here is that although Maslow says people will become idiosyncratically more themselves, in many different ways, he still has a very definite idea of what people WILL become. There is an obvious tension here. He still believes in some kind of teleology - but cannot admit it.

And perhaps there is a deeper current of liberal thought that believes that once barriers and obstacles are removed, the innate goodness of human nature will reveal itself. And thus there is no real need to think more about purpose or the actual questions about how higher societies will be realized in practice.

It is the same kind of view that believed once the evils of capitalism are removed, real existing socialism will spring into being. Instead, of course, in most cases you got the terror and the show trials.

After all, some people's highest talents may be to invade Poland or mug people. We cannot assume that all desires for esteem or self-actualization are automatically, by definition, benign. We don't necessarily want everyone to self-realize in their own way. We do require some idea of more general human flourishing, and incentives to co-operate.

All the same, Maslow's assumptions (or confusion) about human nature should not detract from the validity of his basic idea, that of shfiting human values and demands as we rise up the hierarchy of needs. There is no necessary link between the idea of the hierarchy of needs and a specific positive view of human nature, or a specific liberal sensibility.

What we can stipulate, though, is that just satisfying basic needs is not enough to guarantee human nature will naturally incline towards utopia. But that only means we have to think even more critically about what needs actually are, and how to structure institutions to incentivize cooperation and happiness.


Thursday, May 17, 2012

One mistake Maslow makes

In the last post we came across Maslow's definiton of the good society:

The good or healthy society would then be defined as one that permitted people's highest purposes to emerge by satisfying all their basic needs. p31

This in many ways encapsulates the liberal position, and is a fine example of high-minded mid-century thinking.

But it is essentially a negative conception, about negative liberty. Maslow in essence says society has to take care of basic needs and then get out of the way, because people's purposes are too idiosyncratic.

And this is the problem. There is no sense that society might help people's purposes to emerge, or encourage or promote or structure them. It is about removing obstacles - and then you are on your own.

And so we get what we so often see these days. People end up with no purpose, and end up with anomie, drift, addiction or waste. Or they become primarily motivated by intermediate aims, like money income. Or they get stuck at lower levels of the hierarchy of needs, working harder for bigger McMansions which makes them feel respected by the neighbors.

Some of the institutions that have given people a sense of purpose or meaning to their lives, like religion or the traditional family, are in fact eroded by modern secularism.

And when people DO have unique talents, it is often hard to realize them. Our economy needs a lot more accounting technicians (at least for now) than novelists or musicians or athletes. In fact, we've set things up so that only a few individuals can thrive in winner-take-all spheres like acting, where the number of people with mediocre highest talents vastly outnumbers the top tenth of a percent who have world-class talent. The ability to sell your highest talents may count for too much. Many of our highest talents just are not very marketable, or too risky, or too idiosyncratic, to be saleable.

We have relegated purpose to an afterthought in our economic system.

And politics turns into gridlock based on competing ideas about fairness and incentives, because we don't think in any deeper way about what the incentives for flourishing are or ought to be.

If people realize their highest abilities, not only is that more likely to make them happy, but it is likely to make for a more productive, happier, peaceful society too.

The market is a wonderful thing on the whole on lower rungs of the hierarchy. But you can't so easily sell love, friendship, self respect, or fully realizing your talents. Those are not on the shelves at Wal-mart. The market, as I've said so often, is a tool which is extraordinarily good at incentvizing fulfilling some of our needs - but not all. And increasingly not the needs we care most about.

But "from each according to their abilities, to each according to their needs", the socialist ideal, has spectactulalry failed as well and has little or no legitimacy any more.

So here is my definition of the good society; one that encourages people's highest abilities and purposes to emerge, by structures and institutions that facilitiate human flourishing


Wednesday, May 16, 2012

Greeks apologize to EU with huge horse

Left outside the ECB in the middle of the night. No harm in wheeling it into the vaults? (h/t Instapundit)


Turbulence in Europe

Sigh. It's risk-on again in Europe, as Greeks pull their money out of local banks. It's not a full-scale bank run yet, but the situation is deteriorating.

G told me this morning she's fed up with the Europeans and wish they'd sort themselves out. We have been thinking of going to Italy or Spain on vacation later this summer, but have held off. There is too much risk of public sector strikes and transportation disruptions. It wouldn't be much fun to have a holiday spoiled by an air traffic controllers' strike.

Spanish and Italian bond yields are still climbing, and the political appetite for austerity is fading. The European political class seems to be running out of options.




Learning to change

We were just discussing online education in the last post. And this morning in the NYT Thomas Friedman talks about the education revolution.

Andrew Ng is a Stanford Professor the founder of Coursera, a new online education company that is offering certificates taught by professors from the leading schoools .


I normally teach 400 students,” Ng explained, but last semester he taught 100,000 in an online course on machine learning. “To reach that many students before,” he said, “I would have had to teach my normal Stanford class for 250 years.”

That is one heck of a leap in productivity.

Of course, it ought to mean that teachers have more time to do the higher value activity like small classes or one-to-one discussion. But it may also mean something like the kind of process Clayton Christensen describes in other industries , as we were discussing in a recent post. A relatively inferior product appears at the bottom end of a market, and then slowly improves and chews its way up through the rest of the market.

Serious change in third level education is probably still at least ten years off, however. This is going to follow the hype cycle of expecting too much too soon. For comparison, it ought to have been easier to transform academic publishing, with its absurdly high prices for journals. But the institutional momentum of existing reputations and brands is very strong. Most serious researchers still want to publish in the top referreed journals in their field.

The soaring cost of college education will be an immense force for change. But until there is solid evidence over many years that a Coursera certificate counts for something in the labor market, people will still choose to go to four year colleges if they can. It takes much longer to alter human institutions than to create technological possibilities.

And it could actually reinforce the position of the top schools. Recall the way technology meant that financial markets actually consolidated into the key centres of New York, London, and Tokyo at the expense of many small markets. If everyone has access to most of the same information, every last little edge that you get from being near the center of the action becomes ever more important.

However, it also means the basic content of the best education will be vastly more widely available as well. The courses, exams and access to the university library could be just as easily offered in a town in rural Kenya as Palo Alto.


Abraham Maslow and the Hierarchy of Needs

One fundamental idea underlying this blog is that people's needs evolve over time, especially as society grows wealthier and people's material needs are increasingly met.

The most famous expression of this idea is Maslow's hierarchy of needs. I've mentioned it briefly before here. It is often found in management or marketing or psychology textbooks, but rarely if ever in economics texts. And even then it is usually covered in a few paragraphs, with a chart of the pyramid of needs - like in this Wikipedia entry. For such a potentially profound idea, it generally gets cursory treatment.

On one level, it is one of those ideas which are so briliant they are obvious once you think about it. Maybe that explains why we don't devote more attention to potential implications.

But I wanted to go back and read about it in more detail, and think about potential objections. It is such an important idea it deserves more sustained attention. So I dug out his original book, Motivation and Personality, which is now out of print and hard to find. I found one tattered copy in the NYPL.

Maslow's idea is that people first need to satisfy basic physiological needs - hunger, thirst, shelter, or sex. Then once these are largely met they turn more attention to other needs at higher levels of the pyramid.

Above basic needs comes safety, and then emotional/love/ belonging needs, then esteem/ respect and finally "self-actualization" needs.

This highest level of need recalls Aquinas or Aristotle. Maslow says:

What human beings can be, they must be. They must be true to their own nature. This need we may call self-actualization. .. It refers to people's desire for self-fulfillment, namely the tendency for them to become actualized in what they are potentially. This tendency may be phrased as the desire to become more and more what one idiosyncratically is, to become everything that one is capable of becoming. p22

In other words, there is no one right end.

At this level, individual differences are greatest. However, the common feature of the needs for self-actualization is that their emergence usually rests on some prior satisfaction of the physiological, safety, love and self-esteem needs. p22

The hierarchy is not rigid. There can be exceptions, for instance.

We have spoken so far as if this hierarchy were a fixed order, but actually it is not nearly so rigid as we may have implied. It is true that most of the people with whom we have worked have seemed to have these basic needs in about the order that has been indicated. However, there have been a number of exceptions. p26. [eg martyrs, needs that are undervalued because always satisfied before}

And it is not as if all needs need to be satisfied at one level before turning attention to higher needs.


This statement might give the false impression that a need must be satisfied 100% before the next need emerges. In actual fact, most members of our society who are normal are partially satisfied in all their basic needs and partially unsatisfied in all their basic needs at the same time. A more realistic description of the hierarchy would be in terms of decreasing percentages of satisfaction as we go up the hierarchy of prepotency. For instance, to assign arbitrary figures for the sake of illustration, it is as if the average citizen is satisfied perhaps 85% in physiological needs, 70% in safety needs, 50% in love needs, 40% in self-esteem needs, and 10% in self-actualization needs. p27-28

Importantly, however, satisfied needs do not tend to produce much motivational energy in people. They are taken for granted.

If we are interested in what actually motivates us, and not in what has, will or might motivate us, then a satisfied need is not a motivator. It must be considered for all practical purposes simply not to exist, to have disappeared. p30
The idea also leads to his definition of the good society:

The good or healthy society would then be defined as one that permitted people's highest purposes to emerge by satisfying all their basic needs. p31

There is another very important consequence of this idea, which is worth quoting at length. As needs are progressively satisfied, he says, human interests and values shift as well.


The most basic consequence of satiation of any need is that this need is submerged and a new and higher need emerges. .. This exchange of old satisfiers for new ones involves many tertiary consequences. Thus there are changes in interests. That is, certain phenomena become interesting for the first time and old phenomena become boring, or even repulsive. That is the same as saying there is a change in human values. In general, there tend to be: 1) overestimation of the satisfiers of the most powerful of the ungratified needs, 2) underestimation of satisfiers of the less powerful of the ungratified needs (and the strength of those needs) and 3) underestimationand even devaluation of the satisfiers of the needs already gratified (and of the strength of those needs). This shift in values involves, as a dependent phenomenon, reconstruction in philosophy of the future, of the Utopia, of the heaven andhell, of the good life, and of the unconscious wish-fulfillment state of the individual in a crudely predictable direction. In other words, we tend to take for granted the blessings we already have, especially if we don't have to work or struggle for them. p33


He does not provide any evidence or historical accounts here, and at least for now I am not aware of anyone else who has looked at history in this way. But it does make sense as a way to think about politics or recent history. Now that basic physiological needs are satisfied and security/defense is taken care of in most countries, life is no longer nasty, brutish and short in a Hobbesian way. The need for love and belonging is generally met within families and relationships and small groups. So national politics has increasingly revolved around issues of rights and equal respect and esteem.

The 19th and 20th centuries could be seen as about demands for national self-esteem, and the period since the 1960s which has seen the "rights revolutions" seeking racial, gender or sexual orientation equality could be seen as demands for personal self-esteem.

Of course, the need for self-actualization has been increasingly met by more education and more challenging jobs, together with more choice about which careers or goals to pursue.

It is no surprise, on this view, that college education has soared in expense in the United States. Self-development is more in demand than ever. Part of that is vocational competition, of course, as more jobs require credentials. But part of it must be the rotation in demand that one would expect to see if people find other needs are being satisfied more efficiently and cheaply. People devote more time and effort and resources to higher needs.


Our economy is still focused on the fading needs on the lower rungs


The trouble is our economic system is still largely focused on the lower rungs of the hierarchy - earning income to pay for food, shelter and basic transportation and healthcare. It is about putting bread on the table. Our system is optimized for dealing with scarcity of material goods.

So it should be no surprise the economy is getting into trouble if we get more and more efficient at satisfying the more basic needs, when actual demand and human needs are moving up the hierarchy to levels where we just don't have the right institutions and structures to deal with them.

Let's just assume that someday, soon, all physiological and safety needs can easily be met. We've talked about this many times on this blog, most recently here. Given that even the poorest people in the US often have cellphones and flat-screen tvs, let alone refrigerators and food stamps, that is not unrealistic.

That means it is the needs for love/belonging, esteem and self-actualization which will need to lead the economy. In other words, human flourishing.

And that's the problem with the assumption that some entrepreneur in a garage will always invent the next big thing, and some huge new industry will emerge which will employ millions. We increasingly want things which are less about selling stuff and more about selling self-development.

Won't that just mean more and more demand for new forms of education, which will employ many more people? It could work out that way. The highest form of learning is always in essence apprenticeship, emulating by osmosis some master.

But most basic forms of education could increasingly be automated, just the same as many other industries. Stanford and MIT are putting courses online, and it could well be that educational software will finally realize its promise. A student can go at their own pace, watch videos of superb teachers when necessary, and answer enough tests for the program to identify weaknesses and help fix them.

In other words, we'll still have a problem with running society based on labor market income in a few years.

I have much more to say about Maslow, but we can sum up this post in a line; human needs tend to change as we go up the hierarchy of needs, but our economic system hasn't kept up with that.



Tuesday, May 15, 2012

When Giants Fail: Christensen and measuring the wrong thing.

There's a lovely article in last week's New Yorker (firewall) about Clayton Christensen, the famous Harvard business theorist. Best known for his 'Innovator's dilemma' idea, he looks at how lower quality products like minimill rebar in the steel industry repeatedly disrupt established companies.

I hadn't seen before (or had forgotten) his explanation of why established companies often let it happen. It was because managers had come to measure success in the wrong way. "Success was now measured not in numbers of dollars but in ratios", he says. It was about IRR or RoI or margins.

So companies had a tendency to exit low-margin businesses, even if the absolute value of profits was high. And they could not see it was a problem, even as low quality products, like Toyota Cars and transistor radios, steadily got better and devoured their businesses from below.

That was why he called it a church: it was an encompassing orthodoxy that made it impossible for believers to see it was wrong.
This reminds me of the more general problems with measuring the economy in terms of GDP, as we discussed here. But it is a more general problem than national income accounts. We've over applied and overused income as a concept, at the expense of assets, contingent risks and liabilities, and other aspects of the good life.