Category Archives: Practitioner’s Perspective

The New Math of Mitt Romney & Some Progressives

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One of the things that struck me about Mitt Romney’s debate performance was that part of his tone sounded awfully familiar. I couldn’t place it for a couple of days. And then this weekend, while reading some lefty blogs, it hit me: it sounded a lot like some progressives.

When Romney talks about the budget and healthcare, he uses New Math. His budget was nothing but sunshine and kittens – no details as to how it would add up, just a list of happy outcomes. And when he gets called on it, he just doesn’t care. It will all add up, he insists – and if you say it won’t, you’re lying.

When some progressives talk about creating a just economy, it feels a lot like Romney. All we need to do is kick evil corporate butt and we’ll end up with an economy where workers and communities are happy & everyone will have plenty of kittens and sunshine. How exactly? Well, you know, from all that great human capital we’ll unleash. And because they’ll be no more evil corporations.

Of course, there are differences between Romney and these kind of progressives. Romney speaks with the voice of someone who’s used to having power – who’s used to bullshitting his way past clients’ concerns and delegating the ugly details to subordinates. These progressives speak with the voice of someone who’s used to not having power – who assumes that because we are morally pure it’ll all work out combined with the feeling that getting into the inner workings of the economy is… icky (and scary).

But both speak from a place of absolute conviction combined with absolutely no sense of responsibility.

If my framework is going to be successful, it has to help progressives avoid getting caught in this morass of New Math. If we’re going to talk about taking power away from big corporations and putting it back in the hands of ordinary people, the story can’t end there. Romney can get away with his sums not adding up – either way he ends up with $200 million. We aren’t so lucky.

Values-based vs. Market-based Approaches to the Economy

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Time for a little more “stumbling towards.”
(see blog subtitle)

As we saw last week, in Krugman’s world you start by assuming that the market basically works and then you deal with exceptions — “market failures” or “negative externalities.

What if we stopped bowing down to the Market Gods? What if we stopped saying the sun revolves around the earth except on Mondays, Tuesdays, Wednesdays…?

What if we asked instead, is this jumbled mess of a system we call our economy working for us? If we think it isn’t, what values do we think it should support that it currently isn’t? A strong middle class? Justice? The survival of the human race and our responsibilities as stewards of the earth? In short, rather than starting from the market, we start from our values.

Put it another way. Right now we say, we want a strong middle class and the best way to do it is using “free markets” — except in agriculture and transportation and housing and computers and health and finance and so on. What if we start by saying, we want to have a strong middle class. Given the way the economy works now, how do we help make it happen?

I think starting from our values instead of from the market-except-on-Tuesdays-Wednesdays-etc. buys us two big advantages:

1) Debating What Really Matters to Us. Let’s take Finance. Right now, the main debate is over avoiding another massive “market failure” — not giving Wall Street incentives to push the economy over a cliff. That’s obviously a good thing.

But if instead of asking why did the market fail we were asking what values do we want to encourage, we’d be debating a much broader set of questions. What do we really want from Finance? What should its purpose be ? Is it to create good jobs for everybody who’s willing and able to work — to reward hard work? Is it to strengthen our communities over the long haul?

If the debate centered around those values, we wouldn’t just be asking how we stop Goldman Sachs from deliberately screwing over everyone who doesn’t run a powerful hedge fund. We’d also be asking how we can shift Wall Street so it rewards companies that create good jobs over companies that fire thousands of people even when the company is raking in record profits.

2) Debating Who Decides. If you start from the market-except-on-Tuesdays-Wednesdays-etc, it’s easy to avoid talking about power. It makes it easier to obscure backroom deals. And as we just saw in the healthcare debate, it makes it easier for people to successfully pretend they are against “government” that doesn’t directly benefit them — a.k.a. “keep your government hands off my Medicare.”

Or to put it another way, when you pretend negotiating over values isn’t happening, the people who lose out are the people with the least power.

If you start from a value-based approach, it’s going to push you to ask who currently decides which values should shape the economy and who should get to decide. Is it just the owners of the fossil fuel plant belching toxic fumes in Chula Vista? Or is it also the people in Chula Vista’s neighborhoods whose homes and elementary schools are in striking distance of that plant?

In turn, these questions will encourage the debate to focus on the balance of power. It will lead us to ask what we can do to create strong environmental groups, strong unions, etc. — folks who are in a position to act as a dynamic check on corporate power. You’re less likely to ask these kinds of questions about checks and balances and power if you start from Up with Markets. As Krugman said at the beginning of his pro-market based article:

If there’s a single central insight in economics, it’s this: There are mutual gains from transactions between consenting adults.

In other words, a market-based framework starts from the implicit assumption that the owners of the fossil fuel plant in Chula Vista and the poor folks in the neighborhood are on a level playing field.

You might think, isn’t this a bit much? Do I really want to imply that Krugman is rooting for the fossil fuel plant over the poor folks?

Obviously not. The point I’m trying to make is not that folks who use a values-based framework are more virtuous than those using a market-based framework. That would be stupid (not to mention unbelievably arrogant).

Deciding which framework to use isn’t about good vs. bad or right vs. wrong. It’s about focus. A value-based framework pushes the debate towards the issues that matter to us most deeply. And it makes it harder for the wealthy and big corporations to hide what they’re really fighting for.

Up next week: why a value-based framework is also more “efficient” than a market-based framework.

Skeleton of the Framework v0.6

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Now that I’ve used Getting Green Done to flesh out part of my argument, here’s the latest version of my framework.

The conventional economic framework, a.k.a. Econ 101, says the economy can be broken into 3 layers:

  • People are calculators: they rationally pursue their self-interest given near perfect information about the world
  • Organizations are calculators
  • The Market is mostly efficient (with some help from the government)

The RTE framework says, that’s not how the economy works. The economy is like a game with complex rules that shape folks actions at different levels of the economy. In other words, the real world looks like this:

So if you want to make the world a better place, a simple, clean Econ 101 model won’t cut it. You’ve got to get your hands dirty and understand how the economy actually works. To do that, you need 2 perspectives on the economy:

  • Practitioner’s Perspective: Understanding the rules that shape the actions of individuals and organizations in a particular niche of the economy.
  • Movement Perspective: Stepping back, looking at the bigger picture, and forcing yourself to ask not what the most personally satisfying or most comfortable act we can take but what’s the most effective action.

Here’s how the 2 perspectives are related to the 3 levels of the economy:

PE Level Movement Perspective
Organization Level Movement Perspective Practitioner’ s Perspective
Individual Level Practitioner’s Perspective

What feels like it’s working:

  • The 3 levels of the economy
  • The metaphor of economy as a game with rules
  • The ideas/principles embedded in the 2 Perspectives

What’s missing or needs work:

  • Now that the idea of Perspectives has been rattling around in my head for a few weeks, it doesn’t feel like it’s working. I’m not sure why. It might make more sense to focus on the principles underneath the Perspectives rather than the Perspectives themselves. I don’t want to lose the impulse behind the idea of Perspectives. But I need something more fundamental, more bedrock.
  • Issues like the role of race in the economy are implicitly in the framework, but they feel like they are getting buried.
  • There isn’t a clear connection between understanding the mechanics of how the economy works and what really matters to us — our dreams, desires, fears, and overcoming feelings of helplessness. For example, where does a feeling like “we want our country to work again” fit in the framework?

Getting Green Done: the Practitioner's Perspective

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[Part 2 of the Getting Green Done book review]

As we saw last week , in Getting Green Done Auden Schendler says the Enviro movement has to get comfortable talking about their mistakes as well as their successes. Here’s one of his.

When Schendler first started at Aspen Skiing Co., he told Eric Calderon, manager of the luxury resort The Little Nell, that they could cut energy use by 75% if they switched to compact fluorescent light bulbs. They’d save so much money that switching would pay for itself in less than a year. Eric told him no. Schendler was “baffled” — the project had a great return on investment.

The problem was that while I thought I was proposing a money-saving opportunity, for Eric it was a money-losing opportunity, because it threatened the tools he used to generate income — his stylish rooms (P.51)

Eric told Schendler he was worried about how their high-end clients would perceive the compact fluorescent light bulbs even if the light produced by the bulbs created the right ambience. He was even more worried about the reaction of ExxonMobil and AAA auditors.

“If that auditor sees compact fluorescent bulbs in our rooms, he might downgrade us to 4 stars.” In the 5-star hotel world, that’s not just a bad thing — that’s the apocalypse.

Again, we can’t blame Eric for this concern. But most environmentalists do. In turn, they lose a potential ally, and they alienate a good person from their cause. (P.51)

So, Schendler called Exxon Mobil and AAA. Both said fluorescent light bulbs wouldn’t reduce their rating.

But that doesn’t matter. The chance that an auditor is even subconsciously affected by a perceived lack of quality is too great a risk to take. Paying a few extra bucks on the energy bill is unfortunate. Losing your 5-star rating is your career.

My solution was something you’ll never hear from the nonprofits or the sustainability consultants trying to make a buck on the great green vision. I gave up in defeat. (P.52)

Schendler ultimately had plenty of wins at Aspen — enough so that being Green became part of their branding. But it was a long, tough slog.

What Schendler’s describing here is the difference between Econ 101 – where People and Organizations are Calculators — and reality.

Return on investment matters in the real world, but it’s only one piece of the puzzle. If you’re trying to go Green or make any fundamental change in an organization, you need to figure out the hidden rules and the complex relationships that govern how that organization actually make its decisions. As Schendler succeeded at making Aspen more Green, he discovered, for example, that:

  • Sometimes even if you know you’re going to save money, some savings are hard to show. Retrofitting a garage’s lighting may save a bunch of money, but to actually prove it an electrician would need to put the lights on a separate electrical circuit, which would eat up a lot of the savings.
  • Mental models matter. “Hotel managers don’t believe they make money by saving — they make money by selling” even though a huge amount of profit gets eaten up by overhead.
  • Opportunity costs, a.k.a. the availability of capital. If a mid-level manager only has so much money available, they may decide that spending it on another project is a better deal — especially if their mental model says they make money by selling, not saving.

Understanding the rules that govern a particular organization’s world and figuring out how to either make progress within these rules or organize to change them — that’s what I’m calling The Practitioner’s Perspective. As you’ll see in the next few weeks, it’s a critical piece of the Rethinking the Economy model.

Up next week: Getting Green Done’s Department of Strategery.

Review: Getting Green Done

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Engineer Jan L. A.van de Snepscheut said, “In theory, there is no difference between theory and practice. But, in practice, there is.” (p.9)

That’s one of the main points of a terrific new book, Getting Green Done: Hard Truths from the Front Lines of the Sustainability Revolution, by Auden Schendler. Schendler is the executive director of sustainability at Aspen Skiing Company, a luxury ski resort that decided to go green. Getting Green Done is the story of what happened.

Schendler says there’s a basic problem with the Enviro movement — folks aren’t willing to tell the truth of just how hard it often is to go green.

Deep beneath the surface of one of many green “success stories” you read about in the news and you’ll frequently find something more like Apocalypse Now than a finely tuned operation. This doesn’t mean that we give up. But we need to recognize that it’s wanting to watch a PowerPoint presentation on corporate sustainability, and another thing entirely to make a real. ( p.11)

Why do people hide the truth? Enviros are afraid of giving their adversaries ammunition. Green consultants are afraid the truth will scare off clients looking for a quick fix. Green gurus want simple stories with happy endings. And folks like Schendler? Take the case of a company that’s just finished creating a green building.

The problem is that once you’ve gone through the green building process, you are scared to point out the warts because your work is now considered a model and you’re getting huge PR for it. (p.11)

And that makes it hard for us to learn from our mistakes.

What we need, he says, is “more grunts, fewer visionaries”.

“we all need to be part of an army of foot soldiers, laboring in the trenches, for years, making mistakes, failing, learning, and moving forward, one bloody yard at a time. And then we must go to the bar and talk about our experiences, over beers and tequila shots… To that end, this book is the story from the front lines you haven’t heard yet, because often that story is embarrassing. (p. 23)

Up next week: Schendler walks the banana peel walk, A.K.A. the Practitioner’s Perspective