Institutions + Innovation + Detroit

Why society depends on love

I thank God everyday for the unconditional love I have in my life. I’m so lucky to have a girlfriend, family, and friends who love me even when I do stupid things or am sinful. And yes, it feels good to be so loved, but there’s a societal benefit to that love as well – it tames my human instinct for greed.

I, like anyone else, have impulses that I’m not proud of. Let’s take business school as an example. Being in business school, I’ve learned a lot about how to make money. As a result, I’ve developed a strong ambition to make money, make impact, and make things happen. On the one hand, this ambition is important because it compels me to act and give effort toward things. On the other hand, it compels me to take, and take ruthlessly.

If unchecked, this ambition will become greed. I know this to be true, because it’s a theme that runs throughout history. I am not immune to this the fallibility of human nature.

And that’s where love comes in. It checks my ambition and greed.

The love that Robyn, my family, friends, and even strangers sometimes, give me is not something I feel afraid of losing. I feel secure in it and know it is there to catch me when I am at my lowest. It’s something I can lean on.

That love is enough for me to be happy. Even if I’m not successful in my career or in other pursuits, having and giving love fills me up. Because I have and give love, I do not have to worry about replacing the space it occupies with money, prestige, or power.

This is good, because when money, prestige, and power become an end in themselves, it makes us do funny things. It makes us behave unethically and robotically. At best, the lust for money, prestige, and power stress us out. At worst, that lust will drive us to madness.

Even though, I think hippy-dippy interpretations about love in society are bit superficial, I think those that talk about society needing more love are on to something. Love isn’t just something that’s nice to have as an individual. Because it’s a calming force that tempers greed and the darkest parts of our humanity, love is something society depends on.

 

Jobs pay a lot when they suck

I don’t think a high salary necessarily indicates that a job is “better.” Most of the time, I think jobs are high-paying because they suck.

Of course, I’m being a bit hyperbolic, but, here’s what I mean.

Let’s say there’s a dollar value, let’s call it $I (for income), and $I is the average amount of money people in America need to have a pretty good life. Nothing super fancy, but something nice enough that the average person is happy with.

Now, why would anyone take a job that pays more than $I per year? After all, if you’re happy with I, why bother doing something that requires more effort (which is presumably the case because you’re getting paid more).

There are two types of reasons:

1) Because you’re awesome
2) Because the job sucks

BECAUSE YOU’RE AWESOME
You might take this job for more money, because you’re valuable. Maybe you have a special set of skills and therefore, companies have to pay you more because of competition in the marketplace. If they don’t pay you a premium, someone else will. You get paid more because you’re awesome.

This is ideal, because you’re not sacrificing anything to get higher pay. You’re happy, and you are really skilled so you get paid more. Wonderful.

BECAUSE THE JOB SUCKS
An alternative explanation for taking the job that pays more than $I per year is that something about the job makes it less desirable. Maybe it’s because you have to work many hours, or the work is physically demanding. Maybe it’s boring or worse, maybe it’s not meaningful. Maybe it’s humiliating or dehumanizing work. Maybe the job is difficult and you’re likely to fail. Maybe the work/company isn’t prestigious. Maybe it’s stressful.

In this scenario, if the company doesn’t pay you a premium you wouldn’t want to do the job. You get paid more because the job sucks.

In reality, the wage we’re all paid is probably a mix of both – being awesome and the desirability of the job. If you  have a high paying job it’s worth asking yourself, and I direct this at my MBA classmates, is your job REALLY paying you a premium because you’re awesome, or because the job sucks?

WHAT DO YOU THINK?

  • How much of our educational life prepares us for being awesome, and how much of it prepares us for dealing with stuff that “sucks?”
  • What careers do you think are the most desirable? How much does it pay? Does it seem high or low, why?
  • Are there other reasons why some jobs pay a premium?

Detroit is not a laboratory

Detroit is not a laboratory, but we should be scientists. Here’s some explanation about where I’m coming from.

DETROIT IS NOT A LABORATORY

One of the narratives I’ve heard about Detroit, especially when stories about Detroit are told to those not currently living here, is that Detroit is a laboratory. It’s a blank slate, a place where enterprising folks can experiment and make something for themselves. Detroit, the story goes, is the new wild, wild west and a low-cost place to take risks and try something new.

That’s not exactly true because Detroit is precisely NOT a blank slate. The City was founded in 1701. It had over 1.5 million residents at its peak, and there are still over 700k that live within the city limits – not to mention the many more in the metro area. Detroit already has a culture, and monuments, artifacts, and history. It has major sports teams, and Universities. We’ve started cultural, economic, and social movements in our storied history.

Detroit is the opposite of a blank slate.

I mention this because talking about Detroit as a blank slate / laboratory can make locals feel marginalized – like they’re in a petri dish, under observation, and without agency. More and more, I feel that way too when folks talk about Detroit as a “laboratory.”

BUT WE SHOULD BE SCIENTISTS

That said, there are lots of people – both long-time residents, and new comers – trying new things and figuring out what works to make life in the City better. And I think that’s great. Detroit isn’t a city that works for everyone. It can be better, it can “rise from the ashes” as we Detroit’s like to say.

The way we get there is being scientists – by observing, listening, trying, failing, succeeding, learning, and sharing. Being a scientist doesn’t have to mean treating the city – and those in it – like part of an experiment. What it does mean being curious, humble, and learning by doing.

I’d also say that “being scientists” is part of who we are as Detroit’s. We’ve always been creative people, who work hard and build new things. And so we should.

It’s not lost on me that this is a subtle distinction, but I think it’s an important one.

When Facebook isn’t free

I’ve been asking friends a simple question over the past month: if Facebook started charging a monthly fee, what’s the most you’d be willing to pay?

Take a second and think about your answer.

Most people I talked to, unsurprisingly, said $0 is the maximum they’d pay for Facebook. 1-3 people said they’d pay $5 a month for Facebook, assuming all their friends stayed on the site.

This is remarkable to me, because so many people are on Facebook and people spend so much time on Facebook. In fact, the average American spends 40 minutes on Facebook, according to a July 2014 report. That’s a remarkable amount of time for something that’s close to value-less, based on the results of my straw poll.

Why do you think this is the case?

I’d contend because Facebook is free. The thing is, it’s not. Time has a tremendous opportunity cost – there’s so much other stuff you can be doing with time. Especially when you think of Facebook time in aggregate – what would you do with an extra 250 hours a year?

Perhaps that’s also why folks use Facebook profusely. It’s hard to imagine what you would do with an extra 300 hours a year. It’s less daunting to just use Facebook, than to go through the deep reflection required to imagine new possibilities for your own life. We don’t exactly live in a society with that’s facilitating of that sort of imaginative visioning, unless you grow up with uncommon privileges.

That’s a deeper issue, I’d say, than the fact that folks use Facebook a lot. What would it take to create a world where people are more likely to imagine a different future for themselves, rather than use that time on Facebook?

Enter, the liberal arts.

Knowledge, Skills, Wisdom (and Liberal Arts)

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I’ve been fairly amazed by the proliferation of online learning platforms, like Coursera, Skillshare, Khan Academy, and others. They’re remarkable, I think, because they decouple “learning” from needing to interact with a person in real-time. You can learn from a screen and/or a computer and still have it be more interactive than a book.

As a quick point of reference, I’d argue there are (roughly) three types of things we learn:

 

  • Knowledge – awareness and understanding of a topic. Knowledge answers what something is.
    • Sample Online Platforms: Coursera, Khan Academy
  • Skills – an ability required to complete a task. Skills are an answer for how to do something.
    • Sample Online Platforms: Skillshare, CodeAcademy
  • Wisdom – a virtue which helps decide what to do. Wisdom is an answer for why to do one thing versus another.
    • Sample Online Platforms: Do you know of any?

If you look at online learning platforms, you’ll find that most platforms fall into the knowledge and skills categories. The only platforms that come close to developing wisdom are things like TED and BigThink and even so only with certain talks. TED and BigThink are more like insights – when other people share their wisdom. True wisdom, I’d argue, is something which must be internalized.

The thing is, developing wisdom takes practice, thoughtfulness, self-awareness, and reflection. It takes asking tough questions and sitting with them. It takes a broad diversity of people and disciplines around you to develop.

Wisdom is the stuff of deep truths. Developing it is hard. I think that’s why you find plenty of online platforms exchanging knowledge and skills but few, if any, developing wisdom.

HIGHER ED

It seems to me that colleges and universities can’t win if they hang their hat on distributing knowledge and skills unless they do most of it cheaply on digital platforms. Online courses for knowledge and skills will always be cheaper than in-person ones.

What colleges and universities can win on is wisdom. They can offer meaningful experiences and a diverse community. They can offer mentors and teachers. They can provide coaching and external influences. In other words, they can provide the right environment for students to develop wisdom through practice.

They also have the liberal arts. Because of its diversity, propensity to uncover truths and deep questions, and it’s depth, it seems to me that the liberal arts are essential to developing wisdom.

Even if you’re an engineer, business person, doctor, or lawyer, the liberal arts are essential. Why? Because the liberal arts cultivate wisdom.


photo credit: Russ Allison Loar via photopin cc
 

Exploring Business Strategy via Fantasy Football Drafting

When deciding on a business strategy, it’s important to choose the right target and frame challenges correctly. In fantasy football, for example, you can frame the objective when drafting in one of two ways (note that I’m thinking of a standard draft, not an auction draft):

1. Draft the players who will score the most points
2. Draft the team that will score the most points, against my opponent, week after week

Here’s how the drafting strategy changes based on how you frame the objective -

If your objective is draft the players who score the most points, you:

  • Draft stars because they score a lot of points
  • Draft players who are anchors of their respective teams because they are perceived to score more points
  • Draft sleepers because you want to get more value for your pick (and appear to be smarter than your friends)
  • Draft kickers and defenses in late rounds because they usually score low amounts of points

My objective is to draft a team which scores the most points, against my opponent, week after week. So, this is how I draft my team:

  • Draft stars because they score a lot of points (duh)
  • Draft players on teams that are expected to win games (this reduces variability because if the team is better, they will likely score more points, even if they aren’t at the top of the depth chart of their individual team). If you’ve ever drafted an offensive starter on the Oakland Raiders you know where I’m coming from
  • Avoid players who have had major injuries or off-the-field issues (Ray Rice, AP, anyone?)
  • Draft players in contract years (because they are more motivated to do well)
  • Spread out bye weeks (so you can prevent having two stars out of your lineup in the same week)
  • Draft defenses and kickers early (their expected value is higher) You play defenses and kickers 16 out of 17 weeks so they end up being higher contributors than a bench player you only play during bye-weeks. Also, there’s less depth at those positions so drafting late gets you lemons
  • When trying to draft sleepers, determine how the team has improved in the offseason to determine whether the player is now surrounded by better teammates

I’ve had fairly good results once adopting this strategy, but my fantasy football strategy is beside the point. The point is, how you frame your objective dramatically affects your business strategy. So choose the right one.

Society is every company’s debtholder

I’m not convinced society should be companies’ customer and shareholder or whether it should be, but I strongly believe that society is and should be thought of as every company’s debtholder.

WHY SOCIETY IS A DEBTHOLDER
In short, a debtholder lends resources to a business (i.e. money) and expects the money to be repaid. In exchange for the risk that the company won’t be able to pay them back, they insist upon charging a fee (interest).

In addition to that, debtholders aren’t “residual claimants” if and when the company goes bankrupt. What that means is if a company goes bankrupt debtholders aren’t the last people paid when the company’s assets are liquidated (shareholders are).

Society is definitely a debtholder of sorts for a business because it does lend resources to companies that they risk not being “paid back” for, in effect. For example, society “lends” the following resources to companies:

-Enforced rules which create fairer markets
-Clean water and air and access to other natural resources
-An educated workforce
-Roads and infrastructure to transport goods
-Assurances for citizens which transfer the burden of social welfare (e.g., unemployment, healthcare) to the state
-I could go on

Moreover, companies are getting a a great deal on all these resources. If companies privately tried do these things it would be astronomically expensive, even if they were possible. My guess is, the value companies get from these resources far exceeds the amount they pay for these resources in taxes.

If companies don’t compensate government for the risk they are taking to invest in resources, we all run the risk of the government running out of money to keep lending these resources to companies. For example, if companies don’t reinvest (i.e., pay back their “interest”) in the workforce, eventually the workforce will be so devoid of skills to the point where government provision of these resources becomes unsustainably costly.

THE BOTTOM LINE

So here’s the takeaway. Companies uses resources that society lends. They ought to pay their “interest” on these resources or eventually there will be no resources left to lend.

Why non-profits and government are harder than business

In my time at the Ross School of Business, I’ve come to believe that it’s much harder to run a non-profit or government organization than it is to run a business. One of my professors even brought this up in class, explicitly, yesterday.

Here’s the basic reason why.

In any organization you have to do two basic things, create value and secure the resources you need to create value. This dynamic looks different across sectors.

In business, you end up creating value for and getting resources from the same people – customers. In non-profits and government the people who fund (or vote for) you and the people you serve are different. This makes non-profit and government management fundamentally more difficult because you have to manage the needs of two groups of people (who have different interests) at the same time.

To reconcile this dissonance in government, you could either get funders/voters to care about the needs of all. Or, you could just get everybody to vote.

What’s Missing From “Business For the Social Good”

When it comes to “business for the social good,” there are many examples to be proud of. Bill and Melinda Gates are fighting malaria. Warren Buffett advocates that billionaires give their money away. Many others have signed The Giving Pledge. In addition to all this, many businesses participate in corporate social responsibility activities or pro bono work. All this is great.

However, I’d like to point out that proponents of “business for the social good” are largely motionless when it comes to fixing political issues which cause social problems in the first place*.

There are underlying schisms in the political systems which exacerbate or increase the likelihood of market failure. Business interests overlook these issues. For example, when’s the last time you heard a corporation advocate for campaign finance reform or billionaires (with Warren Buffett as a sort-of exception) talk about fixing loopholes in the tax code?

With limited exception, business interests are silent on underlying political and institutional issues to the social problems they are trying to solve. They fix market failure ex post instead of working ex ante to create a more resilient political system which prevents market failure in the first place.

I appreciate all business interests do for society, I really do, and for that they should be lauded. But, I don’t think we should ignore the fact that corporate interests and billionaire philanthropists are ignoring the gorilla in the room: fixing political systems so their money isn’t as needed to fix social problems.

Most companies, I’d argue, actually do the opposite of fixing political and institutional problems. Instead, they actively try to exploit political systems to improve their chances of winning in the marketplace.

If companies are not actively trying to bend the rules in their favor, they are silent. I can’t think of one business interest (though I’m sure there are a few) that lobby for fairer markets that are aligned with the public interest.

Business schools are mostly silent on this issue, too. Not once in my MBA so far, for example, have we talked about whether business has the responsibility to advocate for fair and efficient markets. In class, we assume that markets are fair, businesses play by the rules, and that businesses don’t actively try to bend the rules in their favor.

The problem with that assumption is that it’s undoubtedly false.

* – Why? Because fair, competitive markets are bad for business.

Reimagining Healthcare, Education, and Government

I have been, and likely always will be interested and motivated to improve how institutions work. The three biggest institutions of our time that need to be reimagined are healthcare, education, and government.

I don’t think this is because healthcare, education, or government are inherently flawed or because the good folks working in those realms are foolish or stupid. Rather, I think those three areas are the last institutions to be reformed since the beginning of the information age because they’re the biggest, gnarliest, and most difficult to change.

If you claim to be interested in “systemic change” and you’re not working in healthcare, education, or government I’d seriously question your understanding of modern-day problems or your courage. These domains are where all the action is*.

* – It’s worth noting that all these domains are inextricably linked to cities.

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