The Work We Need Done: Outcomes Not Ideologies
Several years ago, the CEO of my company and I were having a discussion with an imminent economist about the future of work. This was pre-pandemic — when the angst in the press and society was all about robots and artificial intelligence taking our jobs. The economist pointed out this angst was born of a logical flaw economists call the “lump of labor fallacy” which assumes there is a fixed amount of work to be done in an economy — and the work can be distributed to create more or fewer jobs. If you believe this fallacy, it might well make sense to believe that robots are coming for your job. If, however, you don’t believe in the fallacy, there is ample work to go around and keep everybody employed.
During the discussion, my CEO made the comment that there are plenty of worthy things to be done — such as cleaning up our waterways and beaches, tutoring inner city kids, and addressing homelessness. He said
“there is no shortage of worthy work, society is just not willing to pay for it. It is a resource allocation problem.”
That comment has stuck with me for several years and, although a simple, offhand comment — led to deeper insight.
Currently, in the US at least, in addition to worthy work not being funded,
we also have a lot of work that society is willing to pay for but doesn’t add any value to society — and, in some cases, destroys value to society.
Here are just a few examples:
Tax avoidance. The US tax code is byzantine and bloated. It is full of loopholes and exceptions. There is a substantial industry of lawyers and accountants devoted to figuring out how to legally minimize corporate and individual taxes. While this may benefit their clients, it provides no benefit to society.
Healthcare administrative costs. The US has the highest healthcare costs with far from the best health outcomes. I doubt that this is because we have the highest clinical costs. We do seem to have exorbitant administrative costs and our convoluted system of health insurance seems to be geared to trying to push costs to someone else.
Financialization of the economy. Finance as a share of the economy has grown enormously. While finance provides value to society in matching borrowers and lenders, running a payments system, and helping individuals and organizations finance their activities — a lot of finance seems to be speculation that enriches the speculator but does not add value to society. Activities like high frequency trading, in which enormous sums are made from arbitraging tiny slivers of each trade, seem to be parasitically siphoning off value with no social purpose.
Political lobbying. Enormous sums are spent trying to influence elections and political policy decisions. While such spending may benefit the companies and individuals, there is dubious value to society and a pretty general sense that such spending distorts fairness and equity.
We have a resource allocation problem. We cannot invest in work that needs to be done that benefits society and we spend enormous sums on the activities above — economic waste that either adds no value or extracts value from society. There has to be a better way.
The purpose of political and economic systems is — or at least ought to be — to allocate resources for the maximum benefit and well-being of society.
There is a lot of ideology around political and economic systems — and a lot of claims about which is better. But how do we define better? I believe that better is about maximizing the benefits and well-being of society. By society I mean both in collectively — all of society — and granularly — for the individuals who comprise society.
It occurs to me that there are two ideological poles that people advocate. I’m not an expert, but it seems that both of these ideological extremes are insufficient — yet people are passionately polarized around them. Each pole presents a mental model. The collective pole — most often associated with the political left — emphasizes shared responsibility and collective decision-making — but is often associated with less dynamic economies and growth. The individual pole — most often associated with the political right — emphasized the individual — it affords dynamism and opportunity but often neglects or even creates societal systems problems like those my CEO said were worthy work but society is not willing to pay for.
Both of these poles really represent theoretical constructs. We have had attempts move to the left pole — think of communist and socialist states like Russia, Cuba, North Korea, and China. All of them had failed economies and lots of suffering. In some cases, like China, the adoption of market-oriented approaches mitigated these failures. In fact, most all of the communist/socialist counties which recovered from too much collectivism (e.g. China, Vietnam) did so by adopting market-based reforms.
On the other hand, there are no pure-free market economies. While libertarians might hope for a free-market nirvana, all economies have some governance and constraint upon markets. While the free market is an attractive idea to some, we don’t have any good examples of success — only theories. We have also seen that too much deregulation, for example, leads to externalities such as climate change, income inequality, and massive concentrations of wealth and power.
I’d maintain that both poles in the diagram above are theoretical constructs — with passionate believers — but neither has been truly implemented in practice — nor has been particularly successful when tried. These poles are mental models of how economics and politics work — in effect lenses through which people view the economy. I’m not sure either pole serves us well. There is a wide gulf between these two theoretical constructs and most countries fall somewhere in the middle — with passionate advocates tugging either way.
It feels like many of our leaders — particularly our political leaders, approach problems first through the polarizing lens of ideology, In so doing, they focus less on the outcomes we want and more on the mechanism inherent to their particular lens.
There may be another way of framing this discussion — another mental model or lens. I come back to my CEO’s comment about allocating resources to things we need, not just the things our political/economic systems are willing to pay for. Further, there must be a way to deallocate resources that are spent on economic waste — those things that don’t add value to society. I’m not sure of the mechanisms, but it seems like we could arrive at a better way to allocate resources than these two poles afford.
A good first step is to train our lens not on the means (government or markets) but the ends. Let’s get our leaders to focus on the outcomes we want, not the ideological lenses that drive particular means.
This brings us back to my CEO’s comment on resource allocation. If we focus on outcomes rather than ideologies we might just find ways to pay for the things that benefit society and defund those things that are simply economic waste. In fact, if we reallocate funds going to economic waste — we can both reduce the drag on society and increase the benefits.
The pandemic put a hold on all of the angst about robots taking our jobs. And it also got people to fundamentally rethink their values — primarily at a personal level. What do they want to do with their lives. Perhaps, as we come out of the pandemic and revisit the role of work, we will have a similar rethink at a societal level. We can only hope.
