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The Key Business Concepts Missing From The National Debt Debate

In business, if you decide to do a project you scope out the project. You estimate what it will cost, over what time frame it will produce results, and so on. Then you decide how to finance it. There are many, many possibilities: you might finance it by paying for it directly. That’s equity investment. You might borrow to pay for it, which is debt financing. You could also finance it in other ways by having suppliers or customers carry part of the cost. Which option is best depends on many factors, including prevailing interest rates, payback periods, and so on.

It’s easy to get people to have a knee-jerk reaction to the idea of lower taxes, however. So for political reasons, virtually the entire debate has focused on “do we finance our government with taxes (the equivalent of equity) or debt?” That’s been turned into rallying cries about taxes that candidates use to drive elections.

If we were making good decisions, the national debate would be about how we want to spend our money. In 2011, the only large discretionary category is defense at $722 billion(*). If we include mandatory spending, the other large categories are social security, Medicare, unemployment assistance, and health care.

Once we’ve made that decision, we would decide whether it makes sense to fund those measures with equity or with debt. The consequences of debt default would, of course, be included in the financing discussion.

Neither the Democrats nor the Republicans seems much inclined to cut spending. They cut specific items that they’re ideologically opposed to, but they don’t touch the big items listed above. And not even candidates who claim to advocate small government propose slashing the only large discretionary item in the budget, our $722 billion defense budget.

What worries me most, structurally, about debt is that debt has to be repaid with interest. An ever-increasing percentage of our national budget is going to pay interest on debts incurred decades ago, whose benefits have long been played out. If we continue funding things with debt, we’ll be piling up interest payments that could eventually wreck us.

Why do people not like high taxes? Because it brings into stark reality the fact that policy choices have real monetary consequences that we must pay for collectively. We like our highways, and our Medicare, and our defense department. But we don’t like to face up to the cost of those things.

Debt allows us to defer taking responsibility. High taxes forces us to take responsibility immediately. That’s why I favor tax hikes. For the ultra-rich? Certainly; they use far more of our infrastructure than the average person uses (e.g. airports, the justice department, the banking system, etc.), and it’s only fair that they pay their fair share of the common resources they’re using. But for all of us. Taxes force us to make smart choices now, rather than giving us the false luxury of waiting for emergency to push us into harried stupid choices.

And above all, I believe in paying $10 for a $10 expense. When we finance with taxes, that’s what we do. When we finance with debt, we pay $11 or $12, or $20, or $50 for that $10 expense. And I don’t care if you’re conservative or liberal, that’s just plain dumb.

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(*) You can see the budget numbers here. Try clicking “hide mandatory spending”: http://www.nytimes.com/interactive/2010/02/01/us/budget.html

Is The Marketplace of Ideas Turning Into a Swamp?

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We take it for granted that making things easier is always a good thing. I disagree. Sometimes it is, while sometimes it isn’t. Today, I’ve been contemplating the case where maybe it’s good to make things harder.

Technology has made it so that anyone can produce music or publish books. This is a very good thing, in that it means people driven by the desire to do those things can now do them far more economically. But there’s a downside to technology that enables: it drives the supply of those goods up, without necessarily driving demand up. More supply without more demand means prices will fall. In both arenas—neither of which have been famous for paying creators very much money—we’re seeing so much content being created that it’s hard for anyone to make a living anymore. The very few who manage to rise above the fray capture most of the money, and everyone else has to work as a waiter to get by.

In some abstract way, this may be good for the consumer by giving the consumer more choice (though the book The Paradox of Choice discusses about a dozen reasons why more choice is not necessarily good). But there’s now so much noise in the market that matching that consumer with the perfect author/musician is harder than ever. Unless the musician/author is one of the winners with a huge marketing budget, the consumers will never find them.

There may actually be benefits to markets that are somewhat harder to enter. Fewer players enter, but the ones who do can make enough money to make a living, and the number of entrants is low enough that consumers can at least have a decent shot at discovering the product that’s best for them.

Do we create our institutions to stifle creativity?

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My friend Michael posted on Facebook: I’m feeling sad today, because I’m already one of those people who works his butt off and doesn’t do much of anything to be creative, innovative or out-reaching. How did I stray from the ideals so quickly?

My response: I think most of our institutions are designed (or have evolved) precisely into places where creativity and innovation are squashed. It isn’t deliberate in the sense of some evil dictator trying to keep us down, but it *is* deliberate in the sense that we create institutions to be stable. That means, to do the same thing day in and day out. We scope the jobs, workload, and responsibilities around just enough to get things done the way they’re currently done. When was the last time a job description included, “Four hours a week to be spent day-dreaming, engaging in creative flights of fancy, and redesigning how things work?” (Well ok, Google has a similar policy, but who else?)

What do you think?

Your stereotypes may blind you to opportunity

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Today I visited a store where I often shop. The young man who cleans up and maintains the displays was there as usual, with a sullen expression on his face. My story about him is that he’s lazy and unfriendly, and does his best to do as little work as possible. Yet, I see him often. So today, I walked over to him and introduced myself.

His face lit up, he got a huge smile, and gave me his name. Suddenly, my whole conception changed. He didn’t seem sullen, lazy, and unfriendly at all. It struck me that he’s quite possibly shy, and given his job, ignored by virtually everyone who comes in. Far from wanting to drive people away, he wants to connect and be acknowledged. But my misreading his cues made me stay part of the problem until today.

A friend reported something similar after doing an exercise where he had to strike up a conversation with a stranger. Though he was in his 40s, the first person he found to talk to was a teenager who was present at a summer school program. He was astounded to discover how interesting this teenager was. Then he realized with a shock that his son was the same age, and he’d never talked to his son as a person, but always as “his son.”

Our preconceptions can help us. If they’re accurate, they can let us step right into a situation with a great deal of information. But they can also blind us to what’s really going on. The young man at the store was friendly and shy, not sullen and hostile. The teenage son is a whole person with a rich inner life, not simply a child to be disciplined or controlled. By double-checking our assumptions about other people, we sometimes find that things are very different than we think.

Challenge:

  • Find someone you don’t like. Talk to them and learn about them.
  • Find someone you’d never normally approach and talk to. Talk to them.

See what happens. The results may surprise you–or not.

Pop up ads are necessary for advertising business models

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My friend tweeted me about how obnoxious web popups are. You know the kind: you’re reading a web page and your reading is interrupted by a pop-up urging you to join a mailing list or buy a product. It’s a total interruption, and almost everyone clicks past the popup. Why would merchants be so stupid, he asked.

They aren’t stupid. Because, my friends, those popups work.

We’re in an attention arms race that won’t be doing anything but escalating. The reality is that content is not free. It takes time and effort to put up web sites. Ultimately, those must be paid for somehow. Since very few people want to pay for content directly, advertising is the only way to pay for it. But the more ads we see, the more we ignore. Advertisers must get increasingly in-your-ace to have even a small chance of motivating you to buy something. And at the end of the day, it’s that purchase that helps them feed their families, not the legions of people who read for free and never spend a dime.

I hate popup ads too, but I make my living as a content creator. I understand the reasoning and reluctantly join in the war for attention, myself. Because if enough of you don’t buy my products and services, I’ll have to shut down my business and get a job plucking chickens or something. That wouldn’t be very pleasant for you, for me, or for the chicken.

So if you’ve enjoyed my free content, please consider supporting me by buying something in the shop, or joining my Time Control membership program.

An NLP hint on writing and emotion

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NLP has taught me a lot about how people experience words. By carefully considering your words, you can change the whole mood that people get left with.

I recently posted a Facebook update: For those that missed it, here’s my popular ‘Modern Vacation’ video spot (don’t worry – just 36 seconds!): http://www.youtube.com/watch?v=Gt0Bs0frEnM

Once I’d posted it, I re-read it and realized it used language poorly. The evocative words in the post are:

  • popular
  • worry
  • just 36 seconds

As people read each word, they access the meaning of that word and any associated feelings unconsciously. What then comes to mind is a gestalt of those meanings and feelings. How’d I do?

  • popular – evokes ideas of something desirable
  • worry – evokes the sense that something’s wrong
  • just 36 seconds – implies that it’s fortunate that there’s not much of it

Once through the reflection process, it makes sense to ask what feelings I’d like to leave the reader with. Excitement, curiousity, and a desire to see the video would be a better frame of mind for the reader. Here’s my rewrite:

For those that missed it, here’s my popular ‘Modern Vacation’ video spot (the best 36 seconds you’ll have all day): http://www.youtube.com/watch?v=Gt0Bs0frEnM

Try reading both versions back-to-back and notice which images and feelings each one leaves you with. It’s subtle, but it has an impact. When you’re writing a longer piece of writing (like a podcast episode or an article), what you write will move people through a series of images and feelings. Think carefully about the sequence! The emotions you evoke may be positive (desire) or negative (fear), but if it’s negative, you probably want to lead somewhere else, like hope or resolution. The feelings people have when reading your material get connected to their concept of you. That’s called branding.

Go forth. Write with emotion. And make sure the emotions leave people in a good place. Giving people nice emotions is good for them, and you’ll find it’s good for you, as well.

There’s such a thing as too much convenience.

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One of the things that amuses me most about Americans (of which I am one) is how we blather on and on about “freedom” and then voluntarily give it up at every available opportunity. As long as we give it up in the service of commerce, rather than in the service of government, we seem to embrace the steady erosion of our rights, our health, our privacy, and even our minds.

After a decade of brainwashing that I need to have the latest and greatest gadget on my body at all times, I tried an experiment. A few weeks ago, I went to a conference and made the conscious decision to leave my cell phone in my hotel room safe each day. After a couple of days of fidgeting and feeling disconnected, I relaxed and returned to my pre-cell-phone state of attention and being-present. It was a really wonderful feeling. I picked up my messages after the conference each day and was able to be focused in how I returned and responded to those calls.

The moment the conference was over, of course, I went right back to being a cell phone addict.

Last night, I met a friend for dinner. I purposely left my cell phone at home, and surprise!, my attention was on her all throughout dinner. It felt kinda neat.

If you’re up for an experiment, try going 2 days without your cell phone. Pretend it’s a landline, leave it at home, make plans with people before leaving the home, etc. It actually produces a nice, high-quality evening. I’m starting to believe there’s an optimum convenience point. Too little convenience and life is drudgery. But too much and life becomes an endless stream of distractions/interruptions.

Hint: If your immediate response to this is “there’s no way I could ever do that,” stop and think again. You absolutely could. The fact that you’re so defensive about it and eager to justify not even trying has more to do with the symptoms of addiction that cell phones trigger than with reality. Just do it! You’ll survive!

Attitude isn’t everything!

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I recently read an article in which the writer asserted that “attitude is everything.” He was quoting none other than the famous sales guru, Zig Ziglar.

I respectfully disagree. I believe attitude is simply part of the equation. You can succeed with a bad attitude and you can fail with a good one.

In my experience, bad attitudes can crush people. A bad attitude can keep someone from achieving their goals, even if they are superb and skillful in their execution. Their attitude can blind them to opportunity, prevent them from even attempting to find solutions, destroy relationships, and cause them to give up too soon.

A good attitude, however, isn’t enough. It still needs to be backed up with thought, ability, and execution. The good attitude may set the stage for someone to work hard, learn, try, fail, and try again. But the attitude itself isn’t enough. Confidence should follow from competence, not replace competence. Similarly, attitude should partner with aptitude, not replace it.

Google, building better bosses. I doubt.

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In this New York Times article, the reporter explains how Google is using data to “build better bosses.” Their first amazing discovery: bosses are wanted not for technical skills, but for management skills. Wow. That’s an eye-opener. I’ll bet no one’s ever observed that before. Actually, last time I checked, companies often promote people to management based on technical skill, give them virtually no training, and then those managers do a piss-poor job. This has been going on for decades, and don’t think I’ve ever met an engineer over 25 who would find this surprising. Of course, I haven’t worked at Google.

Fortunately, they’ve now hired statisticians to analyze a gillion pages of interviews and measurements. What I love about statisticians is how they’re known for making keen, non-obvious observations and distinctions in human behavior, and measuring them. Excuse my incredulity, but … really? No sociologists? No psychologists? No cognitive behavior people? The human race knows an incredible amount about ways of understanding and measuring human behavior in data-driven, statistically significant ways.

Are Performance Evaluations Examples of Their Management Expertise?

By the way, Google has four performance evaluations a year. Frequent feedback, right? Maybe. There’s increasing evidence that performance evaluations serve almost no function except to stress out everyone involved. If an employee and their boss communicate well, there should be no surprises at such evaluations, rendering them unnecessary.

And if they really believe performance evaluations are valuable, do they bother to quality control them? Do they make sure that their managers are trained in an objective way of evaluating behavior? Performance evaluations are measurements, and the managers are the yardstick. Measuring something with a broken yardstick produces a meaningless measurement.

Are They Accounting for Cognitive Biases?

They go so far as to mention cognitive biases in the article but don’t seem to have considered whether or not there’s a halo effect in interviewing their employees about what makes a good manager. Perhaps if you ask someone what makes a good manager, they always give you the same answer, which would imply we have a built-in explanation that may or may not even relate to external reality. And if that’s so, turning a description like “listens well” into actual teachable behaviors is a trick in and of itself. (I’ll bet some of them don’t know how to rigorously realize that a phrase like “listens well” is too vague a concept to be teachable.)

Just look at the field of leadership research; pretty much every leadership book says the same thing about what makes a great leader. Yet with 80,000 leadership books on the market, we still suffer from a terrible lack of leaders. Maybe we’re wired to think about leadership in terms that aren’t specific-enough to be useful or are simply wrong. There’s ample evidence that people are extremely bad at predicting their own reactions. So asking someone “What kind of boss would be good?” may produce well-meaning but inaccurate answers.

I admire Google’s desire to be data-driven. And I also envy and admire their persistent desire to give their entire company the intellectual freedom and comfort of a college campus. Yay!! More companies should do this. (And more high tech companies have done it in the past, as long as they were pulling in the kind of gross margins Google pulls in. Most such companies abandon those cultural artifacts and revert to more traditional and soul-destroying modes when under economic pressure. I hope if it ever comes to that, Google has the fortitude to hold on!)

But at least as much as I love what I’ve heard about their culture, at least as reported in this Times article, their attempt to build a better boss is high on data manipulation and gathering, and very low on data quality.

Sad for T-Mobile

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I just visited T-Mobile.com and saw their big ad, emphasizing the amazingness of their 4G network. They haven’t yet realized that people are no longer buying cell phone service. People are now buying a platform and functionality, which happens to run on top of cell phone service. Super-fast streaming does me no good if I can’t super-fast-stream the tools I need/want to keep my life going.

Maybe most people think of their cell phones merely as media, entertainment devices, but I think that’s too simplistic. A vast number of us think of our cell phones as adjuncts to how we do business. I tried the MyTouch 4G from T-Mobile and returned it, because it was hyper-optimized for Facebook, tweeting and texting and watching YouTube. But could it handle a to-do list or a memo pad? Nah. They hadn’t thought to include that. (After 9 hours of downloading Android apps to handle that functionality and not finding a single app that did everything I wanted and was also pleasant to use, I finally gave up.)

Get with the program T-Mobile: the platform is now what matters. The game has changed. Rather than just OEMing Android and the phone hardware, take a good look at how people use their smartphones. Don’t just read the hype. Watch people. Watch teenagers. Watch parents. Watch businesspeople. Then make sure your entire phone experience supports those people’s ability to get their work done.

If you can get the iPhone, do it, and do it as fast as you possibly can. Many people are more loyal to the platform than the carrier, and if you can handle the capacity issues, providing the iPhone with your excellent service will be a big win in the marketplace.

If you elect to stay Android-only, look much closer and more deeply at how people use their phones. Don’t be afraid to hire a team of programmers and have them do as much customization as it takes to produce something both functional and usable. That’s not easy, but it’s doable. You just need to know that’s your goal going in.

Good luck. My contract ended last month, so now I’m free to switch carriers with no penalty. I can buy a Canadian unlocked iPhone and manually trim my existing SIM card to fit, but that will cost me an extra $1,000. Or I can switch to AT&T or Verizon. Or, I’m willing to wait for you to get the iPhone. But not forever…