Will Talking About Tradeoffs Save Our Economy?

Posted on March 3, 2014
Filed Under Critical Thinking, Economics | Leave a Comment

We live in a world of soundbites, which is unfortunate because it means the deep, rich, nuanced view that accurately reflects most significant issues in the world has been lost. Why read an in-depth analysis that requires 12 minutes of your time when you can just retweet a couple 140 character zingers on the same topic and feel like you’ve won a political battle? Our short attention spans, our neomania, and the media’s monetization of our hypernovelty seeking have discouraged us from reading any in-depth analysis on anything, and discouraged the media from reporting on anything in a deep, rich, and nuanced manner.

As a CEO, I had to get up in front of my company at the beginning of the year and talk about our 4 big goals. These are “the only 4 things we care about this year.” It’s a lie, unfortunately. There are really about 400 things I care about this year, but most people aren’t ready to have an ongoing discussion about the relevance, priorities, and dependencies involved in a whole bunch of subgoals. I have to keep things simple, just like the media. So, I have to admit, it isn’t just a problem with the media. It’s a problem with humans, with society, and with the way we think. We crave clarity and simplicity. Unfortunately, it’s killing us.

You know the straw man caricatures of each party as well as I do. The liberals believe that if we just made the rich pay their fair share and took care of the people at the bottom, that the economy would thrive. The conservatives believe that if we just kept tax rates low and let the market take care of things, the country would be fine. But it’s all wrong.

The truth is actually very complex, and what has been hidden from us, in our soundbite world, is the nuanced understanding of these issues. But there is hope. The CBO analysis of a minimum wage hike last month was the first time I ever remember a national discussion about tradeoffs. The analysis basically showed that such a hike would do two things:

  • 1. Lift 900,000 people out of poverty.
  • 2. Kill 500,000 jobs.

Wait, you mean we can’t get our economic cake and eat it too? Of course we can’t, but that didn’t stop each party from jumping on the point that most resonated with their ideology.

In my mind though, this was a huge step forward for the United States. For the first time, we are looking at an issue not as a panacea, but as something rich and deep and nuanced. Which would we prefer… 1.4 million people who are employed but under the poverty level, or 900,000 people employed above the poverty level but 500,000 people not working as a result? Employment is important because it builds skills and lets people eventually move to higher paying jobs. But working at a level that doesn’t make ends meet can also make things seem hopeless for the people in those positions. It is a difficult decision.

Government issues, particularly those that affect the economy, are actually full of tradeoffs that we don’t usually discuss. Studies show that unions destroy jobs, yet get higher pay for those who are employed. An article about North Carolina’s unemployment benefit experiment shows that killing benefits did encourage more people to seek work, but many of those people are employed in jobs way below their skill level just to make ends meet. A recent study showed that inequality, which is supposed to be the main topic of the next election, might more to do with changes in mating patterns in the U.S. rather that the traditional rich get richer rhetoric. Love vs. Money tradeoffs.

The truth is that these issues, and most interesting issues really, are very complex and difficult to understand in a 140 characters, or even a 700 word editorial. As a nation, I’m hopeful that this CBO discussion of economic tradeoffs will encourage people to talk about politics and economics in this way going forward. It’s all about nuance and tradeoffs, and unless we understand and embrace that, we can’t be successful at solving the problems we face.

How The Economic Equality Mindset Holds Back The Economy

Posted on December 13, 2013
Filed Under Economics | 1 Comment

There is a great Ted talk about Grit, given by Angela Duckworth but based on initial research by Carol Dweck. The “meta” takeaway from Dweck’s research is that mindset matters. The way people think about something affects how they act. Dweck proved this by showing that students who believe success is based on hard work do much better when challenged than students who believe success is based on intelligence.

I was thinking about Dweck’s research this week when I read this infographic about the view of Inc 5000 entrepreneurs think about the economy. Spoiler alert: They tend to lean right, not left. Sixty three percent of them voted for Mitt Romney. Ten percent consider themselves politically liberal. Seventeen percent are registered Democrats.

It made me wonder… why, in a world where the government constantly speaks about the importance of entrepreneurship, how we need more entrepreneurs, and how they make up the backbone of our economic growth, why do we praise these entrepreneurs so much but then pass off their economic and political views as old fashioned rubbish? Why do we, as a society, think much more highly of the economic ideas of someone with no relevant experience (a populist like Elizabeth Warren for example) instead of listening to the ideas of the very people who are in the trenches and we claim are the lifeblood of our economic growth?

I wonder if these two ideas are tied together. I wonder if entrepreneurs are like the students who have grit. I wonder if holding the belief that the economy is a meritocracy actually promotes economic growth by encouraging people to go out and start companies. I wonder if the opposite mindset, the idea that you’ve worked hard and are owed something, but big companies and rich people have ripped you off, is the kind of mindset that could hold you back.

We know mindset affects expectations of performance. We know expectations of performance affect economic decisions. Maybe our economic problems are just as psychological as they are structural.

Does Passion Matter?

Posted on October 13, 2013
Filed Under Critical Thinking | 3 Comments

Scott Adams, the man behind Dilbert, has a new book out about career success. He discusses some concepts from the book in this Wall Street Journal article, and the most interesting thing to me in the article is his rejection of the conventional wisdom that you should “follow your passion.” Here is his explanation.

But the most dangerous case of all is when successful people directly give advice. For example, you often hear them say that you should “follow your passion.” That sounds perfectly reasonable the first time you hear it. Passion will presumably give you high energy, high resistance to rejection and high determination. Passionate people are more persuasive, too. Those are all good things, right?

Here’s the counterargument: When I was a commercial loan officer for a large bank, my boss taught us that you should never make a loan to someone who is following his passion. For example, you don’t want to give money to a sports enthusiast who is starting a sports store to pursue his passion for all things sporty. That guy is a bad bet, passion and all. He’s in business for the wrong reason.

My boss, who had been a commercial lender for over 30 years, said that the best loan customer is someone who has no passion whatsoever, just a desire to work hard at something that looks good on a spreadsheet. Maybe the loan customer wants to start a dry-cleaning store or invest in a fast-food franchise—boring stuff. That’s the person you bet on. You want the grinder, not the guy who loves his job.

There are two schools of thought here. One says that passion is the thing that keeps you going when times get tough. The other says passion is fleeting and when you lose it, you give up too easily.

After nearly 5 years running Backupify, I definitely find myself in the latter camp. I look at a lot of the other startup companies of our vintage, and they were boom and bust. They rode high, much higher than we ever did in terms of hype and valuations, and then came crashing down. All the while, Backupify was grinding it out, slow and steady, constantly moving forward.

I can’t say that I had passion for cloud to cloud backup when I started. And even though I know so much about it now, and I love to talk about it, I’m not sure “passion” is the word I would use to describe my feelings. So what drove Backupify forward? Well, ask 5 different early employees that question and you will probably get 5 different answers. But here is what I think. I’ve always been a grinder. I was raised to be a grinder. My dad never preached “follow your passion” but rather “work hard and don’t be a drain on other people.” I’ve always had a lot of mental and physical stamina. In high school, college, and as an adult, I have always been able to focus longer, work harder, and deal with more crap than most people. In fact, when I raised the very first round of financing for Backupify, I pitched an at Open Angel Forum event at 7pm in LA, got on a red eye to Boston, tweaked my presentation during the flight, landed and went straight to the offices of General Catalyst to do another presentation on no sleep. (They invested).

I don’t think passion is a bad thing, but when it is the main thing you are looking for, beware that it is fleeting. I see this a lot in young employees versus more mature employees. Young employees read the startup blogs and want to come work for a startup where they can put their passion to work. They think startups should be fun. Mature employees realize that startups are harder, and more difficult, than other types of work. They are in it because they like the grind and are willing to tolerate all the extra crap because they know the career experiences are better. The battle scars help them climb the career ladder faster, learn more, and give them the opportunity to have an impact on the direction of the company.

Young employees often expect the passion to stay forever, and they give up when it is gone. They move on to the next passion, which is why they stay 2 years at every job, no longer. They blame the job because their bosses didn’t keep their passion engaged. They didn’t realize that it’s the people with the mental stamina to suck it up and work through their passion droughts who are ultimately successful.

So maybe Scott Adams missed something in his article. Maybe a “grinder” is just someone who has a passion for winning, a passion for pushing forward in the face of challenges, and a passion for growing as a person. Maybe the issue is that we encourage people to have the wrong kind of passion - passion for the thing instead of passion for the process or passion for the final goal.

There is a lot of research (see Carol Dweck) that says success is a matter of grit. That sounds like the key to being successful isn’t passion - it’s the ability to push forward even when the passion is gone.

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