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Extra-rational Motivation vs. Material Interests in Capitalism… and in Schooling

April 10, 2019 Leave a comment

A recent Evonomics blog post by Peter Turchin, “Does Capitalism Kill Cooperation?”,  examines our current economy and describes the corrosive effects of competition and the benefits of collaboration. At the end of his analysis, he concludes that innovation and the resulting economic growth that stems from innovation is NOT the result of competition– the desire to win—  but rather the result of “extra-rational” motivation.

He opens his post with this description of the current mindset of economists:

Milton Friedman, of course, always argued that economic agents should strictly follow their material interests;there is no place for “extra-rational motives” in business. Most economists today feel the same way, although few are willing to state it as boldly as Friedman did.

Mr. Turchin acknowledges that in many– if not most— cases people make economic decisions based on optimization: they want to get the most value for the lowest cost possible. But he goes on to note that at the systems level capitalism operates differently, emphasizing that capitalism has been successful as a system because it promotes innovation:

But capitalism is not just about buying and selling things—people have been doing commerce for millennia before capitalism. Surely the amazing capacity of capitalism to transform knowledge into innovation, and innovation into economic growth is one of the central of its attributes? So let’s talk about such successful innovation hotspots, as the Silicon Valley. What are the motivations driving successful entrepreneurs within such hotspots?

Mr. Turchin then answers this question using the findings of Victor Hwang and Greg Horowitz whose recent book The Rainforest: The Secret to Building the Next Silicon Valley examines the characteristics of regions where innovation is prevalent. And here’s what they found:

A central theme that recurs throughout the book is that successful entrepreneurs, and the successful innovation systems in which they operate, such as the Silicon Valley or Route 128 in Massachusetts, are the antithesis of the rational businessperson postulated by Branko (a Friedman acolyte) one who is solely motivated by money. In fact, “Rainforests [their term for successful innovation systems] depend on people not behaving like rational actors.” “For Rainforests to be sustainable, greed must be restrained.” “Predatory venture capitalists might win a few in the short run, but they do not last long in the business and are unable to build lasting firms.”

Extra-rational motivations—those that transcend the classical divide between rational and irrational—are not normally considered critical drivers of economic value-creation. …  These motivations include the thrill of competition, human altruism, a thirst for adventure, a joy of discovery and creativity, a concern for future generations, and a desire for meaning in one’s life, among many others.Our work over the years has led us to conclude that these types of motivations are not just “nice to have.” They are, in fact, “must have” building blocks of the Rainforest.

Hwang and Horowitz identify four recommendations to create the “Rainforests” that result in innovation:

First, diversity, which brings people with very different knowledge and skills together, such as a scientist, a venture capitalist, an engineer, a sales specialist, and an administrator (a CEO).

Second, extra-rational motivations, because self-regarding rational actors are simply unable to cooperate to launch a successful innovation enterprise.

Third, social trust, because successful cooperation is the only way to beat the terrible odds against a successful innovation startup, and cooperation requires trust.

Fourth, a set of social norms that regulate the behavior of various cooperating agents, and willingness both to follow them and to enforce these rules by various sanctions.

After listing these recommendations, Mr. Turchin concludes his post with this:

In other words, Hwang and Horowitt describe a system that uses precisely the same components to bring about cooperation that have been studied in other settings (a foraging group, a military troop, a religious sect, and a state), and in the abstract, by cultural evolutionists.

The Rainforest, then, provides ample empirical material to reject the theory that economic growth, which is based on innovation, is moved by self-interested rational agents. But—and it was one of the real eye-openers for me—it also explains why this is so.

The notion that extra-rational motivations are “must haves” in the Rainforest and the four recommendation offered by Mr. Hwang and Horowitt resonate with me. And they underscore my belief that our public school “system” is based on the wrong premises. Indeed, they currently operate on the opposite set up. They are not diverse, they focus on competition and individual performance over collaboration and group performance, they have rules imposed with no input from students or, in some cases, from staff members, and— as a result— there is no effort to create social norms based on consensus.

Politicians, parents, businessmen and voters all seek to have schools that create innovative and caring graduates who can function effectively in our economy and our democracy. If we want that end, we might consider following the recommendations for creating a “Rainforest” instead of staying with our current system that sorts and selects based on a factory model.

 

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Shareholder Primacy Undercutting Capitalism… AND Democracy.

April 1, 2019 Comments off

The NYTimes David Leonardt, whose columns often miss the mark, hit the nail on the head with a column that appeared in yesterday’s paper titled “A CEO Who’s Scared for America”. The op ed piece profiled Peter Georgescu — a refugee who became C.E.O. of the advertising firm Young & Rubicam. For the past several years, Mr. Georgescu has written extensively about the demise of capitalism, which he traces back to the 1970s:

Things began to change after the 1970s. Stakeholder capitalism — which, Georgescu says, optimized the well-being of customers, employees, shareholders and the nation — gave way to short-term shareholder-only capitalism. Profits have soared at the expense of worker pay. The wealth of the median family today is lower than two decades ago. Life expectancy has actually fallen in the last few years. Not since 2004 has a majority of Americans said they were satisfiedwith the country’s direction.

“Capitalism is a brilliant factory for prosperity. Brilliant,” Georgescu says. “And yet the version of capitalism we have created here works for only a minority of people.”

Shareholder primacy (aka Shareholder-only capitalism), Milton Friedman’s mental construct that was promoted by Lewis Powell in a memo he wrote in 1973, is the basis for the pro-business libertarian movement that eroded funding for government at all levels. When it was combined with Watergate, the rise of Reagan-omics, and Grover Nordquist’s takeover of the GOP we find our selves with gutted regulatory agencies, crumbling infrastructure, underpaid workers, a shredded safety net, and underfunded public schools… but the billionaire class is doing well. The unfettered drive for profit at the expense of the well-being of employees and voters can only stop when faith is restored in government at all levels— an uphill battle given the lack of resources now available thanks to tax cuts.

I’m glad that more and more writers are citing the shift away from the “old” version of regulated capitalism (aka stakeholder capitalism) toward the new brand of unregulated capitalism which narrowly shifts all the money in one direction: upward!

Flooded Prairies and Flooded Schools

April 1, 2019 Comments off

An article in today’s NYTimes described the impact of flooding in the Midwest where epic rainstorms and snow melt are combining to overrun levies that were designed for an earlier era. Here’s a paragraph from the report by Mitch Smith and John Schwartz and my comment that uses this quote to analogize what is happening with the floodwaters to what is happening in public education:

“Many of the levees, usually earthen and topped with grass, were built by farmers decades ago and are now managed by a patchwork of local government agencies known as levee districts that often do not coordinate or even follow the same rules. With increased flooding in the past few years, the levees are being tested more frequently than ever before, straining the finances and expertise of some of those districts.”

As one who laments the lack of equity in school funding, I see this paragraph as an apt metaphor for what has happened in public education. Too bad the challenges facing public schools are not as evident as the challenges facing those who build and design levies. The trade-offs are analogous: do we want to spend more money to replace an obsolete design or “let nature take its course”. Here’s the public school version of the above paragraph:

Many of the SCHOOLS, usually 1950s VINTAGE EGG-CRATES WITH DOUBLE LOADED CORRIDORS, were built years ago and are now managed by a patchwork of local government agencies known as SCHOOL BOARDS that often do not coordinate or even follow the same rules. With DEMANDS FOR MORE SERVICES AND MORE SOPHISTICATED INSTRUCTION in the past few years, CHILDREN are tested more frequently than ever before, straining the finances and expertise of some of those districts.

And like those who deny climate change, there are many who deny the significant changes wrought by technology, family structure, and the erosion of taxpayer support.

Changes in culture and loss of taxpayer support are flowing the classrooms the same way as swollen rivers are flooding the Midwest…. and in both cases voters face tough choices.

Something Positive Emerges from the Ashes of the Amazon Debacle: Public Awareness of Tax Breaks

March 9, 2019 Comments off

The NYTimes today featured an article by Matthew Haug describing the tax breaks developers received in the construction of Hudson Yards, an ambitious project that involved the construction of several multi-millions dollar office towers, infrastructure upgrades, and parks and a new school on the West Side of Manhattan. The article’s title, “Amazon’s Tax Breaks and Incentives Were Big. Hudson Yards’ Were Bigger” seemed to implicitly accuse those who supported Hudson Yards but opposed Amazon as hypocrites. But from my perspective, the article did something more important than pointing out hypocrisy: it pointed out that not all tax credits are money grabs by a singular billionaire, that not all tax credits have an adverse impact on nearby neighborhoods, and ALL tax credits need to be examined in the sunshine before they are agreed upon by politicians.

The Hudson Yards project DID make several billionaires even more wealthy… but since government cannot directly provide capital for major projects like Hudson Yards (or Amazon for that matter), some venture capital is required and that venture capital requires a high rate of return since, in some cases, the venture capitalists make bad decisions by investing in projects that do not pan out at all. But unlike the Amazon project— which benefitted one corporation that has a deserved reputation for undercutting wages, displacing local small businesses, and rewarding shareholders with the profits made on the backs of overworked employees and underfunded local governments— Hudson Yards engaged multiple businesses most of whom will receive tax breaks contingent on the creation of new jobs. Also unlike the Amazon project, Hudson Yards was coordinated and devised in concert with the local government. Finally, Hudson Yards was taking an area of the city that the Times described as:

…a neighborhood that included a stubby collection of brick warehouses, factories and tenements built when the Hudson River docks were busy. In the middle was an unsightly rail yard.

Hudson Yards supporters believe the development, which included an extension of the No. 7 subway extension, parks and other improvements, will make the Far West Side an overall better neighborhood. And as for critics of economic development projects like the Amazon one, the Times concludes its article with this:

Councilman Brad Lander of Brooklyn, a Democrat who is a founder of the Council’s Progressive Caucus, said it was smart to expand the No. 7 subway and create parks on the West Side.

But tax breaks for specific companies are a different story, said Mr. Lander, who was an opponent of the Amazon deal.

We’re giving away tax breaks without paying close attention to what’s a good deal or not a good deal,” he said.

If the failed Amazon deal compels newspapers and politicians across the country to pay closer attention to what’s a good deal or not a good deal, then some good will come out of this debacle. Who knows, maybe voters will want to provide more funds to the government so that they can upgrade infrastructure on their own as a means of luring business. It’s just possible that good roads, high quality public services, beautiful parks, and good schools might entice businesses to locate in a city or region more so that cold cash.

One Phrase Explains Demise of Alternative Colleges: “…a Desire for a Higher Return on Investment”

March 4, 2019 Comments off

I have a soft spot in my heart for so-called “alternative colleges”, a soft spot born from my own personal experience as an undergraduate and my older daughter’s experience as a student at The Evergreen State College in Olympia, WA and my younger daughter’s experience at Amherst College.

As one who valued hands-on experiential learning and the opportunity to develop one’s own curriculum, I stumbled into an ideal situation as an undergraduate at Drexel University. When I entered Drexel, it was an “institute of technology” like it’s more famous role model Massachusetts Institute of Technology. It differentiated itself from other “institutes of technology” by offering a five year work-study program that enabled undergraduates to work six-month stints in industry where they could see how the abstract coursework they were completing in the classroom translated to the workplace. When I enrolled, I intended to pursue engineering, but after two six month assignments at the Ford Motor Company and increasingly daunting and uninteresting coursework in mathematics and science I decided to change majors to Commerce and Engineering— a hybrid major Drexel offered to disenchanted and/or challenged engineering majors who wanted to pursue a degree that would prepare them for the workplace at that time. While I found the coursework much more interesting and upgraded my cumulative average, after a successful six-month period at Mobil Oil, I turned down an offer to return there because I had decided to become one of the first students to enroll in Drexel’s fledgling “Humanities and Technology” college— an undergraduate degree that Drexel needed to offer in order to become a university instead of an institute of technology. My plan was to major in English, teach in the City, and find my way to a leadership role in that organization instead of climbing the corporate ladder. While my classmates dreamed of becoming CEO of their own business or of an existing Fortune 500 company, I dreamed of being Superintendent of Schools in Philadelphia.

As a new student in a new and as-yet-undefined program, I was able to design my own major for my final two years. I took a heavy load of poetry, literature, and history courses, was tutored in the design of standardized tests by Drexel’s lone psychometrics professor, and dabbled in introductory courses in biology and pure mathematics (as opposed to the five calculus and many physics and chemistry courses I took as an aspiring engineer) in order to broaden my opportunities for education certification. I also spent three months as a student teacher in English at West Philadelphia HS. When I graduated, I had sufficient courses to be certified in English, social studies, science, and mathematics. Since Pennsylvania only allowed a prospective teacher to have two certificates, my academic advisor recommended that I get certified in English and mathematics. But more importantly, I had a sense that I had in some sense controlled my destiny for the previous five years.

When my daughters were selecting a college to attend, they leaned toward schools that did not have distribution requirements and allowed undergraduates to take a wide array of courses. My older daughter specifically sought out unconventional schools that would allow her to pursue coursework based on her own interests. The colleges we visited included some liberal arts schools that had distribution requirements, but also included Antioch in Ohio and The Evergreen State College in Olympia WA, the school she ultimately selected. My younger daughter was more interested in attending a school that would nurture her desire to become a writer, which led us to visit Brown, Wesleyan, and Amherst where she ultimately enrolled.

Given my personal experiences as an undergraduate and the fact that their mother majored in art as an undergraduate and was working as a fabric artist at the time they were aspiring to college, we supported the idea of them attending liberal arts colleges. We both recognized that once they obtained degrees they would be able to find their way in the world… and, from my perspective, if they could effectively design their own course of studies they would have a sense of agency that many college students who follow a prescribed curriculum lack.

With all of this as a backdrop, I was saddened to read Anemona Hartocollis’ article in today’s NYTimes that one of the groundbreaking “alternative colleges”, Hampshire, was on the verge of closing its doors. The reason?

The problems alternative colleges face point to a larger crisis in higher education: a shrinking college-age population, especially in the Northeast and Upper Midwest, where many of these institutions are clustered. But they are also confronting a growing skepticism of the liberal arts, often a focus of nontraditional programs, and a desire for a higher return on investment.

The shrinking college-age population is a demographic reality, but the notion that college attendance is based on a “return on investment” is a mental construct that exemplifies everything that is wrong with traditional education and the so-called K-12 “reform” movement that perpetuates traditional schooling. A quote from Eva-Maria Swidler, a faculty member at Goddard College, an alternative college in Plainfield, Vermont, offers the best insight on the current state of affairs in undergraduate education:

“What I see happening under the aegis of ‘financial responsibility’ is a purging of colleges that serve unconventional students….What this purge leaves behind is a system of higher education even more focused on either training only the elites in the liberal arts or training everyone else as obedient workers for a corporate work force.

The call for students to be “ready-for-work” creates a demand for cookie-cutter curricula that prepare undergraduates for job vacancies that exist today but are unlikely to exist in the future… and by obediently completing these prescribed course sequences undergraduates who aspire to get a good “return on their investment” are denied the opportunity to control their own destiny, to learn-how-to-learn, to have any sense of agency, or be prepared for an ambiguous future.

Education is not intended to “prepare students for work”… it is, in the words of John Dewey, “life itself”. I did not realize it when I entered college, Drexel was following Dewey’s admonition:

Give the pupils something to do, not something to learn; and the doing is of such a nature as to demand thinking; learning naturally results.

I doubt that John Dewey ever uttered the phrase “return on investment”… indeed, I cannot think of any respected education philosopher who ever used that phrase. Nor did any creative genius.

Goodwill MOOCs Surpass All Others for Enrollment. Why? They Provide What THEIR Customers Need: Job Training

March 2, 2019 Comments off

Many education writers and bloggers, including yours truly, have predicted that MOOCs (Massive Open Online Courses) would someday replace the traditional post-secondary offerings, But like many others, I was completely surprised to read that Goodwill— yes, THAT Goodwill that sells used clothing— has the second most robust MOOC program in the world! Why? Because while start-ups like Udacity, edX and Coursera all fought over the traditional post secondary market, Goodwill seized the larger and more urgent market: those seeking fundamental job skills. As Brandon Busteed of Forbes writes:

…there’s good reason to believe it could quickly surpass all MOOCs in total users.  Why?  It’s simple.  Goodwill got the premise right.  And that premise is all about jobs.  It’s providing the education and skills that help move people from unemployed to employed, from a low-paying job to a higher-paying one, from a bad or average job to a good job.

And in our country, unemployed and under-employed workers all agree that getting a job that pays well and offers benefits is the way to get off the treadmill of pointless and low-paying work… and that getting job skills is essential to securing a better job! And the good news from my perspective as one who sees the world through the lens of social justice, Goodwill, unlike its competitors, is not interested in profit:

Goodwill’s entire focus, though, is a market of people who arguably have both the highest degree of motivation and the least means of accomplishing their goals.  Their model may be the ultimate application of the MOOC educational model – free courses for those who desperately want jobs and can’t afford to pay for education or training.  If Goodwill and its donors and partners can find ways to sustain offering their courses for free to those who need them most around the world, they will most certainly become the world’s biggest MOOC.

I wish them well, and hope that the Federal government, who seems to feel free to bail out and /or support profiteering private post-secondary schools, might find a way to support Goodwill’s MOOCs.

Build a Wall… or Build a Floor? Clearly the Wall is Unnecessary… But a Floor for Earnings is an Emergency

February 28, 2019 Comments off

Reverend William Barber and Dr. Liz Theodoris, co-chairs of the Poor People’s Campaign: A National Call for Moral Revival, wrote a compelling op ed piece for the Guardian declaring that poverty, not the threat of an invasion by Spanish speakers, is the real emergency in our nation. The essay is full of chilling statistics illustrating the widespread poverty in our nation and the crumbling infrastructure that has resulted from decades of underfunding by governments at all levels… and by both parties! Here are some examples:

And the fact is, it’s not just the Republican party that has ignored these issues. Poverty has increased by 60% since the Rev Dr Martin Luther King launched the 1968 Poor People’s Campaign, under both Democratic and Republican administrations.We can no longer accept the same political discourse that for the past 50 years has refused to mention poverty nor can we accept politicians enacting policies that prey on the poor. It’s time to talk about the real emergencies plaguing our nation and the real moral issues of our day – the lack of health care, living wage jobs, clean water and sanitation, the militarization of our communities, the attack on indigenous sovereignty….

This is the time to take on the lies of the enablers. When people say poverty is caused by laziness, race, or lack of moral character, we must expose these lies.

In today’s America, the real emergency is that a quarter of a million people die from poverty each year while our political system refuses to use the great wealth of this nation to lift the load of poverty.

Democrats should validate the fact that 250,000 people die from poverty each year, and hammer that fact home during this debate. One way they could do so is to declare that when they have the opportunity to do so, hopefully after the 2020 election, whoever is elected President as a Democrat will declare a national emergency and divert funds earmarked for wars abroad to deal with the decades-long emergency of poverty. Such a declaration would shine a spotlight on this shameful reality.