Dr. John C. Hulsman: The Ten Commandments of Political Risk

Disturb us, Lord, when we are too well pleased with ourselves
When our dreams have come true because we have dreamed too little
When we arrive safely because we sailed too close to the shore.

Disturb us, Lord, to dare more boldly, to venture on wider seas
Where storms will show your mastery
Where losing sight of land, we shall find the stars.

—Excerpts from Sir Francis Drake’s prayer, 1577 (apocryphal)

HulsmanThe great goal, the Everest of my book, has been to identify the historical elements that comprise the rules of the road for mastering political risk analysis and to holistically put our ten commandments to use in explaining the baffling world we presently live in. Having discovered these commandments—and illuminated them through the use of historical story-telling, deriving them from real-world policy situations throughout the ages—we can get to the Holy Grail of actual understanding.

Here at the end of our story, through the use of this unique heuristic method, we have delineated the long and neglected history of political risk analysis, linking this important tale to the broader efforts of both business and political leaders to master risk in general. Confident in what geopolitical risk analysis has been, is, and can be, it is clear that the Delphic dream of soothsaying—in a limited way, over limited issues, for a limited period of time—can be partially fulfilled.

  • “We are the risk.” As the history surrounding Sejanus and the decline and fall of the Roman Empire makes clear (alongside the corroborating tale of present-day Europe’s decadent decline), geopolitical analysts have a terrible time looking in the mirror and seeing that the society they are part of can itself be the major geopolitical risk problem.

 

  • Gaming out “lunatics.” Far too often geopolitical risk analysts let those with very different belief systems off the hook by lazily assuming that they must be crazy, rather than looking for the method to their madness. As the story of “The Old Man of the Mountain” and the Third Crusade (with inter-chapters on both Charles Manson and ISIS) makes clear, there is almost always an internal logic to any seemingly mad geopolitical interlocutor that can be followed and assessed.

 

  • Gaming out “chess players.” Amidst the daily tumult of a constant barrage of information, it is easy to lose sight of the intellectual needle in the haystack: the assessment of “chess players,” those geopolitical decision-makers who have stable, rational, coherent, long-term strategies in place to further their geopolitical goals. As reviewing the history of Niccolo Machiavelli and Pope Julius II (with an inter-chapter on George Washington and Alexander Hamilton) illuminates, finding these rare geostrategic birds is well worth the effort, as once they are identified (which is difficult), their future actions can rather easily be predicted.

 

  • Recognizing game changers. As the stirring story of John Adams in the sultry summer of 1776 makes clear, seeing the bigger picture—discerning how specific contemporaneous events fit into the larger historical pattern—is a mighty tool in political risk analysis. Separating the wheat from the chaff and intellectually drilling down on what really matters and its historical meaning (as we see both Adams and inter-chapter hero Winston Churchill doing in very different historical contexts) allows the political risk analyst as well as the foreign policy practitioner to see the world as it actually is.

 

  • Balance is the key to foreign policy. Having discovered the secrets of one major driver of geopolitics—be it macroeconomics, geopolitics, or cultural power—far too often analysts quickly forget that there are others and that it is the mix that explains everything. The twin stories of a beleaguered Venetian Republic and a seemingly all-conquering Napoleon in 1797 allow a dual critique of both an economics-only and overly militaristic policies and the doom to which both one-sided initiatives inevitably lead.

 

  • If you are digging yourself an intellectual hole in foreign policy analysis—stop. The “losing gambler in Vegas” syndrome affects both policy-makers and analysts. As the legendary Robert E. Lee found to his supreme peril at Gettysburg (and also “the best and the brightest” of the Kennedy and Johnson administrations as they met their nemesis in Indochina), pushing ahead with an already failed policy in a desperate effort to recoup past losses leads to calamity.

 

  • Know your country’s place in the world. The singular case of the late Victorian titan Lord Salisbury—who bravely and correctly righted Britain’s foreign policy to fit the paradox of its relatively declining but still dominant place in the world of the 1890s—highlights this vital requirement for both policy-makers and analysts alike. Only by fearlessly and correctly assessing your country’s true place in the world (as the inter-chapter on the Genro of Japan makes clear happened across the globe from Salisbury a generation earlier) can you pursue successful political risk analysis.

 

  • Do not put all your eggs in one strategic basket. Distantly related to the “losing gambler in Vegas” syndrome, the “promised land fallacy” besets decision-makers and analysts who ruinously rely on one overall strategy to magically attempt to alter their country’s overall geopolitical position in the world. In the case of Wilhelmine Germany, Admiral Von Tirpitz’s disastrous plan to challenge British naval might (echoing the inter-chapter on Soviet leader Nikita Khrushchev’s equally ruinous “Wars of National Liberation” gambit) helped lead to the Great War and Germany’s destruction.

 

  • Know the nature of the world you are living in. The trials and tribulations of Beatle George Harrison (with the inter-chapter focusing on the diametrically opposed case of the fall of Brian Jones and the rise of the Rolling Stones) and the stunning, lightning-quick dismemberment of his band dramatically underline that successful systems can collapse in the blink of an eye if their underlying power realities change, failing to any longer reflect the systemic power facts on the ground that created such a system in the first place. Policy-makers as well as political risk analysts must know both the nature of the global system they are living in (is it characterized by one great power, two, or many?) as well as if that system is durable, fragile, or evolving.

 

  • Prepare for the “butterfly effect.” The telling present-day case of Deng Xiaoping and the colossal success he made of both Chinese foreign and economic policy must not obscure the reality that East Asia today sits on a powder keg, a single random event away from 1914; just one drunken Chinese sea captain could quite plausibly upset the strategic equilibrium in Asia. The best policy-makers and political risk analysts (as the inter-chapter example of Harold Macmillan also makes clear) see the weaknesses in even the most successful foreign policies, having resilient initiatives at the ready to stave off seemingly unexpected disasters.

 

In traveling far from home, as Sir Francis Drake bid us to do in the swashbuckling, mesmerizing prayer that opens this article and To Dare More Boldly, our journey through history has been bountifully rewarded. For yes, within limits, the future can be foretold through the use of political risk analysis. Truly venturing far from our intellectual shore, in daring more boldly, we have come to see the stars. 

Dr. John C. Hulsman is the president and cofounder of John C. Hulsman Enterprises, a successful global political risk consulting firm. For three years, Hulsman was the Senior Columnist for City AM, the newspaper of the city of London. Hulsman is a Life Member of the Council on Foreign Relations, the preeminent foreign policy organization. The author of all or part of 14 books, Hulsman has given over 1520 interviews, written over 650 articles, prepared over 1290 briefings, and delivered more than 510 speeches on foreign policy around the world. His most recent work is To Dare More Boldly: The Audacious Story of Political Risk.

Rachel Sherman: How New York’s wealthy parents try to raise ‘unentitled’ kids

This article was originally published at Aeon and has been republished under Creative Commons.

ShermanWealthy parents seem to have it made when it comes to raising their children. They can offer their kids the healthiest foods, the most attentive caregivers, the best teachers and the most enriching experiences, from international vacations to unpaid internships in competitive fields.

Yet these parents have a problem: how to give their kids these advantages while also setting limits. Almost all of the 50 affluent parents in and around New York City that I interviewed for my book Uneasy Street: The Anxieties of Affluence (2017), expressed fears that children would be ‘entitled’ – a dirty word that meant, variously, lazy, materialistic, greedy, rude, selfish and self-satisfied. Instead, they strove to keep their children ‘grounded’ and ‘normal’. Of course, no parent wishes to raise spoiled children; but for those who face relatively few material limits, this possibility is distinctly heightened.

This struggle highlights two challenges that elite parents face in this particular historical moment: the stigma of wealth, and a competitive environment. For most of the 20th century, the United States had a quasi-aristocratic upper class, mainly white, Anglo-Saxon Protestant (WASP) families from old money, usually listed in the Social Register. Comfortable with their inherited advantages, and secure in their economic position, they openly viewed themselves as part of a better class of people. By sending their kids to elite schools and marrying them off to the children of families in the same community, they sought to reproduce their privilege.

But in the past few decades this homogenous ‘leisure class’ has declined, and the category of the ‘working wealthy’, especially in finance, has exploded. The ranks of high-earners have also partially diversified, opening up to people besides WASP men. This shift has led to a more competitive environment, especially in the realm of college admissions.

At the same time, a more egalitarian discourse has taken hold in the public sphere. As the sociologist Shamus Khan at Columbia University in New York argues in his book Privilege (2012), it is no longer legitimate for rich people to assume that they deserve their social position based simply on who they are. Instead, they must frame themselves as deserving on the basis of merit, particularly through hard work. At the same time, popular-culture images proliferate of wealthy people as greedy, lazy, shallow, materialistic or otherwise morally compromised.

Both competition and moral challenge have intensified since the 2008 economic crisis. Jobs for young people, even those with college educations, have become scarcer. The crisis has also made extreme inequality more visible, and exposed those at the top to harsher public critique.

In this climate, it is hard to feel that being wealthy is compatible with being morally worthy, and the wealthy themselves are well aware of the problem. The parents I talked with struggle over how to raise kids who deserve their privilege, encouraging them to become hard workers and disciplined consumers. They often talked about keeping kids ‘normal’, using language that invoked broad ‘middle-class’ American values. At the same time, they wanted to make sure that their children could prevail in increasingly competitive education and labour markets. This dilemma led to a profound tension between limiting and fostering privilege.

Parents’ educational decisions were especially marked by this conflict. Many supported the idea of public school in principle, but were anxious about large classes, lack of sports and arts programmes, and college prospects. Yet they worried that placing kids in elite private schools would distort their understanding of the world, exposing them only to extremely wealthy, ‘entitled’ peers. Justin, a finance entrepreneur, was conflicted about choosing private, saying: ‘I want the kids to be normal. I don’t want them to just be coddled, and be at a country club.’ Kevin, another wealthy father, preferred public school, wanting his young son not to live in an ‘elitist’ ‘narrow world’ in which ‘you only know a certain kind of people. Who are all complaining about their designers and their nannies.’

The question of paid work also brought up this quandary. All the parents I talked with wanted their kids to have a strong work ethic, with some worrying that their children would not be self-sufficient without it. But even those who could support their kids forever didn’t want to. Scott, for example, whose family wealth exceeds $50 million, was ‘terrified’ his kids would grow up to be ‘lazy jerks’. Parents also wanted to ensure children were not materialistic hyper-consumers. One father said of his son: ‘I want him to know limits.’ Parents tied consumption to the work ethic by requiring kids to do household chores. One mother with assets in the tens of millions had recently started requiring her six-year-old to do his own laundry in exchange for his activities and other privileges.

This mother, and many other parents of younger children, said they would insist that their kids work for pay during high school and college, in order to learn ‘the value of a dollar’. Commitment to children’s employment wavered, however, if parents saw having a job as incompatible with other ways of cultivating their capacities. Kate, who had grown up middle-class, said, of her own ‘crappy jobs’ growing up: ‘There’s some value to recognising this is what you have to do, and you get a paycheck, and that’s the money you have, and you budget it.’ But her partner Nadine, who had inherited wealth, contrasted her daughter’s possibly ‘researching harbour seals in Alaska’ to working for pay in a diner. She said: ‘Yes, you want them to learn the value of work, and getting paid for it, and all that stuff. And I don’t want my kids to be entitled. I don’t want them to be, like, silver spoon. But I also feel like life affords a lot of really exciting opportunities.’

The best way to help kids understand constraints, of course, is to impose them. But, despite feeling conflicted, these parents did not limit what their kids consumed in any significant way. Even parents who resisted private school tended to end up there. The limits they placed on consumption were marginal, constituting what the sociologist Allison Pugh in Longing and Belonging (2009) called ‘symbolic deprivation’. Facing competitive college admissions, none of the high-school-age kids of parents in my sample worked for pay; parents were more likely to describe their homework as their ‘job’.

Instead of limiting their privilege, parents tried to regulate children’s feelings about it. They wanted kids to appreciate their private education, comfortable homes, designer clothes, and (in some cases) their business-class or private travel. They emphasised that these privileges were ‘special’ or ‘a treat’. As Allison said, of her family’s two annual vacations: ‘You don’t want your kids to take these kinds of things for granted. … [They should know] most people don’t live this way. And that this is not the norm, and that you should feel this is special, and this is a treat.’

By the same token, they tried to find ways to help kids understand the ‘real world’ – to make sure they ‘understand the way everyone else lives’, in the words of one millionaire mother. Another mother fostered her son’s friendship with a middle-class family who lived in a modest apartment, because, she said: ‘I want to keep our feet in something that’s a little more normal’ than his private-school community.

Ideally, then, kids will be ‘normal’: hard workers and prudent consumers, who don’t see themselves as better than others. But at the same time, they will understand that they’re not normal, appreciating their privilege, without ever showing off. Egalitarian dispositions thereby legitimate unequal distributions, allowing children – and parents – to enjoy and reproduce their advantages without being morally compromised. These days, it seems, the rich can be entitled as long as they do not act or feel ‘entitled’. They can take it, as long as they don’t take it for granted.Aeon counter – do not remove

Rachel Sherman is associate professor of sociology at the New School for Social Research and Eugene Lang College. She is the author of Class Acts: Service and Inequality in Luxury Hotels. Sherman lives in New York

Leah Boustan: What hundreds of thousands of census records can teach us about the Great Black Migration

In honor of Black History Month, we’re running a special blog series entitled, “Exploring the Black Experience.” Learn more about the Great Black Migration with this post by Leah Boustan, author of Competition in the Promised Land

BoustanIn 1920, Kernell and Royal Pleasant, two brothers aged 13 and 11, lived with their parents and younger sister Jennie in Assumption Parish, the heart of Louisiana’s sugarcane region, 80 miles west of New Orleans. The boys’ father, Thomas Pleasant, was a carpenter who reported working “by the job.” Even this middling profession placed Thomas one rung above their neighbors, most of whom were farm laborers in the sugarcane fields.

By 1940, Kernell and Royal’s lives had diverged. Kernell, the eldest brother, still lived in the same ward where he had been as a boy, following his father’s footsteps into carpentry and earning only $200 a year. Royal, although younger by two years, had moved up to Chicago, joining the millions of other southern black men and women who moved to northern cities during the twentieth century. By 1940, Royal was a college graduate and worked as a filing clerk in a municipal government office. He earned more than twice as much as his older brother, reporting $480 of annual earnings.

Although separated by region, educational status, and earnings, one feature drew the Pleasant brothers together: both Royal and Kernell lived in all-black neighborhoods in 1940. Back in Louisiana, Kernell’s closest neighbors were all still laborers in sugarcane fields. Up in Chicago, Royal, his wife Louise, and their lodger William lived down the street from railroad porters, barbers, and laborers at the stockyards. Most of their neighbors were fellow migrants, hailing from Mississippi, Alabama, Georgia, and Tennessee.

Royal Pleasant was only one of the four million black southerners who moved North from 1940 to 1970. The Census rolls that document the Pleasant brothers’ lives offer one small glimpse into this mass movement. As it turns out, Royal’s success in the North was a highly typical migrant story.

Using newly-digitized Census records, I was able to trace nearly 250,000 black men who were living in their childhood households in 1920 to their adult location in the 1940 Census. Many of these records contained sets of brothers, one or more of whom had moved to the North. Just as Royal was earning more than double his brother’s pay, I found that the average black man who moved North or West during this early wave of the Great Black Migration earned more than twice as much as his brother(s) who remained in the South.

The bar chart shows earnings estimates of the economic return to moving to the North for both black and white migrants. The blue bars compare earnings between migrants and non-migrants in the full population, and the green bars depict the results of a similar analysis for sets of matched brothers. In both cases, I find that black migrants earned twice as much as their southern counterparts, and white migrants earning around 50 percent more (the bars are presented in log terms; 80 log points is the equivalent of around 130 percent higher earnings). Half of the nominal return to migration can be attributed to higher cost of living in northern cities, but the other half represents a real increase in purchasing power.

The goal of examining brother pairs, rather than simply comparing all migrants to all men who remained in the South, is to account for potential selection in who chooses to move. If migrants were drawn from well-off households, a portion of the estimated return to migration would reflect this positive selection. If, instead, men from poorer households were more likely to move to the North, the estimated return to migration might be too low. The similarity of the estimates suggests that southern migrants were not especially selected, either positively or negatively, a pattern that is consistent with a large mass migration.

The 1940 Census was the first to include questions about individual income levels; earlier censuses only asked about occupation. As it turns out, most of the return to migrating to the North was driven by shifts from lower-paid rural occupations into higher-paid industrial or white collar positions. It was rare for migrants to remain in the same line of work as their brothers in the South. (There are always a few exceptions; the Allison brothers, David and Winston, both worked as waiters in restaurants, but David made twice as much in Chicago as Winston did in Birmingham, Alabama).

My ability to compare men who participated in the Great Black Migration to their brothers who stayed home is only possible because of large-scale digitization projects of the historical Census records. The manuscripts were transcribed by more than 25,000 volunteers organized by FamilySearch, the genealogical arm the Church of Jesus Christ of Latter-day Saints.  Data files were then made available to researchers through a partnership between Ancestry.com and the Minnesota Population Center. The digitized 1940 Census files include 134 million persons and 70 variables.

From the 1940 Census, we can see only one snapshot of how Royal fared in his new life in Chicago and how Kernell managed back home. As new Census waves are released to the public (72 years after the surveys were taken), we will be able to follow these men and their many counterparts forward in time. Did Kernell ever join his brother in the North? Did Royal return to Louisiana, or one of the South’s burgeoning metropolitan areas, when it became time to retire? And how did the lives of their children (if any, as neither brother yet had children in the 1940 Census) unfold in their disparate settings?

On the last question, a new paper (link here) by Trent Alexander and co-authors uses restricted-access data from the Census Bureau to follow young children living in migrant and non-migrant families in 1940 to their adult outcomes in the 2000 Census. The children of migrants enjoy modest income gains even 60 or more years after their parents first moved to the North. Just as the parental generation was able to double their income by moving North, their children continue to enjoy a 10 percent earnings boost. The Great Black Migration is not only an essential chapter in black history but is still a vital part of black economic fortunes today.

Leah Platt Boustan is professor of economics at Princeton University, and a research associate at the National Bureau of Economic Research. She is the author of Competition in the Promised Land: Black Migrants in Northern Cities and Labor Markets.

 

Exploring the Black Experience through Economics

For hundreds of years, the American and global economies have been built on the backs of Black people. In each era, new forms of marginalization—enslavement, segregation, exclusion—have been devised to limit Black economic success. Still, Black dreams and Black resilience have created space for Black people’s hard-won economic gains. As workers, scholars, migrants, and emissaries of empire, Black people have shaped the American and global economies in crucial ways.

From industrial migration to economic colonization, and from unfunded neighborhoods to elite business schools, these four books from PUP’s catalog highlight different aspects of Black Americans’ experiences at the center, the margins, and the cutting edge of the formal economy.

From 1940 to 1970, nearly four million black migrants left the American rural South to settle in the industrial cities of the North and West. Competition in the Promised Land provides a comprehensive account of the long-lasting effects of the influx of black workers on labor markets and urban space in receiving areas.

Employing historical census data and state-of-the-art econometric methods, Competition in the Promised Land revises our understanding of the Great Black Migration and its role in the transformation of American society.

In 1901, the Tuskegee Institute, founded by Booker T. Washington, sent an expedition to the German colony of Togo in West Africa, with the purpose of transforming the region into a cotton economy similar to that of the post-Reconstruction American South. Alabama in Africa explores the politics of labor, sexuality, and race behind this endeavor, and the economic, political, and intellectual links connecting Germany, Africa, and the southern United States. The cross-fertilization of histories and practices led to the emergence of a global South, reproduced social inequities on both sides of the Atlantic, and pushed the American South and the German Empire to the forefront of modern colonialism.

Tracking the intertwined histories of Europe, Africa, and the Americas at the turn of the century, Alabama in Africa shows how the politics and economics of the segregated American South significantly reshaped other areas of the world.

Baltimore was once a vibrant manufacturing town, but today, with factory closings and steady job loss since the 1970s, it is home to some of the most impoverished neighborhoods in America. The Hero’s Fight provides an intimate look at the effects of deindustrialization on the lives of Baltimore’s urban poor, and sheds critical light on the unintended consequences of welfare policy on our most vulnerable communities.

Blending compelling portraits with in-depth scholarly analysis, The Hero’s Fight explores how the welfare state contributes to the perpetuation of urban poverty in America.

For nearly three decades, English has been the lingua franca of cross-border organizations, yet studies on corporate language strategies and their importance for globalization have been scarce. In The Language of Global Success, Tsedal Neeley provides an in-depth look at a single organization—the high-tech giant Rakuten—in the five years following its English lingua franca mandate. Neeley’s behind-the-scenes account explores how language shapes the ways in which employees who work in global organizations communicate and negotiate linguistic and cultural differences.

Examining the strategic use of language by one international corporation, The Language of Global Success uncovers how all organizations might integrate language effectively to tap into the promise of globalization.

Scott Page: Why hiring the ‘best’ people produces the least creative results

This article was originally published at Aeon and has been republished under Creative Commons.

PageWhile in graduate school in mathematics at the University of Wisconsin-Madison, I took a logic course from David Griffeath. The class was fun. Griffeath brought a playfulness and openness to problems. Much to my delight, about a decade later, I ran into him at a conference on traffic models. During a presentation on computational models of traffic jams, his hand went up. I wondered what Griffeath – a mathematical logician – would have to say about traffic jams. He did not disappoint. Without even a hint of excitement in his voice, he said: ‘If you are modelling a traffic jam, you should just keep track of the non-cars.’ 

The collective response followed the familiar pattern when someone drops an unexpected, but once stated, obvious idea: a puzzled silence, giving way to a roomful of nodding heads and smiles. Nothing else needed to be said.

Griffeath had made a brilliant observation. During a traffic jam, most of the spaces on the road are filled with cars. Modelling each car takes up an enormous amount of memory. Keeping track of the empty spaces instead would use less memory – in fact almost none. Furthermore, the dynamics of the non-cars might be more amenable to analysis.

Versions of this story occur routinely at academic conferences, in research laboratories or policy meetings, within design groups, and in strategic brainstorming sessions. They share three characteristics. First, the problems are complex: they concern high-dimensional contexts that are difficult to explain, engineer, evolve or predict. Second, the breakthrough ideas do not arise by magic, nor are they constructed anew from whole cloth. They take an existing idea, insight, trick or rule, and apply it in a novel way, or they combine ideas – like Apple’s breakthrough repurposing of the touchscreen technology. In Griffeath’s case, he applied a concept from information theory: minimum description length. Fewer words are required to say ‘No-L’ than to list ‘ABCDEFGHIJKMNOPQRSTUVWXYZ’. I should add that these new ideas typically produce modest gains. But, collectively, they can have large effects. Progress occurs as much through sequences of small steps as through giant leaps.

Third, these ideas are birthed in group settings. One person presents her perspective on a problem, describes an approach to finding a solution or identifies a sticking point, and a second person makes a suggestion or knows a workaround. The late computer scientist John Holland commonly asked: ‘Have you thought about this as a Markov process, with a set of states and transition between those states?’ That query would force the presenter to define states. That simple act would often lead to an insight. 

The burgeoning of teams – most academic research is now done in teams, as is most investing and even most songwriting (at least for the good songs) – tracks the growing complexity of our world. We used to build roads from A to B. Now we construct transportation infrastructure with environmental, social, economic and political impacts.

The complexity of modern problems often precludes any one person from fully understanding them. Factors contributing to rising obesity levels, for example, include transportation systems and infrastructure, media, convenience foods, changing social norms, human biology and psychological factors. Designing an aircraft carrier, to take another example, requires knowledge of nuclear engineering, naval architecture, metallurgy, hydrodynamics, information systems, military protocols, the exercise of modern warfare and, given the long building time, the ability to predict trends in weapon systems.

The multidimensional or layered character of complex problems also undermines the principle of meritocracy: the idea that the ‘best person’ should be hired. There is no best person. When putting together an oncological research team, a biotech company such as Gilead or Genentech would not construct a multiple-choice test and hire the top scorers, or hire people whose resumes score highest according to some performance criteria. Instead, they would seek diversity. They would build a team of people who bring diverse knowledge bases, tools and analytic skills. That team would more likely than not include mathematicians (though not logicians such as Griffeath). And the mathematicians would likely study dynamical systems and differential equations.

Believers in a meritocracy might grant that teams ought to be diverse but then argue that meritocratic principles should apply within each category. Thus the team should consist of the ‘best’ mathematicians, the ‘best’ oncologists, and the ‘best’ biostatisticians from within the pool.

That position suffers from a similar flaw. Even with a knowledge domain, no test or criteria applied to individuals will produce the best team. Each of these domains possesses such depth and breadth, that no test can exist. Consider the field of neuroscience. Upwards of 50,000 papers were published last year covering various techniques, domains of enquiry and levels of analysis, ranging from molecules and synapses up through networks of neurons. Given that complexity, any attempt to rank a collection of neuroscientists from best to worst, as if they were competitors in the 50-metre butterfly, must fail. What could be true is that given a specific task and the composition of a particular team, one scientist would be more likely to contribute than another. Optimal hiring depends on context. Optimal teams will be diverse.

Evidence for this claim can be seen in the way that papers and patents that combine diverse ideas tend to rank as high-impact. It can also be found in the structure of the so-called random decision forest, a state-of-the-art machine-learning algorithm. Random forests consist of ensembles of decision trees. If classifying pictures, each tree makes a vote: is that a picture of a fox or a dog? A weighted majority rules. Random forests can serve many ends. They can identify bank fraud and diseases, recommend ceiling fans and predict online dating behaviour.

When building a forest, you do not select the best trees as they tend to make similar classifications. You want diversity. Programmers achieve that diversity by training each tree on different data, a technique known as bagging. They also boost the forest ‘cognitively’ by training trees on the hardest cases – those that the current forest gets wrong. This ensures even more diversity and accurate forests.

Yet the fallacy of meritocracy persists. Corporations, non-profits, governments, universities and even preschools test, score and hire the ‘best’. This all but guarantees not creating the best team. Ranking people by common criteria produces homogeneity. And when biases creep in, it results in people who look like those making the decisions. That’s not likely to lead to breakthroughs. As Astro Teller, CEO of X, the ‘moonshoot factory’ at Alphabet, Google’s parent company, has said: ‘Having people who have different mental perspectives is what’s important. If you want to explore things you haven’t explored, having people who look just like you and think just like you is not the best way.’ We must see the forest.Aeon counter – do not remove

Scott E. Page is the Leonid Hurwicz Collegiate Professor of Complex Systems, Political Science, and Economics at the University of Michigan and an external faculty member of the Santa Fe Institute. The recipient of a Guggenheim Fellowship and a member of the American Academy of Arts and Sciences, he is the author of The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy. He has been a featured speaker at Davos as well as at organizations such as Google, Bloomberg, BlackRock, Boeing, and NASA.

Tim Rogan: What’s Wrong with the Critique of Capitalism Now

RoganWhat’s wrong with capitalism? Answers to that question today focus on material inequality. Led by economists and conducted in utilitarian terms, the critique of capitalism in the twenty-first century is primarily concerned with disparities in income and wealth. It was not always so. In The Moral Economists, Tim Rogan reconstructs another critical tradition, developed across the twentieth century in Britain, in which material deprivation was less important than moral or spiritual desolation. Examining the moral cornerstones of a twentieth-century critique of capitalism, The Moral Economists explains why this critique fell into disuse, and how it might be reformulated for the twenty-first century. Read on to learn more about these moral economists and their critiques of capitalism.

You begin by asking, ‘What’s wrong with capitalism?’ Shouldn’t we start by acknowledging capitalism’s great benefits?

Yes, absolutely. This was a plan for the reform of capitalism, not a prayer for its collapse or a pitch for its overthrow. These moral economists sought in some sense to save capitalism from certain of its enthusiasts—that has always been the project of the socialist tradition out of which these writers emerged. But our question about capitalism—as about every aspect of our social system, every means by which we reconcile individual preferences to arrive at collective decisions—should always be ‘What’s wrong with this?;’ ‘How can we improve this?;’ ‘What could we do better?’ And precisely how we ask those questions, the terms in which we conduct those debates, matters. My argument in this book is that our way of asking the question ‘What’s wrong with capitalism?’ has become too narrow, too focused on material inequality, insufficiently interested in some of the deeper problems of liberty and solidarity which the statistics recording disparities of wealth and income conceal.

Was this critique of capitalism also a critique of economics, and if so what do these critics add to the usual complaints against economics—about unrealistic assumptions, otherworldly models, indifference to historical developments such as financial crises, etc?

Yes, the moral economists were critical of economics. But although their criticisms might sound like variations on the familiar charge that economists make unreal assumptions about the capacities and proclivities of individual human beings, the moral economists’ challenge to mainstream economics was different. The most influential innovators in economics since the Second World War have been behavioral scientists pointing out that our capacity to make utilitarian calculations is not as high as economists once took it to be. Part of what the success of this series of innovations is that the ideal of reducing every decision to a calculation of utility retains its allure, even as we come to realize how fallible our real-time calculations are. Behavioral economists have found our capacity to think like rational utilitarian agents wanting. But when did the capacity to think like a rational utilitarian agent become the measure of our humanity? This is the question moral economists have been asking since the 1920s. Initiated by historians determined to open up means of thinking outside economic orthodoxy, since joined by mathematically-trained economists concerned to get a more realistic handle on the relationship between individual values and social choice, the moral economists’ enterprise promises a far more profound reconstitution of political economy than behavioral economics has ever contemplated.

Doesn’t the profile of these writers—dead, male, English, or Anglophile, writing about a variety of capitalism long since superseded—limit their contemporary relevance?

No. Their main concern was to discover and render articulate forms of social solidarity which the dominant economic discourse concealed. They found these on the outskirts of ‘Red Vienna’, on railroads under construction in post-war Yugoslavia, but most of all in the north of England. They believed that these inarticulate solidarities were what really held the country together—the secret ingredients of the English constitution. Though they belonged to a tradition of social thought in Britain that was skeptical towards Empire and supportive of the push for self-determination in India and elsewhere, they raised the prospect that the same dynamics had developed in countries to which British institutions had been exported—explaining the relative cohesion of Indian and Ghanaian democracies, for instance. More broadly E. P. Thompson in particular argued that factoring these incipient solidarities into constitutional thinking generated a more nuanced understanding of the rule of law than nineteenth-century liberalism entailed: in Thompson’s hand the rule of law became a more tensile creed, more capable of accommodating the personal particularities of the law’s subjects, more adept at mitigating the rigors of rational system to effect justice in specific cases. The profiles of the late-twentieth century commentators who continue the critical tradition Tawney, Polanyi and Thompson developed—especially Amartya Sen—underscore that tradition’s wider relevance.

Aren’t these writers simply nostalgists wishing we could return to a simpler way of life?

No. Tawney especially is often seen as remembering a time of social cohesion before the Reformation and before the advent of international trade and wishing for its return. This perception misunderstands his purpose.

Religion and the Rise of Capitalism draws sharp contrasts between two distinct iterations of European society – the late medieval and the modern. But this was a means of dramatizing a disparity between different societies developing in contemporary England—the society he encountered working at Toynbee Hall in London’s East End, where social atomization left people demoralized beyond relief, on the one hand; the society he encountered when he moved to Manchester to teach in provincial towns in Lancashire and Staffordshire, where life under capitalism was different, where the displacement of older solidarities was offset by the generation of new forms of cohesion, where many people were poor but where the social fabric was still intact.

The demoralized East End was the product of laissez faire capitalism—of the attempt to organize society on the basis that each individual was self-sufficient, profit-minded, unaffected by other human sentiments. The political crisis into which Britain was pitched in the late Edwardian period underlined how untenable this settlement was: without a sense of what more than the appetite for wealth motivated people, there could be no ‘background of mutual understanding’ against which to resolve disputes. At the same time the answer was not simply stronger government, a bigger state. The latent solidarities Tawney discovered in the north of England carried new possibilities: the facility of market exchange and the security of an effective state could be supplemented by informal solidarities making everyday life more human than the impersonal mechanisms of market and government allowed.

Polanyi and Thompson brought their historical settings forward into the nineteenth century, making their writings feel more contemporary. But they were both engaged in much the same exercise as Tawney—using history to dramatize disparities between different possibilities developing within contemporary society. They too had come into contact with forms of solidarity indicating that there was more than calculations of utility and the logic of state power at work in fostering social order.  Polanyi and then especially Thompson advanced their common project significantly when he found a new terminology with which to describe these incipient solidarities. Tawney had talked of ‘tradition’ and ‘convention’ and ‘custom,’ and Polanyi had followed Tawney in this—refusing to associate himself with Ferdinand Tonnies concept of Gemeinschaft and Henry Maine’s system of ‘status’ when pressed to, but offering no cogent concept through which to reckon with these forms of solidarity himself. Thompson’s concept of the ‘moral economy’ made the kinds of solidarities upon which they had all focused more compelling.

Does subscribing to a moral critique of capitalism mean buying into one of the prescriptive belief systems out of which that critique materialized? Do you need to believe in God or Karl Marx in order to advance a moral critique of capitalism without embarrassment?

No. Part of the reason that this critique of capitalism went out of commission was because the belief systems which underpinned it—which, more specifically, provided the conceptions of what a person is which falsified reductive concepts of ‘economic man’—went into decline. Neither Tawney nor Thompson was able to adapt to the attenuation of Christian belief and Marxian conviction respectively from which their iterations of the critique had drawn strength. Polanyi’s case was different: he was able to move beyond both God and Marx, envisaging a basis upon which a moral critique of capitalism could be sustained without relying on either belief system. That basis was furnished by the writings of Adam Smith, which adumbrated an account of political economy which never doubted but that economic transactions are embedded in moral worlds.

This was a very different understanding of Adam Smith’s significance to that with which most people to whom that name means something now have been inculcated. But it is an account of Adam Smith’s significance which grows increasingly recognizable to us now—thanks to the work of Donald Winch, Emma Rothschild and Istvan Hont, among others, facilitated by the end of Cold War hostilities and the renewal of interest in alternatives to state- or market-based principles of social order.

In other words there are ways of re-integrating economics into the wider moral matrices of human society without reverting to a Christian or Marxian belief system. There is nothing extreme or zealous about insisting that the moral significance of economic transactions be recognized. What was zealous and extreme was the determination to divorce economics from broader moral considerations. This moral critique of capitalism represented a recognition that the time for such extremity and zeal had passed. As the critique fell into disuse in the 1970s and 1980s, some of that zeal returned, and the last two decades now look to have been a period of especially pronounced ‘economism.’ The relevance of these writings now, then, is that they help us to put the last two decades and the last two centuries in perspective, revealing just how risky the experiment has been, urging us to settle back in now to a more sustainable pattern of economic thought.

You find that this moral critique of capitalism fell into disuse in the 1970s and 1980s. Bernie Sanders declared in April 2016 that instituting a ‘truly moral economy’ is ‘no longer beyond us.’ Was he right?

Yes and no. Sanders’ made this declaration at the Vatican, contemplating the great papal encyclicals of Rerum Novarum and Centesimus Annus. The discrepancies between what Sanders said and what Popes Leo XIII and Pope John Paul II before him said about capitalism is instructive. The encyclicals have always focussed on the ignominy of approaching a person as a bundle of economic appetites, on the apostasy of abstracting everything else that makes us human out of our economic thinking. Sanders sought to accede to that tradition of social thought—a tradition long since expanded to encompass perspectives at variance with Catholic theology, to include accounts of what a person is which originate outside the Christian tradition. But Sanders’s speech issued no challenge to the reduction of persons to economic actors. In designating material inequality the ‘great issue of our time,’ Sanders reinforced that reductive tendency: the implication is that all we care about is the satisfaction of our material needs, as if redistribution alone would solve all our problems.

The suggestion in Sanders speech was that his specific stance in the utilitarian debate over how best to organise the economy has now taken on moral force. There is an ‘individualist’ position which favors free enterprise and tolerates inequality as incidental to the enlargement of aggregate utility, and there is a ‘collectivist’ stance which enlists the state to limit freedom to ensure that inequality does not grow too wide, seeing inequality as inimical to the maximizing of aggregate utility. The ‘collectivists’ are claiming the moral high ground. But all they are really proposing is a different means to the agreed end of maximizing overall prosperity. The basis for their ‘moral’ claims seems to be that they have more people on their side—a development which would make Nietzsche smile, and should give all of us pause. There are similar overtones to the rallying of progressive forces around Jeremy Corbyn in the UK.

The kind of ‘moral economy’ Sanders had in mind—a big government geared towards maximizing utility—is not what these moral economists would have regarded as a ‘truly moral economy’. The kinds of checks upon economic license they had in mind were more spontaneous and informal—emanating out of everyday interactions, materializing as strictures against certain kinds of commercial practice in common law, inarticulate notions of what is done and what is not done, general conceptions of fairness, broad-based vigilance against excess of power. This kind of moral economy has never been beyond us. The solidarities out of which it arises were never eradicated, and are constantly regenerating.

Tim Rogan is a fellow of St. Catharine’s College, Cambridge, where he teaches history. He is the author of The Moral Economists: R. H. Tawney, Karl Polanyi, E. P. Thompson, and the Critique of Capitalism.

Jerry Z. Muller on The Tyranny of Metrics

Today, organizations of all kinds are ruled by the belief that the path to success is quantifying human performance, publicizing the results, and dividing up the rewards based on the numbers. But in our zeal to instill the evaluation process with scientific rigor, we’ve gone from measuring performance to fixating on measuring itself. The result is a tyranny of metrics that threatens the quality of our lives and most important institutions. In this timely and powerful book, Jerry Muller uncovers the damage our obsession with metrics is causing—and shows how we can begin to fix the problem. Complete with a checklist of when and how to use metrics, The Tyranny of Metrics is an essential corrective to a rarely questioned trend that increasingly affects us all.

What’s the main idea?

We increasingly live in a culture of metric fixation: the belief in so many organizations that scientific management means replacing judgment based upon experience and talent with standardized measures of performance, and then rewarding or punishing individuals and organizations based upon those measures. The buzzwords of metric fixation are all around us: “metrics,” “accountability,” “assessment,” and “transparency.” Though often characterized as “best practice,” metric fixation is in fact often counterproductive, with costs to individual satisfaction with work, organizational effectiveness, and economic growth.

The Tyranny of Metrics treats metric fixation as the organizational equivalent of The Emperor’s New Clothes. It helps explain why metric fixation has become so popular, why it is so often counterproductive, and why some people have an interest in pushing it. It is a book that analyzes and critiques a dominant fashion in contemporary organizational culture, with an eye to making life in organizations more satisfying and productive.

Can you give a few examples of the “tyranny of metrics?”

Sure. In medicine, you have the phenomenon of “surgical report cards” that purport to show the success rates of surgeons who perform a particular procedure, such as cardiac operations. The scores are publicly reported. In an effort to raise their scores, surgeons were found to avoid operating on patients whose complicated circumstances made a successful operation less likely. So, the surgeons raised their scores. But some cardiac patients who might have benefited from an operation failed to get one—and died as a result. That’s what we call “creaming”—only dealing with cases most likely to be successful.

Then there is the phenomenon of goal diversion. A great deal of K-12 education has been distorted by the emphasis that teachers are forced to place on preparing students for standardized tests of English and math, where the results of the tests influence teacher retention or school closings. Teachers are instructed to focus class time on the elements of the subject that are tested (such as reading short prose passages), while ignoring those elements that are not (such as novels). Subjects that are not tested—including civics, art, and history—receive little attention.

Or, to take an example from the world of business. In 2011 the Wells Fargo bank set high quotas for its employees to sign up customers who were interested in one of its products (say, a deposit account) for additional services, such as overdraft coverage or credit cards. For the bank’s employees, failure to reach the quota meant working additional hours without pay and the threat of termination. The result: to reach their quotas, thousands of bankers resorted to low-level fraud, with disastrous effects for the bank. It was forced to pay a fortune in fines, and its stock price dropped.

Why is the book called The Tyranny of Metrics?

Because it helps explain and articulate the sense of frustration and oppression that people in a wide range of organizations feel at the diversion of their time and energy to performance measurement that is wasteful and counterproductive.

What sort of organizations does the book deal with?

There are chapters devoted to colleges and universities, K-12 education, medicine and health care, business and finance, non-profits and philanthropic organizations, policing, and the military. The goal is not to be definitive about any of these realms, but to explore instances in which metrics of measured performance have been functional or dysfunctional, and then to draw useful generalizations about the use and misuse of metrics.

What sort of a book is it? Does it belong to any particular discipline or political ideology?

It’s a work of synthesis, drawing on a wide range of studies and analyses from psychology, sociology, economics, political science, philosophy, organizational behavior, history, and other fields. But it’s written in jargon-free prose, that doesn’t require prior knowledge of any of these fields. Princeton University Press has it classified under “Business,” “Public Policy,” and “Current Affairs.” That’s accurate enough, but it only begins to suggest the ubiquity of the cultural pattern that the book depicts, analyzes, and critiques. The book makes use of conservative, liberal, Marxist, and anarchist authors—some of whom have surprising areas of analytic convergence.

What’s the geographic scope of the book?

In the first instance, the United States. There is also a lot of attention to Great Britain, which in many respects was at the leading edge of metric fixation in the government’s treatment of higher education (from the “Teaching Quality Assessment” through the “Research Excellence Framework”), health care (the NHS) and policing, under the rubric of “New Public Management.” From the US and Great Britain, metric fixation—often carried by consultants touting “best practice”—has spread to Continental Europe, the Anglosphere, Asia, and especially China (where the quest for measured performance and university rankings is having a particularly pernicious effect on science and higher education).

Is the book simply a manifesto against performance measurement?

By no means. Drawing on a wide range of case studies from education to medicine to the military, the book shows how measured performance can be developed and used in positive ways.

Who do you hope will read the book?

Everyone who works in an organization, manages an organization, or supervises an organization, whether in the for-profit, non-profit, or government sector. Or anyone who wants to understand this dominant organizational culture and its intrinsic weaknesses.

Jerry Z. Muller is the author of many books, including Adam Smith in His Time and Ours and Capitalism and the Jews. His writing has appeared in the New York Times, the Wall Street Journal, the Times Literary Supplement, and Foreign Affairs, among other publications. He is professor of history at the Catholic University of America in Washington, D.C., and lives in Silver Spring, Maryland.

Jonathan Haskel & Stian Westlake on Capitalism without Capital

Early in the twenty-first century, a quiet revolution occurred. For the first time, the major developed economies began to invest more in intangible assets, like design, branding, R&D, and software, than in tangible assets, like machinery, buildings, and computers. For all sorts of businesses, from tech firms and pharma companies to coffee shops and gyms, the ability to deploy assets that one can neither see nor touch is increasingly the main source of long-term success. But this is not just a familiar story of the so-called new economy. Capitalism without Capital shows that the growing importance of intangible assets has also played a role in some of the big economic changes of the last decade.

What do you mean when you say we live in an age of Capitalism without Capital?

Our book is based on one big fact about the economy: that the nature of the investment that businesses do has fundamentally changed. Once businesses invested mainly in things you could touch or feel like buildings, machinery, and vehicles. But more and more investment now goes into things you can’t touch or feel: things like research and development, design, organizational development—“intangible’ investments. Today, in developed countries, businesses invest more each year intangible assets than in tangibles. But they’re often measured poorly or not at all in company accounts or national accounts. So there is still a lot of capital about, but it has done a sort of vanishing act, both physically and from the records that businesses and governments keep.

What difference does the rise of intangible investments make?

The rise of intangible investment matters because intangible assets tend to behave differently from tangible ones—they have different economic properties. In the book we call these properties the 4S’s—scalability, sunkenness, synergies, and spillovers. Intangibles can be used again and again, they’re hard to sell if a business fails, they’re especially good when you combine them, and the benefits of intangible investment often end up accruing to businesses other than the ones that make them. We argue that this change helps explain all sorts of important concerns people have about today’s economy, from why inequality has risen so much, to why productivity growth seems to have slowed down.

So is this another book about tech companies?

It’s much bigger than that. It’s true that some of the biggest tech companies have lots of very valuable intangibles, and few tangibles. Google’s search algorithms, software, and prodigious stores of data are intangibles; Apple’s design, brand, and supply chains are intangibles; Uber’s networks of drivers and users are intangible assets. Each of these intangibles is worth billions of dollars. But intangibles are everywhere. Even brick and mortar businesses like supermarkets or gyms rely on more and more intangible assets, such as software, codified operating procedures, or brands. And the rise of intangibles is a very long-term story: research by economists like Carol Corrado suggests that intangibles investment has been steadily growing since the early twentieth century, long before the first semiconductors, let alone the Internet.

Who will do well from this new intangible economy?

The intangible economy seems to be creating winners and losers. From a business point of view, we know that around the world, there’s a growing gap between the leading businesses in any given industry and the rest. We think this leader-laggard gap is partly caused by intangibles. Because intangibles are scalable and have synergies with one another, companies that have valuable intangibles will do better and better (and have more incentives to invest in more), while small and low performing companies won’t, and will lag ever further behind.

There is a personal dimension to this too. People who are good at combining ideas, and who are open to new ideas, will do better in an economy where there are lots of synergies between different assets. This will be a boon for educated, open-minded people, people with political, legal, and social connections, and for people who live in cities (where ideas tend to combine easily with one another). But others risk being left further behind.

Does this help explain the big political changes in recent years?

Yes—after the EU referendum in the UK and the 2016 presidential election in the US, a lot of pundits were asking why so many so-called “left behind” communities people voted for Brexit or Donald Trump. Some people thought they did so for cultural reasons, others argued the reasons were mainly economic. But we would argue that an intangible economy, these two reasons are linked: more connected, cosmopolitan places tend to do better economically in an intangible economy, while left-behind places suffer from an alienation that is both economic and cultural.

You mentioned that the rise of intangible investment might help explain why productivity growth is slowing. Why is that?

Many economists and policymakers worry about so-called secular stagnation: the puzzling fact that productivity growth and investment seems to have slowed down, even though interest rates are low and corporate profits are high, especially since 2009. We think the growing importance of intangibles can help explain this in a few ways.

  • There is certainly some under-measurement of investment going on—but as it happens this explains only a small part of the puzzle.
  • The rate of growth of intangible investment has slowed a bit since 2009. This seems to explain part of the slow-down in growth (and also helps explain why the slowdown has been manly concentrated in total factor productivity)
  • The gap between leading firms (with lots of intangibles) and laggard firms (with few) may have created a scenario where a few firms are investing in a lot of intangibles (think Google and Facebook) but for most others, it’s not worth it, since their more powerful competitors are likely to get the spillover benefits.

Does the intangible economy have consequences for investors?

Yes! Company accounts generally don’t record intangibles (except, haphazardly, as “goodwill” after an acquisition). This means that, as intangible assets become more important, corporate balance sheets tell investors less and less about the true value of a company. Much of what equity analysts spend their days doing is, in practice, trying to value intangibles.

And there’s lots of value to be had here: research suggests that equity markets undervalue intangibles like organizational development, and encourage public companies to underinvest in intangibles like R&D. But informed investors can take advantage of this—which can benefit both their own returns and the performance of the economy.

Jonathan, you’re an academic, and Stian, you are a policymaker. How did you come to write this book together?

We started working together in 2009 on the Nesta Innovation Index, which applied some of the techniques that Jonathan had worked on to measure intangibles to build an innovation measurement for the UK. The more we thought about, the clearer it became that intangibles helped explain all sorts of things. Ryan Avent from the Economist asked us to write a piece for their blog about one of these puzzles, and we enjoyed doing that so much we thought we would try writing a book. One of the most fun parts of writing the book was being able to combine the insights from academic economic research on intangibles and innovation with practical insights from innovation policy.

CapitalismJonathan Haskel is professor of economics at Imperial College Business School. Stian Westlake is a senior fellow at Nesta, the UK’s national foundation for innovation. Haskel and Westlake are cowinners of the 2017 Indigo Prize.

The Greatest Showman and the Deceptions of American Capitalism

by Edward J. Balleisen

BalleisenPerhaps unsurprisingly, The Greatest Showman, the new cinematic musical about the nineteenth-century American impresario of entertainment P. T. Barnum, unabashedly takes liberties with the historical record. As reviewers have already documented (Richard Brody in the New Yorker, Bruce Chadwick for History News Network), it fabricates matters large and small, as is the wont of Hollywood screenwriters and directors who work on biopics, while ignoring a host of truthful vignettes that cry out for cinematic treatment. As a historian of business fraud, I found myself especially disappointed that the musical steered clear of many aspects of Barnum’s career that speak powerfully to elements of our own moment, including the rise of a Barnum-esque publicity hound and conductor of media misdirection from the White House, and the constant turmoil swirling over allegations of fake news. And yet, The Greatest Showman does get some of the larger implications of Barnum’s life right—especially his injection of a democratic style of hullabaloo into American capitalism.

A full inventory of the film’s flights of fancy would require catalogue length. But a sampling conveys the minimal concern for fidelity to historical detail. The movie portrays the young Barnum as the poorly-clad son of an impoverished Connecticut tailor, rather than the child of a respectable proprietor who had a number of well-to-do relatives and also owned a store and inn. It gives Barnum experiences that he never had (begging and stealing food as an orphaned New York City street urchin; clerking for an insurance company). It depicts his move into the world of entertainment as occurring sometime well after the establishment of the railroad, perhaps even after the Civil War, rather than in the 1830s.

The Greatest Showman ignores Barnum’s earliest promotions of lotteries, curiosities and hoaxes, including his cruel exhibition of the elderly African-American slave woman Joice Heth as supposedly the 161-year old former wet-nurse of George Washington, and his willingness to profit further after her death through a public autopsy, experiences that laid the groundwork for his management of the American Museum. The screenwriters (Bill Condon and Jenny Bicks) have Barnum buy the museum on a wholly fictional mix of frustration, fantasy, and fraud, made possible by his fraudulent provision of fake collateral to a New York City bank that lends him the necessary $10,000. Instead of coming to grips with the actual Barnum’s vociferous advocacy of temperance, the film conjures up a hard-drinking man who makes deals over whiskeys in saloons. Rather than showing how Barnum consistently found new performers over the years, it brings together the midget Charles Stratton (known on stage as Tom Thumb), the Siamese twins Change and Eng, and the other members of the troupe within weeks of Barnum’s purchase of the American Museum.

The historical Barnum had a falling out with the famed Swedish singer Jenny Lind not because he refused her amorous advances in the middle of their American tour (the musical’s explanation), but because she tired of his relentless focus on maximizing the returns from her concerts. A key antagonist for Barnum in The Greatest Showman is one “Bennett,” portrayed as a stiff-collared, high-toned theatre critic of the New York Herald. The actual James Gordon Bennett was the publisher of that paper, who proved more than happy to go along with hoaxes and sensationalism himself, using both to help cement his newspaper’s position as the first penny newspaper that catered to the broad masses. The character of Barnum’s high society sidekick Philip Carlyle is entirely fictional, as in his relationship with Anne Wheeler, an African-American female trapeze artist. One last illustration—the film attributes the fire that destroyed Barnum’s New York City Museum to neighborhood toughs who did not like his business, rather than the actual arsonist, a Confederate sympathizer who wished toward the end of the Civil War to strike a blow against the Union.

Of course, by indulging a willingness to elide facts or push outright lies in the service of a hokey story, the makers of The Greatest Showman adopt Barnum’s own modus operandi as a purveyor of entertainment. And the movie does a creditable job of engaging with some of Barnum’s larger cultural significance—his recognition that publicity and HYPE of any kind was often a marketing asset; his understanding that the public would be forgiving of misrepresentations and humbug if they, on balance, enjoyed the eventual show; his embrace of difference and variation within the human condition as worthy of celebration (if also exploitation); his compulsion to expand operations to take advantage of new opportunities, even at the cost of incurring gargantuan debts; his relentless focus on the American mythos of democratic opportunity, whether through his own experience (as carefully narrated in his autobiographies) or those of the stars in his shows. As the film implies, there was indeed deep-seated antagonism to Barnum’s business practices and willingness to engage in fakery, though the complaints came overwhelmingly from pulpits and the pages of evangelical newspapers, rather than protesters who made their presence known outside the Museum. And Barnum did in fact seek to defuse those critiques through the promotion of respectable performers such as Jenny Lind, alongside his curiosities, penchant for misdirection, and outright fakery.

Nonetheless, The Greatest Showman also missed many opportunities to explore episodes in Barnum’s life that have renewed resonance in the early twenty-first century. One crucial theme here concerns Barnum’s engagement with American race relations, both as promoter and in his post-Civil War forays in Connecticut politics and public service. Barnum’s often dehumanizing treatment of people of color and his evolving political views on race will surely occasion much commentary amid the current dramatic growth in ethnocentric nationalism and racially-grounded politics, as in a recent Smithsonian Magazine piece by Jackie Mansky. Other contemporary developments that suggest the value of reconsidering Barnum’s historical significance, closer to my own expertise, include the reoccurrence of massive business frauds, the emergence of enduring conflict over the appropriate role of government in consumer and investor protection, and diminished faith in institutions of all sorts.

The musical, for example, overlooks Barnum’s own bankruptcy in 1855, brought about because of his misplaced faith in the promises of a clock manufacturer who was willing to relocate his operation to Barnum’s adopted home town of Bridgeport, Connecticut, as part of an industrial development scheme. Barnum freely endorsed the Jerome Clock Company’s loans, opening himself up to devastating losses when the company failed, losses made worse by the firm’s eventual forging of Barnum’s endorsement on many additional notes. Yet he also sidestepped the worst consequences of that failure by illegally transferring assets into his wife’s name, a move that greatly facilitated his ability to get back on his financial feet, and for which he never faced public condemnation or legal penalty. Barnum’s insolvency thus speaks to the reality that even the savviest operators can be victims of imposition; and that well-connected perpetrators of commercial deceit have often been able to sidestep the most damaging fallout from their actions.

Another fascinating episode that The Greatest Showman ignores is Barnum’s growing focus on debunking the deceit of other purveyors of rhetorical (or actual) snake oil. By the 1860s, the promoter sought to legitimize his own brand of hokum and bluster not only by adding unquestionably respectable acts to his museum and eventual circus, but also by exposing frauds in many sectors of American life.  Compiled in his 1866 volume, Humbugs of the World, these endeavors targeted misrepresentations in retail trade, medicine, and religion (especially in the realm of spiritualism). Here Barnum intuited the great power associated with well-constructed strategies of deflection—that one could gain trust in part by setting oneself up as an arbiter of untrustworthiness. Perhaps there is no greater contemporary practitioner of this particular form of showmanship than the current occupant of the White House. Donald Trump has rarely hesitated to get out ahead of critiques of his own business and political practices by casting the first stones, as through his allegations of malfeasance by political opponents (the pleas during the 2016 general election campaign to investigate Hillary Clinton and “Lock Her Up”) or representatives of the media (the incessant allegations of FAKE NEWS.) In addition to muddying factual waters, such strategies can shore up support among the faithful, sustaining the conviction that their champion is fighting the good fight, and could not possibly be engaging in duplicitous behavior of his own.

In the end, The Greatest Showman cares most about exploring fictionalized or wholly fictional romantic tensions—those between Barnum and his wife Charity and between the Philip Carlyle and Anne Wheeler—as well as the degree to which Barnum lives up to his purported insistence on an inclusive respect for his socially marginalized performers. These choices constrain the musical’s capacity to engage deeply with Barnum’s historical significance as an entrepreneur who played an outsized role in creating modern mass entertainment. And so a multitude of opportunities go begging. Barnum’s many legacies, however, continue to reverberate in contemporary America, whether one focuses on the the dynamics of social media saturation, the process of invented celebrity, the sources of abiding racial tensions,  the implications of pervasive commercial dissembling, or the nature of popular skepticism about expert appraisals of reality. And so the ground remains open for cultural reinterpretations of the Great Showman’s life and times.  If the twentieth-century is any guide, we won’t have to wait too long for another cinematic treatment—every generation or so, some movie-maker finds the resources to put Barnum back on the screen.[1]

[1] Previous films include “The Mighty Barnum” (1934), “The Greatest Show on Earth” (1952), “Barnum” (1986), and “P. T. Barnum” (1999).

Edward J. Balleisen is professor of history and public policy and vice provost for Interdisciplinary Studies at Duke University. He is the author of Fraud: An American History from Barnum to Madoff. He lives in Durham, North Carolina.

Geoff Mulgan on Big Mind: How Collective Intelligence Can Change Our World

A new field of collective intelligence has emerged in the last few years, prompted by a wave of digital technologies that make it possible for organizations and societies to think at large scale. This “bigger mind”—human and machine capabilities working together—has the potential to solve the great challenges of our time. So why do smart technologies not automatically lead to smart results? Gathering insights from diverse fields, including philosophy, computer science, and biology, Big Mind reveals how collective intelligence can guide corporations, governments, universities, and societies to make the most of human brains and digital technologies. Highlighting differences between environments that stimulate intelligence and those that blunt it, Geoff Mulgan shows how human and machine intelligence could solve challenges in business, climate change, democracy, and public health. Read on to learn more about the ideas in Big Mind.

So what is collective intelligence?

My interest is in how thought happens at a large scale, involving many people and often many machines. Over the last few years many experiments have shown how thousands of people can collaborate online analyzing data or solving problems, and there’s been an explosion of new technologies to sense, analyze and predict. My focus is on how we use these new kinds of collective intelligence to solve problems like climate change or disease—and what risks we need to avoid. My claim is that every organization can work more successfully if it taps into a bigger mind—mobilizing more brains and computers to help it.

How is it different from artificial intelligence?

Artificial intelligence is going through another boom, embedded in everyday things like mobile phones and achieving remarkable break throughs in medicine or games. But for most things that really matter we need human intelligence as well as AI, and an over reliance on algorithms can have horrible effects, whether in financial markets or in politics.

What’s the problem?

The problem is that although there’s huge investment in artificial intelligence there’s been little progress in how intelligently our most important systems work—democracy and politics, business and the economy. You can see this in the most everyday aspect of collective intelligence—how we organize meetings, which ignores almost everything that’s known about how to make meetings effective.

What solutions do you recommend?

I show how you can make sense of the collective intelligence of the organizations you’re in—whether universities or businesses—and how to become better. Much of this is about how we organize our information commons. I also show the importance of countering the many enemies of collective intelligence—distortions, lies, gaming and trolls.

Is this new?

Many of the examples I look at are quite old—like the emergence of an international community of scientists in the 17th and 18th centuries, the Oxford English Dictionary which mobilized tens of thousands of volunteers in the 19th century, or NASA’s Apollo program which at its height employed over half a million people in more than 20,000 organizations. But the tools at our disposal are radically different—and more powerful than ever before.

Who do you hope will read the book?

I’m biased but think this is the most fascinating topic in the world today—how to think our way out of the many crises and pressures that surround us. But I hope it’s of particular interest to anyone involved in running organizations or trying to work on big problems.

Are you optimistic?

It’s easy to be depressed by the many examples of collective stupidity around us. But my instinct is to be optimistic that we’ll figure out how to make the smart machines we’ve created serve us well and that we could on the cusp of a dramatic enhancement of our shared intelligence. That’s a pretty exciting prospect, and much too important to be left in the hands of the geeks alone.

MulganGeoff Mulgan is chief executive of Nesta, the UK’s National Endowment for Science, Technology and the Arts, and a senior visiting scholar at Harvard University’s Ash Center. He was the founder of the think tank Demos and director of the Prime Minister’s Strategy Unit and head of policy under Tony Blair. His books include The Locust and the Bee.

Browse Our New Economics 2018 Catalog

Our new Economics 2018 catalog features new books from Dani Rodrik, Jean Tirole, Andrew W. Lo, and Jonathan Haskel and Stian Westlake, and many more. 

PUP at ASSA 2018

This year in Philadelphia we will be having something of an ASSA PUP bonanza with:
—Reception on Friday at 10am with our new director Christie Henry
—Reception on Saturday at 6pm with Richard Layard and Alan Krueger for The Origins of Happiness
—Competition for John Campbell’s Financial Decisions and Markets
—Samplers of Posner and Weyl’s Radical Markets
—Buttons for Jean Tirole’s Economics of the Common Good

Come and find us at booths 308/310, where you can pick up a copy of the catalog and see our full range of books in Economics.

Follow the conversation on Twitter, #ASSA2018

In Straight Talk on Trade, Dani Rodrik argues that unfettered globalization is undermining the ability of nations to achieve basic goals including prosperity, stability, and equity, and calls for a new global order that balances the global and national interests.

Straight Talk on Trade, by Dani Rodrik

Economics for the Common Good is Nobel Prize-winner Jean Tirole’s manifesto for a new economics that is fully engaged with the many challenges faced by modern society, and seeks to be a force for the common good.

Economics for the Common Good, by Jean Tirole

Are investors rational or irrational? Andrew W. Lo argues that, in real world markets, rationality and irrationality coexist, and proposes a new framework for understanding market behavior in Adaptive Markets.

The increasing share of intangible assets in the economy has ushered in a quiet revolution. In Capitalism without Capital, Jonathan Haskel and Stian Westlake uncovers the role of the intangible economy in the major economic changes of the last decade and consider its implications for the future.

Capitalism without Capital, by Jonathan Haskel and Stian Westlake

Find full details for all of these titles in our Economics 2018 catalog.

Éloi Laurent on Measuring Tomorrow

Never before in human history have we produced so much data, and this empirical revolution has shaped economic research and policy profoundly. But are we measuring, and thus managing, the right things—those that will help us solve the real social, economic, political, and environmental challenges of the twenty-first century? In Measuring Tomorrow, Éloi Laurent argues that we need to move away from narrowly useful metrics such as gross domestic product and instead use broader ones that aim at well-being, resilience, and sustainability. An essential resource for scholars, students, and policymakers, Measuring Tomorrow covers all aspects of well-being, and incorporates a broad range of data and fascinating case studies from around the world: not just the United States and Europe but also China, Africa, the Middle East, and India. Read on to learn more about how we can measure tomorrow.

Why should we go “beyond growth” in the 21st century to pay attention, as you advocate, to well-being, resilience and sustainability?

Because “growth,” that is growth of Gross Domestic Product or GDP, captures only a tiny fraction of what goes on in complex human societies: it tracks some but not all of economic well-being (saying nothing about fundamental issues such as income inequality), it does not account for most dimensions of well-being (think about the importance of health, education, or happiness for your own quality of life), and does not account at all for sustainability, which basically means well-being not just today but also tomorrow (imagine your quality of life in a world where the temperature would be 6 degrees higher). My point is that because well-being (human flourishing), resilience (resisting to shocks) and sustainability (caring about the future) have been overlooked by mainstream economics in the last three decades, our economic world has been mismanaged and our prosperity is now threatened.

To put it differently, while policymakers govern with numbers and data, they are as well governed by them so they better be relevant and accurate. It turns out, and that’s a strong argument of the book, that GDP’s relevance is fast declining in the beginning of the twenty-first century for three major reasons. First, economic growth, so buoyant during the three decades following the Second World War, has gradually faded away in advanced and even developing economies and is therefore becoming an ever-more-elusive goal for policy. Second, both objective and subjective well-being—those things that make life worth living—are visibly more and more disconnected from economic growth. Finally, GDP and growth tell us nothing about the compatibility of our current well-being with the long-term viability of ecosystems, even though it is clearly the major challenge we and our descendants must face.

Since “growth” cannot help us understand let alone solve the two major crises of our time, the inequality crisis and ecological crises, we must rely on other compasses to find our way in this new century. In my view, the whole of economic activity, which is a subset of social cooperation, should be reoriented toward the well-being of citizens and the resilience and sustainability of societies. For that to happen, we need to put these three collective horizons at the center of our empirical world. Or rather, back at the center, because issues of well-being and sustainability have been around for quite a long time in economic analysis and were a central part of its philosophy until the end of the nineteenth century. But economics as we know it today has largely forgotten that these concerns were once at the core of its reflections.

Isn’t there a fundamental trade-off between well-being and sustainability? Can we really pursue those goals together?

That is a key question and the book makes the case that advances in human well-being are fully compatible with environmental sustainability and even that the two are, or at least can be, mutually reinforcing provided we think clearly about those notions. Well-being represents the many dimensions of human development and sustainability represents dynamic well-being. They are obviously related.

To use the words of Chinese Environment Minister Zhou Shengxian in 2011, “If our planet is wrecked and our health ravaged, what is the benefit of our development?” In other words, our economic and political systems exist only within a larger context, the biosphere, whose vitality is the source of their survival and perpetuation. If ecological crises are not measured, monitored, and mitigated, they will eventually wipe out human well-being.

Well-being without sustainability (and resilience understood as short-term sustainability) is just an illusion. Our planet’s climate crisis has the potential to destroy the unprecedented contemporary progress in human health in a mere few decades. As acknowledged by Minister Zhou, if China’s ecosystems collapse under the weight of hyper-growth, with no unpolluted water left to drink nor clean air to breathe, the hundreds of millions of people in that country who have escaped poverty since the 1980s will be thrown back into it and worse. But, conversely, sustainability without well-being is just an ideal. Human behaviors and attitudes will become more sustainable not to “save the planet,” but to preserve well-being. Measuring well-being, resilience and sustainability makes their fundamental interdependence even clearer.

 But do robust indicators of well-being and sustainability already exist? If so, what do they tell us about our world that conventional economic indicators cannot?

Plenty exist, the task now is to select the best and use them to change policy. This is really what this book is about. Think about health in the US. Simple metrics such as life expectancy or mortality rates tell us a whole different story about what has happened in the country in the last thirty years than just growth. Actually, the healthcare reform initiated by Barack Obama in 2009 can be explained by the desire to amend a health system in which the human and economic cost has become unbearable. The recent discovery by economists Angus Deaton and Anne Case of very high mortality rates among middle-aged whites in the United States, all the while GDP was growing, is proof that health status must be studied and measured regardless of a nation’s perceived wealth status. How is it that the richest country in the world in terms of average income per capita, a country that devotes more of its wealth to health than any other, comes close to last in the rankings with comparable countries in terms of health outcomes? Use different indicators, as I do in the chapter devoted to health, and the solution to the American health puzzle quickly becomes apparent to you: the ballooning of inefficient private spending has led to a system where the costs are huge compared to its performance.

Or consider happiness in China, which has seen its per capita income grow exponentially since the early 1990s, while happiness levels have either stagnated or dropped (depending on the survey) only to increase again in recent years when growth was much lower. If you look at China only through the lens of growth, you basically miss the whole story about the life of people.

Paying attention to well-being can also help us understand why the Arab Spring erupted in Tunisia in 2011, a country where growth was strong and steady but where civil liberties and political rights clearly deteriorated before the revolution. The same is true for the quality of life in Europe and in my hometown of Paris, where air pollution has reached unbearable and life threatening levels despite the appearance of considerable wealth. Measuring well-being and sustainability simply change the way we see the world and should change the way we do policy.

What sign do you see that what you call the well-being and sustainability transition is under way?

In the last decade alone, scholars and policy makers have recognized in increasing numbers that standard economic indicators such as GDP not only create false expectations of perpetual societal growth but are also broken compasses for policy. And things are changing fast at all levels of governance: global, national, local.

The well-being and sustainability transition received international recognition in September 2015, when the United Nations embraced a “sustainable development goals” agenda in which GDP growth plays only a marginal role. In the US, scores of scholars and (some) policy makers increasingly realize the importance of paying attention to inequality rather than just growth. China’s leaders acknowledge that sustainability is a much better policy target than explosive economic expansion. Pope Francis is also a force of change when he writes in the encyclical Laudato si, published in June 2015: “We are faced not with two separate crises, one environmental and the other social, but rather with one complex crisis which is both social and environmental.” and urges us to abandon growth as a collective horizon. Influential newspapers and magazines such as The Economist and NYT recently ran articles arguing that GDP should be dropped or at least complemented. Local transitions are happening all over the planet, from Copenhagen to Baltimore, Chinese provinces to Indian states.

How should students, activists and policymakers engage in “Measuring tomorrow?”

The book serves as a practical guide to using indicators of well-being and sustainability to change our world. The basic course of action is to make visible what matters for humans and then make it count. Unmeasurability means invisibility: “what is not measured is not managed.” as the saying goes Conversely, measuring is governing: indicators determine policies and actions. Measuring, done properly, can produce positive social meaning.

First, we thus need to engage in a transition in values to change behaviors and attitudes. We live in a world where many dimensions of human well-being already have a value and often a price; it is the pluralism of value that can therefore protect those dimensions from the dictatorship of the single price. It does not mean that everything should be monetized or marketed but understanding how what matters to humans can be accounted for is the first step to valuing and taking care of what really counts.

Then we need to understand that the challenge is not just to interpret or even analyze this new economic world, but to change it. We thus need to understand how indicators of well-being and sustainability can become performative and not just descriptive. This can be done by integrating indicators in policy through representative democracy, regulatory democracy, and democratic activism. Applied carefully by private and public decision-makers, well-being and sustainability indicators can foster genuine progress.

Finally, we need to build tangible transitions at the local level. Well-being is best measured where it is actually experienced. Localities (cities, regions) are more agile than states, not to mention international institutions, and better able to put in motion well-being indicators and translate them into new policies. We can talk, in this respect, after the late Elinor Ostrom, of a “polycentric transition,” meaning that each level of government can seize the opportunity of the well-being and sustainability transition without waiting for the impetus to come from above.

As you can see, so much to learn, do and imagine!

LaurentÉloi Laurent is senior economist at the Sciences Po Centre for Economic Research (OFCE) in Paris. He also teaches at Stanford University and has been a visiting professor at Harvard University. He is the author or editor of fifteen books, including Measuring Tomorrow: Accounting for Well-Being, Resilience, and Sustainability in the Twenty-First Century.