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September 1, 2014

Dividing, Succeeding and Analyzing

Why we can’t get along; managing companies better; overhyping GDP 

 

The Big Sort: Why the Clustering of Like-Minded America Is Tearing Us Apart

by Bill Bishop. Mariner Books, 2009.

We blame political partisanship for all sorts of things: gerrymandering, humongous campaign contributions, plots on the right or the left, the popularity of media outlets like Fox News and MSNBC. All of those things are wrong, according to Bill Bishop, a journalist and editor in Austin, Texas.

Though this book was published five years ago, policymakers, pundits and academics alike are referring to it a lot these days for its useful and convincing insight into why Washington remains gridlocked and the nation so politically polarized.

No one’s gerrymandering state lines, Bishop points out—though the parties do fool plenty with voting district boundaries. The increase in the number of states where national elections are decided by a landslide has steadily increased. Enormous last-minute campaign contributions made no difference in the 2012 presidential election; the June polls showed the same thing as the outcome in November. The popularity of slanted media outlets is a symptom rather than a cause, Bishop writes.

The real cause of our national division is that we don’t like to live with people we don’t like. As Americans have become more mobile, able to live where and how they want instead of where they grew up or where some corporate employer sent them, we have sorted ourselves into like-minded communities where we never have to confront an opposing view. In one of the studies quoted in this fascinating book, two counties in Wisconsin tell the story. Around 80% of those who move to Waukesha County are Republican and 80% of those who move to Dane County are Democrats.

None of this was done intentionally, at least not from a political standpoint. We don’t move simply to be near other people who belong to the same political party. Tech capitals emerge and young, college-educated techies go there for opportunities. The fact that such cities are heavily Democratic is an unintended consequence. Politics has become part of a lifestyle choice, like driving a Prius rather than a Mercedes. Voting has become a way to show that you belong to one tribe or another. In the process, politicians from those constituencies become more extreme; they play to what the audience wants to hear.

In the short term, we have begun to push problems to the local level to solve. Although this does mean that the problems get solved closer to the people experiencing them—better mass transit in one city, more highways in another—it also means we lose the ability to solve problems at the national level. Income inequality, climate change and immigration are not local problems, but there has been and probably will be little or no movement of much consequence on any of those issues. In the longer term, the real danger—aside from hating each other—is, as Bishop writes, “Monocultures die.”

 

The Hard Thing About Hard Things

by Ben Horowitz. HarperCollins, 2014.

 

At last! A really, really good management book. Ben Horowitz, tech billionaire and partner in the venture capital firm Andreessen Horowitz, has had it with the giant library of let-me-tell-you-where-you-went-wrong management books. As he says, setting huge goals is not hard; failing to meet those goals and having to lay people off is. The hard thing about hard things is “there is no formula for dealing with them” because they are totally different from what you had counted on to happen.

This book, based on Horowitz’s immensely popular Ben’s Blog, has two heavy influences. The first is his own experience, starting as a cubicle techie at Silicon Graphics and quickly moving to Netscape where he met the co-founder, Marc Andreessen, and from there founding an early cloud computing company called Loudcloud, which became Opsware and eventually sold to Hewlett-Packard for $1.6 billion in 2007. The second influence, and the reason that there is no BS in the book, is rap music. Yes, rap music. If you actually listen to the lyrics as he does, you can find wisdom like this from Jay-Z: “I move onward, the only direction / Can’t be scared to fail in search of perfection.”

The book’s unvarnished truth and highly entertaining writing make it one of the best management books I’ve read. There is no secret to good management and being a successful CEO, Horowitz writes, “but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves.” Horowitz took his company public in the middle of the dot-com bust when no one else would invest. He had six weeks of cash left and 340 employees. “There’s always a move,” he writes. You just need the guts to make it.

Few CEOs will talk about how and why they fell flat on their faces. But those experiences offer the sharpest lessons for them and for everyone else.            

 

GDP: A Brief but Affectionate History

by Diane Coyle. Princeton University Press, 2014.

Here’s the thing about GDP: It doesn’t exist. We made it up. The statistic was developed during World War II. Until then, an economy was measured based completely on its private sector—no government or military spending, no welfare and no services. During and after the war, it became clear that was too large an omission to give any clarity to what was going on. Services now make up 68% of the U.S. economy, for instance. Lately, says Diane Coyle, visiting professor at Oxford University’s Smith School of Enterprise and the Environment, GDP has seemed more like fun with numbers. The GDP of Ghana, for instance, jumped 60% overnight in 2010 when the Ghanaian statistical agency changed the way it calculated GDP. Nothing else changed.

 

At just 168 pages, this book is indeed brief. Coyle offers the history of GDP, but also shows why it needs to be updated to reflect the economic realities of our time. Coyle argues that we must adopt more sophisticated measures of GDP. The way the financial sector is calculated makes no sense, for instance. “Increased risk-taking is recorded as increased real growth,” Coyle writes, but “what’s so special about banks taking risks?” There is no way to account for unsustainable growth—that which depletes a resource, thereby robbing us of future growth—or free things like Facebook and GPS, even though they provide a clear value. Although GDP tells us how fast economic output is growing, or not, the statistic “struggles with measuring innovation, quality and intangibles,” Coyle writes.

Although flawed, GDP is what Coyle terms “a bright light shining through the mist.” The suggested alternatives—dashboards of various statistics, a “happiness” index—do not offer the clarity we tend to ascribe to GDP. But if we really understood the index’s vagaries and inadequacies, we would be a lot more skeptical of how broadly and readily it is used.