social issues

Process Over Outcome

Consider a group that is attempting to create organizational or political change. I typically see the leaders of these groups take one of two approaches.

The first is to get a bunch of like minded people together in an attempt to “make things happen”. These types of groups mostly agree on what needs to be done. But this approach often suffers from two problems.

First, there are other groups of stakeholders who may not agree that the proposed solution is the right one. Since most situations like this require buy-in from many different stakeholders, this lack of buy-in dooms the solution to failure. Second, even when the group does have the ability to “ram through” their solution without securing broad support, their solution is often missing key perspectives or makes invalid assumptions, which render their solution ineffective.

The second approach is to bring a diverse set of stakeholders together and attempt to get alignment. This approach addresses the problems above but often runs into its own challenges. In many cases each faction has their own favored solution that they “know” is the right one; each group is just waiting to take the floor so they can explain why their solution is the one that will work. Groups may question the motives of the other groups and trust can often be strained.

The Power of Process

The power of the scientific method is that – at least nominally – scientists are not wedded to a specific “answer” but instead are aligned by their agreement on a fundamental process: they agree on a set of methods and processes for determining what is true.

It seems like this would be a better approach to change management as well. Rather than starting by trying to agree on a solution, start by getting agreement on the process by which we will arrive at a solution.

Note that in some cases this approach might mean using a different set of criteria for who is invited into the group. Perhaps it might mean splitting folks into two different groups: a content group who are experts in a given area or representatives of a given constituency, and a process group whose job it is to take the information provided by the content group and use it to inform their process.

Getting key stakeholders in each group to agree to a process achieves two things. It negates any specific emotions or biases that the group might have for or against a given outcome. And it creates psychological commitment to a process, making it more likely that they will agree to the results of the process, regardless of outcome.

This approach does have downsides. First, it requires that each party is willing to give up its “known” solution. It would be naive to think think that ego and self-interest aren’t often at play in these situations. But through a combination of reasonableness and peer-pressure (who wouldn’t want to follow a logical process to get to an answer? *wink*), perhaps these dynamics can be mitigated. Second, because the parties must first agree on a process rather than jumping straight into the content, this approach can seemingly take longer. Of course the only time measure that matters is the time to achieve the desired outcome. And I’d argue that this approach will lead to better outcomes more quickly.

Getting alignment is never easy. Nor is designing solutions that work. But it seems like focusing on process over outcome might help.

Creating Value

I have heard many times that the key to a successful business is to “create value”. While there is truth to that, it seems inadequate. Moreover, the ways in which it is inadequate have significant implications for the types of businesses one should start, the skills one needs to be successful, and the nature of our market system as a whole.

To my mind, there are two important clarifications here.

Value for Whom?

First, I actually don’t think our capitalist system rewards those who create value; it rewards those who create value for those who have value to give in return.

This can be most obviously seen in consumer brands. Apple and Starbucks are two of the most valuable brands in the world. Why? I would argue it’s because they target more affluent consumers for whom the marginal opportunity cost of that $3,000 computer or that $5 latte is not that big.

This reality has real consequences for the types of businesses that get started, funded, and succeed. Most people would probably agree that a business that helps uneducated, unemployed, single moms improve their parenting skills is ‘valuable’. But that’s not necessarily an easy business to start because – even if the moms wanted it – they don’t have the money to pay.

Now of course that business could attempt to sell its services to the government or a non-profit — or even get sponsored by a corporation – but this really is just the same thing: convincing the group that has value to give that you are providing a product or service that they value (even if they’re not the direct recipient of that product or service).

Creating Value vs. Capturing Value

The second clarification I’d like to make is the ability of a person or an organization to create value vs their/its ability to capture value. It took me a long time to realize that these are not the same thing, and that the skills/capabilities required are often quite different. Moreover, for the purposes of becoming financially successful, I would argue that being able to capture value is more important..

Let’s say you’re a brilliant developer. You’ve worked for years developing this algorithm that solves some massive problem. And just last night, you finally got it to work. You’re telling some guy about this at a party, and he’s super interested. In fact, after some more discussion he agrees to pay you $500K for your work. $500K! You gladly take the money, and at tax time gladly pay your tax bill on that income when the time comes.

Meanwhile, this guy takes your algorithm, forms a corporation, and then turns around and goes and licenses it to big company. He’s a great negotiator and manages to get a $1M license fee – non-exclusive, of course – per year. And come tax time he’s got a bunch of business expenses to pay — marketing, business-class travel, etc., and leverages his disregarded entity’s self-directed plan to make large, pre-tax contributions to his retirement account, allowing him to reduce his tax bill significantly.

Who created the value here? Who captured it? Are the skills and knowledge required for each the same?

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There’s obviously a lot to discuss here. Even my example is far from perfect in illustrating the distinctions. Perhaps I’m even thinking about it the wrong way. But they seem like important distinctions to consider.

Which Way To Miss?

Policy, as in many areas of life, is about tradeoffs. To take a simple example, consider arguments that some conservatives and progressives might make regarding welfare. I’ve heard friends that lean progressive say things like “How can we let someone who is really trying and down on their luck go hungry? We need to increase the availability of SNAP [food stamps].” On the other side, I’ve heard friends that lean conservative say some version of “I’ve seen people who get food stamps just waste them on things like cookies, cake, soda and chips – we need to reduce their use.” Who is right?

The answer, of course, is that they both are. People come in all shapes and sizes. They also vary in their behaviors, values, and ethics. This is what makes policy so difficult: you have one policy, but how people behave in response to that policy can vary widely.

There are various ways to deal with this. One is to refine the policy. For example, current SNAP policy does not allow folks to buy alcoholic beverages with those funds. This can work well when there is fairly broad agreement that such a refinement makes sense. But this can easily end up getting very complicated as you attempt to refine further and further until you end up with a complex mess that is difficult for the consumer to understand and for the regulator to enforce, and where the interaction effects between the various rules can cause unintended outcomes. (Tax policy, anyone?)

Error Types

Beyond some basic “common sense” refinements, however, a better approach is simply to acknowledge that any policy is going to have some “error” in it, and to ask which type of error is more acceptable, and how much? This is basically the same thing as thinking about Type I and Type II model errors in hypothesis testing.

Using the example above, would you rather someone get food stamps that didn’t really need them or not give someone food stamps that really did need them? To be clear, not everyone may agree on the answer to this question, but at least we’re now starting to have a real conversation.

Let’s say you think that it’s better to err on the side of being generous, even if it means some abuse of your generosity will happen. What ratio are you wiling to accept? For example, if there’s one abuse for every 10,000 people you truly help, that seems reasonable. What if it’s 5 people helped for every 1 abuse? 1 to 1? What if it’s 5 abuses for every 1 person truly helped? What if it’s 10,000?

Standards of Proof

Some parts of our legal system are already explicitly like this (or at least try to be). In the justice system there are known various ‘standards of proof’ that are required depending upon what’s going on. For example, a police officer is required to have a ‘reasonable suspicion’ before stopping and questioning an individual. A ‘probable cause’ is required to issue a search warrant or arrest someone. A ‘preponderance of evidence’ or ‘clear and convincing evidence’ is required in civil court (and sometimes in criminal). And ‘proof beyond a reasonable doubt’ is the standard required for a criminal charge.

Source: DefenseWiki

By placing such a high bar for evidence, we as a society have made the choice that we would rather let a guilty party go free than convict an innocent one. According to Wikipedia, it is estimated that between 2.3 and 5 percent of all U.S. prisoners are innocent. Is that an acceptable error rate? That’s an open question, but at least its a tractable one.

I’m not saying that the details of individual policies don’t matter. Clearly they do. And of course there are other real considerations, such as cost. But when there is disagreement it may help to start the conversation by asking “which type of error are we more willing to make?” and “by how much”?

Systems of Poverty

Several years ago, I participated in the AdvancingCities Initiative run by JP Morgan Chase – cities and/or regional groups were to propose projects that addressed one or more of several key ‘focus areas’ for the initiative, all generally based around improving the major cities within the region. As I am based in St. Louis, I got involved there.

E2E: Education to Employment

My particular proposal was the development of an ISA-financed “Education to Employment” pathway where various stakeholders (i.e. government, employers, schools and non-profits) would coordinate their activities to provide educational and other support services needed to help folks from low-income backgrounds get living-wage jobs. These investments would be financed by an ISA, where the student would start paying back a percentage of their income once they started earning over a threshold amount. The proceeds from this payment would then be divided across the various organizations within the ecosystem according to an agreed upon formula.

It was my hope that this would provide an economically sustainable way to continually reinvest in our communities.

Mapping the System

My proposal wasn’t chosen and we ended up going in a different direction. But in the course of those discussions I learned a lot about the causes of poverty and the feedback loops that often make it very difficult both to escape individually and/or address systemically.

When faced with complex problems like this, one of the things I like to do for my own sake is to develop what I call “causal maps”: basically simple digrams that map out the cause-effect dynamics at play.

The way to read the maps are simple – it’s mainly [Cause] –> [Effect]. I find that doing this often helps me distill a lot of complexity down into something that I can understand, while also highlighting the interconnected nature of the problem.

Draft effect map of poverty
Draft Cause-effect map of poverty

Above is an example of a simple one I created to understand the dynamics of poverty. Now I certainly don’t claim that this is complete or that I am any type of expert. I am mainly sharing in case others find it interesting and to encourage trying this mapping approach and see if it works for them.