> The reward for success in most corporations is to be able to hire more people.
In business:
1. success => more budget
2. failure => budget gets cut
In government:
1. success => budget gets cut
2. failure => more budget
In business:
1. success => more budget
2. failure => budget gets cut
In government:
1. success => budget gets cut
2. failure => more budget
This is more common in government due to politics: if agencies aren’t allowed to hire competent technical staff, the contractors will be poorly supervised but when it fails the same people who cut staffing will use it to argue even more things need to be contracted out. Again, the problem isn’t the sector but the lack of an effective feedback loop.
Of course. The feedback loop for government is different from that for business. Failure in business means going out of business. This powerfully incentivizes business to stop rewarding failure. Like when Alexa lost $billions and Amazon cut off its funding.
No such feedback exists for government operations.
I didn't say otherwise. I said they were different loops.
But government departments and agencies are never axed, no matter how useless they are.
1. fail to get kids to meet grade academic standards => teachers get a raise and more budget
2. gifted programs succeed => gifted programs get canceled
School performance is heavily politicized so many people have an incentive, sometimes financial, to say public schools are failing but what actually happens is what close to a century of research has shown: student performance tracks their household socioeconomic status, but we tend to approach the problem backwards for ideological reasons and see it as “improve school performance to fight poverty” when every bit of data says it should be “deal with poverty to improve school performance”.
Is it the case that the amount of money spent on infrastructure is increasing unnecessarily or because previous generations voted against maintenance until things failed completely?
Is spending going up due to teacher salaries or because the solution to perceived problems is adding more layers of much higher-compensated management who will reliably divert staff time away from education?
Again, I’m not saying that everything is perfect with no room for improvement but rather that there’s both deliberate misrepresentation (e.g. the charter school industry literally banks on this belief) and significant confusion caused by trying to find a cheap fix for complex social problems.
That doesn't work in business. You fail, you go out of business. Nobody cares why you fail, nobody listens to excuses.
I can't imagine many teachers feeling this way, seriously. Not everything requires life-or-death financial pressure to encourage excellence.
Even the most well-intentioned teachers behave according to their incentives.
> Not everything requires life-or-death financial pressure to encourage excellence.
I didn't say everything. After all, I work on D for free. But you simply cannot run an organization with tens of thousands of people in it and expect excellence when there is zero incentive for excellence. It just ain't gonna happen.
Teacher pay is 100% based on length of service and which college degree. Nothing else. Nothing. It matters naught whether a good job is done or not. Even if one wins "Teacher of the Year", it is worth exactly $0.
Yet they drive the entire economy. They work better than anything else. Other systems have been tried repeatedly that rely on:
1. the lash
2. altruism and ideology
3. threats of going to hell
are pretty lousy motivators.
Giving people autonomy, mastery, and purpose can help, but that simply does not scale.
She's a headmistress in the UK that specifically tailors her school's offerings to lower-socio kids who don't have educated/literate parents at home, and her GCSE results beat out the majority of middle-class schools.
There are some similar examples in Australia too. I know the previous principal of Frankston Primary School managed to get above average AIMS results from a cohort consisting of basically pure white trash.
I guess the point is that, even though this may be true overall, there are clearly examples where excellent schools have thrived in spite of poverty/illiteracy, and tailoring schools to the demographics of the local area could help millions of disadvantaged kids.
The most famous case is that of Jaime Escalante:
https://en.wikipedia.org/wiki/Jaime_Escalante
The school system worked hard to undermine and destroy his work.
In my country they are experimenting with giving them a bonus but it just isn't worth it.
Anyway, this is an example of libertarian first principles thinking. The problem with first principles thinking is that in the real world it's literally always wrong (because there are always factors you forgot about), but that this doesn't convince people to stop doing it, because they know it must be true despite it never in practice being true. Does the profit motive actually stop Google or Uber from constantly doing useless makework projects and releasing unprofitable products?
Large companies are like mini-governments with their own kind of politics. We tolerate them because despite all the useless make-work that happens in a large company, we usually find that it's still far more efficient than a bunch of smaller companies would be.
And when a publicly-traded company gets too large for its own good, corporate raiders can step in, acquire it on the cheap and spin off its parts into leaner and meaner firms. The whole process is driven by the expectation of efficiency.
You mean companies never fail and go out of business? It happens all the time.
> Does the profit motive actually stop Google or Uber from constantly doing useless makework projects and releasing unprofitable products?
Did you read in the news recently that Amazon axed Alexa? Because it was losing $billions?
Besides, it's rarely possible to tell in advance whether a new product line will be successful or not. The thing to do is try it and see. If it fails, you axe it. If it succeeds, you put more investment into it.
It's like a TV series. "Yellowstone" was wildly successful, and Paramount is pouring money into prequels and sequels. "The Time Traveler's Wife" didn't do well, so no second season.
Exactly as free market principles predict.
It's true that "if you can't make payroll, the company goes out of business" but anything less unoptimal than that also happens all the time. Individual executives who cause the failures get promoted, bad products with price-insensitive customers/investors live on, unprofitable business lines in otherwise surviving companies can live forever, managers grow their teams for non-economic reasons, customer brands of failed companies get bought and relaunched by anonymous Chinese companies instead of disappearing.
(Wrt this website, capitalism has given former YC president Sam Altman multiple McLarens and a New Zealand apocalypse bunker despite his never having a known productive job in his life.)
> Did you read in the news recently that Amazon axed Alexa? Because it was losing $billions?
That wasn't a rational decision. Amazon started Alexa on a whim, didn't monetize it on a whim, and canceled it on a whim. In a large company, the R&D people who develop products are often walled off from knowing about finances because the execs don't want corporate finances to be widespread knowledge, and so their yearly performance reviews are based on inventing cool stuff rather than if they were profitable or not. So the execs just didn't decide to tell them to do profitable stuff, then got bored and cancelled it instead of doing that. Too bad for anyone who got laid off, but it wasn't their fault.
(It's strange for them to claim it was losing billions though. It sure seemed like they were selling a lot of licenses, and Amazon is usually known for good cost control. Where was it all going?)
> It's like a TV series. "Yellowstone" was wildly successful, and Paramount is pouring money into prequels and sequels. "The Time Traveler's Wife" didn't do well, so no second season.
The TV industry has lots of cost-insensitive customers because most people don't cancel their cable/streaming accounts every month even if they don't use it. So they don't have perfect signals here either.
Netflix in particular is famous recently for constantly cancelling series even if they're doing well. And when something underperforms just a little they also cancel it, when they probably could've invested a bit more to improve it instead. This is actually hurting them because it reduces customer trust, which suggests they really just like cancelling things - or at best, they're irrationally sensitive to the possibility actors might ask for a raise next season.
That's why there's always opportunity for a competitor to step in, do better, and take their lunch. Happens all the time.
> Amazon started Alexa on a whim, didn't monetize it on a whim, and canceled it on a whim
How do you know this?
Besides, I can see from your post that you know how to run businesses better. Maybe you do. I recommend you start one - you'll get rich!
That's not a cite. Please cite your evidence.
1. Spend all your budget => equal or greater budget
2. Spend less than your budget => budget gets cut
Exactly. They failed, so they get more budget. Happens with nearly all government projects. It's almost as if the department/contractor knows that if they fail they'll get more budget. Hmmm...
Sorry, but LOL. For one fine example, the cost of a NASA launch vs the cost of a SpaceX launch.
> is mostly powerless to prevent private contractors from abusing the public's interest.
The government? Powerless? The government writes the contracts. There are a vast array of regulations specifically aimed at government contractors.
The observation is very simple: if the government estimates and allocates $500 million for a bridge and finds a contractor that claims to be able to do it for that price, there's very little reasonable power we can grant them to make the contractor meet their claimed budget. We could allow the government to throw contractors in prison for bilking them but, well, we already allow that (and it doesn't recoup the costs anyways).
Regulatory capture and special interests seem to be the bigger problem here. Complaining about NASA without considering why the government so fecklessly pays Lockheed Martin et al. billions a year is short-sighted.
True, as those examples are everywhere one looks.
The trick is to find one that is efficient.
> he observation is very simple: if the government estimates and allocates $500 million for a bridge and finds a contractor that claims to be able to do it for that price, there's very little reasonable power we can grant them to make the contractor meet their claimed budget.
Yet private companies contract stuff out to other companies all the time, and the contracts get done on time and on budget. For example, take Boeing. Boeing gets a contract from Delta to build, say, 50 airplanes for $5 billion, to be delivered on June 1. Every day Boeing is late, Boeing pays the airline a penalty. If Boeing runs over budget, Boeing eats the difference, not Delta. If Boeing fails to deliver Delta 50 airplanes, Boeing pays a big penalty to Delta.
Now, if Delta wants to change the spec after it is signed, well, they gotta pay Boeing. If Delta doesn't pay the bill, they get sued by Boeing. If Delta wants to reduce the number of planes they contracted for, Delta pays a penalty.
See how that works?
And Boeing does their damn-dest to be on time and on budget.
I've also watched contractors who are paid a $$$ bonus for every day they are ahead of schedule. It's amazing how fast they work. I remember one group that received $10,000 each for delivering on time. This was back in the 80s, when that was real money. There was no way that project was going to be late.
May I suggest your outfit hire better contract lawyers.
Do you recall after that earthquake in LA the city hired a construction company to rebuild a freeway interchange that collapsed? They offered ONE MILLION DOLLARS PER DAY to complete it ahead of schedule.
The contractor broke all records and got it done months ahead of schedule. Everybody was happy.
Isn't it amazing how that works?
I've hired contractors to renovate. They get paid the contractual amount if they complete it. If they fail, they don't get paid till they fix it.
It's not rocket science. See this thread for what happens with Boeing and their customers.
The free market solves this problem by a thing called "Contract Law" which is enforced by the courts.
If you can really solve this problem, you can make a ton of money.
Meanwhile, non-trivial projects with clauses like yours are less profitable and therefore tend to be the first delayed when resources are scarce. Which they frequently are. Unless you overpay by default. After all, "on budget" doesn't matter if the budget is 100x what other people are being quoted
Meanwhile, how you described Boeing contracts doesn't seem plausible.
No it doesn't. Programs are cut or cancelled outright all the time. The important question is not whether they're failing or succeeding but whether they're believed to be necessary. Projects that are necessary get more funding if they are failing, like schools. Well duh.
Projects that are succeeding and have budget left get trimmed. Again, duh.
Projects that are unnecessary or no longer necessary get cut regardless of budget.
That's just good governance. The same pattern happens in the economy.
How about those zillions spent to eliminate homeless encampments? They're spending something like $50,000 per homeless person. Hasn't put a dent in it. What is happening?
More budget! It's called the Homeless Industrial Complex for a reason.
> Projects that are necessary get more funding if they are failing, like schools
Yup, failing means more budget!
So the US military has been failing for 70 odd years then?