Tuesday, March 21, 2017

When We Lost Our Mojo

In my course on The Economics of Organizations I do a section on personal reputations.  As we use student blogs to ready the class for discussion on the issues, it may be interesting to consider the prompt I gave students on this topic.

The topic is personal reputations and their role in influencing behavior. Describe some domain where you have a strong reputation with others (it could be with friends, it could be with your family, it could be at some place you worked, etc). Then discuss how your reputation developed. Consider what you do to keep your reputation intact or enhance it further. Finally, reflect on whether there are occasions where you'd like to stray from the behavior suggested by your reputation and what you do on those occasions. Have you ever "cashed it in" by which I mean you abandon your reputation altogether in favor of some immediate gain?

There is an economics theory of reputations based on play in a repeated Prisoner's Dilemma.  Without getting into technicalities, what the theory shows is that if the future looks sufficiently optimistic then players don't cash it in.  In contrast, a more pessimistic forecast leads to doing what is myopically optimal, disregarding its impact on the future.

I'm now going to switch from the language of economics to the language used in considering diffusion of innovation.  Early adopters of an innovation tend to be optimistic.  They embrace the new thing because of the possibilities it enables.  Those possibilities suffice for them.  High likelihood of success is not necessary.  Their enthusiasm combined with their experimental play with the innovation ends up being the driver of success, as much or more so than the innovation itself.  In this sense, adoption is itself a creative act rather than a mere flip of a switch.  Adoption entails fitting the innovation to purposes that adopters see, which were not apparent to the inventor of the innovation.

I am specifically thinking of teaching online in considering the above, but I think it applies in many other areas as well.  Examples include Muhammad Yunus' development of micro credit and Atul Gawande's championing of hand washing to prevent the spread of infection in hospitals.  In each case, apparently successful adoption encourages spreading the innovation further, till it is embraced broadly.

In contrast, latter adopters of innovation may do so for defensive reasons and/or to create more immediate gain for themselves.  In the online learning arena, one finding from more than ten years ago is that many instructors used the learning management system in a dull way, primarily to share files, and completely eschewed the possibility of experimenting with their teaching with the technology as an enabler of such experimentation.  In the business arena, one might consider subprime lending with essentially no underwriting standards (loans equal to 100% of the value of the house offered to any borrower whatsoever regardless of ability to pay off the loan).  In retrospect, it is difficult to fathom how this could have occurred.

It is worth noting that Gawande's piece on hand washing occurred roughly at the same time that Countrywide was making all those inappropriate subprime loans.   Indeed, at any one time we are likely to experience early adopters doing creative things that improve matters and  latter adopters of some other innovation creating harm via some cashing in approach.  For example, the late 1980s to early 1990s were a period that can be generally characterized by a sense of optimism for a variety of reasons, one being that the PC revolution was well underway.  Yet during that time my parents, who were retired and then snowbirds living in Florida in the winter and in New York the rest of the time, were scammed by their financial advisor at Prudential Bache.  Less than a decade later, there was the well known Enron debacle, much of which occurred during an even more optimistic period, now referred to as the dot.com bubble, with Enron's bankruptcy an emblem of the bursting of that bubble.

Optimism and pessimism vary over the business cycle - bulls charge while bears shy away.  But what we seem to have now is a very broad malaise, even while the stock market itself has been faring pretty well. 

I won't offer up a precise time, though I suspect in retrospect it will seem earlier than it did in prospect.  I will also try to do this both for me as an individual and for the country as a whole.

I switched careers, from doing economics full time to becoming an administrator in online learning, in that same optimistic period we associate with the dot.com bubble.  I was caught up in the enthusiasm, not for financial reasons, but for the potential that the technology seemed to unleash for learning.  But the job gradually changed, moving from supporting experimentation in a variety of ways, to offering production services for ordinary faculty.  In spring/summer 1999 when I became the director of a new campus Center for Educational Technologies, there still was a soft-money organization SCALE that was giving us a good chunk of our funding and enabled the experimental approach.  We had a chance to extend SCALE's funding, with the Mellon Foundation replacing the Sloan Foundation as the outside funder.  But that didn't pan out.  Thereafter, our funding was mainly internal.  It had a consequence I didn't fully appreciate at the time but seems quite clear looking backward at then.

Six years later we are in the midst of the full campus roll out of our enterprise learning management system, which was branded on campus as Illinois Compass.  It was a disaster.   The service had to be taken offline for a better part of a week.  After that we threw money at the problem and did a variety of reorganization to shore up the service.  Thereafter things were better for Illinois Compass, but I'm somebody who believes you can and should solve problems in prospect.  In this case I was unable to address these matters and this was to be my big moment.  It was all very deflating.

A year later I had a horrific fall, severing all the tendons on my left leg between the quadriceps and the knee. This piece is from four weeks after the surgery.  During this time I was between jobs, moving from the campus job I had to the College of Business.  There was potential that the new work would revive my enthusiasm.  But I found some blocks to that in how the College was structured that I hadn't anticipated when I applied for the position.  It's not that there weren't some successes and forward motion.  There were several of those.  But there was no home run, no fully online program.  The College has that now.  It wasn't ready for it then, though I only realized that in retrospect.

Let me switch to the country as a whole and draw some temporal parallels to my personal experience.  The aftermath of Hurricane Katrina happened at roughly the same time as the Illinois Compass debacle.  It seemed the Federal Government was incompetent and uncaring.   How the Airlines responded to 9/11 gives a different look, that it was the private sector as much as the government that was incompetent and uncaring.  This piece is talking about a time around when I had my leg accident.

The U.S. Commercial Air Transportation Analysis concluded in 2006 that despite advancements in technology, the overall customer flying experience was going down.  Cuts in food, customer service, capacity, onboard conditions were just some of the reasons given by the report, which came to this conclusion: "Virtually all travelers would likely say that travel through the aviation system today is less rewarding and more onerous than it was 5 years ago."

A year later there was the Surge in the Iraq War, a war that had been ongoing for five years.  People disagree about the efficacy of the surge, but that the American public was wearing down from the ongoing involvement with no obvious win to claim for the effort.  Surely that was demoralizing.    And this is still a year before the burst of the housing bubble.

Let me close by moving earlier in time, to the Bush Tax Cuts.  These were initially passed in the aftermath of 9/11, with the Republicans in control of both the White House and Congress, as is the case now.  Piketty's much discussed book Capital in the Twenty-First Century has a 2014 copyright.  Looking at the Bush Tax Cuts from the perspective of Piketty, what were we thinking?  When we willfully make such bad choices we eventually have to pay the piper.

And we're still paying the piper now.

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