The Economics and Politics of Openness

The fuzzy concept of Openness is correlated with macroeconomic progress and microeconomically with superior ideas. I suspect/hypothesize mega-region economic growth -explained by economist Richard Florida in The Great Reset, p.144- can be symoblized by Openness of the kind Jack Layton expressed.

5 factor personality test

http://en.wikipedia.org/wiki/Big_Five_personality_traits

1.Openness to New Experiences

2. Extroversion

3. Agreeableness

4. Conscientiousness

5. Neurotic (or inverse Emotional Regulation)

http://en.wikipedia.org/wiki/Openness_to_experience   - describes Openness-to-New-Experiences in more detail.

- inversely correlated to political conservatism

- inversely correlated with age (youth more open)

Macro-economic: prosperity is correlated with 5 factor personality model's Openness to New Experiences. 

p.210 "Openness to experience is the only personality type that plays a consistent role in regional economic development"

-book "Who's Your City?", Richard Florida: http://www.creativeclass.com/_v3/whos_your_city/

- see also p.196 diagram of geographic distribution of big-5

Micro-economic: superior ideas are correlated with Openness

studies show openness is correlated to quantity of superior ideas generated by teams:

The Effect of Personality on Collaborative Task Performance and Interaction

          http://doras.dcu.ie/2154/1/Camera-Ready.pdf

The Impact of Big Five Personality Characteristics on Group Cohesion and Creative Task Performance

          http://scholar.lib.vt.edu/theses/public/etd-32198-18285/materials/etd.pdf

The conference board of canada's tip sheet on how to be innovative:

http://www.conferenceboard.ca/Libraries/EDUC_PUBLIC/ISP_brochure.sflb

- the first category seems to be about Openness, the second category seems to be about Conscientiousness.

Discussion:

Correlation does not prove causation. Two things can be randomly/by-luck correlated, or a 3rd thing can be causing both. But when I looked at how I could train people to be more innovative, I found microeconomic studies on openness that seemed to confirm what Florida was seeing on a macroeconomic scale. And Jack Layton's magic seemed to be his openness. And didn't he win in urban cores?

Openness by itself could also mean careless though, and I think that's what got some interim Liberal leaders in trouble. If you're open to new ideas, you also need to have a good process for vetting the ideas, and that relies on Conscientiousness. The Conservative Party symbolizes Conscientiousness well in my mind, but not so much Openness - somewhere around 50% on openness. When I hear about Conservative attack ads, the Conservative Openness score goes way down in my mind. I'm not sure why -either it reminds me of USA politics, or attack ads say more about the attacker than the attackee.

The NDP or Liberals symbolize Openness much better, or at least Layton did. I don't know about Mulcair - the feeling is much different. I think the Liberals -Bob Ray- score much higher on Openness in my mind than Mulcair does.

Openness - generate and gather new ideas

Conscienciousness - carefully process, vet ideas

Hypothesis: you need both to win our economic driver: mega-region cores.

Creative Class and Monitoring

Authors such as Richard Florida in "Who's Your City?" and Roger Martin & James Milway in "Canada What It Is, What It Can Be" mention a "Creative Class" - workers with good wages doing interesting things, versus RoutineService and RoutinePhysical with lower wages. But what exactly is driving the wage gap? And what might the future look like for careers?

CREATIVE CLASS - the 'profit' gap with everyone else:

Economists talk about 'monitoring' and agency theory and efficient wages. I mention it because one way to explain the wage gap between CreativeClass vs RoutinePhysical and RoutineService is how easy it is to monitor effort. Which has been changing with the era of digital records. Hiring a night-shift worker for your fast-food store? 50 years ago you would need to pay enough so the worker would fear losing their job even when not directly monitored. That's because you had no way of tracking how much they were taking home in their pockets. So the fear of being discovered had to be high: loss of a good paying job. The extra wage premium that created a sufficient level of fear economists call 'efficient wages' - efficient because it saves the cost of having a supervisor standing over every worker every shift. But even supervisors are often 'agents' for the owners if they are hired help. So they need efficient wages too. To reduce the agency and efficient wages, owners can do the supervising themselves. But then it's hard to scale up the business. And that led to more small local businesses doing routine things. It was hard to scale a routine business because of the agency / monitoring issue.

More recently with the digital era of bar codes, computer reciepts and computer tracking -and with tiny cameras positioned around the place of business, and telling the employees the cameras are there in case a bad guy comes in- the cost of monitoring employee effort has gone way down. And that means more monitoring. And that means less 'efficient wage' premium. And less need for extra layers of agent supervisors being paid efficient wages to monitor. And that means small proprietor shops can be replaced by / consolidated into cross-country chains.

HARD-TO-MONITOR CREATIVE WORK

The exception to this trend would be the kinds of jobs that even if you were staring directly by the individual, you might not be able to tell if they are performing well or poorly. To a large extent you rely on 'qualifications' and assume if they were driven to get say a BSc in something  that might be a somewhat indirect measure of some natural baseline internal motivation the individual has for making a contribution to understanding and knowledge. Then look if they published anything - a sign they not only like to build knowledge but do it in a shareable way. Still, since it's hard to monitor effort, you'd want them to at least not be worrying about their financial future and hedging their bets. You'd want them to focus on your stuff. And you'd want them to fear losing the opportunity to contribute, so you'd pay them highly efficient wages.

They would know a few things from that: a) they may be able to slough-off shoddy effort for 6 months or a year but eventually when it comes to publishing they would be found out and let go, and b) they're making enough money that if they focus and do a good job they should be well looked after - no need to hedge with other activities.

The dichotomization is on the dimension of monitorability.

MONITORING THE (CURRENTLY HARD-TO-MONITOR) CREATIVE CLASS

Lets say I come up with computer algorithms that can now monitor the creative types. Like bar codes, computers and security cameras did for routine jobs. There are some analogies: software boiler rooms have 'testers' so instead of paying programmers highly efficient wages so they are more careful not to make mistakes and to think of everything, you can pay them less and hire testers. The testing is like monitoring. If a programmer is spewing out a lot of broken code the testers will have statistics on that. So you should be able to pay programmers less efficient wages. And you should be able to scale your operations beyond a small-shop environment. You could even outsource the implementation overseas.

Likewise you might be able to peel away at more of what has been traditionally efficient wage territory, one by one. Step 1: adopt modern monitoring techniques Step 2: cut efficient wages

ADOPTING vs INVENTING MODERN MONITORING TECHNIQUES
Now lets say you're left with some work tasks still falling into the CreativeClass. You've searched high and low for off-the-shelf monitoring techniques and came up empty. Still expensive efficient wages. What to do?

a) scale implementation -which is monitorable- of creative output and/or outsource it to low wage zones so there's more revenue to pay the highly creatives efficient wages

b) invent some new monitoring techniques for those creative jobs, and then cut the efficient wages to save money. But how?

Some ideas that pop to mind:

1. analogies to software testing: specify testable outputs in the job description and hire routine (non-efficient wage) monitors

2. statistical programs and large comparison datasets with many parameters

- for example a dataset for 5000 economists: how many papers and books published, weighted by number of downloads and references, number of students who go on to great things, impact of research on positive economic results for the world

3. algorithmic programs - something that tries to think like an expert, and can 'judge' or serve as a peer expert to compare against. Expert programs have been used in diagnostic medicine. Then some statistics on how well you are doing.

4. peer review - something done in science publishing. Somehow make more of the creative job peer reviewable, and somehow motivate independent peer reviews while avoiding collusion or petty politics - likely using modern web technologies to make the peer reviews fast and cheap

5. online review > comments/feedback - get those affected to put in their Comments, Like, and cut the cost of monitoring.

VS SPREADING THE JOY - MAKE ROUTINE JOBS PARTLY CREATIVE

Some authors seem to argue for a 'creativization' of routine work: rather than make all jobs more monitorable, and therefore more routine and therfore paying less efficient wages, the idea is to get more hard-to-monitor creative component into each job, in such a way it pays off for the company and the employee. In some cases computer technology may be able to assist: help capture and utilize creativity by every worker, like a suggestion box on steroids. For example an internal issue system where any employee can create an issue, and any employee can offer suggestions to solve/improve the issue. To some extent this would reduce the need for a CreativeClass worker doing all the thinking. So it would be like spreading the CreativeClass premium across the RoutineClasses. That may have net benefits to the company: better profits, differentiation, competitiveness, flexibility of the business model across geographic and cultural zones, and over different stages of economic cycles: flexibility, growability and sustainability.

Firms might differentiate on the extent to which they attempt to increase routineness through monitoring to cut efficient wages, or increase creativity for flexibility, growability and sustainablity at some cost of more efficient wages, or some cross such as increasing creativity monitoring while increasing or sustaining efficient wages.

In the last century we saw Hollywood movies with future themes, where some computers are supervising everyday life, implying that computer intelligence supercedes human, so why fight it.

In this century I expect to see us getting closer to that, as computer technology facilitates less costly means of monitoring the human effort we currently class as creative. Where that all leads I can only ask my creative peers to explain their wage premiums as reshuffling of staff positions occurs.

AWESOME_AIRDRIE #3 post-analysis

I had a great opportunity to give a spiel and win a $1000 prize to help fund a project, at the AWESOME_AIRDRIE #3 competition (see http://www.creativeairdrie.ca/ )

I nailed my spiel. It felt great to have the undivided attention of so many influential people for 90 seconds. That's a value that I otherwise couldn't afford, yet as an average citizen I experienced no barriers to entry. I'm very greatful for that opportunity, and commend the organizers, participants, judges and volunteers.

I didn't win. After hearing the others I did predict the winner. Trying to summarize what I think will win -for future reference- the 2006 book "The Long Tail" by the Wired magazine editor Chris Anderson popped to mind, for it's lucid talk about sales rank graphs.

http://en.wikipedia.org/wiki/The_Long_Tail   refers to book featuring a sales rank graph and commercial viability

- ‘the long tail’ refers to the right side of the graph, formerly sub-commercial items have become commercially viable recently by cutting production costs via online retailing

http://www.wired.com/wired/archive/12.10/tail.html  see the thumbnail diagrams on this page

The LongTail/Sales Rank Graph can be broken into 3 sections:

#1. over-commercial or supra-commercial or public-good: not only are these commercially viable, there’s enough local demand so the public can ‘buy in bulk’ / negotiate special rates by buying collectively as a public good if it can be delivered as a public good

#2. commercial: enough local demand so that at some price and quantity there is a viable non-zero market equilibrium

#3. sub-commercial / LongTail: not enough local demand to make it commercial viable so it’s done as hobbies by those that love it and will subsidize it with their own time, effort and pocket money. Or not done locally at all / done in a nearby large population centre.

Hypothesis: the A_A contest is converging toward favoring #1 over/supra-commercial entries. Some of the entries -like mine- seemed to be in #3 subcommercial/longtail: we were there giving our pitch because our ideas are subcommercial and we are hunting for a solution to that problem.

There are a few solutions for #3s like mine to help them move down the sales rank curve (sell more) and at least make it into commercial territory:

1. adjustments to offerings to make them appeal to more local buyers (less specialized, broader appeal) to raise demand into the commercial zone

2. expanding beyond local market to sell to nearby larger population centre (presumably keeping the same % of population interested, selling to a larger population should bring up units demanded)

3. Recommendation Engines – which say “if you like this mainstream item, you may love this LongTail item”. I haven't looked into if or how that would work in Airdrie.

And something to help them become commercial without changing their sales rank:

4. cut production costs ie by switching from physical delivery to online / video / automated

If I have a linguering issue it's how to help these subcommercial ideas insofar as they can be helped. Perhaps there could be an Airdrie LongTail collector website, for those with non-mainstream tastes looking to accumulate like-minded citizens into a small market, and those with non mainstream supply looking to find rare buyers.

more...

Analysis of Airdrie as a market:

Q. Assuming all of the above 4 remediations, and assuming AWESOME contests can and are also done in larger population centers to the same extent, does it mean that Airdrie should attract home buyers / new citizens who are somewhat more mainstream or less mainstream in their demand patterns?

I suspect it depends on the ‘viable scale’ of things. Lets talk about athletics - winner of the A_A this time, and a category that's seen in the 3 segments of the sales rank curve. Calgary has several athletic centres, each one serving a small section of Calgary perhaps the size of Airdrie. But for rarer things Calgary might have viable commercial services and Airdrie not. Lets say if you compare a chunk of Calgary that’s the size of Airdrie – both 40,000 – then comparatively Airdrie would tend to attract more mainstream citizens than the Calgary equivalent, because the Calgarians can drive a few minutes out of their zone to get to rarer services, and Airdrie residents can’t. Therefore Airdrie would tend to attract more mainstream shoppers compared to equivalent zones in Calgary. The mainstream demand patterns might accumulate / compound over several cycles of growth. Net result: “Airdrie destiny: city of mainstreamers”

If so this might be helpful to inform those concidering new initiatives. If there’s something that will somehow give large city rare services at prices afordable to small city residents, that might take up quicker in Airdrie than Calgary. Otherwise if it’s a regular business model then care must be taken to ensure the city is large enough to support it – that it makes it out of subcommercial longtail and into commercially viable demand quantities.

So from this I would guess that if there was no #1 over-commercial entry in AWESOME_AIRDRIE, the next best entry would be one that solves a problem about something sub-commercial in a way and to an extent that it converts a subcommercial item into a mainstream item, and then proposes an over-commercial business model to allow Airdronians to buy it collectively as a public good to save money. That’s a giant jump, and if it could be made, it would likely also apply to larger population centers, and would likely already be done in larger population centers. Which puts us back to the more likely scenario of A_A supporting over-commercial deals, and Airdrie trending to a population of mainstreamers.

It could be argued that the winning entry -a climbing pole project- did invent some way to make something sub-commercial into something over-commercial. I’ve seen climbing walls at local athletic centers in Calgary. I wouldn’t be surprised to see them at GenesisPlace sometime in the future. I suspect the climbing pole fills a transitory gap in what would normally be an over-commercial service.

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Valuing Free Services Using Marginal Opportunity Cost

As a volunteer or staff for not-for-profit you might want to know how much effort to put into a free service. If it was helpful or valuable or important to many people volunteer effort might be easier to recruit. Or conversely, when deciding between competing projects how can you pick the one that delivers the most value? Or how can you compare free and paid service projects -which are like apples and oranges?
Or if you have private sector experience and would love to talk about not-for-profit activities like you did in for-profit, how to do that?
I've been asking myself those questions recently and I came up with a formula I call marginal opportunity cost, but it's really an educated guess, pulling numbers out of fairly thin air. Use with caution.
If you can sort your customers into a list starting with those who gave up little to get what you offer on one end, and those who gave up so much on the other end they almost didn't take up your free deal, then that last customer is the 'marginal' customer. What they gave up is called an opportunity cost. They could have been somewhere else doing something almost better, or their cost of transportation made coming to you almost as costly as the value they are getting for free. Calculate the opportunity cost of this marginal customer, in units of money. Then multiply that by the number of customers to get the value of the program.
For example a parade. Lets say your not-for-profit wants to enter something - an old vehicle. How much value does that create? Lets say 10,000 people come out for the parade. It's hard to know what they had to give up -their opportunity costs- but lets say for the marginal parade goer they had to give up making bread which would have been a value of their time of $10 for the 2 hour event. And lets say they had to drive, find parking, fight traffic jams at the end - all which gives hard costs and disutilities of $5. Total opportunity cost: $15. But they came. So they must have got at least $15.01 of value from attending.
Lets say there are 100 entries in the parade. $15 / 100 = 15 cents per entry on average. Some entries have music and dancing on a long float. Lets put it on a scale from 1 to 5 of value an attendee would get. The fancy float gets 5, your simple drive through scores 1, and the average is 3. 15 cents / 3 = 5 cents per point. Your entry is 1 point so it's worth 5 cents per attendee in opportunity costs. For 10,000 attendees that's 10,000 x .05 = $500. Your entry creates $500 in gross value.
If you don't hang a sign from the car - it's just a beautiful old car - then we'll call that $500 surplus value, which the attendees enjoy all to themselves. If you hang a sign on the car with the name of your organization, then some or all of that surplus value you capture as goodwill.
Now you can compare for profit and not-for-profit programs and services, and -like in the private sector- you can compute a net present value or market value of your organization, based on a discounted sum of all future goodwill generated. And you can set goals, measure and compare activities as in the private sector.