Early in my working life, I found myself managing a few salesmen, along with some entry level managers. Since my area of responsibility only required three salesmen, it did not warrant a sales manager, so that duty was mine, as well as operations. It was a good training job for a young guy. One thing I learned from the sales guys is something that stuck with me forever. That is, no one cares about a deal more than the salesman working the deal. He’s the one that will make it happen.
You see, even in a big company, every salesman is like a small business. His expenses are his time and his revenue is his commission. The really good salesmen are shrewd in how they spend their time, never wasting a minute on a bad deal. They never fight the commission structure. If selling the crap product gets a bigger commission, then they sell the crap product. If the product is so crappy, they can’t sell it, they find a new job where they can hit their commission goals.
Since sales drives everything about business, it was a great lesson about the reality of business and bureaucracy. The managers have goals and they try to craft incentives so their people naturally work toward those goals. The trouble is, they often see the world through their own myopic eyes, rather than through the eyes of their people. Alternatively, they will foolishly think their people will make personal sacrifices on behalf of their goals. They think everyone cares about their deal as much as they do.
We are seeing this play out in the response to the pandemic. The people making the models and making predictions care about things that are important to them. It has always been assumed that they care most about being right, but as the models have failed and they are now “updated” on a daily basis, it turns out that accuracy really was never all that important to them. Marc Lipsitch, the guy largely responsible for the panic, was never all that concerned with being right.
Similarly, the people making public policy were always working their deals, rather than working your deal. By that I mean they were not issuing crack down orders on people because it was good for the public. They did it because it was good for them or at least they assumed it was good for them. It is why we had a race between states to see who could arrive at the most absurd policies. The nation lies dormant now because of a bizarre beauty pageant among the nation’s governors.
The response from our imperial rulers to this shuttering of the country is another deal that means everything to the people who passed it. Trump and Congress were really proud of themselves for having done the deal in such short time. It turns out though, that the deal was a great public relations stunt, but not much of a deal for the nation’s small business people. This post at the Federalist walks through the math of the Payroll Protection Act. Be prepared for breadlines this summer.
Of course, the most glaring example of this is the health care system. In response to a theoretical problem, it is in the process of creating real problems by faking death certificates and indefinitely postponing medical care for people with real diseases, in order to perpetuate the crisis atmosphere. The system is acting in the interest of the system, because the people at the top making the decisions care about their deal more than anything else. They closed the system to save it from the virus.
All of this should be a good reminder about the reality of anything that has the word “managed” in its label. Whether it is a managed health care system or a managed economy, the people doing the managing care more about their deal than anything else, thus the system they manage comes to reflect their interests. The stone-heads on our side cheering the crisis and demanding managed health care and a managed economy will soon find out what that really means. Enjoy the bread lines.
Of course, the stone-heads will argue that destroying the civil life of the country is the price to be paid for discrediting the current order. That may be true, but that does not mean the people cheering it will suddenly be vaulted to the top by the people being made to pay the price for this disaster. Again, those people at the top with the monopoly of force will surely take care of their deal before allowing anyone else to profit from the turmoil that is coming our way this summer.
The point of all this is even small organizations become very complicated in a hurry, because people have lots of priorities individually, which can coincide with and contradict their collective priorities. Fine tuning those while working your own deal is beyond the skill of most managers. It is why bureaucracies become self-serving and why managed anything is a fool’s errand. Whether it is managed economies or managed health care, eventually, the deal that matters most is the manager’s deal.
Circling back to those salesmen I managed, the second big lesson I learned in that job was from my boss. I complained to him that the commission structure I inherited worked against our interests because it was too complicated to manage. He told me to make it a flat commission on gross, but that I was responsible for the performance of every deal I signed off on going forward. It did not take long for the sales staff to know what was good business for me and what was a waste of their time.
That’s the lesson the stone-heads from the planned economy camp and the free market zealots never grasp. The choice is not between a system managed by angels or a system run by the invisible hand of magic. The choice is always between clarity and opacity. When the incentives are clear and individual interests are clear, everyone makes better decisions and demands more rational sacrifice. When those things are hidden, it is when our virtues are soon turned into vices.
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