Miles to Go, Promises to Break

October 28, 2009

We are assured that whatever version of healthcare reform is passed, it will save us money and provide more access to healthcare. Promises can be made, but the laws of economics trump words.

There are indeed ways to reduce health care costs. Increasing competition and/or increasing innovation can reduce costs by increasing supply. Demand can be reduced; demand for health care falls when consumers take more responsibility through self-care, diet, and exercise. Demand can also be reduced by lowering the quality of the product or by rationing care. With a process controlled by politicians who are ignorant of economics and by lobbyists from the medical and pharmaceutical industry, which door do you think will be chosen? If you answered “ration care or reduce quality” you are correct. Fundamental reforms that increase competition will not be accepted by doctors; increasing consumer responsibility is against the interests of the pharmaceutical industry who depends upon millions of Americans taking drugs for conditions that could be treated in safer and less invasive ways.

I am sure of one thing—any healthcare reforms passed by government will take us more towards top-down, centralized healthcare and move us further away from a free-market. This will in turn create the need for even more “reform” that moves us further from a free-market. There are indeed many problems with our current healthcare system, but unlike our cousins in Canada and the United Kingdom, a dire shortage of healthcare is not one of them.

Allow me to share a tale. Last week, I began to experience light flashes in the corner of my eye; a few days later I began to experience what appeared to be black filaments floating in front of my field of vision. From that starting point, I will contrast my experience with the experience of a United Kingdom (UK) citizen who had similar symptoms.

My experience: My wife calls a Blue Cross hotline and speaks to a registered nurse. The nurse advises my wife to get me to an emergency room immediately as I was at risk of suffering from a detached retina.

UK citizen: “I went to see my GP (I’m from the UK). He didn’t seem to know much about it so he had to resort to looking in his pocket book of family health (which really gave me a lot of confidence). Despite his clear lack of knowledge, he suddenly decided he was an expert and told me that I was just worrying about nothing, everyone gets them etc. But I told him that this had just suddenly come on over a week, but he just said I was a worrier and that there was really nothing wrong.”

My experience: We consider our options. There is a local rural hospital close by or there is Dartmouth-Hitchcock Medical Center which is about an hour and half drive away. We decide that should I need surgery, Dartmouth-Hitchcock is the place to be. I pack an overnight bag and off we go.

UK citizen : “I wasn’t satisfied with that so I went to the opticians who were surprisingly well equipped with digital retina cameras etc. The optician was very nice and took great interest in finding out was wrong. He could clearly see that something was wrong (and unofficially made the correct diagnosis) and referred me to a specialist.” [Brownstein’s note—the only place that our UK cousin got good care was from the optician who is not part of the NHS (National Health Service.)]

My experience: I arrive at Dartmouth-Hitchcock where, in the emergency room, I am triaged into a high priority category. An ophthalmological surgeon is immediately called in who does a very thorough and caring exam. Fortunately, mine is a benign condition called vitreous separation, there is absolutely no retinal damage. I am referred to a local ophthalmologist for follow-up checkups. My wife and I go out to lunch, feeling greatly relieved.

UK citizen: “When I eventually got to see the specialist (this is the NHS I’m talking about, so it took a while), he said I had a detached vitreous in both eyes. He then shooed me away like I was wasting his time.”

Now a fair criticism of my account would be something like this: “You have insurance that allowed you to seek the best possible care. What about someone who has no insurance? A fair enough question indeed; I would not want to go through my experience having either no money to pay for care or to be told that it would be weeks or months until I could see a specialist.

Now, I realize that the current proposals do not call for socialized healthcare as in the Canada or the United Kingdom. But this is a slippery slope—more regulations cause more problems, which breed more regulations, which create lower quality care and less access. The answers lie in true market-based reforms that remove barriers to competition and give more access at lower costs to more Americans. Access to a waiting list, like the UK citizen experienced, is not access at all.


The Medicalization of America

September 16, 2009

I am bewildered by the angry speakers at the health care town-hall meetings. They defend both the current system of medical care and their freedom to choose. Freedom to choose? You can send an overnight letter by FedEx, but that hardly means we have a free market in mail service. Similarly, the medical industry is far, far removed from a free-market. A complex web of subsidies and licensing has resulted in a distorted health care market. People cling to it because it is what they know. A free market in health care would no more resemble our current system than the modern supermarket industry in the United State resembles food distribution in the former Soviet Union.

Lost in the heated debate is an examination of assumptions. Those who promote a position, by speaking in sound bites, are often unaware of the assumptions that underlie their position.

Naïve patients, patients who eschew responsibility, and arrogant and/or inexperienced doctors agree on a big lie: Medicine is an objective science. Present the same patient to ten doctors and all but the incompetent will agree on the diagnostic tests to run and the treatment protocol to follow.  None of this is remotely true.

I observe another, related hidden assumption held by many: At any time, there is an objective, fixed amount of disease and poor health. Thus if more diagnosis and treatment is applied, disease and poor health will decline. This assumption is false. It is no more true than believing additional food is the solution to poor nutritional habits.

You have probably never heard of Jack Wennberg. In her brilliant book Overtreated, Shannon Brownlee writes that Jack Wennberg “is one of the heroes of modern medicine.”  After reading Wennberg’s story it would be hard to disagree with Brownlee’s assessment.

Dr. Wennberg has been a professor at Dartmouth Medical School for over thirty years. As a young physician, Wennberg bought into the assumption that the most serious problem in health care was that there was not enough of it. Joining the University of Vermont in 1967, Wennberg began to compile statistics that would cause him to question his basic assumption. In some towns in Vermont, only 7% of children under sixteen had had their tonsils removed; in other towns, 70% had had their tonsils removed. Wennberg found similar variations for many treatments, including hysterectomies and appendectomies. As he shared his findings, physicians dismissed them. His critics explained that where surgery rates were higher, patients needed the surgery; where surgery rates were lower patients, patients were not getting needed treatment. In other words, Wennberg’s statistics were explained away with a “there is not enough medical care in some areas of Vermont” narrative.

Wennberg, along with statistician Alan Gittelsohn, dug deeper. According to Brownlee, they found the population of Vermont was “remarkably homogeneous in their health, their socioeconomic status, their level of education, and how well-insured they were. Practically everybody was white; nearly everybody had a personal physician, whom they visited on average about as often from one region to the next.” There was one explanation for significantly higher rates of surgery in some towns: The anomaly was not “driven by patients but rather by doctors.”

Wennberg’s conclusion was not welcome among doctors, especially those who maintained the delusion that a medical diagnosis was an objective, scientific fact. Eventually, Wennberg was run out of his position at the University of Vermont. In 1979 he joined the faculty at Dartmouth. The same pattern he found in Vermont, and later in Maine, he found all over the country. He found it for virtually every medical procedure: CT scans, cardiac catheterizations, back surgeries, knee replacements, etc. In 1993, Dr. Wennberg became the founding editor of The Dartmouth Atlas Project (DAP) to study “health care markets in the United States, measuring variations in health care resources and their utilization.”

In a June 2009 essay in The New Yorker, Dr. Atul Gawande summarized some of Dartmouth’s eye opening findings:

Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse… Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. In fact, the four states with the highest levels of spending—Louisiana, Texas, California, and Florida—were near the bottom of the national rankings on the quality of patient care.

In a 2003 study, another Dartmouth team, led by the internist Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse.

That’s because nothing in medicine is without risks. Complications can arise from hospital stays, medications, procedures, and tests, and when these things are of marginal value the harm can be greater than the benefits. In recent years, we doctors have markedly increased the number of operations we do. For instance, in 2006, doctors performed at least sixty million surgical procedures, one for every five Americans. No other country does anything like as many operations on its citizens. Are we better off for it? No one knows for sure, but it seems highly unlikely. After all, some hundred thousand people die each year from complications of surgery—far more than die in car crashes.

To make matters worse, Fisher found that patients in high-cost areas were actually less likely to receive low-cost preventive services, such as flu and pneumonia vaccines, faced longer waits at doctor and emergency-room visits, and were less likely to have a primary-care physician. They got more of the stuff that cost more, but not more of what they needed.

Unfortunately, some, including President Obama, draw incorrect conclusions. If some areas of the country spend too much, they reason, experts can prevent the waste; and the saving can be applied elsewhere in the health care system. They believe that government, acting as a smart third party, can provide coordination so that high cost and/or excessive treatment options are rejected. This is an impossible dream! In the next part in a series on health care, we will explore why. More government involvement in health care means more medicalization of America, not less.


Practice Trumps Talent

September 9, 2009

Do you know who this man is?

He is perhaps the world’s foremost and highest-paid expert on finding fun in everyday minutia. Every week, he performs in front of as many as 20,000 people in order to test his material. These performances are not his full-time job. He still calls former high school teachers and classmates to test his material on them. He arrives at the job an hour before anyone else and often works up to 18 hours a day. He spends at least 6 hours a day writing material that will take 10 minutes to perform. At age 59, he still runs 4 miles a day. When he was a younger man, to perfect his craft, he performed 300 or more days a year, on the road, and often in obscure venues.

The man is Jay Leno. When you read the article about Jay Leno and his new prime-time show in the Wall Street Journal it is hard not to see the connection between practice and success. Although Jay Leno is talented, if he was not willing to practice his craft, few of us would have heard of him. In the universe of funny men and women, only a few are willing to make the sacrifices that Leno has made, and still makes, to be successful. Yes, Jay Leno is talented; but talent is mere potential until it is developed through effort; few are willing to make the effort.

A regime of what researchers call deliberate practice (see here) has a big side benefit: it cultivates resiliency. Faced with a difficult challenge, you know you can work through it; your experience with deliberate practice proves this to you. The resilience you cultivate feeds back to help sustain a rigorous practice regime. The natural human resiliency Leno has cultivated is available to everyone; a person with a fixed mindset (see here) would give up when the work is hard. Audiences can be tough; Leno has surely been on the receiving end of nervous laughter, blank stares, and heckling. Yet, he gets up, dusts himself off, and goes back for more the next day.

You should be at least slightly unsettled by the Jay Leno story. Don’t many of us dismiss our own average performance with the simple explanation that only some people have God-given gifts? Now, it is true that you need a certain level of talent, not to mention interest, to reach the success of a Jay Leno. It is also true that the universe is populated with many more potential Jay Lenos than we care to admit.

Most of us will never achieve success equivalent to that of Jay Leno. There is nothing wrong with that; 18 hour days would not lead to a balanced life for me. (Of course, I would never assume to judge what is right for Jay Leno.) But, the Leno story helps you ask this question: What would careful cultivation of my own craft, according to the principles of deliberate practice, mean for me? You may find success you never dreamed of; you may accomplish goals you thought were beyond you.

Yet, most people do not employ deliberate practice. In his book Talent is Overrated, Geoff Colvin writes:

Extensive research in a wide range of field shows that many people not only failed to become outstandingly good at what they do, no matter how years they spend doing it, they frequently don’t even get any better than they were when they started. Auditors with years of experience were no better at detecting corporate fraud… surgeons were no better at predicting hospital stays after surgery than residents were… in field after field… people with lots of experience were no better at their jobs than those with very little experience…Managers with experience did not produce high-caliber outcomes.

Indeed, if you don’t practice, you might be left behind. Rapidly rising standards are the norm in every field. Did you know, for example, that many high school athletes running the 200-meter can easily beat the 1908 Olympic gold medal winning time?

I have no personal knowledge of what motivates Jay Leno. Perhaps it is the huge financial rewards he receives (about $30 million a year), perhaps he loves perfecting his craft, or perhaps he hears the footsteps of young comics gaining on him. If he is like most individuals, he is motivated by a combination of factors such as these.

Put these two ideas together: Practice trumps talent. And, competition motivates us to perform at a higher level. Together these ideas shed light on why some people behave as they do in response to the market’s demand for continual improvement. Some people seek a way out; they seek to prevent competition. For example, in education, teacher unions prevent the unmotivated and incompetent from being fired. These same unions lobby against charter schools which would introduce competitive pressure.

Those teachers who are unmotivated to practice do tremendous damage to themselves and to our children! Yes, they hurt themselves too. In their desire to be slackers, they destroy their chance for happiness. Ralph Waldo Emerson in his classic essay “Self-Reliance” taught the truth: “…No kernel of nourishing corn can come to him but through his toil bestowed on that plot of ground which is given to him to till. The power which resides in him is new in nature, and none but he knows what that is which he can do, nor does he know until he has tried.”

As we rush to socialize more of the American economy there will be tremendous costs; not the least of those costs will be an increase in the number of slackers. Society will lose the benefit of precious human energy that goes untapped. For the slackers of the world, more government is their best hope. They lie to themselves: They pretend they are deserving of the special privileges and subsidies bestowed by government. They tell themselves they have much talent but the unfair world doesn’t recognize or reward them for it. The world may not recognize or reward their talent for a variety of reasons; often it is simply because they don’t practice it.  Without practice, talent is mere potential.  Practice trumps talent.


On Soviet Sausages and American Apple Pies

April 15, 2009

In the former Soviet Union there was one commodity, along with vodka, that was ubiquitous—that  commodity was cheap, low-quality, very fatty sausage. Fresh fruits and fresh vegetables were rarely found in the state run stores; but at the end of a queue, sausages were usually available for purchase. Now mind you, even by sausage standards these were extraordinarily low quality and, in truth, not fit for human consumption. But the Soviet citizen—their bellies full and their minds distracted by alcohol—had little understanding that they did not have to live a life of such degradation.

A little history of socialism can make you appreciate the cornucopia of food that is available in the United States. Perhaps some homemade apple pie? Maybe not.  As the Wall Street Journal reports,

On the first Friday of Lent, an elderly female parishioner of St. Cecilia Catholic Church began unwrapping pies at the church. That’s when the trouble started.

A state inspector, there for an annual checkup on the church’s kitchen, spied the desserts. After it was determined that the pies were home-baked, the inspector decreed they couldn’t be sold.

“Everyone was devastated,” says Josie Reed, a 69-year-old former teacher known for her pumpkin and berry pies.

Sold for $1 a slice, homemade pies have always been part of the Lenten fish-fry dinners at St. Cecilia’s, located in this tiny city near Pittsburgh. Similar dinners are held in church basements and other venues across the country this time of year.

After a state crackdown forbidding the sale of homemade pies, members of St. Cecilia Catholic Church in Rochester, Pa., proceeded with their annual Lenten fish fries anyway. The pie flap helped draw healthy crowds.

The problem is the pies are illegal in Pennsylvania. Under the state’s food-safety code, facilities that provide food at four or more events in a year require at least a temporary eating and drinking license, and food has to be prepared in a state-inspected kitchen.

Make no mistake, very little of our food supply is inspected; one can only wonder why this crackdown now. Instead of harassing church kitchens, perhaps the Pennsylvania inspectors might look for contaminated Chinese food ingredients that are alarmingly ubiquitous in our food supply.

Remember Seinfeld’s Soup Nazi? If Seinfeld had a “Pie Nazi” character he would say, “No homemade pies for you! Instead go to the supermarket where you can get a pie with little fruit but with bleached flour, high fructose corn syrup, dough conditioners, emulsifiers, preservatives, artificial colors and artificial flavors.” Homemade pies may have 5 or 6 ingredients; the next time you are in the supermarket, read the label on a pie. You may find close to 20 to 30 ingredients.

In his essay The Rush Towards Socialism – and How To Stop It Thomas DiLorenzo recently wrote:

The administration’s main agenda is an explosion of federal spending and debt so large and outrageous that America will soon exceed Sweden in the proportion of the economy that is controlled by government – if it hasn’t already. That’s just for starters. They also want to sharply increase taxes on the most productive and hardest-working people in society; increase the capital gains tax to deter private investment; expand the welfare state; spend trillions on pure, pork barrel spending in a massive vote-buying spree; set all corporate compensation levels by governmental fiat; tax away the wealth of unpopular business people (only starting with those AIG executives); regulate and control all risk taking by private entrepreneurs; enforce a civilian draft to create a modern-day, American version of the Hitler Youth (See Rahm Emanuel’s creepy, Stalinist-sounding book entitled The Plan); nationalize entire industries, starting with the capital markets (they understand that there can be no capitalism without private capital markets); and double, triple, and quadruple the number of “regulators” who already regulate all aspects of human life in America.

In the United States, as we collectively rush to give up our freedom in exchange for perceived security, we too may experience the degradation and deprivation of relying on government to meet our basic needs.

State run food stores are not yet on our horizon, but neither was much of the government intervention that we have seen a few years ago. We may stand online for sausages yet. And for you socialists living in “sophisticated” urban centers, let me lower your expectations now—the bureaucrats will not be providing you free sushi in state run food stores.


Ethanol, the Aral Sea, and the Looming American Environmental Disaster

November 16, 2007

Consider the Aral Sea. The Aral Sea—once the fourth largest inland body of water in the world—is now a vast wasteland that has shrunk to less than 25% of its former size.

The Aral Sea in Uzbekistan (formerly part of the Soviet Union) stands as a tragic monument to environmental carnage that frequently occurs under socialism. How could this have happened? Was it a change in weather? No, the destruction of the Aral Sea was the consequence of the Soviet decision to divert waters that flowed into the Aral Sea for farming.

With the lessons of the Aral Sea in mind, let us reflect on the looming environmental catastrophe that is beginning to build in the United States. Like the Aral Sea disaster, our own central planners think they know best how water should be used. In our case, it is for the production of ethanol.

Ethanol is a fuel that would not exist in the United States without billions of dollars of taxpayer subsidies. Robert Bryce, writing in Slate, clearly explains why. Simply put, the production of ethanol uses more energy than it produces. Bryce writes:

David Pimentel, a professor of ecology at Cornell University who has been studying grain alcohol for 20 years, and Tad Patzek, an engineering professor at the University of California, Berkeley, co-wrote a recent report that estimates that making ethanol from corn requires 29 percent more fossil energy than the ethanol fuel itself actually contains…

In addition to their findings on corn, they determined that making ethanol from switch grass requires 50 percent more fossil energy than the ethanol yields, wood biomass 57 percent more, and sunflowers 118 percent more. The best yield comes from soybeans, but they, too, are a net loser, requiring 27 percent more fossil energy than the biodiesel fuel produced. In other words, more ethanol production will increase America’s total energy consumption, not decrease it.

Ok, but let’s face it—we’ve all been overloaded with reports of government boondoggles that benefit some at the expense of all. Why should we be especially concerned about ethanol?

Corn is a plant that needs a lot of fertilizer. The excess fertilizer is poisoning aquifers in the Corn Belt states. Nitrates that come from the runoff are especially toxic to children and pregnant woman.

But that is just the tip of the iceberg. All throughout the Corn Belt, ethanol plants have been opening. Besides polluting the ground water they are draining aquifers at alarming rates.

Here is just one example. The water aquifer in southwestern Minnesota is mostly ancient clay sea beds. The region doesn’t get a lot of rainfall; and in any case, recharging clay aquifers is not a process that nature easily accomplishes. In Granite Falls, Minnesota, one ethanol plant, Granite Falls Energy, drained the town aquifer by nearly half in less than a year.

Let’s be clear here. Without the billions of dollars of subsidies paid each year for corn and ethanol production, there would have been no Granite Falls Energy. Nor would there have been any other ethanol plants draining aquifers in states such as Minnesota, Nebraska, and Iowa.

How long it will take for an environmental catastrophe of the size of the Aral Sea to occur is not easily predicted. Such a disaster in the United States is beyond our imagination. Although it may be beyond our imagination, that is not very reassuring. We can be sure of one thing—no country is immune from the consequences of the follies of socialism.


The Horrors of Socialized Health Care

October 23, 2007

Imagine a modern, first-world country where there is such a shortage of dental care that patients are reduced to pulling their own rotting teeth. This country is the United Kingdom—where ordinary citizens encounter primitive and barbaric dental care practices and experience nightmarish ordeals.

You’re probably wondering how can this be? Before we explain, please read one Scottish man’s horrifying account of dental care in Scotland.

As you read the horrors that this Scottish citizen is going through, please remember that this is a national phenomenon he is describing. See for example this news account.

The United Kingdom provides public, socialized dental care. Socialized care creates shortages and reduces both quality and the rate of innovation.

One of the most basic principles of economics is that if you reduce the price of an item or service below its market price, a shortage of that item is created. In health care, we see this phenomenon in the emergency rooms of hospitals. It is commonplace for patients who are not paying for their care to show-up in emergency rooms with illnesses that do not require emergency medical attention and frequently do not require any medical attention at all. You can wait a long time in an emergency room—there is a shortage of emergency room services.

In the United Kingdom, teeth are still routinely filled with poisonous mercury amalgams. To a citizen of the United Kingdom, innovations, like laser dentistry or one-step dental implants, would be possible only in a science fiction story.

As I read accounts of United Kingdom dental care, I felt compassion for those who go without basic necessities. Be it food, shelter, or medical care, there are still too many deprivations all over the world.

The economically illiterate believe these deprivations can be solved with more government involvement. As I read accounts of UK citizens queuing-up for substandard dental care, I remembered accounts of citizens in the former Soviet Union queuing-up for substandard food.

I thought of our own socialized educational system. We usually don’t think of it as socialized—instead, we call it public education. But the same principles operate. We pay through the tax system and then, except if you are fortunate enough to have extra income to buy your child private education, you’re forced to use the public school no matter how low the quality is.

Consider inner-city families whose public school doesn’t even provide a basic level of safety for the children. Telling the parents that they should send their children to private schools is an inconceivable possibility.

Similarly, for poor or middle class United Kingdom citizens, private dental care is just not possible. The gentleman whose account you read earlier is clearly thoughtful and caring. I have exchanged views with him on his blog and on my own. Despite all of the suffering that he is experiencing, he still seems to believe that the failures of socialized care are due to to failures in implementation. He does not see that the failure of socialized care is due to a faulty concept.

This is not unlike the former Soviet Union, where the answer to their food problems was always a new five-year plan. It is not unlike the United States, where the answer for the failures of the public schools is always seen to be more money.

In this rush toward socialized services, many imagine that they will get top-notch care while paying less than they do right now. Nothing is further from the truth. For most, the “price” will go up in many ways—new taxes to fund a new healthcare bureaucracy, shortages of services, stagnation of innovation, and reduced quality of care.


Time Warner Cable Tries Socialism and It Doesn’t Work

July 16, 2007

Time Warner Cable is known for having terrible customer service. No wonder, since they rely on the failed ideas of socialism to run their business.

Though socialism has been shown to be a failure throughout the world, its ideas still enamor many academics, intellectuals, and businessmen. Businessmen? You may be surprised to see them listed with academics and intellectuals as supporters of socialism. Most businessmen themselves would indignantly scoff at this assertion.

One of the failed ideas of socialism is relying on centralized decision-making; that means substituting the will of one person or small group of people for the on-the-spot knowledge and day-to-day decisions of many people.

For instance, the former Soviet Union instead of having a market system for food distribution had five-year plans. These plans specified which crops a farmer would grow, which train or truck would transport each crop to each city, which stores would stock which products, and how much of each product they were allotted to sell.

No matter how refined the five-year plan was, the result was the same—food rotted in farmers’ fields, transportation was inadequate to get the food that was picked into the cities, and little food was stocked on store shelves.

The idea that centralized decision-making can work has been shown to be theoretically impossible and centuries of failed experiments have confirmed that it does not work.

Yet many businessmen in the United States persist in utilizing centralizing decision-making. Why? They may arrogantly believe that they are smarter than everyone else; and thus, they should make all the decisions.

My own inconvenience is not the point of the following little tale.

Ownership of our local cable company had been transferred from Adelphia Cable to Time Warner Cable. The local town office of the cable company is still in the same building. From the outside it looks like only the name has changed, but there is one big difference. Time Warner Cable believes in centralized decision-making.

Our home, which is on a small side street, needs a new cable buried across the road. We found this out when the local installer was unable to complete our installation. The installer did promise that the additional work would begin within 48 hours.

After a week went by, we called Time Warner Cable in another state? Why would we call another state? We do not have the phone number of the local cable office. It is Time Warner Cable policy that all calls have to be routed to this central office.

After several rounds of phone calls to this “foreign” office and being told a different story each time, we decided to drop in at the local office of Time Warner Cable.

We were actually able to speak to the manager and he was very apologetic. He had our work-order; but other than that, he could give us no information. He explained he was literally not in control of his own crews. The management of his own crews have been taken from him and transferred to this out-of-state office.

He had no way of knowing when our job would be done. Under the former policy of decentralized decision-making, he explained, the job would have been done in a few days. Now, he explained to our frustration, it may be months until the job would be completed. He promised to call us in a few days.

When he didn’t call, we returned to the local office and learned from the secretary that our installation was scheduled. She was surprised that no one had called to tell us. We were not.

A few days later, a Time Warner employee showed up to mark the road. He told us that he didn’t know when the work would be completed. He didn’t know that our installation was scheduled and hoped that the road cut would be completed in time.

Apparently decision-making at Time Warner Cable is not only centralized but information is not even shared. Every employee that we encountered was a decent human being trying to do a good job, but their hands were tied by the policies of Time Warner Cable.

The failed ideas of socialism at work indeed! Human intelligence is not utilized, jobs are not getting done, customer service costs escalate for Time Warner Cable, and everybody is frustrated.

There is enough theoretical and empirical evidence to convince anyone that centralized decision-making can never be efficient. Because they don’t understand this, the leadership at Time Warner is destroying their shareholders’ equity.

Destroying shareholders’ equity is a bold claim. Yet, every time Time Warner Cable employees cannot efficiently coordinate among themselves and their customers, money is lost. Not only that, consumer ill will is created. Isn’t customer good will among an organization’s most important assets?

Currently Time Warner Cable “has no plans to pay cash dividends on its common stock in the future, and expects to retain future earnings for use in the operation and expansion of its business.”

Good luck to their shareholders! Future expansion of their business depends in part upon innovation. Innovation can not easily occur under a regime of centralized decision-making. Innovative organizations, such as W.L. Gore and Associates, use flat hierarchies with decentralized decision-making to promote a culture of innovation. They don’t use the failed ideas of socialism.


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