Adverse Selection of Leaders
Another Organizational Problem
A reader emails,
how do you think we ensure government agencies, like the CDC, don’t repeat these mistakes?
The same question could be asked about the financial regulators.
The same question could be asked about the “intelligence community.” See Jacob Siegel’s reporting on the intelligence agencies’ role in promoting false accusations about Donald Trump and Russia. Also see Siegel’s interview with Matt Taibbi.
(Siegel’s piece is getting a lot of coverage on right-of-center sites. It is getting no coverage in what Eric Weinstein called the Distributed Information Suppression Complex.)
There is much similarity in these examples.
The public has been poorly served
No public official has accepted blame
No public official has suffered any consequences
No independent commissions have been chartered by Congress to propose reforms of the agencies involved
The agencies subsequently asked for, and typically were granted, even more authority
The last bullet is the most discouraging to me. When an agency fails and a crisis ensues, the agency often comes out of the crisis with more power than it had before. Think about what means in terms of incentives to avoid crises.
One impediment to reform in the present environment is that bipartisanship seems impossible. I am old enough to remember the days of the Church Commission and the formation of the Congressional Budget Office, when the Democratic Party was trying to challenge entrenched power. But today the Democratic Party is aligned with the status quo.
The progressive base of the Democratic Party views bureaucrats primarily in partisan terms. The CDC and the intelligence agencies are seen as anti-Trump, and therefore good. Progressives want to blame financial crises on deregulation and greed, which for them precludes acknowledging bureaucratic dysfunction.
Assume that we could get the Democrats on board with the idea that there is more to serving the country than being adversarial to Donald Trump. Suppose that they were willing to participate in an effort to make agencies more effective at the job that they are supposed to do. What might we propose?
Readers of my series on human interdependence know that I think that in every organization there are problems of aligning the incentives faced by career managers with the higher goals of the organization. I have talked about the individual desire for authority without accountability. I have talked about how incentive systems tend over time to get gamed.
Another problem is adverse selection of organizational leaders. The wrong behavior gets rewarded with promotions.
We can think of an ambitious person playing one of two games. The Favorable Game is trying to achieve the goals of the organization. The Adverse Game is trying to get to the top of the organization. These goals are not necessarily aligned.
A classic example is in the military, in which The Adverse Game works in peacetime but wartime requires The Favorable. In peacetime, generals are rewarded for filling out reports properly, flattering their superiors, and conforming to established doctrine. In wartime, they have no idea how to win. They lack drive, the ability to inspire followers, and the ability to improvise when the standard doctrine is not working.
Civilian bureaucracies suffer from the same adverse pressures. The people who get promoted tend to be people who stick to the party line. They never question superiors. They distrust creative thinkers. Their goal for power is stronger than their goal to serve the public. When they get to the top, they value people like themselves. The agency gets captures by the players of the Adverse GamT.
In my view, what the agencies most need is what they most resist: a challenge to their authority. Conventional wisdom needs to be questioned.
When agencies fail to do their jobs, they say that they need more authority. But what they really need is more accountability.
I have suggested two mechanisms for trying to address the problem of bureaucracies. One is a strong Chief Operating Officer to oversee agencies. The right COO would be aware of the adverse selection problems as well as other dysfunctional tendencies in organizations. The COO would try to get the agencies to play The Favorable Game.
The second mechanism is a powerful Chief Auditor. The CA would provide a check against groupthink. The CA would apply powerful public pressure on agencies that have been captured by The Adverse Game.
I am not overly optimistic that these two mechanisms would solve the many problems that exist in government agencies. But I think that what we have now is agencies that are so deeply captured by The Adverse Game that we need fundamental reform.
This essay is part of a series on human interdependence.
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I once worked in a large organization and my boss was “rotated” to a new job. He seemed to have fallen into disfavor because he took care of his work fairly quietly and pursued strategies to avoid crisis. The new boss took a different approach. He exaggerated the problems in his reporting, and then “solved” them down the road. The latter was seen as more effective than the former, it would not surprise you to learn. I saw that in other areas as well, where people who found themselves in crisis and somehow got out of the situation were rewarded, while those who never got into a crisis in the first place were seen as mildly incompetent.
I don’t know how you fix a culture like that. At least in business, there’s ultimately the success and profitability of the company to keep things in check. There’s the ebb-and-flow of talented people out of an organization and into new organizations, with the attendant decline and rise of those respective organizations.
Maybe a better solution is to come up with “shadow CDC(s)” to compete with “actual CDC”? What if we had two FDAs? Or two FTCs? Would that be less or more efficient? The military somehow has embodied this approach through the different services, who have to compete and jockey with each other, and who clash on strategies and funding. There are certainly problems with this idea, but it may not be a terrible model, or at least it may not be as terrible as the current model.
Wouldn't the Chief Auditor and Chief Operating Officer be subject to the same adverse selection problems?