Saving America’s Private Sector Institutions
An institution is what its internal incentives make it. Internal incentives respond to the external environment. Here's how rethinking liability can improve those envirnments.
Part 3 of a 4-part series on institutional reform
Quick recap: America’s institutions, and most of the experts they credential, are corrupt. Trust them at your peril. Yet modern life is so complex that we need the guidance of trained experts just to survive. What can you do when the people you must trust have proven themselves to be untrustworthy?
This essay is the third in a series grappling with that problem. The first discussed the problem itself and concluded that we’re heading toward a critical inflection point. Will we soon collapse into an elitist totalitarianism? Will the masses rise in overt rebellion? Or will we defuse the situation, gut our existing institutions, and rebuild them in more trustworthy form?
My fervent hope is that it’s not too late to implement a gut-and-rebuild strategy. Working along those lines, the second essay explored some ways to rework our corrupt public sector institutions. This essay considers the private sector.
The private sector is far more diverse than the public sector along any measurable dimension. That includes the nature of its institutional corruption, the depth of that corruption, and the specific steps necessary for institutional reform. There are, however, some broad themes that run throughout all private sector institutions. Those themes are worth developing.
Only Internal Incentives Matter
Ignore mission statements. Only internal incentives matter. No institution or organization is what it claims to be. At best, mission statements are aspirational. Sometimes they’re intentionally fraudulent. In most cases they’re simply irrelevant. If you want to understand any organization, you must understand its internal incentive system. How does someone enter? Once inside, who get promoted, elevated, or rewarded? Who is feted? How does one rise to the top? The answers to those questions will determine how the people inside the organization behave. An organization is nothing more than the behavior of its people. If you want to change an organization, you must change the internal incentives that drive it.
The central theme I developed in The New Civil War is that the corrupt incentives driving academia have spread across our professions and into broad public consciousness, where they stand poised to destroy the entirety of American society.
Those incentives are easy to describe. To succeed in academia, you must flatter your senior colleagues. The best way to flatter them is to “build upon” their work: Push their own work one half-step further along whatever direction they have already chosen. In one fell swoop you will have tied your success to their prestige and vested them with an interest in your success.
Now, what happens when new scholars enter the field (any field) year after year after year, each moving one half-step further in the same direction? Over time the field’s frontier moves further and further from reality. It’s an incentive system I call “incremental outrageousness.” It plays itself out in most professions; medicine and public health have demonstrated it in recent years, though climate science is its highest-profile exemplar. The net result is a rigid orthodoxy that none may question. Its primary consequence is a collection of credentialed experts who care about only each other’s opinions—not the people or missions they’re supposed to serve.
That idea might have seemed a bit far fetched to those outside the credentialed circles until the advent of social media. Now it’s well known. Ask yourself: What sort of message is most likely to go viral. Is it: “Hey! Remember that outrageous thing we were talking about yesterday? Well, here’s something that pushes the envelope a bit further!” Or: “Hey! Remember that outrageous thing we were talking about yesterday? That was pretty out there. Maybe we need to pull it back a bit.” Or maybe: ““Hey! Remember that outrageous thing we were talking about yesterday? Here’s something that’s light years more outrageous.” The answer, lest there be any doubt, is the first. No one ever gains acclaim by stepping backwards. Too far out lacks credibility. The sweet spot is…incrementally outrageous.
Now let’s back things up. How can we, standing on the outside, force entire industries to alter their internal incentive structures? Only one way: Change the external environments in which they operate. Fortunately, there are ways to do that. Unfortunately, the all rely on a small number of blunt instruments. To alter industry-wide operating environments we must find ways to alter their revenue streams, their exposure to liability, or (where applicable) the regulations that define them.
Media Liability
I discussed several potential tactics in The New Civil War. Without getting into too many details, liability considerations are central if we want to gut-and-rebuild either media or social media. The 1964 Supreme Court case New York Times v. Sullivan set an absurdly high standard for public officials seeking to sue newspapers for defamation. The plaintiff must be able to prove malice. In other words, a newspaper that chooses to publish an implausible and unsourced rumor can’t be held liable. If they take the time to source it, on the other hand, they may get scooped and they may not be able to publish something nasty about a public figure they despise. Motivation? Publish!
Wrong. We need to be able to hold the press liable in ways that motivate responsible reporting.
It gets even worse on social media. Thanks to an early effort to protect children from Internet porn—Section 230 of the Communications Decency Act of 1996—big tech’s social media giants cannot be held liable for anything that third-parties post. Now, that might not be a problem were the tech companies merely providing a bulletin board on which users could post anything. That is hardly, however, all that they do. Big tech today spends a great deal of time curating, arranging, sequencing, promoting, censoring, and commenting on third-party posts. Yet their exemption from liability remains.
Wrong. If you’re going to exercise substantial editorial control over contributed postings, you should be held to the same standards as all other editors and publishers.
Corporate Liability - Governance
How about corporate boards? Anything we could do there?
Absolutely. Corporate boards have an obligation to maximize shareholder value. As a standard matter of corporate law, boards have extreme flexibility when arguing that everything they do serves that goal. There’s no reason that we couldn’t tighten that rule. For example, suppose some publicly traded corporation adopts ESG (Environmental, Social, and Governance) guidelines. Why isn’t that a statement elevating certain “social responsibility” goals above corporate profits?
Mind you, no one need argue that ESG guidelines are bad. If there are people on this planet who elevate environmental goals above their own personal welfare, power to them. I wish them well. But when you’ve got a fiduciary duty to maximize shareholder profits, you’ve checked your personal policy preferences at the door. All we must do is change the rules to remove the presumption that corporate boards (and CEOs and managers) act in accordance with their responsibility to maximize profits from all corporations that announce potentially conflicting goals. Want ESG guidelines? That’s fine. But when challenged, be prepared to prove that you haven’t compromised your duty to your shareholders when you adopted it.
Corporate Liability - Workplace
How about the parts corporations that real people experience?
Workplace rules constitute another critical front in the battle to rework corporate incentives. Many of the most egregious attacks on decency have arisen—and been impelled forward—by inverted workplace rules. As things stand, employers who treat workers and customers as reasonable adults can get his with massive fines. Those who infantilize their workers and customers, and who force-feed them a diet of Wokeism “for their own good” fare much better. That’s backwards.
We could start by acting—finally—in the spirit of the post-Civil War amendments and the Civil Rights Act of 1964. It’s far beyond time to stop collecting racial data. I haven’t completed one of those demographic forms since the late 1980s, when I first realized that there were few non-racist reasons for its collection. Granted, there are interesting things that demographers might learn from the internal migration of various communities, and medical treatment can vary by genetic grouping. For the most part, however, the reason driving the ubiquitous collection of racial data is that it eases racial discrimination. It’s time for it to stop. We need clear laws making it illegal to take race into consideration across a broad swathe of decision-making. That legislative fix that should be a top priority for our next decent Congress.
Worse, the prevailing thinking about a “hostile workplace” is way off. Today, a company get in trouble if it doesn’t provide training courses heightening racial and gender differences. They can get sued if anyone in a “protected group” ever feels insulted, slighted, or shocked—whether or not such a response is remotely reasonable given the “offense.” Backwards! Let’s start holding companies liable for offering courses designed to heighten differences and promoting hypersensitivity. Training course should focus on commonality and respect for co-workers as individuals. “Hostility” arises in settings that force people to divert their attention towards watching every word and every opinion they might utter.
Bad HR policies drive so much of the agony, discomfort, and day-to-day tension in modern life. So too do comparable policies in our schools—which should be subject to the same inversion and correction. HR is another dull corner of American life that decent people have abandoned as seemingly unimportant, allowing radicals to move in and take over. It’s become a potent weapon in the hands of those dedicated to making free living, free expression, and the robust exchange of ideas untenable. We must reclaim them. Take back HR policy and we can reduce discomfort and tension appreciably. Quality of life will soar. Neglect this critical corner of rules driving daily life and very little else will matter.
Reworking Academia
How about academia? Well, that’s an enormous topic—far more than a paragraph or two. That’s why I addressed it in a book. Suffice it to say, however, that our modern universities don’t operate in a market economy. They receive an enormous share of their revenues through government contracts, grants, subsidies, and loans to third parties (i.e., students). They have no products liability concerns. Ever hear of a university sued because the degrees for which it overcharged are worthless?
All we have to do is tinker with some of those revenue flows and liability rules to bring down the entire self-referential internal incentive structure. American higher education will remake itself as a matter of necessity.
There’s also, of course, the matter of personnel. Too many of our private sector institutions are both wrongly staffed and poorly staffed—none more so than our schools and universities. The “wrong” part of staffing ties back to our discussion of regulation. Every regulation that the government puts on the books adds a compliance task. If it’s relevant to my company, school, or organization, someone must take charge of compliance. Every few new task generates the need for a new administrator. Every new administrator tilts the balance against performance and towards compliance. Nationwide, higher education (i.e., America’s universities) employ more full-time administrators than full-time faculty. While few other industries are likely to be able to sustain themselves on with an imbalance that great, most American industries are obscenely overstaffed with compliance and administrative professionals. The only way to alter that balance is to reduce the regulatory burden they face. From there, competitive pressures will force them to ratchet their administrative staff downwards.
The “poor” part of staffing is an immediate consequence of flawed incentive systems. There are indeed plenty of Americans with integrity trained in every skill necessary to function in the modern economy. They are rarely, however, at the “top” of their professions. Top slots, by definition, go to those who excel at getting promoted. Promotion requires mastery of corrupt internal incentives, not fidelity to institutional mission or customer service. The past few years have provided a rare high-profile demonstration in the realm of public health and epidemiology. Genuine experts like Jay Bhattachrya, Martin Kuldorrf, and Scott Atlas have been sidelined and excoriated; far lesser scientists with far greater promotion skills like Anthony Fauci have run the show.
Most budding academics with integrity find their careers derailed at a far earlier stage than did Bhattachrya, Kuldorff, and Atlas—all of whom hold prestigious, tenured positions at top Universities. In academia, many find themselves denied their doctorates. Others fail to find academic positions. Another swathe cannot get tenure. Some find comfortable niches, teach, publish, but have minimal effect on their fields. Outside of academia the problem is at least as pronounced if harder to identify and describe. Does anyone really believe that America’s best lawyers, doctors, or engineers are also America’s most successful, wealthiest, or prestigious members of their respective fields? It’s entirely possible that some are. The overlap between those who excel at quality on-mission performance and those who excel at working the system, however, is likely small in each of the endeavors driving American life.
Another Long Hard Slog
If we want to fix our staffing problems, we’re going to have to get some bold hiring professionals willing to take chances. Rather than drawing safely among those who already hold the most prestigious appointments, they will have to look to those who stuck with their values and standards even when it reduced their prospects for promotion and acclaim. That’s a genuinely challenging task. Few institutions—public sector or private—will be able to put it into practice. But if we want to align our internal institutional incentive systems with the values we actually seek to promote, there is can be alternative.
America’s private sector institutions, like its public sector institutions, will not be fun to reform. We’ll have to ferret through rulemaking, HR, compliance, liability, and all of the other tasks that are auxiliaries to getting anything done. The tasks are difficult and boring. Unfortunately, they’re also absolutely necessary. Without this sort of inner-functioning reform, we’ll have no alternative to corrupt institutions and untrustworthy experts serving as our guides.
For more information about Bruce D. Abramson & American Restorationism, visit: www.BruceDAbramson.com
To learn more about how America’s elites destroyed the republic, see: The New Civil War: Exposing Elites, Fighting Utopian Leftism, and Restoring America (RealClear Publishing, 2021).
To learn more about the ideology driving today’s anti-American leftism, see: American Restoration: Winning America’s Second Civil War (Kindle, 2019).
To learn more about our work at the American Coalition for Education and Knowledge, visit us at https://coalition4america.com/
To learn more about how I turn the ideas I discuss here into concrete projects that serve the interests of my clients, donors, and society at large, please e-mail me at bdabramson@pm.me.