Catching up Silicon Valley

23-07-2018

Source: dt.ua

Ukraine has been looking for a role model for many years. Back in the 90’s, Leonid Kuchma said his famous words, “Tell me what to build, and I will do it”. I do not know if he liked any suggestion, but he made something at random just like his successors. There is no unanimity even now. Someone wants to follow China or Singapore, while others like more the experience of Eastern European countries or draw analogies with Israel.

This is not the worst approach, but it can not help catch up with economic leaders. With this approach, we will be doomed to fail, like Achilles in the famous Zeno’s paradoxes, to constantly run after a turtle without the chance to catch it one day.

We need to come after those who are more efficient than our competitors. Those who have demonstrated breathtaking growth. These are Google, Apple, Amazon and other companies that quickly moved from garage businesses by using whatever was available to corporations, which budgets are the same as many states have, and the number of service users is similar in size of the populations in large countries. At the same time, the effectiveness of such corporations can not be compared with the state apparatus.

Is that even possible, and what’s the difference between a large corporation and a state?

“How can you judge what you do not know?”

One of the key differences between the state apparatus and the corporation is their decision-making procedure. Government authorities poorly understand the consequences of their management decisions. In the most optimistic scenario, when facing with a problem, a government agency will do the following: analyzing the problem; searching all possible ways to solve it; then – choosing the most appropriate option; and, finally, there will be development, approval and decision-making. This procedure is too bureaucratic, slow, complicated and resource-intensive.

However, this is the optimistic scenario, in most cases, the reality is even more disappointing. Usually, government bodies choose a solution to the problem at random, and then just imitate the analysis process covering it with a crowd of unnecessary papers.

The problem here is not only the reluctance of officials to analyze problems or their inability to do so. In most cases, the problem is the lack of data to make a really informed decision.

And this is not the worst thing. The trouble is that the potential consequences are somehow analyzed, but there are already no resources to analyze the consequences that really happened.

Imagine that you decided to participate in a football pool. You spent your time to analyze the tournament situation, the composition of teams, conditions of key players and the statistics of the results of games played by opponents, then – the time and money to place your bets. And, in the end, you were not even interested to know the results of the game.

Sounds incredible? But this is exactly the case with management decisions. Their actual performance, unlike their planning, is almost never analyzed.

How can the private sector experience be helpful to us? It is very simple. The businesses also face with the problem of forecasting. But for business, one of the ways to solve this problem is design thinking, or simply experiments.

This model is simple: you try – make an assessment – change – repeat. If you watched the comedy “Groundhog Day” with Bill Murray, that’s it. The organization that makes a decision doesn’t pretend to choose the only viable solution that will be used forever. Quite the opposite. Problems are articulated, then different approaches to their solution are tested simultaneously, and they choose the most appropriate option based on practical results. Facebook, Google, and others carry out thousands of experiments on us every day. However, we are simply unware of the large majority of such experiments.

Both the media and politics adopted the experiment practice: what photo will attract the voter’s attention? What article heading will be clicked on more often? The answers are received with no hassles: they offer different options, monitor the respond of online users and then choose the most popular option. In other words, the standard of truth is practice.

That is why experiments will be the perfect choice for public administration. It allows not to be afraid to make a decision without having any information or time to collect it. Moreover, many interesting and innovative solutions are blocked now, because one or another influential government official is twice shy and overestimates the risks. Sometimes it’s false, and sometimes they do it with a clear conscience.

Which reform figures faced with a wake-up call provided by the experienced bureaucratic guards? “You did not build it to break!”. “As soon as you do that, there will be a collapse!”. “Nobody has done this before, and it’s not for nothing!”. It is not possible to persuade them or remove such a barrier at once.

An experiment carried out properly will allow to implement a huge array of innovative approaches, which nobody dared or allowed to apply for personal gain.

Ukraine is also experimenting to a certain extent. The government authorities managed to approve acts on the implementation of “pilot projects” at their own risk. Today there are dozens of such projects. For example, the Ministry of Justice introduced a marriage registration service per day in its “pilot”, despite the legal requirement of the need for a one-month waiting period.

Although the practice of such “pilot projects” is highly commendable, it has many disadvantages. First, all these “pilots” are illegal. The current Constitution does not allow government regulators to be creative, while there is no law providing for the possibility of experiments.

Secondly, all “pilots” are just remotely remind of the design-thinking model. A proper government experiment should match several key characteristics:

– to be carried out on a limited and a small number of subjects;

– the number of such subjects is chosen randomly;

– before the experiment begins, the criteria for a quantitative comparison of results shall be defined;

– the experiment shall be evaluated by an independent body;

– the experiment is limited in time.

In this case, the experiment should not be used as a substitute for a well-considered calculation and analysis. The analysis of the problem and the selection of alternative ways to solve it will be a prerequisite for carrying out the experiment. And the key prerequisites for the experiment are the lack of data to choose a single behavior model and the possibility to collect such data after the end of the experiment.

By the way, it is unlikely that we will completely refrain from following the experience of some country. According to some experts, the model of experiments and flexibility is precisely the key to the success of China, which implemented different economic policies in different regions and in different years. However, it did it not as quickly as corporations do.

However, it is not enough to make correct decisions. They need to be implemented in an effective way.

“If everyone is treated according to his/her deserts, who will escape the sticks?”

Another feature of the state is that it is extremely conservative when it comes to choosing the tools it works with. Most levers of influence used are banal varieties of an archaic “stick”: prohibitions, permits or inspection visits.

Only recently, the state began to use the “carrot” methods: various privileges, increased tariffs and so on.

All this is a stone age toolkit in comparison with business activities. The state uses police and electronic ankle bracelets to enforce home arrests. Instead, Internet giants keep us at home near the computer or smartphone screens without any apparent coercion.

The state maintains a huge staff of employees who try (not very well) to collect taxes. Internet giants get our money in such a way that we do not even notice it.

Would you agree to spend a few hours a day to do some work for several months for a reward in the form of an electronic image of a sword or crown at the request of an official? Probably not. But online game developers do it with no hassles.

The principle here is simple: the behavior, which is desirable for a manipulator (or a regulator) should be comfortable and pleasant, and the undesirable behavior – inconvenient or unpleasant.

One example of this approach is nudge – a concept, the co-author of which (Richard Thaler) won the Nobel Prize for Economics. It is quite simple: though a person has the option to choose his/her behavior, another person (the so-called “choice architect” who can be represented by both a private company and a state) can encourage him/her to choose the desired behavior.

Businesses like to use all these factors, such as too large shopping trolleys in supermarkets, which encourage us to buy more, a special arrangement of goods on shelves promoting one goods over the others, the restricted daylight in the gambling halls, so that those present have no sense of the time.

One of the most common nudge options is to set a rule that works by default (that is, until we give a signal that we do not agree with this rule). A lot of researches along with a real practice showed that we tend to agree with the conditions, stepping back from which requires at least minimal efforts. For example, you do not check all your smartphone settings selected by default, do you?

The nudge option is sometimes used in public administration. For example, the rule that property acquired by a married couple during marriage is common. The couple, of course, can make a different decision, but are many of us doing or discussing it?

The nudge advantages are that it allows to change the behavior of people without any official restriction of their freedom. The extraordinary efficiency of the nudge concept together with its formal liberalization makes this mechanism quite dangerous, which makes it necessary to develop and adhere to the basic ethical principles of its application. Although, on the other hand, the business tests this tool on us without any restrictions.

“All the world is a game”

Another interesting way to influence the human behavior, which is effectively applied in business, is gamification, that is, the use of elements of the game to stimulate the desired behavior. Do you have a personal account in a social network and want to get as many likes as possible? Congratulations, you are in the game. Other gamification varieties include rewarding with special stripes or status awards, competitions, creating a possibility to collect something, etc.

Gamification is not a new phenomenon. Many people still remember the Stakhanovism, when the authorities organized socialist competitions to increase labor productivity in the Soviet era. Groups of workers produced the largest amount of cast iron, mines and miners who extracted the most coal were awarded the winner’s stripes. Similarly, now the state awards and medals or various ratings serve as good examples of gaming incentives.

However, this approach has a much greater potential. For example, in Stockholm experimentally, a model when drivers who achieved a certain point of control without breaking the speed automatically participated in the lottery was used. In this case, the money prizes of such a lottery were made at the expense of drivers who oversped at such a point.

Another real example is the state lottery by the number of cash receipts, which encourages consumers to require the official processing of payments by entrepreneurs.

Keep-it-in-the-family

The methods described above are definitely effective. However, they are not enough for our needs.

The root of our current problems is in our attitude to the state and the society we live in. And this is not just good words, but a very specific scientific fact.

To explain this, you need to immerse yourself in cognitive linguistics for a moment. Our psyche perceives the environment extremely subjectively. One of the important mechanisms that help understand the world around us is metaphors. Metaphors are not just a poetic expression of our emotions. This is a mechanism of our perception of the world and thinking. The terms and concepts, which are new to us, are not placed in our brain in isolation from others, while being included into one of the groups, which contains terms that seem to us related. For example, we perceive life or love through the metaphor of “movement” (we went beyond the mark, relations came to a full stop, we need to step back). Height is a metaphorical measure of dignity (high feelings, lowly intentions, professional growth, spiritual ups and downs, be on a high, etc.).

Business uses visual and verbal metaphors in a very effective way. For example, Volkswagen tries to associate its products with freedom and travels, and therefore binds the names to the winds (Golf, Jetta, Passat, Bora), wild animals (Tiguan) or tribes (Tuareg). The metaphor works even better, if it is well known and often used in everyday life. Well, for example, an apple.

There is a theory that US citizens associate the state with the “family”. Citizens perceive the president, authorities, elections, laws and policies with the help of this metaphor. Under such conditions, the political struggle comes just to the choice of the family type: whether it will be careful or strict. The “family” metaphor is actively used by political technologists. Trump is usually photographed surrounded by children and people of all ages to formalize his visual image of “father”.

The topic of metaphors is very interesting from the standpoint of elections and party programs and slogans, but let’s turn our attention on other aspect. If people unconsciously perceive the state as a family, their behavior will be formed in a completely different way than if they perceive the state through, for example, the metaphor of “resources”.

If the state is a family, it is the psychologically optimal behavior to pay taxes, respect the laws, speak the truth in court. If the state is a resource, then the situation is exactly the opposite. If you have no power (“resources” are in someone else’s hands), then there is no ideological argument for paying taxes, respecting property or laws. If you have some power (“resources” are in your hands), then there are no barriers to use it to your own advantage, except for the fear of losing such a resource.

The step-by-step change in our ideas about the state and its metaphors is a key stage, without which other efforts will be ineffective. We have already some grounds to start: Ukraine is our “Mother” (“Nenka”) and “Motherhood”. As soon as we realize that we are a family (and not the Kaydash’s one), we will be just a step away from Silicon Valley.

 

 

 

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