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Watching the way politicians have been behaving recently, during the economic crisis and during all of the ensuing bailouts and bonuses, and related controversies and dramas, one wonders how exactly anything positive can come out of Washington politics.  Of course a lot of boring things that keep the country chugging along do happen on a regular basis (just keep watching CSPAN).  But for anything that hits the public eye (from one off issues such as bailouts and bonuses, to ongoing themes such as taxes and health care), the disingenuous politicking becomes so extreme that any sort of parody is superfluous. But are “politicians” really to blame?

In a previous post on incentives, I described how compensation structures at financial (and other) firms can create perverse incentives that lead to unsurprising outcomes — firms seek short term profit and take excessive risks at the expensive of long term profits and sustainability.  A recent New York Times article, in discussing this principle, cites a 16-year-old academic paper, “Looting”, that describes how the implicit belief that the government would bail out any sufficiently critical financial firm from going under, led to excessive risk taking by investors at those firms.  They kept the gain, sticking the government with the pain.  In the case of financial firms and other public companies, the deleterious decision-making can generally be traced to perverse financial incentives.  In the case of politics, however, the problem is even worse: perverse incentives tightly coupled with adverse selection.

Consider for a moment the incentives driving a politician.  They are numerous, but certainly include:

  • Civic duty – the politician wants to do what is best for his constituency and the country
  • Money – the politician wants more money (or it’s equivalent in the form of perks)
  • Power – the politician wants power (to secure money/perks for his friends and family)
  • Desire to get reelected – the politician wants to do what it takes to ensure he gets reelected, so that he can continue to benefit from the other incentives above

That last incentive — the strong desire to get reelected — is often times the worst offender in terms of distorting a politician’s decision-making process. Ideally, we want politicians to only be driven by the first incentive above — we (the principals) want our politicians (our agents) to be aligned with our collective interests.  The desire for money and power for personal gain are unavoidable, and as long as they are kept in check (through transparency), perhaps not too unwieldy.  But the desire to get reelected is extremely powerful, since it is effectively basic survival as a politician, and causes the politician  to seek large contributions from special interests and wealthy companies and industries, thus becoming at least partly beholden to them. Although this effect is obvious to everyone, and leads to completely undesirable (from the perspective of the public good) policies at times, it is very hard to fix.  We have no way of knowing for sure which incentives are driving a particular politician’s decision making.

A politician with strong “moral” convictions may draw boundaries as to what they are willing to say and do to get reelected, and may continue to have their decision making dominated by their sense of civic duty.  They might seek and accept large campaign contributions, but remain steadfast in voting based on what they think is best for their constituents.  But any “moral” restriction a politician places on his behavior with respect to getting reelected disadvantages him.  (Consider that the truly amoral politician has more tools at his disposal to get reelected — even mimicking a moral politician is a tool open to him).  And now we see the perfect storm underpinning the subtle yet pernicious corruption that results in the dysfunctional political system: the very people most affected by the perverse incentive caused by the desire to get reelected are the ones who actually do get reelected.  The high-minded politicians with strong ethics and morals are the ones weeded out of the system, because they can not raise enough money, or make enough friends, or manipulate public opinion with enough half-truths and misdirection.  If the only problem with politics in Washington was the existence of perverse incentives, we might still expect to reach some workable equilibrium, where politicians got their fixed cut of money and power, in return for (mostly) working for the public interest.  If the selection were decoupled from perverse incentives, then we would still hope to see common sense rather than demagoguery permeate the halls of political power.  But with perverse incentives coupled with adverse selection, we end up with a one-way street to the bizarre state of affairs we see in Washington today.

In the interest of brevity, I’ve glossed over a number of subtle, yet significant points.  I hope to revisit them in future posts, but they include:

  • What exactly is civic duty?  In an ideal world, whose interests should the politicians’ interests be aligned with?  His local constituency?  The country as a whole?  What are the tradeoffs between the two?  (Game theory can shed some light here on the pitfalls and solutions for aligning incentives)
  • Although we only touched on the negative aspect of the wanting to get reelected, the desire for reelection is supposed to be a positive incentive.  It is supposed to keep politicians in check and is supposed to be the tool to actually align their interests with our interests.  (That’s the whole point of democracy.)  How can we achieve the positive aspect of this incentive, and avoid the perverse effects? (Is transparency the key?)
  • How do term-limits factor in?  Is a lame-duck president for instance more able or less able to advance the public’s interests?


I went to the BRITE 09 Conference held at Columbia (since I had access to a large registration fee discount), which was geared towards branding, innovation, and marketing in the tech field. Speakers included Jeff Jarvis (author of What Would Google Do?), Jeff Howe (author of Crowdsourcing), and Seth Godin (author of Tribes).

Jeff Howe speaking at BRITE 09

Jeff Howe speaking at BRITE 09

Jeff Howe and Seth Godin’s talks appealed to me the most.  Jeff  spoke about the increasing use and reliance on communities to produce things, giving as a canonical example iStockPhoto, which began as an amateur photography site by Bruce Livingstone who simply needed photos for his own site, and found them hard to obtain at reasonable cost.  He began iStockPhoto using the gift economy model, in which users who uploaded images could download them.  He then migrated to the micropayment model, where images could be bought, royalty free, for less than a dollar.  iStockPhoto became very popular, and eventually was acquired by Getty Images.  According to Howe, the key to making a crowdsourcing project successful is to ensure the task at hand is made very modular, with each module simple enough to do in 15 minutes.  That ensures that people will participate, and make meaningful contributions that when aggregated can lead to a useful end product.

Seth Godin speaking at BRITE 09

Seth Godin speaking at BRITE 09

Seth Godin was the keynote speaker on the second day of the conference.  He discussed his book, Tribes, which discusses the modern notion of tribe in the internet age.  His driving argument was that companies or organizations that want to be successful must cater to a tribe, and adapt to the tribe rather than trying to impose their vision on the tribe.  Because of the increased transparency afforded to us by the internet, it is much harder for companies to convince us to want something, and instead, they should focus on helping members of a tribe to stay connected.

He also talked about the qualities of a tribe leader.  Generally they are outside of the mainstream, since the mainstream itself is usually not exciting enough to create or inspire a tribe.  And generally, the tribe leader is seen as charismatic, although Godin emphasized that charsima is not something your born with, it is something that results when leading a tribe whose convictions you feel strongly about.  He gave Al Gore as an example.  As a presidential candidate, he was considered quite boring and uninspiring.  He symbolized the status quo and exuded almost no charisma.  But Al Gore the Climate Change activist was outside of the mainstream, pushing a controversial agenda.  Suddenly he transformed into a charismatic and inspiring figure who was able to have a big impact on the climate change discussion.

Several other speakers were interesting as well, although I won’t describe them here.  A few of the cooler websites that popped up during some of the talks were:

  • Innovid – a technology for adding product placement into videos post production
  • Sundaysky – a technology for automatically generating a snazzy video from a normal text/image-based website

Tavis Smiley Book Signing: Accountable


I went to Tavis Smiley‘s book signing for his new book, Accountable: Making America as Good as its Promise.  He was a very engaging and passionate speaker. He positioned himself as an important, transformative, and influential figure in the African-American community, and the audience was largely African-American.  I used to watch his interviews with politicians and famous figures, and always thought he had a balanced and entertaining style.

Smiley spent the first part of his talk putting his new book into context.  It is essentially the third book in a trilogy; the first two were (loosely) targeted towards African-Americans, although he makes the point that their appeal is more general (otherwise, he claims, they would not have become New York Times Bestsellers).  The second part of his talk honed in on the specifics of his new book, which focuses on how we can hold our politicians (including President Obama) accountable for their words and actions.

Accountability, in addition to being the central theme of his new book, is the central theme of his career as a talk-show host.  Smiley stressed this point repeatedly — promoting accountability among public officials is what he claims to have always been the focus of his career.  It is something that says he applies consistently, even (or especially) to politicians he likes, such as Obama.  He talked about how sticking to his guns on accountability can get him into trouble, but that is no excuse for him to back down.  In particular, he recounted how last year, he ended up in a controversy over taking Obama to task for not attending his State of the Black Union event in New Orleans; to summarize the controversy, Obama at the time was campaigning in other states during the Democratic primaries, and thus couldn’t attend Tavis’ popular yearly conference.  (Hillary Clinton did attend the conference.)  Tavis took this as a sign that Obama was not giving due importance to Black issues.  Because of Obama’s extreme popularity among the Black community, Tavis’ perceived “disloyalty” led to substantial backlash against him, to an extent he did not expect.  Smiley pointed out that he tries to hold every politician accountable, whether he personally supports them or not, whether they are friends of his or not.  For instance he said how he had taken his friend Bill Clinton to task over the Sister Souljah moment, and Al Gore to task for the way he avoided recounts in certain Black districts in Florida during the 2000 election, to avoid tinging the recount effort with “race”.

Smiley recounted numerous entertaining anecdotes.  Among them was one about just how unknown Obama was only a few years ago.  During the 2000 Democratic National Convention in Los Angeles, Obama, who was just an unknown state senator from Illinois, was not allowed into the convention — he had to cajole his way just to get into the building.  Four years later, he was the keynote speaker at the DNC in Boston.  Four more years and he was nominated Democratic candidate for President of the United States.

One of Smiley’s strong beliefs is that if you love a candidate, it becomes all the more important to hold him accountable.  Great presidents are not born, they are made, he claimed.  In particular, he feels that politicians must be pushed and escorted into greatness by holding their feet to the fire.  He was emphatic that the current state of the world is fertile ground for achieving greatness — all of the chaos and crises facing the world gives Obama the chance to shine.  It is only a chance though, and there is no guarantee that he will succeed. But if he does, then he will have secured his status among the Great Presidents.  Tavis mused that Bill Clinton probably regrets not having had the opportunity to prove his greatness, not having been faced by global crises of the sort facing us today.  He ended by reminding us that it is up to all of us to hold our politicians accountable, and in doing so, perhaps elevating some to greatness.

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