Healthcare

Corrupt Feedback Loops: Justice Dept. Extortion

Attorneys General Holder and Lynch

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We’re all familiar with the evil of bribery, in which someone pays a civil servant for favorable handling of a government decision. The briber gains profits that are some multiple of the bribe at the expense of the public; the bribed official’s malfeasance betrays the people who pay his salary.

Since the Code of Hammurabi, government officials have been punished for taking bribes or dealing in property related to their official decisions. In The Republic, Plato suggested government officials live communally without the temptations of private property to insulate their decisions from the temptations of personal gain. In Systems of Survival, Jane Jacobs wrote about systemic corruption when what she called the Guardian Syndrome (appropriate memes for governing and military classes) was corrupted by Commercial Syndrome considerations — and vice-versa. It is corruption if commercial actors use bribes to gain special favors at the expense of competitors and the public, and it is also corruption if government officials use their decisionmaking and spending power to influence private business or voters to give them an advantage over political opponents. Both forms of corruption break down accountability and result in a net loss in fairness and efficiency, leading to less dynamic public and private spheres. And the endpoint of such corruption in a country is stagnation, weakness, and defeat by an external enemy.

Outright bribery is common in developing countries, as the US was before the turn of the century. A less direct form of bribe which is harder to detect is campaign contributions for access and favorable handling, still quite common and legal in the US. The influence is not so much a direct payment for a favorable decision as a tendency to favor the interests of the campaign contributor, putting a thumb on the scales weighing the public interest. The modern version has an officeholder accepting a large number of contributions from both sides of various issues, especially when the officeholder is not a predictable supporter of either side. This bundling of interest-group contributions leaves out citizens who have no trade group or industry representing their interests. This is not ideal, but the commonly-suggested remedy of public campaign financing has the obvious problem of favoring the status quo and whoever decides which candidates deserve public funding. Individual wealthy contributors have provided the seed money for many outsider campaigns for public office, and if private contributions are limited, status quo politicians, with their free access to news media, are much harder to displace.

Another more subtle form of corruption is advertising and PR monies spent by the state at the direction of current officeholders for supposedly public purposes, but which greatly favor their own party or policies. A great recent example of this is the advertising for Obamacare and its insurance exchanges, and the “Navigators” hired to assist applicants in using the unusable Healthcare.gov web site. From the Kaiser survey, “More than 4,400 Assister Programs, employing more than 28,000 full-time-equivalent staff and volunteers, helped an estimated 10.6 million people during the first Open Enrollment period.” Doing the math, this means each navigator served about two people a day, and (especially at first) most of the time spent went to staring at nonfunctional screens and talking about the problems with the system. Navigators were hired with little concern for knowledge or trustworthiness, and information about becoming a navigator was spread via the network of “community activist” organizations that happened to reach out to the same sort of people who serve as political foot soldiers for Democratic campaigns. ACA implementation spent billions of dollars on politically-connected contractors for failed systems and hiring of connected patronage employees. The result was enormous waste and failure of the new systems, but with the politically-desirable side-effect of direct government-funded contact between poor citizens and activists for Democratic causes. This may have backfired since the program failed so obviously, but was motivated by the desire to give poor people a benefit while reminding them personally of the party that got it for them.

Because spending for Federal PR offices and advertising is buried as multiple items in each agency’s budget, it is hard to track. The GAO is launching an investigation to try to trace it, with obvious external advertising contracts adding up to $4.7 billion in 2009-2013 fiscal years:

The 2014 CRS report found it difficult to determine details on federal agencies’ advertising spending. There is no governmentwide reporting standard, CRS said, nor is there a common definition of what constitutes advertising. Additionally, agencies have “great discretion” to budget their in-house PR. Agencies are prohibited from spending money on “publicity or propaganda” not specifically authorized by Congress, but CRS found the lack of a firm definition of advertising has led to “few governmentwide restrictions” on the practice.

Government-funded PR offices send out press releases which end up as stories in the media, which typically don’t question the content — a “government source” is seen as credible. This allows slanted views of science, economics, and political issues to be presented as neutral fact with apparent consensus support — a typical press release from a government agency can result in dozens or hundreds of stories repeating the same information, and most media outlets won’t seek out any opposing viewpoints.

This means the party holding the executive branch can try to mold the views of the citizenry using propaganda funded by the citizens’ own tax money. When the executive branch is held by progressives who reinforce the generally government-favoring slant of the federal civil service employees, the depth of the disinformation provided increases. This is systemic corruption, and creates a powerful positive feedback loop toward larger government and shrinking private freedoms. Progressive politicians believe this is all to the good — because they know what is best for everyone and most citizens choose wrongly unless guided by the state and its social-working employees, it is totally legitimate for the state to enlighten its voters by programming their malleable minds with the correct ideas so that they will vote for the correct politicians, who happen to be them.

Overlawyered reports on a WSJ story (behind a paywall, unfortunately) discussing the fate of the $110 billion in fines paid by mortgage banks to settle with the Justice Dept.:

Following the 2008 crash, government enforcement action extracted $110 billion from lenders and other players over a variety of alleged sins relating to the rise and collapse of the mortgage bubble. Where did it go? Governments held on to a lot of it, a lot went to the government-sponsored Fannie and Freddie mortgage enterprises, favored “housing-related community groups” got some, some went to homeowners with mortgage struggles or to new low-interest loans. In New York, money is going to rebuild the Tappan Zee bridge and “the annual state fair is using bank-settlement money to build a new horse barn and stables.” But no one has kept track of where a lot of the money went, there being no overall effort to account for it.

Kimberly Strassel in the WSJ of 12/3/2015 commented on the phenomenon of fines extracted by Justice Dept. threats going to groups supporting the Democratic party:

Republicans talk often about using the “power of the purse” to rein in a lawless Obama administration. If they mean it, they ought to use their year-end spending bill to stop a textbook case of outrageous executive overreach.

This scandal comes courtesy of the Justice Department, which for 16 months has engaged in a scheme to undermine Congress’s spending authority by independently transferring dollars to President Obama’s political allies. The department is in the process of funneling more than half-a-billion dollars to liberal activist groups, at least some of which will actively support Democrats in the coming election.

It works likes this: The Justice Department prosecutes cases against supposed corporate bad actors. Those companies agree to settlements that include financial penalties. Then Justice mandates that at least some of that penalty money be paid in the form of “donations” to nonprofits that supposedly aid consumers and bolster neighborhoods.

The Justice Department maintains a list of government-approved nonprofit beneficiaries. And surprise, surprise: Many of them are liberal activist groups. The National Council of La Raza. The National Urban League. The National Community Reinvestment Coalition. NeighborWorks America (which awards grants to left-leaning community organization groups, and has been compared with Acorn).

This strategy kicked off with the $13 billion J.P. Morgan settlement in late 2013, though in that case the bank was simply offered credit for donations to nonprofits. That changed with the Citigroup and Bank of America settlements, which outright required $150 million in donations. The BofA agreement contains a provision that potentially tees up nonprofit groups for another $490 million. Several smaller settlements follow the same mold.

To further induce companies to go the donation route, Justice considers these handouts to be worth “double credit” against penalty obligations. So while direct forms of victim relief are still counted dollar-for-dollar, a $500,000 donation by BofA to La Raza takes at least $1 million off the company’s bill.

The purpose of financial penalties is to punish, and to provide restitution to real victims. The Justice Department would make the case that this money is flowing to groups that aid the targets of supposed banking abuse, such as homeowners. But that assumes the work these groups do is targeted at actual victims—which it isn’t. It assumes that the work these groups do in housing is nonpartisan—which it isn’t. And it ignores that money is fungible. Every dollar banks donate to the housing arms of the Urban League or La Raza is a dollar those groups can free up to wage an assault on voter ID laws, or to help out Democrats.

This kind of enforced donation to “public service” organizations that just happen to support the ruling party’s goals is correctly discouraged by Justice Dept. guidelines as possibly creating the perception of a conflict of interest. Not only does this improperly divert money which should have been returned to the customers of the banks, it appears to encourage the Justice Dept. to spend effort on industry-wide feints at prosecution of private companies regardless of actual guilt who are thereby extorted into paying huge fines. The businesses find it cheaper to pay the extortion money, and actual justice in the form of discovery and public knowledge of any provable violations of the law that may have occurred is never achieved. The public interest was not served and there is no accountability for any of the bad actors: those inside the banks, in the ratings agencies, or in the government regulatory agencies themselves. Unresolved, there is no clarity on what reforms might help avoid recurrence. And the President builds a bigger propaganda machine to mislead the voters and retain power for his party.

Tl;dr version: The banks were rescued (whether they needed it or not) and then propped up to earn big profits by Fed actions loaning them money at close to zero rates. The DoJ takes a cut from the banks and distributes the booty to favored groups and everyone goes back to business as usual. No banker suffers. My view is that the failures were systemic and no criminal activity could ever be found… the proper punishment should have been some bankruptcies. But that route had “insufficient opportunities for graft.”

More reading on other topics:

Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Death by HR: The Birth and Evolution of the HR Department

Death by HR

A hundred years ago, employment and recruiting were handled by individual managers—both private-sector workers and government employees were recruited, and served at the pleasure of those managers above them. Arbitrary, abusive, or corrupt practices were common, and managers were relatively free to use their position to benefit themselves or indulge their prejudices at the expense of the enterprise.

Industrial and labor relations as a field got its start around 1900. Frederick Winslow Taylor (1856-1915) explored what he termed “scientific management,” which others later referred to “Taylorism.” He strove to improve economic efficiency in manufacturing jobs by breaking down manufacturing processes into discrete steps, timing them and splitting them up in an assembly line to quantify and speed up each worker’s part of the process. This is the doctrine that gave us “mindless” factory work—the same small step done over and over by one worker, then the work moving on to the next worker for an additional step, before finally arriving completed at the end of the line, as perfected by Henry Ford in the assembly line for the Model T. The assembly line relied on the availability of standardized parts, and standardized the labor steps to assemble them so that no overall skill was required and employees could also be viewed as largely interchangeable cogs.

Taylorism in Dilbert — Scott Adams

As organizations grew and labor laws and unions as countervailing forces became important, companies developed personnel departments specializing in recruiting new employees and deciding pay and benefits questions. The “human resources management” field grew up as a specialization of the knowledge required to manage large numbers of employees under the many new legal and political constraints, and protection of the company or organization from lawsuits, union troubles, or government punishment became critical. The abbreviation HR for Human Resources was the new name for the Personnel Department on steroids, responsible for keeping lower-level managers out of trouble when making hiring, firing, and pay decisions. While team managers still had considerable input in deciding who to hire and fire and how much to pay them, they were required to work within guidelines provided by law, regulations, and an increasingly remote HR department. The immediate concerns of managers about team fit and competence were then subject to new constraints of state and federal regulation, and in unionized and civil service workplaces, overriding hiring managers’ prejudices but also overriding their local knowledge.

There had always been good and bad employers, and depending on the competitive environment and level of skill (and difficulty of replacing) of a class of employees, they could be either well-treated and secure, or poorly-treated and arbitrarily harassed and fired for reasons we would now consider improper, like race or sex. Recourse was reputational—in a many-employer city, larger employers who treated workers poorly would discover only desperate or naive people would apply for their jobs. Newcomers would take jobs with bad employers but then transition to better ones as they gained experience, if business was growing.

The new framework of unions, labor laws, and internal HR worked to establish a minimum standard for worker treatment. Bigoted or abusive managers could find their own jobs endangered as bad behavior was brought to the attention of upper management and resulted in negative consequences for the organization. But it also drove obviously improper behavior and motivations for hiring and firing decisions underground—a sophisticated bigot or sexual harasser in a hiring manager’s role could still get away with hidden discrimination.

It can be hard to determine how much credit to assign new labor laws and unions for the improvement in labor conditions in the era from 1900 to the 1970s, when today’s HR came into prominence. As in most social movements, the laws and organizations evolved together, and enlightened businesses were often reforming their own behavior in advance of the law and union pressure, recognizing that a stable and happy labor force made them more profitable and productive. As a recent example, private companies led the way to providing partner benefits for gay employees, far in advance of any legal requirements to do so. By the time of the Supreme Court’s ruling establishing same-sex marriage as a civil right throughout the country (Obergefell v. Hodges, 2015), most major corporations provided such benefits.

Today the legal landscape for employers is so complex and regulations so easy to violate unknowingly that even the smallest companies have an HR department or outsource the function to a specialized contractor (though there are exceptions, and a recent movement toward eliminating them.) The HR department is tasked with reducing the risk to the organization of leaving hiring, firing, and compensation policies in the hands of local managers, and as a risk-avoiding function they typically are overly cautious and reliant on metrics like credentials, performance evaluations, and written applications to make decisions. Since HR is not intimately familiar with the makeup of specific teams and the complex skills required for maximum effectiveness in some positions, prescreened applicant pools provided by HR will typically have some excellent potential employees disqualified by their crude filters, and overall organizational goals like presenting good diversity numbers for regulators may lead to neglect of local goals like hiring the best performer for a particular position.

HR departments are intended to project corporate goals into team personnel decisions, but are more usefully viewed as internalized guards against hazards to the enterprise from lawsuits and regulatory punishments. Big corporations now spend heavily on lobbying, political contributions, and legal assistance, but most HR spending is also “protection money,” a cost of doing business in a highly-regulated environment. And upper-level management attention to HR functions tends to be an afterthought, with many HR departments staffed by people unfamiliar with the company’s business and with little incentive to increase productivity. When ass-covering is your primary activity, product or service innovation and quality have a lower priority. HR functionaries are roughly analogous to the commissars or political officers of Communist regimes, a separate hierarchy of spies to report on and control internal units. The interests of managers and HR can diverge drastically, with HR coming to be viewed as the enemy within, to be avoided and routed around. One high-tech team manager wrote, “How can you tell HR is lying? Their lips are moving.”

Death by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations, available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

More reading on other topics:

On Affirmative Action and Social Policy:

The greatest hits from SubstrateWars.com (Science Fiction topics):

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Affirmative Action: Caste Reservation in India

Caste Heads of India – Horniman Museum, London

India’s waves of conquest and settlement left thousands of tribes intermingled, and with a prevailing ideology of patronage and spoils — tribal and caste ties determined social roles, down to the details of what kinds of jobs people could have. British conquest began the process of liberalization, and after independence, the new Indian governments made efforts to reduce the hold of caste discrimination.

The Indian caste system is vastly more complex than most outsiders realize, and efforts to catalog and define what caste is often fail. There are at least 3,000 recognized castes, and the recognition of caste as a factor in employment probably dates back thousands of years in the form of reservation of high positions for Brahmins. Reservation of voting strength and employment in the Affirmative Action sense of bringing up those discriminated against began in the early 1900s. The “Communal Award,” a system of representation apportioned by ethnicity and religion. was introduced by the British administration in 1933. Voting and representation was separated for Muslims, Sikhs, Indian Christians, Anglo-Indians, Europeans, and the “untouchable” Dalit caste. This guaranteed some voice in the government to previously powerless classes. After Independence, this system continued after the Poona Pact between supporters of reservation and Gandhi, who had fasted to protest against the British practice of separate voting and representation for Dalits.

The Indian Constitution of 1949 recognized Scheduled Castes (SCs), Scheduled Tribes (STs), and Other Backward Classes (OBCs) as needing assistance to make up for historic discrimination. Reservation schemes have since carved out minimum proportions of each of these for new government jobs, university admissions, and other purposes. The total percent of the population eligible for special consideration is around 50%.

Reservation percentages vary greatly by state, and actual discrimination faced by some castes varies as well — a caste can be seen as untouchable in one area, while accepted in another. And in recent decades, many members of the “backward” classes and oppressed castes have migrated to urban centers and jobs unrelated to their historic categories. You would expect that as India grows more cosmopolitan and historic prejudices have begun to fade, at least in professional and urban settings, that the reservation system would gradually dissolve also. But like affirmative action in the US, it remains a contentious issue, with tribal pride and prejudices continuing to create contention over these set-asides.

The Economist just ran a news story about some of the turmoil created, “Backward ho! – Higher castes demanding lower status make a mockery of positive discrimination”:

A city under siege can resist many things, but not thirst. On February 22nd both the national government and that of Haryana, a state that rings Delhi, the Indian capital, on three sides, crumpled after rioters sabotaged a canal that supplies nearly half the water to the sprawling metropolis. Some 28 people died as police backed by soldiers struggled to control arsonists and looters, as well as more peaceable protesters, who blocked roads and railways into Delhi. But with taps running dry it was easier to capitulate to the rioters’ main demand, which is to allow the Jats, a caste-like community that is powerful in Haryana, to gain “reservations”—that is, a share of state favours formally reserved for the supposedly poor and downtrodden.

It is not the first time that a relatively privileged group among India’s 3,000-odd castes has resorted to threats and blackmail to win inclusion in an official category known as “other backward classes”, or OBCs. Such protests have become alarmingly frequent. Last August in Gujarat a protest by the Patidars, a caste which, like the Jats, is traditionally composed of yeomen farmers but has increasingly joined the urban middle class, brought a crowd of perhaps 500,000 people on to the streets of Ahmedabad, the state’s main city. Ensuing riots left a dozen people dead. In late January the Kapus of Andhra Pradesh set railway carriages ablaze. The Gujjars of Rajasthan are another ethnic group, many of whose members, no longer wholly rural, are prospering. Accounting for 6-7% of the state’s people, they staged protests in 2008, 2010 and again last May.

These people are demanding to be “downgraded” to the category of OBC (Other Backward Classes) to gain from the reservation schemes already in place:

In 1990 the federal government set national criteria for defining OBCs, fixing their quota at 27% and capping the overall reservations for all three groups at 50%. Further tinkering has created an increasingly elaborate structure of reservations. Some states certify hundreds of caste groupings as OBCs, while others have pushed their quota closer to 70%. Government commissions that vet applications for OBC status have grown increasingly imaginative, uncovering such subcategories as “backward-forward” castes, parts of a caste group that have fallen behind the rising status of other parts, or the so-called “creamy layer”, ie, members of an OBC who are denied benefit because their family income is above a defined maximum (about $10,000).

As in all such schemes, what started as a temporary boost to make up for past wrongs has become a political football. By treating people as members of a class rather than as individuals, these schemes actually increase social tensions and racial animosity:

…the preamble to India’s constitution included a call for fraternity along with justice, liberty and equality. Its framers envisioned reservations primarily as a weapon to target social exclusion, and saw it as a temporary measure. Their long-term goal was to do away with the iniquity of caste barriers altogether. Instead, by appealing to one category or another for votes, India’s politicians have perpetuated and entrenched a system that fragments the country into jealous islands of class privilege.

Death by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations, available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

More reading on other topics:

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

—

If you have a good story or anecdote from your organization, please email it to jebkinnison@gmail.com. I can use a few good tales (anonymized, of course) to illustrate the problems.

Death by HR: The Simple Model of Project Labor

Death by HR

We need a simple model to inform our discussion of productivity and the effect of incompetent team members on performance when employment is based on hitting diversity targets rather than choosing the most productive.

Imagine a bucket brigade. Ten people who pass buckets down a line from one to the next, always succeeding in passing it along in one second, so one bucket per second is moved from one end to the other.

There are two types of worker: fast and slow. Fast workers can pass along one bucket per second, while slow workers take two seconds.

Suppose one worker on a bucket brigade ten is slow and takes two seconds; in that case, every person after them in the chain has to wait two seconds for the next bucket, and production is *halved* at one every two seconds. The chain can produce no more than its weakest link.

Recognizing this, the chain is reformed: the slow person is cut out, the rest reach a little extra, but can only pass a bucket every 1.1 seconds. Still, by leaving out the weakest link, production is increased from one every two seconds to one every 1.1 seconds, with everyone working a little harder. The slow worker is idle.

Now suppose there are five slow people. The fast five can’t reach far enough to move the buckets from one end to the other; the best they can do is form a team of eight, three slow and five fast, and production is decreased to one every two seconds. The fast people, reaching a bit further, can produce at one per 1.3 seconds, while still limited by the slow to one per 2 seconds speed. Two slow workers do nothing.

But then: the brigade leader realizes the fast five can move at 1.3 per second then split the buckets between two lines of two slow people each, alternating. This allows the fast people to work at their higher speed of one per 1.3 seconds, passing the bucket alternately to each slow line. Not limited by the slow, total production is now one per 1.3 seconds.

Now imagine hundreds of bucket brigades. Each brigade leader is tasked with recruiting and paying the team members, then taking payment for the buckets moved (Production) and disbursing it to team members at the agreed-to rate of pay.

For simplicity, we’ll assume the payment for each bucket delivered is the same, $0.05. The resulting model starts to look like firms in a competitive industry. The talent pool is continuously refreshed with new people with no performance record; some of them are strong and coordinated even at first, while others learn over time to move faster and more surely. Some will always be slower, or unable to focus on the task, or lack coordination. The brigade leader is Management: the job is to decide what work to do, how to do it, and with what workers.

Brigade leaders have a variety of strategies to choose from. The obvious strategy is to go after those workers who have demonstrated how productive they are previously, and offer them higher pay. A brigade with all fast members will move the full one bucket per second, or 28,800 per eight-hour day. At the end of the day, the brigade leader collects $0.05 per bucket, or $1,440, and if each worker is paid the same, they can be paid $140 each, enough for food, shelter, and clothing in our simple model’s factory town. (We’ll assume our brigade leader also works the brigade line for now, and collects a little off the top for the extra job of managing it.)

But another brigade leader tries to fill her crew with the best workers and discovers only a few are available. She decides on a different strategy: hire some cheaper and slower workers and hire more of them, then use her organizational skill to set up the line to produce as much as possible with the workers she has. She is able to hire five fast workers for the competitive $140/day salary, but then hires four slower workers at $80 a day each, so her payroll is 700+320=$1,020 a day, and by using her fast workers in a single line then having her slow workers split into two lines which alternate handling the buckets coming from the fast line, production is slower than the all-fast team at 1.3 seconds per bucket moved versus the fast team’s 1 second per bucket moved, so in an eight-hour day her team can produce only 22,154 buckets vs the fast team’s 28,800, and they are paid only $1107.70 for their output. But that’s more than she’s offered to pay her workers—so she can collect an additional profit and put to use workers who would otherwise be shunned as slow. Those workers, true, are paid less—and perhaps they have to live near the railroad tracks in smaller, cheaper rooms and eat less expensive meals—but they have work which keeps them fed and healthy, and companionship as they work, and the opportunity to get better with time and practice so that their pay can be raised.

This simple model shows how important it is to be able to pay workers in accordance with their productivity in any business, and how management can reorganize the flow of work to use those who are less productive.

This model also has the feature of the real-world job market requiring each worker to prove their worth before commanding their fair salary. A new worker with no experience will tend to get paid much less than even the slow workers, then rise in pay to the level commensurate with their productivity as it is recognized and becomes common knowledge; a brigade leader (manager) who fails to raise that worker’s pay will find that worker has been hired away by another brigade at a higher rate. And those workers who slowly get more productive will eventually find their new skills recognized in pay, or also be hired away.

Now suppose the town’s mayor comes by and discovers some of the workers are paid less for the “same” job of moving a bucket from one hand to the other. The mayor has been watching MSNBC, and reading Marx, and finds this intolerably unequal—so he returns to Town Hall and has the Town Council pass a law fixing a minimum wage of $120/day. They believe workers will thereby have more money to spend and the town will boom as all these new dollars are spent.

The result is different. All of the strategies managers have used to organize their teams to use less-productive workers are defeated—the only way a brigade can make it is if every worker is fast. All of the slower workers are let go, and teams scramble to reform with only fast workers. Since there aren’t enough fast workers to go around, there are fewer brigades, and the town’s total production falls. Even some brigade leaders are out of work, and none of the remaining brigade leaders will take a chance on a new worker who might cripple their production. The brigades that remain are doing well, and perhaps a shortage of the product even increases its price and thus the profits of the brigade leaders/owners, which allows an increase in the remaining workers’ $140 pay to $150.

But the town is full of unemployed workers, and they demand relief from the Town Hall, who already took responsibility for their welfare by ruling low pay illegal. Retail businesses are suffering as the total spending of the town’s workers falls. More shop workers and owners also find themselves unemployed.

We’ll end our parable here, before the mayor announces a new job retraining program or decides to attract a major-league sports team by borrowing money to build a new stadium.

Most work is vastly more complicated than a bucket brigade, and it is generally more difficult to tell which workers are the most productive when you look at more abstract products like software or engineering design. If a key role in a modern software team is occupied by a less competent worker, that software will not only be produced more slowly, it may never see the market at all. Managers often can’t tell whose failures are damaging a team’s work output until it is too late, and it is far harder to tell whether a new hire is going to be a valuable addition, or a regrettable mistake.

Software is a special case where some programmers are hundreds of times more productive than others, and some are actually negative producers—bottlenecking their teams, derailing meetings, and demanding management attention while making other team members less productive. Fred Brooks wrote The Mythical Man-Month about the mistaken belief of managers that a programming project could be sped up or rescued by adding more programmers. He came up with Brooks’ Law: “Adding manpower to a late software project makes it later.”

The highest-quality programming projects are generally designed and prototyped by a single visionary or a very small team, and as more programmers are added, the clarity of design and implementation are lost and the code balloons in volume and is more prone to errors. When the programmers are mediocre and there are many of them, as in most government-contracted software projects, the entire effort may collapse and be scrapped after millions (or billions — see the examples of catastrophic failure in [chapter number], including healthcare.gov) of tax dollars have been spent. This is just the most extreme consequence of bureaucratic project management which views employees as equivalent cogs; in many other fields, the consequence of mediocre team members is low productivity, poor quality, and wasted effort, but the result may function well enough—for government work.

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Death by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations, available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

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On Affirmative Action and Social Policy:

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US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

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Death by HR: The Simple Model of Project Labor

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