I have strongly believed that CEOs should make employee health a high priority and have been bewildered when they delegate that responsibility to their Benefits departments.  I successfully created a culture of health at Pitney Bowes, but relatively few CEOs have followed my path.

However, some smart and rational CEOs, whose scarcest resource is time, believe that they can deliver shareholder value by putting their priorities elsewhere.  Their reasoning may be as follows:

• Traditional population health improvement programs have not worked in large organizations; and
• The best path to reduced healthcare costs may be to reduce U.S. employee headcount.

(more…)

James B. Stewart, a reporter and author wrote on Op-Ed piece in the Saturday, February 16, 2013, issue of The New York Times, entitled “The Myth of the Rich Who Flee From Taxes.”  His major argument is summarized in the following statement:

“At least three recent academic studies have demonstrated that the number of people who move for tax reasons is negligible, even among the wealthy.”

As a person who knows many wealthy people who have moved to states with no income or inheritance taxes, and many who have chosen not to do so, I am often asked by many people why we do not leave Connecticut and establish a primary residence in a state like Florida, where I could save millions of dollars in taxes over the rest of my life.  My view is that Stewart is only partially correct and partially wrong in his assertion that higher taxes do not drive people to change where they live.

(more…)

Many of my Republican friends (I am registered as an Independent) are bewildered that President Obama won. However, I believe in the voters’ collective wisdom, and would offer observations about some of the reasons Americans chose President Obama over Governor Romney.

The Republican Party platform and its U.S. Senatorial candidates frightened many people who would otherwise consider voting Republican because of harsh, insensitive positions on issues like immigration, abortion, and contraception.  Governor Romney’s path to winning the nomination forced him to support positions he probably would not have supported in a general election campaign.

(more…)

We think of extreme climatic events as happening only in this past few decades, but there were events that fundamentally altered our country’s demography in the 1920’s and 1930’s and 1950’s, and were more devastating than what we are now experiencing.

The Mississippi River flooded in 1927 and had short and long term impacts.  In those floods, 700,000 people lost their homes and Herbert Hoover became a hero for his leadership in flood relief efforts, which propelled him into the Presidency in 1928. The flooding disaster triggered acceleration in the migration by African Americans from the Southern delta farm areas to Northern cities, which was part of a major migration by African Americans from South to North between 1915 and 1970.  It also resulted in a significant increase in federal control of waterways and flood control systems across the country.

(more…)

Today, September 11, 2012, is the 11^th anniversary of the 9/11 attacks, and like that tragic day, is a clear, cool Tuesday.  I remember that day well, as do all of us with some emotional connection to the day’s events.

I was in my sixth year as Pitney Bowes’ CEO.  I was at a breakfast meeting with representatives from our Main Plant.  It was a difficult conversation, because I was explaining why the Plant would eventually close (it closed in 2004).  The reason for its closure was not a cost-saving play, but the fact that postal regulations around the world were driving us away from printing fixed meter impressions on envelopes and toward variable digital printing.  Ink jet technology was the only viable alternative, and companies like Canon, Hewlett Packard, and Brother owned all of the critical patents on that technology.  Inevitably, they, rather than Pitney Bowes, would manufacture the low and mid-range products that had been produced in that factory for over 80 years.

(more…)

Joseph Stiglitz, a renowned economist, has just published a book entitled The Price of Inequality, in which he directly tackles the cost and root causes of societal inequality. While I do not agree with his broad recommendations or his overall view of the world, I believe that he correctly identifies inequality of political access and influence as the source of economic inequality.

Based on the experiences of being involved with both government and private sector marketplaces in which individuals have gotten very rich or successful, I would make four broad observations about economic inequality:

• More complex customer procurement rules or political systems increase inequality;
• More intensive government regulation to redistribute opportunity increases inequality;
• “Stimulative” government programs to increase opportunity increase inequality; and
• Many well-intended, but flawed, rating, ranking and measurement increase inequality.

Complexity, over-reaching government regulation, stimulus programs and badly designed rating, ranking, and measurement systems benefit people with pre-existing advantages and widen their advantages, and, in some cases, they become obscenely rich.

Increasing system complexity increases inequality.

When I was at Pitney Bowes, we were investigated several times for having achieved leadership positions in mail-related markets.  The Justice Department assumed that we must have done something wrong to have a leadership position that spanned several decades.  They were wrong, and, eventually, after five investigations in 22 years, they implicitly admitted that something other than bad conduct was behind our leadership position.

The technical and process complexity of how we evidenced and collected postal revenues, both through postage meters and mail service operations, gave us a huge advantage.  The postal rate structure for work-sharing discounts was extremely complex.  Success depended on successfully making arguments that caused the Postal Service and the Postal Regulatory Commission to approve increases in particular discounts of as little as .1 cents.  Every .1 cent discount increase we received gave us over $10 million of operating income.  To make these arguments required us to hire and educate postal economic specialists, who understood the unique economics of postal mail processing.  Without the complexity of postal economics, which few economists could master, we would not have the significant competitive advantage that enabled us to grow and be profitable.

There was nothing sinister about this complexity.  It was no different from the economics of other public utility pricing systems, but, because postal mail economics was a smaller perceived business opportunity, few economists attempted to master it, which gave us a big opportunity.

The more complex the discount structures became, the more difficult it became for our smaller competitors, many of whom were anxious to have us acquire them. Our experience is replicated every day as large private sector companies create very complex procurement processes that benefit incumbents or large, resource-rich vendors, at the expense of start-up businesses.

More intrusive government regulation and attempts to redistribute wealth, income, and opportunity have exactly the opposite effect.

This is the point at which I most completely diverge from Stiglitz and others sharing his point of view.  When governments try to “level the playing field” between those they believe to be advantaged and disadvantaged, they are more likely to increase inequality.

Complex and comprehensive laws and regulations that attempt to micromanage the economy to redistribute wealth increase inequality in two ways:

• They give advantages to those with more know how and resources to figure out how to play more effectively within the new rules.

New York City rent control laws have been in place since 1947. They have benefited wealthy people who can maintain a New York apartment and spend their own money for capital improvements, since no honest landlord can afford to invest in upgrading rent-controlled apartments for lower-income tenants. They also benefit unscrupulous landlords, because they are designed to protect absurdly low rents only while the existing tenant is in place.  Instead of improving the housing stock to increase the value of the property, landlords finding creative ways to force out or buy out rent-controlled tenants, either by renting adjacent apartments to rock musicians or motorcycle gangs, refusing to make basic repairs, or engaging in noisy construction. The rent control laws induce this dysfunctional behavior because they create a wide gap between the market rate and the rent control rate.  Wealthy tenants can fight these abuses, but the lower-income tenants rent control laws are designed to protect cannot fight back easily.

• They create a new class of people who thrive on being intermediaries, consultants, or other service providers in the marketplace created by these redistribution schemes.  Addressing the needs of these various intermediaries adds cost, complexity, and inequality to any marketplace these intermediaries touch.

Public sector labor unions clearly thrive when the government creates more jobs to “redistribute” wealth, since more government employees are needed in such an environment.  Civil service professionals do well by “monitoring” the disbursement of funds from government to “disadvantaged” people. Major agricultural corporations benefit from highly profitable food stamp programs.  Firms that provide specialized software for managing government social service programs make a lot of money licensing that software to non-profits that have to comply with complex government requirements.  Ross Perot became a billionaire because he mastered the intricacies of serving government programs, first at EDS and later at Perot Systems.  Not surprisingly, an individual, a small business, or an under-resourced large business will have an even greater disadvantage the more of these intermediaries with which they have to deal.

• Title IX has created a whole new cottage industry of parents, coaches, guidance counselors, college counselors, and providers of athletic equipment that benefit from building girl’s sports teams at the K-12 level. Wealthy, resourceful people “game” the college applications process at top-rated schools by getting their daughters into Title IX-induced sports like lacrosse, equestrian sports, squash, and rowing. Greater governmental intervention to redistribute wealth, income, and opportunity simply creates new opportunity for those who are already rich.  Title IX has created new opportunity for women, but has significantly skewed all sports toward wealthier women and men.  The sports programs that get cut to support a new women’s sports program in lacrosse, squash or equestrian sports are inevitably sports that are more accessible to lower income students, like baseball, track and field, or swimming.

Government “stimulus” programs get burdened by the inevitably costly, onerous and time-consuming audit and compliance programs that accompany them.  Wealthy, resourceful people are far smarter in navigating through these expensive requirements.

Elected officials so completely distrust those to whom they give money for stimulus purposes, and are so concerned about failing to catch fraud, waste, and abuse that they insert requirements that slow up the flow of money and siphon off money that should go toward stimulus.  This was amply documented in Michael Grabell’s comprehensive analysis of what went right and wrong with the stimulus legislation in Money Well Spent?  Many well-intended programs were delayed and costlier because of an excessive preoccupation with government rules and processes.

One example was the weather-stripping program that was going to reduce energy costs for homeowners, reduce environmental pollution, and provide middle-class jobs for people of moderate skills. Despite the program’s obvious merits, it was delayed for several months in communities that did not apply the resources to get the government to define “prevailing wages” for determining compensation.  Wealthier communities were far better able to drive the government to act than their economically challenged counterparts.

Major infrastructure programs end up in wealthier states and localities and major government spending programs often are disproportionately spent in wealthier communities, because these communities can marshal the resources to do what it takes to get the money, especially when the program requires matching funds.

My favorite example of this last point (although it did not arise from any stimulus legislation) was the case of Westhampton Dunes, a community formed in the early 1990’s at the western end of a barrier island in a super-wealthy resort area on Long Island.  A group of very wealthy real estate speculators bought up beachfront homes that had been severely damaged by ocean wave surges during storms in the late 1980’s, at prices ranging from $50,000 to $100,000 per property.  The damage to beaches and homes was caused by a shortsighted county supervisor decision not to fund the construction of protective barriers along several miles of beach (because he thought it only helped wealthy homeowners.)  The speculators petitioned the Army Corps of Engineers and the state of New York for 91% of the funds required for beach replenishment and the construction of protective barriers, and then assessed the wealthy owners of the beachfront properties for the remaining 9%.

After the Army Corps of Engineer project was completed, each property was worth millions of dollars.  The homeowners got very rich from this well-intentioned government program, because they had the capital and the network to assemble the property, the money and the lobbying strength.  The real estate speculators who benefited were far wealthier than those who sold their homes at $50,000 to these speculators.

Many well-intended rating, ranking, and measurement systems have the unintended consequences of increasing inequality.

Given the apparent importance of a college degree from a “good school,” the competition to get into “good schools” is more ferocious than ever.  Schools appear to be more exclusive than ever is that schools actually have the incentive to increase the number of applicants they reject.  The U.S. News & World Reports college ranking and rating system ranks schools higher, based on their “exclusivity.” As a result, many schools encourage applications from many students who, realistically, have no chance to be admitted.

The flood of applications creates additional complexity and risk for those who actually are qualified, but might be rejected, simply because admissions officers have too many applications to review and have to use shortcuts to screen out applicants.  Wealthier people spend a considerable amount of money and time working with college counselors, who help their children “game” the applications process.  The ranking system helps create the conditions that make this “gaming” necessary and more effective.

To bring greater “rationality” into the reimbursement system for physicians, Medicare and Medicaid adopted a system developed by a Harvard Medical School professor called the “Relative Value Resource Based System” in the late 1980’s.  Payments for clinical encounters were determined by a complex points system, which over-rewards complex procedures undertaken by highly-trained specialists, as opposed to simple cures through consultations by primary care physicians.  The end result: American has so lopsided a reimbursement in favor of subspecialists versus primary care physicians that we only see 4% of medical school graduates go into primary care.  This is one reason why our healthcare costs are so high relative to other developed countries.  We excessively reward skill and inadequately reward cost-effective performance.

Final comments

Stiglitz and others are correct that persistent and widening inequality is dangerous and destructive of the American dream.  However, the notion that government intervention is the “cure” for this inequality is misguided.  Government has done a great deal, in the interests of eliminating inequality in the past, to create the conditions that have led to the inequality we face now.  I do not believe that the future would be any different.

We are going through a very painful time in our country in terms of the changing nature of work, business, technology, healthcare, education, and the role of government.  Because of disruptive innovations in every sector of our society, the old rules about how people succeeded are gone, but it is unclear what will replace them.

The major changes that are horribly disruptive to people’s lives are these:

• Because every marketplace is changing more rapidly and radically than ever before, the value of decades of experience in a job, a company, or an industry is less than it has ever been.
• Because experience is less valuable, everyone is less secure in his or her current employment than ever before.
• When someone loses his or her job, the path to future employment requires more substantial adjustment than ever before.  Moving to the same job in a different company or industry is less and less likely.
• For many people, the right kind of paying employment may be in an independent contractor position, as opposed to a job with an employer.  In fact, many employers are going to sites like www.freelancer.com  to hire workers to perform tasks, without having to create a “job” without fixed responsibilities, pay levels, benefits, and taxes.  For someone to make a living, it is more important that he or she seek “paying work” than to seek a “job.”
• Adaptability and innovation are more important than conformity, a skill most people are not taught in the educational system, which rewards conformity to what the teacher believes is the “right answer.”
• Categories and definitions of what we think about the world are subject to challenge and are less permanent than they have ever been.  The ways we describe what is going on in the world are more likely to be challenged than ever before.  For example, when we use the analogy of a blueprint to describe our genetic code, a common metaphor for describing genetics, we are reflecting an obsolete understanding of genetics, since we now know that we are shaped by the way our genes are “expressed” or “switched on.”  Even something as seemingly fixed as our genetic make-up not only changes during our lifetime, but the altered genetic “expression” can also be passed on to our children.
• Education is increasingly about “learning,” from wherever source we can learn best, as opposed to “teaching.”  Teaching implies that there is a fixed body of knowledge that is imparted from teachers to students.  Learning changes that paradigm by inducing students to seek insight and knowledge from whatever sources they might be available, and to recognize that there are no fixed bodies of knowledge, but continually changing assumptions and paradigms within every body of knowledge.

(more…)

Why don’t more Americans go into public service?  This is a most important question, because the public sector is being crippled by mediocre, sometimes poor, and, infrequently, but too often, corrupt leadership.  When I was young, my parents strongly encouraged me to consider either a career in public service or taking on periodic assignments in public service. I do not want to romanticize government officials in the past, because many of the pathologies we see today have been around for centuries and even millennia.

Nevertheless, I grew up reading about historical figures like the Roman leader Cincinnatus who left his farm to serve in a leadership position, fulfilled his public responsibilities, and then returned as quickly as possible to his farm and his family.  George Washington was admired because he completed his two presidential terms, and then went back to his Virginia home.  Both of these leaders represented a set of values which placed public service above personal ambition.

(more…)

The iconic image, whether a photo or video clip, often shapes the perception of events in profound ways.  As I am learning as a film producer, those who market films specifically look for that one still photo or freeze frame that not only captures the essence of the film, but creates dramatic power.  In an article in the January 20, 2011, issue of The New Yorker, called “The Toppling,” author Peter Maass makes the point that the iconic images of Iraqis tearing down the statue of Saddam Hussein in Baghdad’s Firdos Square on April 9, 2003, was largely a media-staged event.

The significance of these images is that they seemed to convey a sense that Iraqis were ecstatic about the overthrow of the Saddam Hussein regime.  Many commentators compared the statue toppling to the images of Berliners tearing down the Berlin Wall in 1989, or the Rumanians tearing down the statue of their totalitarian dictator Nicolae Ceausescu.  However, whereas these other cases were largely spontaneous expressions of joyous citizens of Germany and Rumania reflecting their newly found freedom, the Baghdad celebrations were clearly premature and, as a result, reflected a strange mix of a few Iraqis, a few media people, and few military personnel.  The power of the images of Iraqis celebrating the American liberation by the symbolic act of toppling Saddam Hussein’s statue may have kept Americans from questioning the wisdom of how the Iraqi war was conducted for quite a while.

(more…)

I was going to post another blog today until I saw the Van Jones Op-Ed piece in the Sunday, July 25, New York Times entitled “Shirley Sherrod and Me.” Not only do I agree with his conclusion that the Obama Administration decision to fire Ms. Sherrod was wrong and destructive, but it might have been one of the most harmful actions the Obama Administration has taken on any issue.

Government officials have become more risk-averse over time, and less effective as a result, precisely because, in varying degrees, they are judged by different standards from private sector employees.  Over a decade ago, I had dinner with an executive who had been fired by the U.S. Postal Service, after he had worked in the private sector for a good part of his career.

His observation about being a government executive was that the highest risk situations for a government employee were either unwanted media scrutiny, the threat of a government investigation, or the threat of a Congressional hearing.  There was another long-term Postal Service executive who was fired a few years later because of a relocation package he received, which received excessive media scrutiny, even though it had been approved by the Postal Service’s Office of the General Counsel, its chief ethics officer, and the Inspector General.  One thing I learned about the Postal Service is that, after a 1992 scandal involving vendor-related events at the Barcelona Olympics, it operated at the highest ethical standards.  The firing was unfortunate, but the Postal Service apparently felt that it had to eliminate even the appearance of ethical problems.

The trouble with the Sherrod firing, as well as other incidents like it, is that as Mr. Jones put it most eloquently:

“Life inside the Beltway has become a combination of speed chess and Mortal Kombat: one wrong move can mean political death. In the era of YouTube, Twitter and 24-hour cable news, nobody is safe. Even the lowliest staff member knows that an errant comment could wind up online, making her name synonymous with scandal.

The result is that people at all levels of government are becoming overly cautious, unwilling to venture new opinions or even live regular lives for fear of seeing even the most innocuous comment or photograph used against them, all while trying to protect and improve the country.”

Not only is he right, but, unfortunately, the Sherrod incident will be remembered for a long time, and will affect behaviors all over all levels of government.  Government officials and employees will attempt to figure out not only whether what they said or did could get them into trouble, but whether someone could misinterpret and distort words or actions to hurt them.  They will refrain from doing or saying something, rather than doing something that needed to be done.

I had that experience a few times while I served as CEO.  It was unnerving.  People literally heard something different from what I said, and, on two occasions, an otherwise competent and well-meaning attorney told me that the company could get into trouble not only for what I said, but for what people incorrectly thought I said.

Having people live in perpetual fear is a bad way to run government, business, a non-profit organization, or any other grouping of people.  It is a bad way to force people to live their lives.  The notion that people should be held accountable for distortions that other people might create or project on to a situation is dangerous.

The Obama Administration has to realize that it did severe and probably irreparable damage to the effectiveness of government at all levels, and needs to pull back from knee-jerk behaviors based on appearing to defend the highest standards of ethics and race relations.  It actually achieved the opposite effect: individuals will be scared to talk constructively about race issues in situations in which a dialogue could help race relations.  Moreover, the impact will be felt in a wide range of other situations and on a wide range of other issues.

The President should take the step of framing how he thinks about the level of initiative he wants from government employees, and have a concrete set of actions, which he should announce in a prime time nationally televised address.  He should then follow through on his commitments, and make it clear to government employees that a misinterpretation and distortion by someone else will never again subject an employee to disciplinary action.

I may come across as an alarmist, but I really think this situation has far more serious consequences than might first meet the eye.