May 31

Photo by Ira Block

[This essay was originally entitled “Lessons from Grand Central Station”, until several readers pointed out that the correct name is Grand Central Terminal.  It was an error that I could not let stand.  The permalink (URL) reflects the original title so as to not break existing references. — Author/Admin]

Every weekday morning, trainloads of people are dumped into New York’s Grand Central Terminal and sent on their way.  Thousands per hour traverse the huge main room as they make their way to their desired subway stations, taxi stands and exits in all directions.  Arteries of traffic spontaneously form and disperse — you can join one that’s going in your general direction, get swept along its path and then step out at your stop.   The human pathways will intersect each other with the precision of a champion marching band.   Collisions between any two people amongst the throngs are rare, even amongst those who clearly don’t know where they’re going.

Photo by Ira Block

What’s most remarkable about the above is that no one manages this process.   There are no human traffic cops in white gloves waving some people on and telling others to stop.  There are no ropes herding commuters one way or another.    There are no rules dictating which path you must take to get from point A to point B.   The room manages itself, based on essentially one unwritten rule:  common courtesy. That is to say, you can’t charge through the crowd like a running back, stiff arming people as you go.   What might initially appear as chaos is instead a model of simplicity and efficiency.

Many of the most beautiful structures and creations in the world are also models of simplicity.  Most people will recognize

E=MC2

as Einstein’s deceptively simple “energy equivalence” formula, which explains some of the most profound physical relationships in the universe.   Many others have encountered the classic Mandelbrot image, which can be described by a set of mathematical equations totaling about 1/2000th of the length of Obamacare.

Not designed by Congress

Sadly, it seems as though simplicity is politically incorrect.

Witness the bewildering sizes of recent pieces of legislation, or attempted legislation, drafted in true “we’ve really got it this time” fashion.    Obamacare tips the scales at 2000+ pages. The recent financial reform bill is 3000+ (with the original Glass-Steagall act, whose re-birth some people are calling for, weighing in at a paltry 34 pages).   Even the government’s response to the tragically ongoing BP oil spill has been one of triangulation and determined-complexity.   Get some supertankers to siphon off the leaking oil?   Nope.   Help Louisiana Gov. Jindal to build some temporary barrier islands along parts of the coastline?  No sir.  Keep a boot on the throat of BP — hey, that’s a killer sound bite!  Let’s go with that!

It’s interesting to instead think of how brief, yet sweeping, some alternatives might be:   Take financial regulation:   How about a few pages, summarized by:  “You are free to fail; proceed at your own risk”. Or health care:   “A true insurance policy, provided by the private sector, can cover you for catastrophic-but-unlikely events.  You can cover all other expenses, just like any other consumer good.” Energy policy?   “The government will enforce property rights but otherwise has no dog in this hunt.  We encourage (verbally only) all entrepreneurs to build the better mousetrap and let the world beat the path to your door.” International trade:   “We welcome the best and cheapest suppliers, as defined by their customers, to provide them with goods and services.   To levy taxes and tariffs on imports is to commit an act of war against our own citizens.”

 

 

What each of these “solutions” have in common, besides simplicity and less attractive press conferences, is something which an ever-growing government seems determined to choke off:  personal responsibility.    What each of the government “solutions” substitutes instead, is hubris.

Indeed, the hubris of government is that multi-thousand page bills can actually accurately describe and account for the complexity of the real world, where hundreds of millions of economic actors interact in virtually infinite combinations (see also, the Mandelbrot above).  By contrast, any good engineer will tell you that simplicity and reliability go hand in hand.  Remember the KISS principle?  (Even the rock band of the same name has profited handsomely from that.)  How many times have we seen “fewer (or no) moving parts” as part of a sales pitch?  Computer hard drives are being replaced by flash memory for this very reason.   A software engineer might tell you that the fastest code is the code that is never called.   Likewise, the most productive programmer is the one that solves the problem with the fewest commands.    Complexity is the arch-enemy of reliability, and its corollary, predictability.     Think about this:  A system with 50 required parts, each one having 95% reliability, has an overall reliability of .9550, or barely 8%!

It should be no surprise, therefore, that our telephone book sized pieces of legislation fail to hold up to their lofty promises.   Betting on their ultimate ineffectiveness is like the proverbial “shooting fish in a barrel”.   In trying to capture one detail after another, they bake failure in to their very core.

Back in the real world, such legislative endeavors have a perverse effect.   This past Friday, CNBC aired some extraordinary comments by Steve Wynn, Chairman of Wynn Resorts.   He basically echoed sentiments expressed at this web site many months ago, and lamented on the lack of clarity and predictability of the environment within which business must operate.     In this adminstration’s lust for addressing every nook and cranny of our economy, and in their belief that they can legislate their way to greatness, they have instead legislated paralysis.  And the Steve Wynn’s of the world, the risk takers, the true job creators, are expending their productive energies in far away places like Macau, rather than in our own backyard.

If one wonders why job creation in this country is below expectations, perhaps examining those expectations in the context of such legislative complexity is in order.    Where Grand Central’s unmanaged and unregulated system allows solutions to spontaneously ebb and flow as needs require, Washington instead is criss-crossing our economy with crowd-control ropes and tangling our economic actors into knots.

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