Bruce Bueno de Mesquita, a professor with New York University and Stanford and author of The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future, discussed wht makes organizations work at TMRE 2011.
“Surprising, sad truths” from Bruce:
- Almost all the world’s top universities are in democracies.
- Highways to airports are straighter in dictatorships than democracies.
- The World Bank shuns whistleblowers who tell them how their money was stolen.
What makes a great job? “Job security, high income, freedom, answer to hardly anyone, and everyone praises you (no matter how bad you are doing!).” Dictators have a great job!
Five simple rules govern all organizations, from families to charities to companies to democracies to dictatorships:
- If you want to keep your job as long as possible, depend on as few people as possible to keep your job (“a small coalition”).
- You want that small coalition of people to be drawn from as large a pool of people as possible. You want them all to know they are easily replaced. “When petty dictatorships have an election, the press says it is legitimizing. That is utter nonsense. Similarly, how can shareholder meetings mean anything when everyone knows who will be elected to the board in advance? These are rigged elections, and the beauty of rigged elections is people being elected know they are very easily replaced.”
- “Tax the hell out of everybody else.” Tax everyone not in the coalition but don’t tax them so much it doesn’t pay for them to work. Don’t tax them so much that their lives are so miserable that they decide it is worth taking the chance to overthrow you. For companies, “extract as much as you can from customers and withhold as much as you can from shareholders”. “Why are bankers so tone deaf? We spend billions to bail them out and they spend billions in bonus. We the people don’t get to fire CEOs: the board does, the senior management does, so they get the big rewards so that they don’t fire them!”
- Make sure to pay those people you depend on to keep your job just enough so they don’t think about switching sides. Don’t pay them more that, for two good reasons: if you pay them too much, they may be consumers who buy luxuries; if they are savers and you pay them too much, they accumulate wealth and build a power base.
- “Don’t waste money on improving the lives of the people you rule. They are not important. They are not a threat to your job.” Of course, leaders can be civic-minded and generous. China is the second largest economy in the world today; of course, it was in 1890 as well before Mao took it backward.
“So that’s how it describes dictatorships, but you’re asking how it describes partnerships, families and democracies?” If democratic leaders want to do this, they have the rule of law; dictatorships are jobs for life, and democratic leaders rule on average 3.5 years. “I highly recommend being a dictator.”
The probability of an incumbent member of Congress being reelected is 95% compared to 97% for the Soviet Duma. “Congress is the least respected institution in the U.S. today, with 17% popularity, but people like their representatives. Congress decides who their voters are by gerrymandering to pick their voters. We need to change that!”
Obama wants to raise taxes to pay for government services, but the Republicans want to cut entitlements and to balance the budget. “Obama doesn’t want to raise taxes on the riches; he wants to raise taxes on Republicans. Republicans want to cut the benefits of Democrats. Tax the people who are not essential to keeping you in power.” The parties are simply trying to follow the rules, “dressed in ideological cloth”.
As another illustration, look at foreign aid. Foreign aid prompts four questions: Who gives foreign aid? How much do they give? Who gets foreign aid? How much do they get? There is so much poverty in the world, according to one camp, because the poor don’t get enough money. According to another camp, the aid is given to the wrong people. In democracies, democrats fund foreign aid to win votes of key blocs: the U.S. spends 0.2% on foreign aid. Most aid is given to dictators, where it doesn’t improve growth, infrastructure or social welfare. The UN reports 74% of foreign aid is stolen. “We give foreign aid with the expectation it will be stolen, because we the people want out government to give to thieves. Why? If you depend on a small coalition, if you give to that coalition, the foreign leader stays in power by bribing them. What do we get in return? Policy compliance.” For instance, Hamas was democratically elected, at which point the US cut foreign aid. Similarly, Iran’s regime is more democratic than the Shah’s regime. The needier a country is, the less likely it is to get foreign aid from Europe and the less aid it will get. In the U.S., aid is “need blind”. The richer the country, the more aid has to be provided to produce policy compliance.
How can we fix these things? Free speech, freedom of the press and freedome of assembly (“the worst thing that can happen to a dicatator!”). Instead, Bruce argues to put aid in escrow that is provided not on the promise of performance but on actual performance for ensuring freedoms. Don’t build primary schools, which encourage literacy so dictators can create wealth from their people; build secondary schools, which encourage people to think.
How about gerrymanding? Create compact congressional districts with one person, one vote, based on topography and age distribution. “No one would agree to that today, but date the legislation for 25 years from now. Never expect our politicians to make changes that put their jobs at risk.”
“We should eliminate the Electoral College, which was a slavery institution designed to strengthen the slave states.”