Friday, July 8, 2016

A Business Lesson for Cities

“I am of two minds about democracy…We would certainly tolerate no different system yet most people are disenchanted with the way it works. One reason is that our rulers now manage so much of our lives that they cannot help but do it badly. They have overreached themselves.” –Kenneth Minogue

On Redstate today Leon Wolf makes the case that the reason for the events in Dallas can be found in the historically driven perception in black communities that the police are not to be trusted as protectors. He points to the incidents of police shootings and the relative lack of cases being brought, much less actual penalties being handed out, as strongly supporting this suspicion.

As Mr Wolf explores it, the lack of a simple solution is evident and it brought to mind what I take to be a contributing problem. Now as readers of these posts know, I am highly critical of approaching government from a business perspective. But there is a business idea, naturally ignored, that might be helpful here and that is what is the optimal interest of a business.

In the 1960’s and 70’s the fashion was for conglomerates. A company would consist of many otherwise unrelated business. Superior managers in the ‘best’ companies wouldn’t be limited by the size of the respective industry, profits could be smooth out, and synergies among the companies could be found and exploited.

But the reality was quite different. Synergies weren’t found, coordination problems grew, poor businesses were kept going despite failures. Young focused firms handed the conglomerates their lunch proving there was something to the jack of all trades master of none adage. By the 1980’s the theory had reversed to one of being focused on core competencies and “sticking to your knitting” and by noting that investors could hedge away volatility themselves if they so chose.
As Ken Minogue points to in the quote I opened with, part of the problem is that our governments have taken on too much (and also promised too much). Policing in the present circumstances in a way that builds trust is a formidable challenge. It would be helpful if government stuck to what it and only it can do and left the rest to others.

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