How Small Business Comes To Be So Misrepresented

There is one discovery I find especially intriguing when I drill down into surveys of businesses such as Bloomberg’s, which goes deep enough to reveal the sentiments of truly small businesses.

These are the concerns that make up 90% of small businesses nationwide, those that employ 5 or fewer employees including all startups.  Seventy percent are owned and operated by a single person.

Three-quarters, according to other polls, rely on locals for all or most of their business, making them the very backbone of economic development.

These so-called micro businesses, according to Gallup, make up an incredible 80% of all businesses in the United States.  Some calculations go as high as 92% by expanding the definition to include those that employ 10 or fewer employees.

Don’t even ask why the so-called Small Business Administration still defines small businesses in general by metrics as large as 500 employees.

But I have a hunch, that similar to the way official dietary recommendations were originally established, it was originally superimposed by special interests and politicians, not science.

However, these truly small businesses generate 7 of every 10 new jobs.

Fostering and fueling the retention and growth of these micro businesses is the “low-hanging fruit of economic development” overlooked by communities firmly addicted to providing incentives to larger but less fruitful concerns.

A study in 2012 found that micro businesses of 5 or fewer employees directly employed 26 million Americans and indirectly supported another 1.9 million jobs while inducing 13.4 million other jobs.

But these concerns don’t often show up on the radar or in the actions of self-described business advocacy organizations such as chambers of commerce.

Neither do they typically show up in any representative sample during public hearings regarding pending legislation.

While they are claimed as a cause celeb by many along the spectrum of political ideology, the sentiment that tells me these small businesses are not being accurately represented is how they regard government regulations.

In fact, in North Carolina, the political party now in power, often uses this group as an excuse to unravel these public protections.

However surveys such as the one conducted for Bloomberg, show that only 2.2% of these concerns rank complying with government regulations as one of their top problems, making it 10th on the list of concerns among small businesses in North Carolina.

The percentage with this view nationwide is 2.6%.

So what segment of business are Republicans really representing when they seek to undermine public protections in the name of being business friendly?

Well it isn’t large employers in North Carolina where it is a top concern for only 4.7%, making it 7th on their list of concerns and hardly emblematic for what partisan elected officials claim.

Nationwide, the view is held by only 4.3% of large employers, making it 9th on the list.

Taxes aren’t much of a concern either, ranking a top concern among only 7% of small businesses and 4.7% of large employers in North Carolina.

Of far more concern to small businesses are issues such as access to capital where studies show they are largely reliant on small, local banks which are being squeezed out of business by mid-sized and large banks.

Small, community-based financial institutions now have just 24% of overall banking assets and yet they make 60% of all small business loans while giant banks now control 59% of all banking assets and yet make only 23% of small business loans.

The reason is so-called regulation reform and the silence among the elected officials responsible is deafening.  This is in part because of the feed-back loop they helped create.

For instance, while only 2% of small businesses have regulations as an issue, nonetheless for having been caught for years in an echo chamber, this is one of the top two issues that Republicans say will influence their vote.

Just don’t blame small businesses.

So what is really forcing concerns of far less concern to small and large businesses alike, such as taxes and regulations, to the very top of the list for the Republican majority now dominating North Carolina’s three branches of government?

How does an ideology, any ideology, so often find itself so narrow in its representation?

I have witnessed personally, that in some cases, this happens when elected officials come to think it is their opinions they should push rather than those of their constituents.

I have also been privy to how large blocks of elected officials begin to view their constituency more as the special interests that financed their campaigns rather than all voters.

It doesn’t take much to form a vacuum-sealed feedback loop, especially when special interests have lobbyists that seemingly vote their opinions every single day at the state capitol while voters, in general, officially only get to weigh in every few years.

Cities that have taken the lead to require a livable wage aren’t just avoiding these feedback loops, they are fully disaggregating and examining the sentiments of employers rather than just listening to those who pay people to attend meetings.

This is an idea still novel to many officials.  But it is more complicated than that.

An understanding of how an entire political party or ideology can become out of step with business owners and other voters can be found in a paper published by Duke University business and psychology researchers.

It is entitled “Solution Aversion: On the Relation Between Ideology and Motivated Disbelief”, and weaves together a series of behavior studies.

“Solution aversion” explains a lot about how organizations such as business advocacy groups and elected officials can become so estranged from the views of their constituents.

It isn’t just because very few constituents have time to attend meetings or the patience to deal with the games played by those who do.

It is because we can all form cherished beliefs and then ideologically align with people who share those same beliefs based on biases rather than information in such a way that we are led to pair solutions and problems, not based on empirical and generalizable information, but on fear.

For anyone caught in an ideology or belief system that seems averse to solutions or trapped in positions where the same old worn out solutions are recycled with the same disappointing results, whether it be in business or politics or religion, this paper is an extremely worthwhile read.

It’s Healthy to be Skeptical, Just Not Cynical

Whenever I come across global warming/climate change deniers, I try to carefully listen or read what they have to say.

Some don’t really deny it’s happening.

They believe we’ll just overcome it somehow as we have major crises in the past without seeing that those were ultimately overcome by action, after being made worse by waiting.

I used warming/change in my opening because a new Yale University study shows that Americans feel a sense of urgency when the term global warming is used.

Which, in part, is why more than a decade ago savvy Republican researchers suggested the substitution of “climate change” to make it seem less threatening.

That warm and fuzzy approach to global warming turned out as predicted to not only divide Americans but cause 1-in-5 to be not at all worried (p. 16.)

As an Independent I may have been cynical about the motives of “professional confusers” behind today’s gridlock but now having read this memo I’m not even skeptical.

Ironically, the 2002 Republican research called for a flip-flop.

A decade earlier conservatives had teamed in a bipartisan effort under the first Republican President Bush to break a 13-year logjam by deploying market-based “cap and trade” to successfully curb another harmful emission.

In 2002 there wasn’t the overwhelming scientific consensus there is today that climate change/global warming is a real and present danger or that it is due to human actions above and beyond natural causes over the last 250 years, especially the last 60.

If you are a skeptic who happened to read this far, you may want to read the research by scientists at Berkley Earth who until recently were also skeptical.

It is summarized their new report entitled, Know The Facts: A Skeptic’s Guide to Climate Change.

Then again, studies of “motivated reasoning” find that in many people skepticism is really a cognitive cover used to deflect unwelcome information.

This is especially true when it is sincerely held that what ordinary people believe will not make a policy difference.

Showing irrationality is often rarely enough to “induce individuals to process information in a different way.”

There is a difference between being skeptical and being cynical.

Skeptics have reservations.  Cynics believe others are motivated by selfish concerns and don’t believe in altruism or even honesty.

If you’ve never been into reading and understanding various philosophical outlooks, a new book illustrates each one instead, entitled Philographics.

Deniers often fall into both categories though it seems more often the latter while global warming believers sometimes can get caught up in being cynical about deniers.

New science shows that cynics on both sides run a much higher risk of dementia, especially perhaps those cynical about scientific studies.  The study also shows that cynics won’t die any earlier, perhaps they just won’t remember.

That 2002 Republican research memo predicted more than a decade ago what a new Yale study confirms: use of the terms global warming and climate change are synonymous to Republicans and Conservatives (or as we Independents often joke, is that now redundant?)

But the term climate change “actually reduces engagement” among Independents, Democrats, moderates and liberals.  Fortunately, groups that will soon dominate elections such as minorities and young adults light up when global warming is used instead.

And that might be why global warming is still the most used by Americans personally, as well as in the news media, and in conversation according to the Yale study.

The Berkley Earth report meant for climate change/global warming skeptics includes a breakdown of what events are unrelated, e.g. tornados and earthquakes.

Hurricanes, droughts, forest fires and floods may change due to global warming/climate change but the amount hasn’t been established.

There is a link established to increased heat waves and coastal flooding.

New research also shows that global warming is not only reducing snow pack where water has historically been stored until released into rivers and reservoirs each spring, the means by which 1-in-6 people worldwide receive fresh drinking water.

But paradoxically, the resulting switchover to rainfall also means these water ways are less full in part because it is held in place by soil instead.

Sitting idle, we are likely to see much more rainfall but much less available for human use for drinking water.  This also mean less available for electrical power and agriculture.

Of course the use of climate science has been outlawed for the time being by the legislature in North Carolina because it was inconvenient for a few coastal land developers.

And some members of Congress are trying to do the same regarding military research which over the last 60 years has been the foundation of nearly all of the technological changes driving American innovation.

Fortunately, corporations are paying no heed and building the price of reversing global warming into strategic plans. Nor are many states.

Nine northeast states which banded together to cap emissions in 2009 have seen their economies grow faster than the other states while reducing greenhouse gas emissions nearly five times quicker.

A similar combine of five western states and two Canadian provinces fell apart after conservatives seized control in 2010.  But British Columbia in 2010 and California last year moved ahead.

Regressives such as those banning the use of studies on global warming and other research are easy to spot.

Even those who make it onto the governing boards of much smaller organizations where research is a core value are obvious by using every opportunity to demean it and to starve it of resources and focus.

All conservatives are not regressives, nor are all regressives conservatives. What they have in common is a disdain for research and resistance to progress.

In the words of the famous Brooklyn Dodgers then Yankees announcer Red Barber, “back, back, back, back (smile.)”

Regressives in the North Carolina General Assembly today are failing to head the warnings in that landmark 2002 research for Republicans, because that would, uh, be using scientific research.

It warns that while conservative attempts to negatively brand environmentalists had been successful by 2002, Americans as a whole remain overwhelmingly sensitive about the environment.

They just prefer instead labels such as pro-environment and conservationist.

The memo warns that “when we [Republicans] talk about ‘rolling back regulations’ involving the environment, we [Republicans] are sending a message Americans don’t support” and when it comes to regulations, Americans are “most comfortable with local oversight.”

The last part is lost on North Carolina regressives seeking every means possible to strip local governments of any oversight while demonizing science and regulations meant in the publics interest.

Not all narcissists in high office (found in greater proportion and much further up the spectrum than the general populace) are regressives, but uber narcissism among regressives may explain their claim “we don’t give a damn how many people this hurts.”

Oops, I hear someone banging on my door but keep the faith.  Whoever it is that thinks I’m part of a conspiracy probably won’t remember long.

Probing the Pluralistic Small Business Views

Having spent the better part of four decades working with local businesses, one thing I know is that they have always exhibited far more diversity of opinion than represented by the news media or associations portending to represent them.

State and national associations often give a distorted impression to policy makers and news media by disguising that their misuse of the term small business is dominated by the concerns of companies with hundred of employees and tens of millions of dollars in revenue.

Further distorting the views of small business, association legislative committees and related PACs are often hijacked by cabals of narrow viewpoints of formulaic-type businesses unrepresentative of the either the membership or businesses of that type in general.

A quick check of their membership lists or board members, which reporters and elected official seem to rarely do before giving credence to their claims, reveals that most are using the term small business only as a disguise.

What most of us think of as small businesses are now called micro businesses.  These have around 5 or fewer employees.  The majority have annual revenues of $100,000 or less and most never want to grow beyond 10 employees.

They are primarily sole proprietorships, far more likely than other businesses to be locally based with owners living in the same community as their business.  About half depend at first, on another job.  Half are based outside the home as they grow.

About a third of microbusinesses depend primarily on locals for their business but 4-on-10 rely on a mix of locals and visitors including day-trippers from surrounding areas and clients outside the community.

Micro businesses are the backbone and true drivers of local economies.

In North Carolina where I live, micro businesses represent nearly 60% of all business establishments and more than 60% of those considered small businesses overall.

Rarely are they members of local chambers of commerce which today are dominated by much larger concerns many with mid-level executives who are paid to attend meetings, many watching out for special interests.

Chambers often complain that the threshold small and micro businesses can pay to be members is too low to provide the services they need.  In desperate need of membership revenues they turn to larger businesses instead.

Truly small or micro businesses rarely find time away from the cash register for meetings of any type, let alone getting involved in the push and shove of politics.

Their voice is also not found in the positions taken by the U.S. Chamber of Commerce (no relation to local chambers) or most state chambers.

Without typically charging a fee, community marketing organizations, most of which are apolitical, usually incorporate all businesses regardless of size under their promotional umbrella.

The handful that still firewall benefits behind outdated membership models continues to shrivel.

Guess which approach is more customer-driven?  These are also the DMOs that are far more effective on behalf of the communities they serve.  Of course, most community marketing organization migrated to or were founded with self-funding models years ago.

That community marketing organizations incorporate small and micro businesses under their tent is significant because surveys show that to grow and thrive, their greatest need, outside of capital, is marketing.

Showing the diversity of opinion among small and micro businesses are two Gallup tracking polls, one with Wells Fargo as a partner which uses a cut off of $20 million in revenues and a new one focused on truly small or micro businesses with Sam’s Club as a partner.

The Wells Fargo definition captures 80% of all business establishments with employees, small to the size of a mega-bank maybe.

The definition for Sam’s Club’s new tracker captures micro business owners which, according to Gallup, represents 80% of business owners overall including the 44% that do not employ anyone other than themselves.  This excludes hobbyists or paper only businesses.

Micro business is now far more representative of the definition of small business.

Showing the pluralism of views among small business owners under either definition is a comparison of views regarding an increase to the minimum wage.

The Wells Fargo index found that nearly half of those surveyed had no problem with raising the minimum wage.  More than 4-in-10 felt it would help most small business employees and another quarter felt it would have little effect.

A similar proportion believed it would have no effect on small business or might actually help them.

Of course these findings escape those in Congress pushed to block the increase by those lobbyists who feign to represent small business there.

Another more recent poll probed much deeper down into truly small businesses, including micro businesses in the state of New York, and found that 74% support raising the minimum wage and indexing it to rise with the cost of living.

A similar percentage agreed that cities and towns should be able to set the minimum wage even higher.

By political affiliation 45% identified themselves as Republicans, 40% as Democrats and 15% as independent or other.

Republicans and Independents who lean Republican may claim they represent business but over time their numbers have included only about 4-in-10 small business owners, just a notch or two different than the ratio of those who identify themselves as Democrats.

Survey findings by associations of the political affiliations of small business members often skew differently depending on the ideology the association uses to recruit members.

But even polls of those that skew right show, for instance, that only 1-in-3 members express concern to elected officials with hopes of reducing and reforming government regulation.

This hardly makes it the hot button issue that legislators in states such as North Carolina claim to justify gutting state and local regulations.

Even polls by those in sympathy show that a far greater proportion of members just want existing regulations to be actively, fairly and evenly administered.

Polls by less ideological associations including pioneers of the micro business definition show that more than 3-in-4 members felt regulations on the books should be enforced, especially those that an even larger ratio felt were important to protect business.

While special interest “whiners” are using pretense to undermine the North Carolina Environmental Bill of Rights that voters embedded in the constitution by a vote of 7-to-1, it is clear they are not representative of North Carolinians in general or those who own small or micro businesses.

Serious members on both sides of the aisle know that any concern about regulations is only solved by energetic, passionate, fair and even enforcement by the executive branch, unfettered by interference by special interests or legislative allies.

Only 20% of micro businesses worry about regulations, a percentage similar to those who worry about taxes.  Of more concern is consumer demand and the rising cost of supplies and materials. 

It is clear that a recent op-ed by a small business owner advocating for a more livable minimum wage is representative of the majority of small and micro businesses.

More certain is that the viewpoints of small and micro businesses are far more pluralistic than the impression we're given.

The Privatization of Regulations & Sustainability

According to a new report on sustainability trends by the network 2degrees, the primary aim by companies and organizations for taking a sustainable business approach is cost savings 53%, followed by regulatory compliance 46%, reputation 39% and branding 38%.

But of those businesses and organizations that put sustainability as a central, strategic focus, brand and reputation also leapfrog compliance, a signal that sustainability is considered first and foremost, just good business.

Some, as I will share below, are even privatizing regulations to establish higher standards.

This movement also leaves the “whiner economy” more transparent.  These are the special business interest lobbies who are bottom feeders.  These are the interests that feel their only way to create value is to undermine government and sustainability.

By this, I mean they hammer public servants into submission and open their wallets wider and wider to influence election campaigns as a means to secure favorable legislation at the expense of the public interest.  This includes lowering the bar as every opportunity.

Of those businesses and organizations focused on cost savings as the reason to be sustainable, 57% put energy efficiency as the top priority, 50% put reducing waste at the top and 25% want to reduce or improve water usage.

Among businesses and organizations of various types, retail is leading the way with sustainability as a central focus (41%,) ahead of telecoms/media (39%,) utilities, heavy industries and even government (37%,) and far above finance (15%,) and logistics (13%.)

Engaging management and co-workers remains the biggest hurdle to sustainability efforts including, as there is with local governments in Durham, North Carolina where I live, a huge disconnect between sustainability goals and budgets to reach them.

This is a strategic failure.

A long-time friend of mine was an executive at a major router manufacturer for many years and involved in the company’s first cross-functional teams responsible for making packaging more sustainable.

He jokes to me that when they did their first assessment, it seemed as though those responsible had set out to make the company’s product packaging as environmentally unfriendly as possible.

It made me take a close look at the environmental performance reviews and reports that Apple, now #6 on the Fortune 500, provides on each of its products including the one at this link for the iPhone 5s.

Even more telling is the company’s newest Supplier Responsibility Report.  It covers not only the environment but health and safety performance, education and empowerment of workers, labor and human rights, business ethics and most interesting, accountability and performance audit results.

In addition to the results of 451 annual audits at all levels of its supply chain, Apple released for the first time 100 pages of its comprehensive requirements for suppliers.  In other words, Apple has set up its own system of regulations as well as compliance transparency.

At the very time that the “whiner economy” is fast at work in states like North Carolina seeking to undermine regulations, high-value, global concerns like Apple are not only practicing sustainability as good business but raising the bar for the businesses in its huge, global supplier network by raising the bar with its own, tougher regulations.

Elected officials and public servants at every level who are obsessed with deregulation need to read this best practice report.  They are going in the wrong direction.  But they know that.  For many, it is purposeful.

Elected officials and regulators should also take a look at the ethics practices and systems requirements Apple requires of its suppliers including audits of business integrity, disclosure, handling of complaints and protection of intellectual property.

I suspect those with interests in roadside billboards who pushed through a sacrifice of publicly owned roadside forests would fail the test to be a supplier for Apple products such as smartphones and tablets.

Unfortunately, it is this cozy relationship with special interests that will undermine any reaction to the tragic chemical and toxic sludge spills recently in West Virginia and North Carolina.

Maybe until democracy is restored and decisions made in the public rather than private interest, we’d all be far better off under Apple management.

Just sayin’.

Open Source Rule-Making

“The problem with ‘self-regulation’ is that it’s usually ‘no regulation’.”

 Seth Godwin

My involvement in scenic preservation since retiring four years ago from a forty year-career in visitor-centric economic development has given me a front row seat on how regulations evolve, at least in North Carolina, and it isn’t what I thought.

Equally distressing has been learning of the lack of vigor with which they are enforced at the federal level when states and their constituent counties violate or end-run agreements such as those related to the Highway Beautification Act.

A variety of studies by experts explain why this is the case, but also why it is counterintuitive to what those in high office seem to think. But while drilling down, I’ve also come across some future solutions.

Many politicians attack regulations in the name of being pro-business, others defend them as being necessary to compensate for marketplace failures, especially where costs are not fully incorporated by the market but are instead pushed off on the general public.

Economists call these negative externalities.

The latter view is called the “public interest” approach, which is how I have always naively viewed regulations.  But there is a far more insidious rationale called “public choice,” which turns out to be much more prevalent now.

This “public choice” approach refers to the fact that, once enacted, regulations and the very agencies in charge of imposing and enforcing them are “captured by the businesses and industries they are supposed to regulate.”

Often, as has been the case with outdoor billboard companies, regulatory “capture” is gained with the complicity by billboard interests in elected office which in North Carolina were deemed by their peers not to have a conflict of interest because the benefits will accrue to all billboard companies, not just to the billboard owners behind the legislation or regulations.

This convoluted reasoning is why transparency isn’t what it is so often cracked up to be and as shown in studies, often serves as an enabler for others to cross the line, a shady quid pro quo.

An excellent study published in 2006 revealed that business interests have far greater influence in regulatory rule-making than either public interest groups or the general public, more than twice as much, and not because their input was more substantive.

Ironically, or maybe cynically, Republican candidates seem prone to pose the issue of regulatory reform as being pro-business.

Democratic party candidates often defend regulations as being pro-consumer but seem to fail to understand that this is the very reason regulatory reform as a means to cleanse them of “capture” should be so important as a bipartisan issue.

The news media, as with most things counterintuitive, usually settles for just parroting “bumper sticker” slogans. Unraveling misperceptions such as this must seem too daunting.  So regulatory reform is often reported with little or no penetrating analysis and never with persistence.

This all clouds the issue of regulatory reform which has real day-to-day consequences.

While it doesn’t explicitly account for “externalities,” an excellent analysis co-authored by Dr. John Dawson, a peer with my friend Dr. Dana Clark who heads the hospitality degree program at Appalachian State University’s Walker School of Business, calculates that federal regulations have reduced economic growth by 2% a year between 1949, the year after I was born and 2005.

Regulations in the public interest are meant to act as a sort of hidden tax on activities where the free market fails to account for negative costs that are pushed off onto the general public instead.  But because the regulations aren’t revisited for simplification or to simplify or remedy unintended consequences, they often fail in that purpose.

Regulatory reform is far from simple even when genuinely and/or astutely undertaken.

Findings from studies about regulatory reform among states are mixed as to whether legislatures or governors are more effective, but most give the nod to governors.  Courts are shown to play an ineffective role, especially where judges are elected such as in North Carolina.

Here, the legislature set up a commission to oversee rule-making, but failed to insulate it from partisanship, abuse of power by individual legislators or “capture-driven” by business interests.  Unfortunately, this commission often pretends to be a court, although unauthorized.

Recent regulatory legislation starts off with a few pages of just that. Then it succumbs to six times that number of pages filled with “regulatory capture” by extremely narrow “whiner” business interests.

This legislation sets back true regulatory reform by decades.  You can often see these same “whiner” interests at work in a local chamber of commerce.

Years ago, committees in these member-driven local business advocacy organizations were carefully balanced to represent all interests including the general public’s and that of the communities whose business climates they were meant to represent. 

Many have now devolved to be havens for self-appointed committees of “whiners” working to end run more legitimate forums that are free of conflicts of interest, or worse, to push on behalf of special interests including the “capture” of regulatory rule-making.

Executives who once safeguarded the integrity of these organizations from whiners now often enable them instead or lead ambushes in hopes of gaining a member or two.

Rather than pro-business, many groups like this are complicit in regulatory “capture” and anathema to business climates.

They would have been well served to have attended a one-day symposium last spring at NYU’s Stern School of Business entitled “Darwin’s Business: New Evolutionary Thinking About Cooperation, Groups, Firms and Societies.”

In writing recently about the event in Forbes, Stern business professor Dr. Jonathan Haidt and Binghamton University biology professor Dr. David Sloan Wilson noted that:

“…people have been applying Darwin to business since Darwin’s day, but they applied a cramped and crippled version, assuming that Darwinism’s primary postulate was that the strong do (and should) crush the weak.”

Instead, evolution is actually far more about cooperation.  Haidt provides Chapter 9 of his best seller The Righteous Mind as background to this notion, which is highly recommended to anyone interested in legitimate regulatory reform.

The Stern School of Business is the first to think about and seriously relate modern evolutionary science to the world of business.  Visit Evolution: This View of Life or click here for snippets as well as full-length versions of the talks at the spring symposium held at Stern. 

Integral to regulatory reform should be the notion of “coopetition,” a term we used during my now-concluded career in community destination marketing.

It refers to the integration of cooperation with competition.  What is good for public interest is good business, what is good for business must be in the public interest.

Regulatory reform is critical.  As a society we can no longer afford regulatory “capture,” a form of hostage taking.

We must break the strangle-hold that narrow-interest whiners have among business interests and on regulatory rule-making.  This means rebalancing business groups, agencies and elected officials to pursue only the most practical, proven and cost-effective regulations possible.

This means regulations that are both in the broader public and business interests.

But since regulatory rule-making is now dominated by business interests, often to the detriment of business in general, a good start for any effort at regulatory reform would do well to begin with Dr. Haidt’s overview entitled “Working With Human Nature To Improve Business Ethics.

Another intriguing idea is open-source regulatory reform and rule-making.  A good overview of how this might work is gained by listening to a TED talk by Beth Simone Noveck who led President Obama’s Open Government Initiative who also founded the “Do Tank.”

Three years ago, the President issued a an executive order to improve regulations and rule-making.  It called required government agencies among other things to (underlining is mine):

(1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify);

(2) tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations;

(3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);

(4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.

More importantly, the President called for more public involvement in regulations and rule-making, a 21st Century approach.  In a related move he issued an order opening up government data for public and private use.

As noted by Noveck in her speech, what we have done to involve the public until now is primarily with voting and juries. This is much too slow and cumbersome in today’s world.

In her speech, she gives a number of examples where open source government is at work, including the U.S. Patent Office and states such as Texas which use “policy wikis” to craft better regulations and policies and to simplify the ones that exist.

It is not about privatization or transparency, both of which have serious drawbacks.  She gives a number of examples.  There may not yet be legal precedent for open-source government but there should be.

I think she is on to something.

Where Democracy Is Still Potent

Recently during a public hearing in southwestern North Carolina, the head of the state association for outdoor billboards tried to argue that North Carolina was a safer and better place in the 1970s when it didn’t have roadside trees.

Of course that wasn’t the case, but his point was that cutting down all of the trees along the state’s roadways and especially around billboards would make them safer.  Of course, that isn’t true either.  Current setbacks for trees along roadsides have long been calibrated based on meticulous safety research.

However, those who might fall for this faulty reasoning, which unfortunately may include far too many legislators coupled with copious amounts of campaign donations, might be surprised to learn that it was proven at the dawn of motorized vehicles that cutting down roadside vegetation actually made roadways less safe.

This phenomenon was first observed in the English countryside where early roadways were often lined on both sides by very tall hedgerows.  However, when the hedges were lowered, it was found that drivers then increased speeds and drove more recklessly because they “felt safer.”

Andrew Zolli, co-author with Ann Marie Healy of the 2012 book Resilience: Why Things Bounce Back, included that tidbit in a presentation recently.  He also shared findings that when bicyclists wear helmets they may wisely be protected from the occasional fall but the fact is that when they wear one, drivers feel they can move closer to bicyclists at higher speeds increasing the likelihood of accidents.

Zolli is the executive director and curator for a fascinating organization known as PopTech, a collaboration of social innovators and scientists dedicated to investigating, prototyping and growing social innovations and breakthroughs.

In my opinion, at heart he is a futurist.  In a recent presentation Zolli noted that one reason we’re so lousy at predicting the future is a condition he calls “novelty bias.”  When we think long term, we take what is newest and make it the dominant feature of the future.

We’re doing that now with many technologies.  Today smartphones and tablets are toppling desktops and laptops but that doesn’t mean they won’t be just as rapidly toppled.  Thinking long term means looking beyond today.

Zolli notes that we have a tendency to focus too much attention on fast-moving threats such as terrorism, and not on far more powerful slow-moving threats such as climate change.

For instance, he cites that we’re spending trillions on the 1 in 28 million chance we’ll be impacted by an act of terrorism but zilch on the 1 in 6 chance we’ll be impacted by climate change.

Too often this misdirection is fueled by media frenzies that give us very unrealistic expectations.

The same phenomena can be fueled by social media such as neighborhood listservs.  On one level they can provide a useful heads up on suspicious activity, but on other levels they amplify and recirculate alarm to the point that many subscribers tune out just when they should be tuning in.

In organizations of every size you can see “novelty bias” undermining strategic thinking both at the management and board governance levels.  As Dr. Michael Porter argues, ninety-five percent of executives are too focused on operational effectiveness.

Governing boards often spend far too much time on compliance and not enough on strategic thinking.  This results in what Porter cautions is trying to mimic and then best the competition.

Truly strategic thinking should lead them instead to “compete to be unique.”

I find it disingenuous that many of the people who trash government regulation as ineffective are adherents of the ideology that has gutted its capacity over the last forty years.

But I agree with Zolli that regulations often become far too complex to be effective, primarily made that way, in my experience, by lobbyists who continue to pollute the regulatory process on behalf of special interests long after the legislative mandate.

A wry example Zolli gives is that BP had stringent rules for being careful with the handling of coffee while something obviously wasn’t working as intended with higher risk requirements such as proper capping of wells.

Regulations need to be more nimble and resilient to be effective and that starts with far more adequate enforcement by executive branches at every level. Regulations must also protect the process from legislative and special interest meddling.

Strategic thinking begins with executives and governing boards being aligned on the true purpose of the organization.  This isn’t, as the authors of Can’t Buy Me Like argue, just a mission or vision statement.

Purpose has more to do with intent.  Who is served?  How are lives touched and improved?  What is the organization’s ethos or character?  Purpose according to the authors is the core that informs every move.  It isn’t just about marketing.  In fact, they point out that an organization’s true purpose may never show up in its marketing.

If as consumers we only valued organizations, brands and products with passion, maybe we wouldn’t need regulations.  The author of Red Thread Thinking defines passion as drive connected to the heart of what the organization is all about.

Since the 1980s, anti-government partisans have largely gutted the effectiveness of regulations.  Today their work perverts true democracy by demonstrating that six people for whom only a few of us were permitted to cast ballots can thwart things supported by 90% of Americans or North Carolinians.

However, we are not powerless.  There are companies such as Chipotle Mexican Grill, that even as meat inspection has been eviscerated, has firmly stood for “food with integrity” and a core purpose illustrated by the commercial at this link and in this article in Onearth magazine about the pork growers who inspired it.

A tool I use and hope to help improve by factoring in companies that use desecration marketing such as outdoor billboards is GoodGuide which is most useful in the form of a smartphone app.

It ranks companies, brands and products by a 1 to 10 scale for how they treat society, health and the environment.

This is where true democracy can still  be potent.

The New Era of Stewardship

American concern for the environment isn’t static.  At its roots in the years before 1850, life was breathed into the movement as much by artists such as Henry David Thoreau and my favorite landscape painter, Albert Bierstadt, as from science.  The term ecology wasn't even coined until 1866.

Experts break our concern for stewardship of our environment down into three eras and perhaps now a fourth:

• Pre-1970, environment was more about natural conservation
• Post-1970, environment was more about pollution control
• Post-1990, environment was more about pollution prevention
• Post-2010, environment is more about sustainability

As I was making my home in Durham, North Carolina in the late 1980s, a global conference was defining sustainability simply as “an activity that meets the needs of the present without compromising the ability of future generations to meet their own needs” (1987 UN Conference on Environment and Development).

I’m persuaded that “sustainable resilience” is a better term as proposed by Professor Emeritus Dr. Roger Caldwell of the University of Arizona because in his view lots of experimentation is required to achieve or maintain sustainability and also because it transcends just the environment.

Caldwell even suggests that sustainability may be the next great era after technology, but not in my mind, if conservatives have their way.  According to researchers working at UNC-Chapel Hill’s Sheps Center, which just 10 miles from my house in Durham, conservatives are much more likely to distrust what they stigmatize as “regulatory science” because it doesn’t support their world view prejudices.

What do I know?  The study by Dr, Gordon Gauchat, released just a little over two weeks ago, illustrates that conservatives’ trust in science has been declining since 1974, especially among the higher educated.  But maybe as capitalist George Soros suggests what new really need is to “move from the Age of Reason to the Age of Fallibility in order to have a proper understanding of the problems.”

Gauchat’s UNC-CH study also reveals that moderates like me tend to be less educated than conservatives and especially liberals, but we’re definitely not stupid.  Quibble about degrees here or there but who can argue that we don’t owe it to future generations to be better stewards of this planet? Really!

The study rules out some long-held theories about the long gradual decline in trust for science among conservatives settling on politicization.  The study is particularly enlightening for those of us living in Durham, home to two major research universities, world-renowned Research Triangle Park and scores of major corporate and government research facilities.

Duke University in Durham is also the gold standard for sustainability, both in policy and practice.  Next month when I go to Duke Eye Center for my annual exam, I will park in a green parking deck with living green walls, cisterns, a retention rain garden and a clematis covered rooftop level.

Adjacent buildings sport an award-winning green roof and heliport and across the street is an area where University Trustees have approved construction of a new tree lined 6-acre reclamation pond that alone will save 100 million gallons of Durham drinking water each year.

The 23-million-gallon pond will collect and retain rainwater and storm run off from more than a fifth of Duke West Campus to be recycled for other uses such as cooling towers.

Any organization, private, public or non-profit would do well to study and emulate both the Duke policy and the extensiveness and intensity with which it is being put in practice, much of it driven by my friend Dr. Tallman Trask III.

There are obvious contradictions such as the outdoor billboard messages either bought by marketers or enabled as donations for Duke Medicine Marketing.  While sacrificing roadside forests and undermining community values they are easily corrected anomalies and understood given the difficulty of entrenching sustainability in every nook and cranny of such a large enterprise.

Those who distrust science as an objective means of making and informing democratic decisions, public or private, are well advised to suggest anything better.  While they may thwart or retard government sustainability initiatives, this is a movement now so pervasive as to make such obstinacy anything more than a speed bump.

The Role of Regulations in the Free Marketplace!

I smiled to myself when I heard a so-called political Independent and small business owner comment on a national television newscast that he just wanted government out of ours lives.  I think he was nervous and just parroted an empty political slogan.  More disappointing still was that the interviewer didn't probe.  Most newscasters doesn’t these days.

In regular surveys to determine why businesses lay off workers, only 13% cite regulations as a major factor. The percentage has not increased in the past few years, according to a column last month by conservative David Brooks.  He notes that only 0.18 percent of the mass layoffs last year were attributable to regulations.

Even free-market zealots admit that many businesses, thanks in part to strong lobbies, do not charge the true price for their products.  For example, long-haul trucking does not pay the true cost of the public highways they chew up.  Utility and cable companies claim it is too expensive to bury power lines, but they don't factor into their expenses the cost to the public of things like hacking street trees to death.  Outdoor billboard companies, whose only value is parasitic on public roadsides, chop down publicly owned trees (or illegally poison them) without paying the true value or replanting and never shoulder the cost of the scenic easements they destroy.

Regulations, if done properly and evenly enforced, are merely a means of adding what economists call corrective pricing or market value to compensate for spillover effects like these which are called externalities.  Coal-fired power plants don't pay the true cost they levy on the public because conservatives have blocked putting a price on carbon.  Automobile companies became conscious about safety and fuel efficiency because regulations made them realize that by failing to do so they were levying a huge spillover cost on the public.

The gentleman I noted at the beginning of this blog wanted government out of his life but I assume that didn't mean he wanted the air he and his customers and his grandchildren breathe or the water they drink or the food they eat to be unsafe.  I assume he didn't want to go without roads or streets or public safety or consumer protection from loan sharks.

Ultraconservatives argue that the votes individual consumers make in the free marketplace are a better way to make decisions about these things than might be made by representative democracies prone to winner-take-all decisions largely controlled now by special interests.

But the reason we have a mixed economy is that few of us want to wait for good roads, national defense, public safety, consumer and environmental protection and good public health until businesses react to the votes consumers make with their purchases.  And few of us are naïve enough to believe that we still wouldn't be subject bottom feeders.

As Brooks wrote in his column, as a reminder to other conservatives, especially those prone to hyperbole:

“There are two large lessons here. First, Republican candidates can say they will deregulate and, in some areas, that would be a good thing. But it will not produce a short-term economic rebound because regulations are not a big factor in our short-term problems.

Second, it is easy to be cynical about politics and to say that Washington is a polarized cesspool. It’s true that the interest groups and the fund-raisers make every disagreement seem like a life-or-death struggle. But, in reality, most people in government are trying to find a balance between difficult trade-offs. Whether it’s antiterrorism policy or regulatory policy, most substantive disagreements are within the 40 yard lines.”

And as far as fearing the person Newt Gingrich loves to mischaracterize as a socialist and the most dangerous President ever?

Conservative Brooks points out in his column that “Nineteen-eighty-eight, under Ronald Reagan, 1992, under George H.W. Bush and 2008, under George W. Bush, were monster years for new regulations. In his first years, Obama has not increased regulatory costs more than Reagan and the Bushes did in their final years.”