This Is Your Brain… This Is Your Brain in the White House

I am beginning to be glad I am such a dummy.  Have you noticed how the smart guys really screw things up?  All those smart guys in Washington got us into a war in Iraq.  Oops, no weapons of mass destruction.  All those smart guys on Wall Street bought into the mortgage mess.  Oops, the mortgages weren’t worth the paper they were printed on.  All those smart guys in the Silicon Valley convinced themselves that IPO’s of pre-revenue startups were a great investment.  Oops, the tech bubble bursts.

Ever since the Age of Reason, we have convinced ourselves that we are rational human beings.  The central concept is that reason should overrule emotion.   So, we rationalize everything, convincing ourselves that our rational mind is in charge.  Our leaders – government and corporate -- are no more or less immune to this phenomenon than are we.   To make matters worse, we are now converting our best reasoning into software, moving to a society ruled by algorithms. Wall Street runs their trading operations by computer.   Computers write news reports for Forbes magazine.  And, Wal-Mart’s computers automatically generate orders to their suppliers when their stock runs low.

Now, the math geniuses behind this trend are preparing us for robots that will clean our houses (think Roomba on steroids) and cars that will drive themselves. 

We can’t trust the tech industry with our credit card numbers.  Now, we are going to have them drive our kids to school?

All of this is going on within the context of recent studies of brain science that suggest we are not simply moved by math.  We are motivated by emotion and our success is a function of the human cocktail that blends both sides of the brain. 

Karl Albrecht, Ph.D

I had been thinking about this when someone sent me a link to Psychology Today’s website.  The blog post (Brain Snacks), written by Karl Albrecht, Ph.D. delineated recent presidents along the lines of the type of thinker they are.  It divided them into two spheres – left brain is Blue and right brain is Red.  And, it further identified the high concept thinkers (Sky) and the pragmatists (Earth).  So, there are four possible combinations. 

Dr. Albrecht is careful to disclaim any notion that he is certain of his analysis.  After all, he hasn’t examined the “patients”.  That said, he believes he has had enough opportunity to observe the style of recent presidents to reach some tentative conclusions.  Ronald Reagan was both a Red Earth and a Red Sky.  Bill Clinton, a Red Sky.  Big thinkers with a vision, he says. 

Not so, the current contenders to be our nation’s chief executive.  Obama, according to Albrecht, is a Blue Earth thinker while Romney is likely a Red Earth.  “If you’re hoping for a Reaganesque ‘new America’ narrative, for example, don’t hold your breath,”  says the good doctor.  “Whoever wins, it’ll be all about tools and tool belts.”

He goes a step further and claims that even the programs that the two candidates propose will not matter a whole lot.  “Very few of them will survive the first collision with the Congress and the lobbyists,” he says.  “Ultimately, what matters is the individual leader’s ability to deploy his or her particular kind of intelligence, and his or her cognitive orientation, in a way that can mobilize people and resources to get the big things done.”

George Friedman

I have reported on the writings of Stratfor founder George Friedman in the past (Hey, We Had a Deal... Didn't We?).  He has observed that we have had a crisis that gave rise to a strategic president who made big changes to the way we are governed about every 50 years.  Most recently, it was Ronald Reagan.  Friedman does not suggest any reasons that it’s 50 years.  He just makes the observation.

I had been hoping that the current crisis might give rise to a strategic presidency – one which would make big sweeping changes to our entitlement programs, our fiscal circumstance and our social policies -- someone who might shorten the 50 year cycle.  But, if Dr. Albrecht is correct, we’ll have to wait a little longer.  Pragmatists like Obama and Romney are not guided by ideology.  They focus on what can get done. 

What they can get done is important.  However, how they LEAD is more so.  Reagan was able to convince Democrats to vote against their own interests.  Clinton forged a path contrary to his party’s ideology on trade and fiscal matters.  Bush imprinted our nation with a new security paradigm following 9/11. 

So, what happens next?  Can either of the current candidates LEAD us to a more sustainable economic future?  Or, should we just find an algorithm to do the job?

Hey, We Had a Deal… Didn’t We?

George Friedman

While shopping for a car last weekend, we met TJ.  He is one of those guys who really should be a salesman.  He is always happy to see you and always has a smile on his face.  He’s the kind of guy everyone wants to be around.  TJ has been selling cars for 30 years.  “What did you do before that?” I asked.  “I was an air traffic controller,” came the reply with a chuckle. 

Remembering my late 20^th Century history, I observed he must have been one of those guys put out of work by the PATCO strike.  He was.  “I bet you didn’t vote for Ronald Reagan in 84,” I said.  Laughing again, he admitted I was right. 

TJ didn’t know it at the time but his plight was at the leading edge of a strategic shift.  Stratfor founder, George Friedman, has observed that there have been four such shifts in our history.  Each was brought about by a paradigm that had run its course and a crisis that brought about a failed presidency that was followed by a seminal presidency.  These shifts have occurred approximately every 50 years.  The failed presidency of John Quincy Adams was followed by Andrew Jackson.  A half century later, Grant was followed by Hayes.  Then came Hoover and FDR and, one that many of us remember, Carter followed by Reagan. 

The conditions of the Great Depression made it politically feasible for FDR to create programs that supported the poor, the elderly and the working class.  The term "social safety net" was coined by one of the most conservative economists of that time, Friedrich Hayek.  Social Security, unemployment insurance and the Civilian Conservation Corps were seen by many as a way of placating a wave of immigrants who were accustomed to socialist or social-democratic governments.  By offering the safety net, the lower economic classes were less likely to join truly socialist movements.

Friedrich Hayek

During this half century phase, government was designed to plan, regulate and control economic and social outcomes.  The extremely high tax rates of the Truman and Eisenhower years were necessary not only to pay off the debt accumulated by WW II but also to support the regulatory state. 

For two generations following the war, business, government and organized labor worked in concert to create a domestic economy that served our needs.  Our schools and universities turned out students who were well equipped for the economy of that time.   Those who were fortunate enough to go to college joined the management of big companies like AT&T, GM and IBM.  The rest joined unions and worked in the factories.  Everyone expected to be employed for life by the same company and many, if not most, were. 

But, high tax rates took their toll on capital investment; and, by the 1970’s, foreign competition was taking its toll on the union model.  Globalization meant American companies needed to update their factories and had to compete with low labor cost nations like Japan.   

The Reagan revolution would not have happened if the economy were not in shambles.  He sold us on a vision that undermined the model on which the populace had come to rely.  He used the PATCO strike as a public demonstration that the unions could be broken.  In the 30 years since, union membership has dropped from 30% of the workforce to 7%. 

I don’t remember Reagan ever announcing that he was changing the social contract.  But, it certainly changed during his administration.  Fixed benefit pensions were replaced by 401K’s.  To compensate for rising healthcare costs, corporations introduced HMO’s to replace traditional health insurance.  American corporations needed to become more nimble to compete on a global stage.  Lifetime unemployment was out; flexible workforces were in. 

Under this new paradigm, the American economy boomed for three decades on the strength of the wealth effect from the establishment of two income households, the stock market boom of the 1990’s and the rise of home values in the 2000’s.  But, just as FDR’s model of government had started to fray by the 1970’s, the Reagan revolution has started taking its toll on the middle class.  Globalization has flattened incomes, corporations pass on more of the cost of health and pension benefits to their employees and the cost of a college education is skyrocketing. 

The national political debate seems to be a continuation of FDR vs. Reagan.  But, would either of those models work today?

The booming economy of the 1950’s was coincident with the highest tax rates in our history.  But, anyone who has ever taken a course in logic knows that correlation is not causation.  Perhaps if you could create all the other factors at play in the 1950’s – lack of foreign competition, a balanced federal budget, population growth – you could replicate the economic outcomes. 

Similarly, the 1990’s boomed with improvements in corporate efficiency, technological innovation, low tax rates and a balanced budget.  Can we replicate those conditions again? 

At their core, Americans want the same things no matter their political beliefs.  We want security at a national and local level for our families and property.  We want the opportunity to improve our standard of living.  And, we want to fulfill our role on the global stage – international leadership. 

There is an underlying need for financial stability that will provide a platform for achieving our goals in these areas.  And, there are significant challenges to providing that stability. 

Politicians at the local and state level are taking on those challenges.  Republicans like Scott Walker of Wisconsin and the “love-him-or-hate-him” governor of NJ, Chris Christie, make headlines because the media likes conflict.  But, there are significant reforms being made to pensions by Democratic governors in Rhode Island and New York and at the local level in San Jose and San Diego, CA. 

Beneficiaries have a moral right to say “hey, we had a deal, didn’t we?”  But, the hard reality is that they will have to make a sacrifice in order to get something or run the risk of getting nothing. 

We have the same risk at a national level.  Baby boomers will drain the coffers of Social Security and Medicare.  Rising healthcare and education costs are undermining middle class standards of living.  Our infrastructure needs a serious overhaul and modernization.  And, we are competing with the rising economies of Brazil, China, India and others. 

So, why are we still debating 1932 vs. 1982?  Do we really think either of those solutions sets would work today?  The issues of today are structural and strategic.  Compromise and sacrifice are called for.  The leaders who will get us out of this quagmire are those with the vision to craft a solution, the charisma to get the public to embrace it and the political skill to overcome the momentum of special interests.

So, I ask you…  Who will that person be?  WHO WILL LEAD?