Can Everyone Become a Billionaire?
I’m going to tell you something that Barack Obama doesn’t understand.
And because he doesn’t understand it, our country is wasting hundreds of millions of dollars at a time when we cannot afford to waste hundreds of millions of dollars.
Time and again President Obama has told us how he intends to solve our health care problems: spend money on pilot programs and other experiments; find out what works and then go copy it. He’s also repeatedly said the same thing about education. The only difference: in education we’ve already been following this approach with no success for 25 years.
Still, if the president were right about health and education, why wouldn’t the same idea apply to every other field? Why couldn’t we study the best way to make a computer, or invest in the stock market and do any number of other things — and then copy it?
I want to propose a principle that covers all of this: entrepreneurship cannot be replicated. Put differently, there is no such thing as a cookbook entrepreneur.
Let’s suppose for a moment that I am wrong. Suppose we could study the behavior of successful entrepreneurs and write down the keys to their success in a book that everyone could read and copy.
Consider Bill Gates, Warren Buffett and Sam Walton. If we could discover what they did right, and everyone copied their behavior, then we could all become billionaires. Right? Well, not quite.
Here’s the problem: In order for each of us to be a billionaire, we have to each be doing something that produces a billion dollars’ worth of goods and services. But if all we’re doing is copying action items out of a book, then we are not doing anything special. And if we’re not doing anything special, we are definitely not producing a billions dollars of value added.
In mathematics, Gödel’s Theorem says that no complex, axiomatic system can be both consistent and complete. What I am proposing is something similar for social science. Although there are some habits of highly successful people that can be identified and copied, there are not enough of them for each of us to become highly successful ourselves through copycat behavior alone.
I think I will call this Goodman’s Nonreplicability Theorem.
In health care, it’s already been borne out.
Scholars associated with the Brookings Institution identified 10 of the best hospital regions in the country and then tried to identify common characteristics that could be replicated. There were almost none. Some regions had doctors on staff. Others paid fee-for-service. Some had electronic medical records. Others did not.
A separate study of physicians’ practices found much the same thing. There were simply not enough objective characteristics that the practices had in common to allow an independent party to set up a successful practice by copycat alone.
By the way, this is not bad news. It is good news. How much fun would life be if we all went around copying what we read in a book?
Great post. Love it.
Very good. But no song today? I feel cheated.
Telling high-spending, inefficient hospitals to operate like the Mayo Clinic, Cleveland Clinic, Geisinger and Intermountain is akin to telling a failing Kmart to just copy Walmart. Kmart probably would if it could — but it lacked the capacity or leadership. However, one huge difference in this analogy, high-spending hospitals make money off the additional services — it is not in their self-interest to cut spending and operate like the centers of excellence.
Perhaps the real motivation is not a genuine concern for all Americans to have “affordable” healthcare. But rather a means to an end, of the America we all grew up in. This man is not stupid. He takes the disparaging comments like water off a ducks back. He is not being criticized for his real intent,this entire process is a ruse. His concern therefore about Americans individual health is a facade. He cannot possibly believe his ideas will work. He just needs to keep enough useful idiots and fellow travelers convinced he does. Americans, put down the damn remote and engage.
Interesting point. I don’t think I’ve ever seen the “replication of success” problem explained in this way.
I would take a step back toward the theoretical and suggest that this cookbook inclination is simply an extension of the misguided notion that humans, and their social institutions, are perfectible if only we can find the right solution. See John Passmore’s “The Perfectibility of Man” (an excellent summer read, btw!).
Economist Tim Harford has a great new book with a simple premise: success is often born of failure. Many firms are successful because they experimented with what works and what doesn’t work using trial and error. A feedback loop allows successful entrepreneurs to learn from their mistakes.
I believe the feedback loop is effectively missing from many of the pilot projects. Trial and error needs continuous adjustments. If these project are the result of waivers or special grants, I doubt if the managers are allowed to adjust the demonstrations with the speed necessary to improve the programs over time. This type of experimenting using trial and error won’t work if takes academic 10 years to evaluate the pilot projects and write up their observations in academic journals before an experiment can be adjusted.
Could that be the reason why my stomach gets all twisted up whenever I hear some wonk use the phrase ‘best practices?’
John, you had me all the way until “this is good news.” It’s only good news if health care payors and providers are allowed to operate in an environment that permits (let alone encourages) genuine innovations in health care delivery and finance. That’s certainly not the case now, and certainly won’t be the case for many a year to come.
Providers and payors think up new (and possibly better) ways to do things all the time, and then they are told by their lawyers that they can’t do it that way because it’s against the law, or (more often) that the regulators who hold subjective approval authority over the payor or providers’ operations will not approve it.
I know you cite lots of examples of providers that are thinking up ways to save Medicare money, but that is small beer compared to where the medical trend is projected to take us, and quickly at that. If we really want healthcare to be affordable ten years from now, we would have to let the industry go through some very fundamental (and likely painful) transformations. And I don’t see Congress or state legislatures willing to permit that pain to happen.
So what you describe is, to me, a tragedy, because it underscores the how antagonistic the current legal and regulatory environment is to any kind of “developments” in delivery or finance that don’t come from D.C. in the form of multi-thousand-page rulebooks. And that’s not “good news.”
But isn’t that exactly what we have with Obamacare? A one size fits all health care that was replicated in Massachusetts and which is failing? So, if I’m right about my example, your Goodman’s Non-replicability theorem is right on the money. Thanks for another great post, by the way.
@ralph
I believe patients should take more responsibility for their own care. At least initially, most care is self-care using home remedies and over-the-counter drugs. Indeed, something like 25% of office visits are for conditions that could have been treated by the patient.
Yet, performing hernia surgery on yourself using a butter knife is showing a little too much dedication to the concept. I personally draw the line at do-it-yourself-surgery!
John,
You are the greatest!! Keep it up.
Dan
John,
Terrific post. Government cannot create entreprenuers or entreprenuerial development. True entreprenuers take action based on what they believe. They simply persue a dream. When I began my business to help seniors, I quit my job (wife, 3 kids and $18,000 cash) before I learned that no one wrote an insurance policy for what I wanted to do. Luckily I convinced a broker to craft a policy that “sort of applied” and off I went. Now we are nearing a billion in revenue and operating in 15 countries and four continents. And by the way – nowe there are thousands of businesses like mine today that have the opproprite insurance policy.
No cookbooks are written on dreams – especailly from government.
Call it “Lake Woebegone” medicine, where all doctors (and patients, too) are above average.
The communist will always try to rip off the Imago Dei creativity of the individual, but too much is lost in translation where there is not legitimate ownership. Fallout from this theft is always failure of the system that the central planner tries to replicate.
Spot on, John. What successful entrepreneurs do can’t be bottled and dispensed to the masses. To think otherwise is a lazy fantasy.
Fantastic article. I have seen what you are talking about first hand in education. What works wonderfully in the schools in the town where I currently live, which is suburban, upper middle class, almost entirely white, mainly two parent and well educated families, would not work in the town where I used to live, more urban, diverse racially, working class, far more single parent households, not nearly as well educated.
I moved 11 miles and the same solutions don’t work the same. How can a single set of solutions possibly work all across the country? You say President Obama doesn’t understand this, I’d say the vast majority of politicians don’t understand this.
Brilliant post — this is what it all comes down to, local knowledge and innovation.
Problem is, Obama is not interested in success. It is the socialist ideal that he is selling, not the reality. He could care less if it works or not–and we all know that socialized medicine is failing all over the world. The examples are there, if Obama and the libs were interested.
It is all about ‘feel good’ that all have healthcare and insurance, whether or not it is worth anything whatsoever. Matters not. It is the image, the ideal, the ‘feel good’ about helping the poor masses, less fortunate, on and on.
The first place to start is tort reform and deregulation as much as possible.
Re:: Paul says:
July 27, 2011 at 10:16 am
John, you had me all the way until “this is good news.”
Paul, you’ve touched the sorcerer’s stone! In astrodynamics, when we begin to discuss how things like planets work in space, we start with the “two body problem.” No external forces, like another body, to muck up understanding the basics.
Well, as Paul said, government has and will continue to mess up the basics as long as they can implement a mandate or regulation that impacts the social economics surrounding the health care delivery system. Doctor-Patient is a utopian dream.
John, change the name to, perhaps:: Goodman’s Theorem of Destructive Economics by Government Proxy.
Goodman’s Nonreplicability Theorem. I like it.
Some of your best thinking is in today’s blog!
Ray
John, I usually don’t respond to your nuggets of wisdom, but this one is really important. Too bad those who should learn the lesson will not understand.
Doug
The phrase “best practices” is used in the private sector just as it is in the public.
Trying to “replicate success” is by no means unique to government programs.
You’re trying to draw an analogy between entrepreneurship and a successful product. Products can be replicated–it’s what happens when a new idea transforms the way business happens. Of course replicating social services is much more difficult and less understood, but to the extent that we can learn at all from successful and unsuccessful hospitals, we’re not learning about entrepreneurship but about what works and what doesn’t. Figuring out why is harder–but it has nothing to do with trying to make “all hospitals better than average”. It has to do with delivering better care at a lower cost.
This all seems obvious and shouldn’t need to be said. Why does it?
I dont understand how he says that Google wants taunral back linking. 1- Natural back links (or Natural promotion) by creating a twitter account and hope that people start following back to your site? This could take forever or if ever at all. 2- Why would Matt say to get back links from social sites like Twitter or Facebook when both are NoFollow links from both sites. NoFollow for those who dont know what it is, means the google spiders wont follow from any site back to your site (no credit).