Robert H. Frank: An interview by Bob Morris
Robert H. Frank
Robert H. Frank is Henrietta Johnson Louis Professor of Management and Professor of Economics in the Johnson Graduate School of Management at Cornell University. Frank is a monthly contributor to the ”Economic View” column in The New York Times and a Distinguished Senior Fellow at Demos. He has also served as a Peace Corps volunteer in rural Nepal, chief economist for the Civil Aeronautics Board, fellow at the Center for Advanced Study in the Behavioral Sciences, and was Professor of American Civilization at l’Ecole des Hautes Etudes en Sciences Sociales in Paris. Frank’s books, which include Choosing the Right Pond, Passions within Reason, Microeconomics and Behavior, Luxury Fever, What Price the Moral High Ground?, The Winner-Take-All Society (with Philip Cook), Principles of Economics (with Ben Bernanke), and The Economic Naturalist, have been translated into 22 languages. His most recent book, The Darwin Economy: Liberty, Competition, and the Common Good, was published by Princeton University Press (September, 2011). Frank holds a BS in mathematics from the Georgia Institute of Technology, an MA in statistics from UC Berkeley, and a PhD in economics, also from UC Berkeley.
Here is an excerpt from my interview of him. To read the complete interview, please click here.
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Morris: Before discussing The Darwin Economy, a few general questions. First, who has had the greatest influence on your professional development?
Frank: My reigning intellectual heroes among living economists are Thomas Schelling and Ronald Coase. Schelling’s 1978 book, Micromotives and Macrobehavior, persuaded me that the link between rational individual behavior and collectively desirable outcomes is extremely tenuous. And it was Coase’s work that taught me how to think much more clearly about how best to resolve conflicts between individual and group interests.
Morris: In your opinion, what are the most common misconceptions about economics? Which of them seems to cause the most serious problems?
Frank: The most glaring deficiency in traditional economic models is that they completely ignore the role of context in evaluation. Questions like, “Is my suit OK?”, or “Is my job performance satisfactory?”, are impossible to think about in the absence of a suitable frame of reference. For an interview suit to serve its purpose, it must make you look good relative to other candidates for the job you want. For your job performance to be satisfactory, it must compare favorably with the performance of others who want the same promotion you do. As Charles Darwin saw clearly, much of life is graded on the curve, and conventional economic models completely ignore that fact.
Morris: Everyone else has an opinion about how best to create more jobs. What do you suggest?
Frank: We’re in a classic demand-shortfall recession. There aren’t enough jobs because total spending is too low. Consumers won’t lead the way because they’re busy paying down debt and are fearful they’ll lose their jobs, if they haven’t already. Businesses, which are currently sitting on mountains of cash, won’t spend either, because they already have sufficient capacity to produce more than people are willing to buy.
As John Maynard Keynes taught us in the 1930s, in such situations, government is the only entity with both the motive and the ability to boost total spending by enough to put people back to work. As it happens there are long lists of important public projects that cry out to be done. The American Society of Civil Engineers, for example, recently identified some $2.2 trillion in desperately overdue infrastructure maintenance. No one denies that these projects need to be done, or that postponing them will only make them more expensive.
Many of the people and machines required for these projects are currently idle. Materials prices and interest rates are at historical lows. We should be moving full speed ahead on this work. Yet we’re told that we cannot, that government cannot spend more than it takes in, any more than a family or business can.
That’s true as a statement about the long run, but it’s completely false for the short run. Getting the economy back on its feet is properly viewed as an investment in future prosperity. When businesses and consumers confront attractive investment opportunities, often the only way to seize them is by borrowing. The same is true for government. Contrary to the pronouncements of critics of economic stimulus, these investments will not impoverish our grandchildren. Continuing to allow the economy to languish in recession is the surest way to impoverish them.
Morris: Everyone also has opinions about the federal government. In terms of economics, in what specifically do you think only the federal government should be involved?
Frank: The states and local governments are not legally permitted to run deficits in times of recession, which is why they’ve been slashing employment and spending for the past several years. But that has only made the recession worse. Only the federal government has the power to spend beyond its current revenue. It shouldn’t do that when the economy is at full employment. But it’s an essential step for an economy mired in recession.
Morris: Here’s the inevitable follow-up question: In terms of economics, in what specifically do you think only the states should be involved?
Frank: As with the economic stimulus problem just discussed, unless a problem can only be solved (or only be solved well) at the national level, the states should be free to intervene as they see fit.
Morris: Since 1996—with one exception (2008)—fewer than half of those eligible to register to vote in fact registered; worse yet, fewer than half of those registered then voted. What do you make of that?
Frank: As economists have long noted, the puzzle is not that so few people vote, it’s that so many do. After all, no individual’s vote has ever tipped the balance in a presidential election.
Morris: Now please shift your attention to The Darwin Economy. When and why did you decide to write it?
Frank: I was driven by a growing sense of frustration about the national political conversation as the 2010 elections approached. The slogans and pronouncements coming from Tea Party spokespeople bore no resemblance to the choices actually before us.
Morris: Any head-snapping revelations while producing the manuscript?
Frank: When I sat down to write in May of 2010, my goal was to combine the essential assumptions that lie behind conservative political arguments with Darwin’s central observation that life is graded on the curve and see what kind of conclusions would result. I thought the additional assumption about the importance of context would invalidate many of the standard libertarian conclusions about how best to organize society. But I was surprised at how little of the traditional libertarian edifice survives once we take adequate account of the of context
Morris: To what does the title of Chapter 2, “Darwin’s Wedge,” refer?
Frank: I use that term to describe the conflict that often exists between individual and group interests. Adam Smith’s uncritically enthusiastic modern disciples portray his invisible hand theory as saying that market forces reliably harness selfish individuals to serve the common good. That’s often true, but as Darwin recognized clearly, many traits that serve the interests of individual animals make life more difficult for larger groups. The massive antlers of the bull elk are a vivid case in point. Spanning four feet and weighing more than 40 pounds, they greatly compromise the mobility of bulls when they try to escape from predators in densely wooded areas. But they are also the weapons upon which bulls rely in their battles with one another for access to females. A lone bull with small antlers would never transmit copies of his genes into the next generation. But if bulls could act collectively, they’d favor a resolution calling for each animal’s antlers to be scaled back by half. Fights would be resolved as before, since it’s relative antler size that matters, but each animal would be better able to escape from predators.
Morris: How do you also explain the enduring power of a meme, namely, “that government is the source of all ills”?
Frank: There have been hundreds of millions of dollars spent to propagate that meme in recent decades. And the success of those messaging investments has no doubt been enhanced by the fact that government actually is the source of many ills. But the private sector isn’t perfect either, and no society has ever succeeded without a decent government. Unless we can act collectively, there would be no way to defend ourselves, no way to define or enforce property rights. We couldn’t curb congestion or pollution or build and maintain public infrastructure. So if government is inevitable, the challenge is to come up with the most effective one possible.
Morris: For those unfamiliar with John Stuart Mill’s harm principle, what is it and what is its relevance to solving current economic problems?
Frank: Mill believed that the only acceptable reason for government to limit a person’s liberty was to prevent him from causing unacceptable harm to others. Mill was not a libertarian, but many libertarians are quick to cite this principle when arguing against a regulation that they oppose. And I believe most thoughtful libertarians are prepared to embrace something fairly close to Mill’s harm principle. But as I argue in the book, accepting that principle implies accepting many of the institutions of the modern welfare state that libertarians have vigorously opposed in the past, such as safety regulation.
We’ve long known that firms can pay higher wages if they spend less on workplace safety enhancement. Libertarians ask, “If a worker is willing to accept higher wages in return for his agreement to exercise greater caution while performing his job, why should the government prevent him from making that choice?” It’s a rhetorically powerful question, yet it overlooks the fact that the agreement in question will have adverse effects on others. One reason that might motivate a worker to accept a riskier job at higher pay, for example, would be that doing so would enable him to bid more effectively for a house in a better school district. But if other workers did likewise, none would achieve the goal they were striving for.
A good school is a relative concept, and the better schools are located in more expensive neighborhoods. But when everyone bids more for a house in a better school district, they succeed only in bidding up the prices of those houses. As before, 50 percent of all children will attend schools in the bottom half of the school quality distribution. As in the familiar stadium metaphor, all stand, hoping to get a better view, only to discover that no one sees better than if all had remained seated. Under the circumstances, it’s easy to see why well-informed workers would welcome limits on their ability to trade safety for higher pay.
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To read the complete interview, please click here.
Robert Frank cordially invites you to check out the resources at these websites:
His home page
The Darwin Economy’s Facebook page
The Darwin Economy’’s Amazon.com page
Interview: Seth Kahan
Seth Kahan
Seth Kahan is a change specialist, helping create the uptake and support for significant transformation. He has worked with executives and senior leaders on high-impact change at World Bank, Peace Corps, Shell, NASA, and 20+ organizations in the public and private sectors. His latest book is Getting Change Right: Creating Rapid, Widespread Change. His website is VisionaryLeadership.com.
Morris: Before discussing your books, a few general questions. Long ago, Thomas Edison observed, “Vision without execution is hallucination.” One man’s opinion, your emphasis on leaders being visionaries seems to ignore or at least subordinate the importance of leaders also being results-driven.
Kahan: I like to break visionary leadership down word-by-word. Visionary means there is a future state you are working toward that makes a positive difference to your beneficiaries and the world at large. Leadership implies that you not only take personal accountability for bringing that vision into existence, but you put in the hard work and execution required. If you’re not results driven, I don’t see how you can consider yourself a leader.
Morris: Much has been written in recent years about “followership.” I especially admire Barbara Kellerman’s Followership: How Followers Are Creating Change and Changing Leaders, Michael Useem’s Leading Up: How to Lead Your Boss So You Both Win, and The Art of Followership: How Great Followers Create Great Leaders and Organizations co-edited by Ronald E. Riggio, Ira Chaleff, and Jean Lipman-Blumen. Here’s my question: Can followers also be “visionary” in the same sense that all great leaders are?
Kahan: Yes. Anyone can be considered visionary who is operating with a powerful sense of a better future, an image of what is possible, a powerful desire to realize a new and vastly improved world. But, not everyone takes the reins to make it happen. Many choose wisely to support another who has stepped into the driver’s seat. They are, as you call them, visionary followers.
Morris: Here’s a follow-up question. If recent Gallup research is correct, that less than 30% of the U.S. workers are positively and productively engaged, how specifically can a visionary leader increase that percentage?
Kahan: This is what my book, Getting Change Right, is all about. I have a long history of success in what is called the “soft stuff” – the people part of change. There is a dearth of competency when it comes to getting people involved, contributing, participating, and engaged. The old mind-set is, “That is not the leader’s problem. The leader sets the strategy and hires people to execute. It’s up to the subordinates to generate their own motivation. They are, after all, professionals – which means they are paid. Therefore, they have all the inspiration they need to get with the program.”
But, that’s not how real, lasting, widespread change happens fast. Putting it on subordinates to quickly implement and relay new ideas is a cop out. Excellent leaders get to know their constituents, what turns them on, and use their self-interest to create powerful transformation that spreads because people want it to.
My book provides over 200 tactics, frameworks, step-by-step instructions, guidelines, and templates on how to carry this out. The book was written as a guide, a manual for putting these techniques to work, based on my experience as a practitioner.
Here’s a high-level summary of what specifically can be done to increase the percentage of people who are productively engaged:
1. Learn how to craft messages that are compelling and enticing to your constituents. Become a specialist at speaking in ways that excite them, arouse their enthusiasm, and create desire.
2. Know the people you depend on for success: front line staff, managers, partners, content specialists, thought leaders, practical visionaries, even detractors. I call them your Most Valuable Players (MVPs).
3. Get to know the worlds of your MVPs – where are they stuck, what do they need and want, where do things go well for them, what concerns do they have. Make sure you focus on both technical expertise and politics – savvy leaders acknowledge that professionals grapple with increasing their professional competencies and do it an environment of power plays. Become adept at listening – take ownership for understanding how your MVPs see the world and operate.
4 Build communities that deliver business returns. Become proficient at helping people organize around their own interests, in ways that provide them with payoffs while simultaneously moving your organization forward.
5. Bring people together when it counts the most: when strategy is on the line and coordinated behavior is at a premium. Learn how to create events that inspire your professionals.
6. Treat logjams, obstacles, stalls, and unforeseen downturns as the opportunities they are. When circumstances turn against you it is a huge message from the system, piling issues and concerns together in ways that frustrate your works. This is the time to address these issues all at once and move forward on all fronts simultaneously. Seen this way, a logjam or obstacle is a time of great opportunity.
Morris: What to do when two leaders in the same organizations have mutually exclusive visions?
Kahan: This happens all the time. Mutual exclusivity is the hallmark of a third higher way that transcends the current situation. A great book that goes into detail about how leaders use this type of seemingly impossible situation to their advantage is The Opposable Mind, by Roger Martin, dean of the Rotman School of Management. Martin discovered that great leaders from all domains (business, art, politics, social activism, etc) use this technique to achieve what others fail to see. I recommend the book unreservedly.
Morris: What to do if two leaders in the same organization have the same vision but disagree almost completely about how to make that vision a reality?
Kahan: This, too, happens all the time. If the end result is truly the same, you have to find a way to allow both to pursue their separate paths. Achievement is not about how, it is about the goal. If you are limiting others who have the same objective as you, it’s time for some reflection.
Morris: What prompted you to write Building Beehives: A Handbook for Creating Communities that Generate Returns? For whom was it written?
Kahan: In the mid 90s I was part of a small team that achieved extraordinary success at the World Bank. We took an unfunded idea and without any budget in two short years turned it into a $60 million program that spanned the globe with tens of thousands of participants. One of our primary tools were thematic groups, which were a special form of community that generated returns for the organization. This is what I call a beehive in my handbook. We spawned over 120 of these thematic groups at the World Bank.
Today, over a decade later, after our initiative has fallen out of favor multiple times, through numerous budget swings, and even multiple presidents, over half of our communities are still in existence, doing the work we initiated in the 90s. I have come to see these type of communities as the basic building blocks for massive, impressive change. The book was written to provide change agents with a quick overview of how to build beehives that will do this kind of work for them.
What Lies Ahead for Leadership?
Imagining the Future of Leadership
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(Editor’s note: This post concludes a six-week blog series on how leadership might look in the future. The conversations generated by these posts will help shape the agenda of a symposium on the topic in June 2010, hosted by HBS’s Nitin Nohria, Rakesh Khurana, and Scott Snook.)
Six weeks ago, Harvard Business School professor Scott Snook (along with his colleagues Nitin Nohria and Rakesh Khurana) launched an online conversation on the nature of leadership. They invited top scholars and practitioners in the field to talk about our traditional assumptions and practices and how and whether they hold up in a new era — one shaped by modern warfare, severe economic pressures, natural disasters, rapidly changing technology, and some eyebrow-raising ethical choices. If the old models are broken, then what should replace them? They asked these experts, in other words, to imagine the future of leadership. We received 33 posts, each representing a thoughtful, enlightened point of view. As the editor for the series I’ll mention a few themes that came through, but urge you to visit the rest of the series for more.
A few contributors took on the great-man model, arguing that it’s no longer relevant or particularly effective. HBS professor Bill George, for instance, said that the hierarchical model “simply doesn’t work anymore.” Knowledge workers don’t respond to top-down leadership. Barbara Kellerman, from Harvard’s John F. Kennedy School of Government, argued forcefully against what she called the “abiding tyranny of the male leadership model.” In the U.S., she says, “so far as leadership is concerned, women in nearly every realm are nearly nowhere -— hardly any better off than they were a generation ago.” HBS’s Linda Hill wrote about “leading from behind,” a phrase she borrowed from Nelson Mandela.
We had a couple of posts about the simple art of paying attention. Harry Spence from Harvard’s Kennedy School, for instance, pointed to the danger of leaders unconsciously betraying their organizations thanks to personal agendas they’re not even aware they hold. Ellen Langer, a psychology professor at Harvard, wrote a thoughtful piece about “mindfulness” — actively noticing events and people. She cited a study of orchestra musicians who were instructed to be either mindless or mindful. That is, they were to replicate a previous performance with which they were very satisfied or make the piece new in very subtle ways that only they would know. Audiences unaware of the instructions listened to taped performances and greatly preferred the mindful versions (the players liked them better too).
Another series of posts focused on leadership development. Trina Soske (from Oliver Wyman Leadership Development) and Jay Conger Claremont McKenna College), for example, argued that companies aren’t getting their money’s worth with classroom efforts and that development projects should be focused squarely on real business problems. Daisy Wademan Dowling, an author and leadership development executive, and MasterCard International’s Matthew Breitfelder proposed that companies take a page from the Peace Corps, sending employees to volunteer across geographic boundaries. William Sullivan, from The Carnegie Foundation for the Advancement of Teaching, argued for bringing leadership development and a sense of professionalism to undergraduate education, rather than starting with business schools.
Ellen Peebles is a senior editor with the Harvard Business Review Group. She was the editor for the HBS Imagining the Future of Leadership blog series.
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