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The REAL Reason Governments Mess Up So Much

I have been bent and broken, but -- I hope -- into a better shape.

-- Charles Dickens, Great Expectations

"I told him not to take her back," said Calvin.

Calvin was our first boss. We went to work for him at 16. In 1964. He was a painter who loved to talk, joke, sing... It was a pleasure to work for him. He knew everyone. And everyone's business. And he had his own code of conduct, which he was happy to share.

"I told him not to take her back. When a woman runs off one time, she'll do it again. Besides, if you have a woman you have to worry about, you don't have a woman worth worrying about."

It was a no-nonsense judgment. Probably a good one.

"So what happened?"

"She ran off again. With the same guy."

"Oh... So then what did he do?"

Tommy, her husband, took a philosophical approach.

"Oh... Tommy told me that he didn't take it personally. She was just that kind of woman. You couldn't trust her."

Live and Learn

Tommy may have learned something valuable from the experience. Or not. But that's what life does to you. You live. And learn. Or not. You can make a mess of things. You can learn a valuable lesson. You go on...

On his own, a man's errors usually go little further than his own family. His errors are "corrected" by life. He is bent... but usually into a better shape.

Or he is broken...

We learn by trial and error. We try something; if it doesn't work, we feel the sting of our mistake. We lose money. We lose a friend. Our business or career takes a hit.

But if we don't try... and don't make errors... we get nowhere and learn nothing.

Suppose we never suffer from our own mistakes. Suppose someone else does. We put our hand in the fire and feel no pain. But someone in West Virginia gets a blister. We invest recklessly and someone in New York loses money. We moon the mayor at her next press conference... and someone in Seattle gets arrested.

What would we learn from that?

Error-Prone

We have a line we use in our rare speeches that usually draws a laugh:

You can make a mess of things on your own, but if you really want a huge disaster, you need government support.

Let's think about it. Is it true?

Government is the biggest institution on the planet. Talk about large-scale catastrophes and you are necessarily talking about government in action.

But is there any reason to think that governments mess up more often than private businesses or households? Are government mistakes any larger than they should be, proportionally?

Oddly, these questions have never been addressed in any serious way that we know of.

Modern "conservatives" assume government is prone to error -- unless it is kicking someone's butt at home or overseas.

Modern "liberals" think government ought to do more butt kicking -- at home. They want it to put the boot to big business... and the rich... and anyone who isn't green enough.

But why do you need government to pull off a major catastrophe? Is it only because it is big... and it kicks butt?

Not exactly. But almost. Smaller, more civilized institutions -- and individuals -- make plenty of errors. But their mistakes are usually corrected before they become major disasters.

Let's say you make investment errors. You buy subprime mortgage-backed debt in 2007. Then... bam! The market falls apart. You lose all of your money. The bad decisions self-correct. Soon, you have no money. You can make no more bad investment decisions.

Or maybe you thought the world would end on 21 December 2012 , as the Mayans seemed to suggest? You jumped off a high building just as the moment arrived, hoping to be taken up in rapture. Well. Problem solved!

Or maybe you made a bad marriage. But you are a good Catholic. You suck it up. You stick it out. Then your wife runs off with the priest. You won't do that again!

Bent Track

In the private world, problems take care of themselves. Businesses that are badly run go out of business. People who make mistakes usually don't make them again. Bad drivers pay higher insurance premiums. Bad chefs lose their jobs. Bad economists become head of the Fed. (Oops... that's another story.)

That's because the errors one commits in private life are suffered most by the people who commit them... and those immediately around him.

There is a feedback loop that takes your mistakes around the track and delivers them back to you -- with interest. You feel the pain. You suffer the loss. You cringe with embarrassment and shame.

But in larger institutions -- even many private corporations -- it is often the feedback track that is bent. Some people make mistakes. Other people suffer.

Not surprisingly, these mistakes are detected less quickly and corrected more slowly. That's how they get to be so big. They are not readily corrected.

More to come!