The Private Sector’s Role in Transit Innovation

The United States has long had private success and public failure – not just the sense of private affluence and public squalor, in which household income is high but the state of public services lags, but also in that the private sector is more productive than the public sector. American politicians generally recognize this and often propose programs to use private-sector methods to revitalize the public sector – including infrastructure.

As a rule, existing proposals are failures, such as anything with Elon Musk’s name on it, or when moderate governors like Charlie Baker put some second-rate managers like Luis Ramirez in charge of public transportation agencies. Nonetheless, a program for leveraging private-sector expertise to improve public transportation could be fruitful if politicians aimed at long-term management rather than at favorable short-term press.

Much of what I’m going to propose is an extension of what I blogged last year about the value of outside advice. But here it’s not about domain knowledge, since the American private sector knows little of how to run public transportation well, but rather about more general management principles.

Done is better than good

I encountered the aphorism that done is better than good in the context of video game development. In gamedev, multi-year delays are routine since projects commonly expand in scope or have to adapt to changing circumstances. In the 1990s, Starcraft notoriously was delayed from 1996 to 1998, at a time when one-year development cycles were normal – and then in the 2000s both Starcraft 2 and Duke Nukem Forever took longer than a decade, the latter spending 14 years in development. In such an environment, a culture has to develop that puts an emphasis on finishing something even if some compromises on features are needed.

I genuinely don’t know to what extent other industries use this maxim when projects are delayed. I was told of a metropolitan planning organization (MPO) in which everything gets delayed by months or years as everything has many layers of committee review, and when I asked if the organization had heard of the maxim, my source said “lolno.” I know that TransitMatters can take months to edit a document that I can produce in a day as a blog post, and judging by the delays to FRA reform, originally slated for 2015 but only finalized about a year ago, this is also true of public planning.

Making sure things are done on a timely schedule is critical. This isn’t even about delays in construction so much as about planning and engineering. Managers should learn to cut features when in a crunch, to require teams to prioritize, and to avoid the endless layers of design by committee that lengthen the process without improving results.

State regulations, too, should aim at reducing red tape. American government at all levels uses delays as a substitute for rule of law, with federal and state regulations that require layers of mandatory review. The standard approach for achieving any social purpose is to add yet another layer, even if the delays cause more problems than they solve. For example, there are mandatory reviews of disparate impact lengthening the planning process, even though implementing public transportation improvement faster would have a positive impact on racial minorities as they ride at much higher rates than whites (and not just in the US).

Project management

Project management is an expertise that transfers well between different industries. Thus, a successful private-sector manager can transition to overseeing a complex public infrastructure project. The special aspects of the American public sector, such as high union density, are not that unusual from the perspective of a general-purpose American manager, who may well spend time running companies in traditionally unionized industries.

Boston provides a negative as well as a positive example: the Green Line Extension saw ballooning costs due to poor project management, as the MBTA had no person experienced in the supervision of such a large program of construction. But as soon as the MBTA restarted the project with an outside project manager with ample experience, it managed to cut the headline budget from $3 billion to $2.3 billion; moreover, about half the current cost is sunk from the line’s previous iteration, so going forward the cost is barely $1 billion. This is a very high cost for such a short light rail line, but the factor of three difference with the previous estimate suggests that performing the normal oversight and management could save other expensive American infrastructure projects large sums of money.

Hiring and promotion

There are three types of people: people who have never worked in any large hierarchical company, people who work at human resources, and people who loathe human resources from the bottom of their hearts.

Nonetheless, there are HR departments and there are HR departments. The worst horror stories I have heard about hiring come from the American public sector. They are worse than the worst I have seen in the private sector, like when Hyperloop One assured me they had the visa covered when I asked about it in March 2017 when the Trump administration had just revoked the visa category I was to use, and then when the company wanted to hire me in April it discovered the remaining visa category had a deadline that had passed 2 weeks before. In the public sector, there are positions that remain unfilled for years.

A catalog of problems that afflict hiring at transit agencies in New York and Boston, and presumably in the American public sector in general, includes all of the following:

  1. Onerous checks and long turnaround times. The best applicants will find a private-sector job in 1-2 months while the transit agency takes 6-12 months to go through the process. This affects line positions such as driving a bus as well as office work and managerial positions.
  2. General indifference within HR to applicants. A Boston resident was offered a job at the MTA that required residence within New York City; as the potential hire had a partner who worked in Albany, they proposed that they should live in Poughkeepsie and the MTA hire would commute by Metro-North. HR required them to file forms stating their exact address in Poughkeepsie, never mind that they still needed to find an apartment in the area and had no reason to do so without a written job offer. The applicant was unhired and the position remained unfilled for years.
  3. Periodic hiring freezes instituted by politicians and senior managers who wish to look prudent. Critical departments may remain understaffed, contributing to overstaffing elsewhere through inefficiency, which then provides political justification for keeping the hiring freeze.
  4. Uncompetitive salaries. Starting salaries at planning positions are well below what university graduates with comparable skills can fetch in the private sector. They’re balanced by high pension payouts, but first, the overall level of benefits is very competitive with generic white-collar offices but not with tech with its ample stock options, and second, your typical highly-motivated recent graduate wants a salary now and not a pension in 30 years.
  5. An outdated hiring process. For example, there is no dialogue with how tech companies hire employees, that is the whiteboarding system of technical interviews. The MBTA gave up on this entirely and outsourced its tech to a subsidiary that is shielded away from the rest of the org chart and run as a standard tech company.

The promotion process suffers from some of the same problems. It is outdated, based on the rigid hierarchies of postwar office work, with a tinge of the Japanese salaryman system except without the strict demands the company makes of the employee. A smart 30-year-old will take decades to be in a position to make serious decisions, even if the 55-year-old manager is detached from any new idea from the last generation and is in effect providing no value to the agency.

One additional problem with promotion is known as collision. This is when union agreements based on seniority result in a situation in which promoting an employee would reduce their salary, as they would trade many years of experience at a line position with extra pay for seniority for a higher-level position with no prior experience. The agencies are aware of this problem and have attempted to fix it, and I have heard complaints from union sources, namely Tim Lasker of OPEIU Local 453. I stress that this is the case because it’s common among some reformers on the center and right to blame unions for problems with pension cliffs and collisions, and yet the unions themselves understand that there are problems with both; the real blame should go to management, especially politicians, who refuse to back one-time investments into hiring more people or raising salaries where appropriate.

American business culture

My impression of American business culture is that it is extremely practical and anti-theory. German engineering firms like hiring people with advanced degrees in engineering; at the time of the American bailout of GM and Ford, VW was run by a CEO who had a Ph.D. in engineering and had worked in the auto industry or at suppliers ever since graduating. American firms like hiring people with management experience.

This limits the suitability of the American private sector to public transportation in several ways. The most important is that without theory, American business culture is heavily based on the idea that weak firms just die out and strong firms grow. Turnarounds exist, but a huge fraction of turnaround experts are selling snake oil, and with good connections the snake oil peddlers manage to get appointed to turn around transit agencies. Moreover, because American business culture denigrates foreign best practices, its managers are ill-positioned for an industry where little innovation exists in the US and the most important thing for Americans to do is learn to imitate Europe and East Asia.

The benefits of the private sector are then most pronounced in areas where there is genuine industry-independent management expertise. In those areas, American business absolutely shines; a good rule of thumb to remember is that with completely dysfunctional health care, infrastructure, construction, and education, the US still manages to have labor productivity on a par with the richest European countries and better than anything in Asia, so purely by averaging things out, the rest of the economy must be doing well.

Thus, project management is a core strength in which it is both useful and imperative for the American public sector to learn from private-sector success. The issues of hiring, mentoring, promoting, and firing workers are a core strength as well. Transit agencies have to transition to a model in which jobs are not sinecures, and instead of steep pension cliffs, workers get paid well now and can quit or be let go after a number of years without having to start from zero at their next job.

Finally, the culture of delays must give way to a culture of working quickly, which means knowing when cutting corners is feasible and when it isn’t even at the cost of slowing down the process. Spain achieves low infrastructure construction costs in part by setting its regulations as well as internal oversight and procurement to maximize the speed of decisions: key decisions may be made in a single day, environmental reviews take two months rather than years, and contractors are judged in part by how quickly they can construct a project, on the theory that delays create more opportunities for cost overruns.

None of this is flashy. The most applicable parts of high American private-sector productivity are the most boring. This is less about heroic entrepreneurs, who as a rule have no place in the transportation industry, and more about experienced managers, who as a rule are never written about in the business press unless they’re about to be indicted for embezzlement. Just as the latter have built up a high-performance business culture over the generations, so can they build high-performance state capacity if the politicians let them and give them the resources they need. All it takes is political conscientiousness and more macro- than micromanagement.

36 comments

  1. Aaron M. Renn

    I worked in the consulting industry (including a brief stint in our outsourcing division) for many years and have spent a long time thinking about why people hire consultants or ourtsource.

    One reason is that an arms length relationship, especially with a fixed price contract, creates a vendor with green money financial motives to get the project done on time. That’s the biggest benefit of these P3s the Port Authority has been doing. I have a lot of skepticism of the availability payments model of P3s, but the big benefit in NYC is a vendor who has a huge incentive to deliver the project on time. I believe that happened with the Goethals and Bayonne Bridge projects. Skanska just took a write-down on LGA, so things must be a bit behind or over budget there, but anyone can see that they are working hard 24×7 to get that job done. Walsh, the construction firm in that venture, is a superb contractor from what I’ve seen on other project.

    Consultants also free you from the HR problem. Consulting firms tend to have fewer, generic titles, and dynamically assign people to roles on a project basis. That lets them quickly ramp up or down as needed. At Accenture we put enormous effort into building a global common culture to support this. When I started, every single new employee in the world flew to our training center in St. Charles for a three week boot camp (10 hours M-F, 8 hours Saturday and 5 hours Sunday), where deliberate efforts were made to create cross-geographic teams. The facility was a former college, so people stayed in “dorms.” My roommate was from our office in Cairo. The firm used the same methodology globally and I was always impressed to see incredible teamwork from people who had never worked before and may not have even been from the same country. Americans tend to stereotype foreign workers as lazy (e.g., 35 hour work weeks in France with six weeks vacation), but in my experience the professional at Accenture I came into contact with were very sharp and worked their butts off.

    Having said that, the skill set for delivery of something new is very different from operations and maintenance. I think that’s one of the reasons – though perhaps not even the most important – why we had completely separate workforces for consulting and outsourcing.

    • michaelrjames

      Aaron M. Renn, 2019/06/17 – 19:27
      One reason is that an arms length relationship, especially with a fixed price contract, creates a vendor with green money financial motives to get the project done on time. That’s the biggest benefit of these P3s the Port Authority has been doing. I have a lot of skepticism of the availability payments model of P3s, but the big benefit in NYC is a vendor who has a huge incentive to deliver the project on time

      That sounds like a textbook version of how they should work, but do they? Even when every legal t is crossed, even when the private company is clearly at fault, the public commissioning body is often held over a barrel–of adverse publicity or slipped timetables that mess up political timetables and imperatives. There are countless examples of failed P3s or ones where the cost–despite any contract–explodes. A favourite of mine is London’s HS1 (their first and only high-speed rail line linking the Chunnel to London-St-Pancras station) which began as an elaborate PFI (Private Finance Initiative =P3) but collapsed in near-total failure to be taken over by the state in its entirety, costing $5.8bn (for 104km), almost three times the original estimate. Do they do things differently in the US? CaHSR looks similar, and for similar reasons: almost everything including its own oversight and auditing, is outsourced with no one on the side of the payee (government, ie. tax-payer) having proper information, control or authority. London CrossRail is in the middle of one of the most gigantic cockups, when it was publicly on time right up to a month before then suddenly it was to be delayed … 3 months, then 6 months, maybe a year and now into 2 years. No one seems able or willing to explain why.

      to avoid the endless layers of design by committee that lengthen the process without improving results.

      Many like to blame this kind of thing on gummint, but the reality is that in many of these prominent omnishambles there was almost no representation of government, or their relevant transit authority, in all those meetings. (Or, in the case of CrossRail, an endless turnover of the top ‘responsible’ person. By accident or design there is no one person to lay the blame on, and in fact after their short stints running this show they move on-and-up, per Peter Principle, often accumulating a knighthood along the way!) As Rosenthal described it in his NYT series on the MTA, it was the profusion of consultants (>500), the fact that so many came from the MTA including top management of the construction companies, yet there was an absence of anyone representing the MTA or public. It’s not the overbearing and incompetent government that was the problem, it was the absence of them in all these processes that allowed the private players to run wild.

  2. Reedman Bassoon

    I have applied for a couple of civil service jobs in my life. [HR horror stories ….]
    At one, you were not allowed to attach a resume to your application form. You were required to transcribe every date, title, and description onto their particular multi-page form in their particular format.
    At another, a “civil service exam” was required — I got the highest score in the room, above any of the existing workers applying for the job. I was not considered qualified because, even though I had experience with the software they were using, my experience wasn’t with the particular software revision they were using. It was obvious the entire “job posting” process was being done to justify promoting one of the existing workers.

    My significant other used to apply for government grants as part of her job. There were cities and counties that specified that black pens, red pens, or pencils could not be used on their forms, only blue ink pens.

    • Brendan Samuel Dawe

      Canadian Federal Public Service jobs have you apply to ‘pools’ so that they have a bunch of pre-qualified resumes and maybe maybe not hire you some time in the future. If you actually get a job it takes months. Furthermore, you are required to transcribe a bunch of personal information into a form that you cannot save until you complete it but you only have an hour before you are auto-logged out

      This process seems less ridiculous as one goes down towards provincial and then municipal government

  3. IAN! Mitchell

    “heroic entrepreneurs, who as a rule have no place in the transportation industry”

    With the exception of Philip Thomas, James Hill, Walter Varney, August Belmont, Josiah White, Carl Fisher, Henry Flagler, Henry Ford, Henry Huntington…

  4. adirondacker12800

    I genuinely don’t know to what extent other industries use this maxim when projects are delayed.

    Almost none. Outside of niche markets catering to eccentrics. Who have the money to be catered to. Gamers are an eccentric niche. ….. really, normal people don’t care about what the inside of a computer case looks like and care even less the lighting….. or that it can do 16 million colors that you can’t distinguish. Really, get a grip, you can’t see 16 million different colors….

  5. adirondacker12800

    tech with its ample stock options

    Gambers tell you all about how with their superior skills and wit they beat the house. You don’t hear it about when they gamble away the rent money. You don’t hear about the people who gave giving stock options a whirl, it all fell apart and they moved back to Peoria to use their accounting degree to do the taxes for individuals and small businesses. Ask someone from Lehman Brothers how it all works out.

  6. adirondacker12800

    In the public sector, there are positions that remain unfilled for years.,

    Like Secretary of Defense. Having someone who is a titan of the private sector running things is working out realllll well isn’t it? And there is civil service so the managers don’t hire their children and or their children’s spouses for jobs they are grossly unqualified for. And that pesky pesky Senate keeps asking about qualifications. And security clearances. Pesky Senate.

    In the private sector when the Republicans blow up the economy again there will be a hiring freeze and everybody figures out how to get along with unfilled positions. That you don’t hear about because staffing projections aren’t made public. Some of those unfilled public sector jobs are that they are getting by and it’s public information that they are under staffed. Which aren’t filled because there is a hiring freeze because the Republican blew up the economy again and tax revenues are down. Maybe not right now because economy is good. When the economy is good, people don’t have to take civil service exams in the hope of maybe perhaps they will be offered a job in six months. ..if nobody shows up for the civil service exam it remains unfilled. Or if nobody passes it. That happens when the economy is good.

    Transit-y; NJTransit is in a meltdown and it’s going to get worse. One reason is that they are having trouble keeping the 18 year old buses on the road. Especially in Bergen County. Well used buses last 12 years. I’m sure someone in NJTransit and very likely more than a few legislators were saying 8 years ago that they would have to replace these ten year old buses in two years. And while everyone hates HR, line managers hate tracking who quits, who is about to retire and who is about to be promoted out of their area. 8 years ago HR was saying we have to hire these many bus drivers to replace the people who are going to quit, retire, get promoted or die. So that things are running smoothly in two years or six years ago looking at it from right now. When Bergen County gleefully voted in an overwhelming majority for Chris Christie. Who starved NJTransit for money to do things like hire bus drivers and train engineers on a fairly regular schedule to replace the ones quitting, retiring, promoted or dead. Or replace buses on a fairly reasonable schedule that almost everybody agrees is rational. Bergen County where if anyone suggests more rail, it’s going to make the chicken milk go sour, turn the yolks of the cow eggs green and cause general mayhem. My empathy nerve is numb. It’s what you voted for. Sit in gridlock in a bus that is likely to break down, breathing in the fumes because an 18 year old bus spews more fumes than a 6 year old bus. It’s what you voted for. And yet again Democrats are getting blamed for a mess Republicans caused. That it seems to be especially bad in Bergen County may be that reporters with journalism degrees are more comfortable listening to people who also have degrees instead of people who take the bus because they are poor. Or that poor people are used to buses that suck and aren’t complaining as spectacularly.

  7. adirondacker12800

    1 Onerous checks and long turnaround times. ….

    Without the civil service clueless politicians will think it’s a great idea to have their idiot son-in-law fill the job. And they can fire the reasonably competent person in the job, who got it because their uncle the politician in the other party actually made a fair assessment that their nephew is reasonably competent. Every time the party in power changes hands. Or fire them all because they don’t believe the dogma and contradict him. Well over a century ago we with came up with the civil service system. Somebody somewhere has to define testable skills, have the test approved, announce that the test is scheduled for some time far in the future. That it will take time to process the results and send them out. By old fashioned mail. And then get submitted to the people making the appointments for interviews. There will be at least three candidates who all have to be interviewed. And it will be discussed. And probably documented and filed. Otherwise clueless politicians will think their idiot son-in-law would be great at the job. We’ve been at this for over a century. That’s way it works. If you dream job is a civil service job, deal with it.

    2 General indifference within HR to applicants. ….

    HR doesn’t make the rules, they explain them to people who don’t understand them.

    HR was quoting the civil service requirements and if you were too stupid to read and understand them that’s not their problem. They will explain them again. They don’t have the flexibility to change the rules. If the requirement was that the applicant lives in New York City, Poughkeepsie isn’t New York City, don’t be surprised when they inform you of that fact. Residency requirement are not a shocking revelation. The address of the motel he or she was gonna crash in until they found an apartment is a residence with an address. When they found an apartment, call HR and change your address. I hear self entitled clueless rich kid whining about not getting coddled in extra special ways that suit his idea of how to do it. Get a motel room…

    One half of the household commuting from Poughkeepsie to Albany and the other half to Manhattan? isn’t my idea of a short walkable commute.

    3…hiring freezes..

    because we are in the grip of zealots who think cutting taxes is the solution to all ills. Who beat their chests about how we are the richest country in the world and then claim we don’t have no munney and can’t afford nothin’. Except cutting taxes more.

    4 Uncompetitive salaries.

    No they aren’t. Private industry doesn’t do that kind of planning. Unless they are trying to placate NIMBYs in rich suburbs who think all planners are idiots and hire lawyers to force them to do what they want. Those awful people in HR know what the market is. And have numbers to prove it. From consultants that make careers out of telling other people what the market is. You can’t out of one side of your mouth complain that those awful blue collar workers are grossly overpaid, whether it’s a bus driver or a construction worker or a school teacher and then out of the other side of your mouth that they aren’t offering good salaries to you glorious college graduates with more refined degrees than an education degree. You don’t like it go ahead find a job in private industry. Where, if you are lucky there is a defined contribution plan you can contribute to with pre-tax dollars. And if you are a really lucky an employer match. And work 230 days a year, 40 ish hours a week unless you get suckered into being salaried. I hear people with advanced mathematics degrees can get really well paid jobs in finance/banking/insurance. That come with defined contribution pension plans with a good match. That gets reimagined the next time the Republicans blow up the economy and the company is flattening their organization chart to be more flexible and responsive. Or just plain old eliminated the next time there is a merger. Feel free.

    5 An outdated hiring process.

    Not too long ago people who have been dialing 9 on their extension, to get an outside line, since the extension was black and had a rotary dial, were protesting loudly, in hearings on C-SPAN, that they are shocked, amazed and perturbed that the telephone system keeps track of the numbers they dialing. It has been keeping track of what number you are…. requesting… since there were numbers or it wouldn’t know how to calculate your bill. Even if your bill is “you have flat rate and there wasn’t anything billable”. It needs to know what numbers you dialed so it can decide to NOT bill you for them. They know even less about computers. And think that it is great that the government outsources things because the valiant captains of the private sector do every thing better than the public sector can. Why are you surprised they washed their hands of it and outsourced it? I doubt it had much to do with hiring practices. The private sector does everything better and they don’t have to think about IT, that is contracted out. And when it goes wrong can blame the contractor not their management skills. Which would be risky to depend on because some of them are shocked that the telephone knows which numbers you called. Anyway I thought the private sector paid much higher salaries. That make the private sector so attractive.

    …if the promotion process didn’t involve taking another civil service exam that was crafted to test your skills, that was announced well ahead of time so everybody who qualifies has time to apply … the brown nosers and idiot nephews would get promoted.

    30 year olds making decisions. Yeah un huh sure. they all still think being in management is a version of late night bull session in a dorm with better coffee. Not that it involves telling the hourlies that they have to show up for work. on time-ish. That they can’t take long personal phone calls on the company phone and can’t hang out at the water cooler. And no they can’t schedule a personal day because only three people can be out and you would be the fourth. I decided in my 20s that is most of work management does and I don’t want to do it. But they do ask me for advice. … they asked for advice, I glanced at a calendar, said “your budget is going to be off by a week of salary, next year, if you do it that way” While thinking, “they went over this while you were getting your MBA.” And explained patiently that 52 weeks is 364 days and every few years that accumulates into an extra week. Really? How often? Depends on when leap years fall. Leap years? Yes leap years have 366 days instead of 365 and that speeds up this by a day which speeds up the whole cycle by year. While thinking this was all briefly mentioned along with multiple ways to keep track of it all when you weren’t paying attention when you were taking your MBA because you were still under the delusion that it’s fun stuff with better coffee. And if you want to really keep accurate tabs on it all you have to decide if you are keeping track of it by period ending date or pay date. Yes, the first pay date of the year covers the last pay period of the previous year, doesn’t it? … When it all went seriously bad, they came up with a solution that doesn’t solve their problem and would be illegal. I decided HR will be gentler at explaining … something that was mentioned briefly in you MBA classes… would be illegal. And anyway it doesn’t solve your problem because you don’t understand paychecks come in weeks and that months, quarters and years don’t have tidy amounts of weeks. Or that the truly obsessive track it by work days, holidays, vacation days etc and don’t track weeks. ….there’s this blogger who apparently thinks two tenths of a passenger exists and can go through a turnstile…. and thinks there are 360 days in a year….

    • Alon Levy

      This isn’t even about civil service exams; all of the horror stories I’ve read are specifically not about civil service exams but about the regular HR process.

      And yeah, the fact that HR required an exact address in Poughkeepsie as part of the waiver process was stupid and the MTA lost someone for a position that went unfilled for years.

      • adirondacker12800

        If it went unfilled for years that means they don’t want to fill it. And I’m sorry, you need a New York address for the job there are multiple easy solutions to that problem. There are “corporate” apartments that rent by the week. There are hotel and motel rooms. Sleep on somebody’s couch. I’m sorry, I hear whining that mommy doesn’t work in HR. Or somebody who didn’t really want the job and is covering that up by whining about those evil people in HR.

        • Matthew Hutton

          Why should I have to jump through ridiculous hoops to work in the public sector when I can get a job in 5 seconds flat in the private sector?

          • adirondacker12800

            I don’t know why should you?. If you aren’t willing to jump through the hoops the rest of us have agreed on, being the employer, I guess you don’t want the job, do you? And you have to jump through the hoops otherwise someone somewhere will say you got the job unfairly. If you don’t want to jump the hoops the rest of us agreed are a pain but have to go through to I guess you don’t want the job. Have a long successful satisfying career in the private sector. There are other people willing to jump through the hoops.

          • Matthew Hutton

            But if I’m a high quality employee I’m going to want to get a new job within a reasonable amount of time. Therefore if the public sector takes 90 days to recruit a member of staff but the private sector only takes 2 days then clearly I’m going to take the private sector job. And then the public sector will lose my expertise.

            Only the worst employees will fail to get a job within 90 days so will be the only ones the public sector can hire.

            This is a significant problem.

          • adirondacker12800

            You aren’t qualified for the job because you don’t realize government work involves complying with rules you apparently think are silly. The rest of us don’t or they wouldn’t be there.

  8. Michael Thomas

    The difference between public sector and private sector is that one is based on coercion and reward from political elites and the other is based on freedom of choice and reward from the consumer. In the private sector if your product is unwanted, no one buys it and the business fails. In the public sector, if your product is unwanted, the product is produced anyway until the the political elites lose the wherewithal to keep it up. By definition, there can be no private sector technique in a public system. In a public system there is no freedom to choose and, more importantly, there is no feedback loop which informs the producer that their product is bad or unwanted.

    • Alon Levy

      And yet in Japan the business culture of the private sector is the same as that of the public sector: you get hired straight from uni, you have lifetime job security and are expected never to quit, you work 70-hour workweeks, and you will learn any skill your bosses need you to learn. As far as I can tell, Scandinavia and Germany have similar private and public office cultures as well (and they’re very different from that of Japan). The chasm between private- and public-sector productivity is very specific to the US, or maybe also the rest of the Anglosphere, I’m not sure.

      • Michael Thomas

        I was defining the fundamental differences between the private sector and the public sector and the way the incentives work for each. If the governments of Japan, Germany, et al. impose rules on private sector employees that make employment in the private sector look like employment in the public sector, it does not change the fundamental nature of the incentives of each sector. If Aldi provides a crappy service in Germany, then people will stop shopping there and it will go out of business. Those Aldi employees will surely lose their lifetime employment in the process. If the German EBA makes bad decisions about railway infrastructure, over any length of time, nothing will happen to it or its employees.

        • Jacob Manaker

          If Aldi provides a crappy service in Germany, then people will stop shopping there and it will go out of business…. If the German EBA makes bad decisions about railway infrastructure, over any length of time, nothing will happen to it or its employees.

          Bullshit. If the EBA screws up, the customers who ride the railway will complain to their elected officials, who will complain to the EBA’s management, who will change practices or start firing people. If the railway still doesn’t improve, those officials will start replacing the management. Just because the corporation isn’t expected to make a profit doesn’t mean people don’t notice when it stops providing public goods efficiently.

          (Yes, not everyone has time to complain to their elected officials. But then some upstart politician will notice that people are upset about the quality of railway service, promise to improve it, and then get elected! You don’t need much public input to get a functioning democracy.)

      • Matthew Hutton

        In the U.K. I don’t think you’d wait 90 days to be hired in the public sector. However the work culture is much more backwards – they will be unlikely to practice agile or lean or any other modern management practice.

        • Matthew Hutton

          This is true. However the office based jobs should be fairly directly comparable 🙂.

          And there should be concerns when public sector employees such as ambulance staff spend ~50% of their time doing paperwork and my private sector staff spend ~15% of their time doing paperwork.

      • adirondacker12800

        The private sector doesn’t run police, courts, social services, free parks… it’s difficult to compare the two.

        • Alex Mazur (@mazuretsky)

          There are private guards, dispute resolution systems (ebay?), healthcare, childcare, attraction parks. There are also public transportation providers, post services, financial institutions, etc, etc

    • RossB

      You are suggesting that monopolies don’t exist in the private sector. I beg to differ. Just the other day I was watching baseball while drinking a beer in a local Mexican restaurant in Seattle. The Mariners are the only baseball team in Seattle and they play in the only baseball major league in the U. S. They suck, and the beers suck and there is very little I can do about it. Oh, I can stop watching the Mariners, but if I’m a baseball fan, that is the only game in town (literally). There is little incentive for that team to get better, as they know people will still show up, and they get a handsome public subsidy to boot. Public pressure might force the CEO out, but you could say the same thing about the head of the local bus agency. I really don’t like Bud (or any of their other beers), but as long as they control distribution, the bar has little choice. Again, I can take my business elsewhere, but if this is the only Mexican restaurant around, then I shouldn’t be surprised that they only serve beer from AB Inbev. Oh, I know, I’ll write a complaint on my Google Phone (oops, another monopoly) or just order something from Amazon (ditto). Ahhh, I got to get of town — time to take a jet plane (oh, no, not again).

      • Matthew Hutton

        Certainly in the UK bars have a wide selection of beers and don’t just have shitty lagers. So you should be able to ask for a guest ale or two. Or visit a different bar if thats an issue.

        And Google has phone competition from Apple and Amazon has competition from other retailers.

        • RossB

          Did you even read what I wrote? Of course there are bars with better beer. That isn’t the point. I said that the beer choices in a MEXICAN RESTAURANT were limited. Not every Mexican restaurant, mind you, but most of them.

          But you are missing the point! Monopolies exist. There is very little difference between the way these monopolies function and the way that governments function. There are alternatives, but the alternatives are difficult, cumbersome and/or expensive. Some of these monopolies are well run, others aren’t. But to suggest that these monopolistic companies are inherently better run because of competition is absurd. The local book store is terrified of Amazon, while Amazon ignores other book sellers.

          • adirondacker12800

            I don’t know how alcohol is distributed in Washington State. In New York if they want to offer more choice someone has to go to the beer distributor once a week and buy different brands. The soda syphon and the beer taps, if they have any, will be from one brand because restaurants aren’t in the business of maintaining soda syphons or beer taps. The distributor takes care of that. That’s why it’s Coke or Pepsi but not both. If one of the usual suspect maintaining the tap, has something good in kegs, the distributor would be happy to bring it. They don’t because the customers want canoe beer or canoe beer light.
            …the neighbor offers me some good German beer. which I recognize. It’s halfway decent. If the restaurant had it I’d drink it instead of canoe beer. It’s made by InBev. He’s gonna offer an ale someday. Made by InBev. Or something Belgian! Made by InBev. Or perhaps Heineken. Because the beer store he goes to, with a wide selection, has InBev or Heineken. And the stuff that looks like it comes from a microbrewery…. is made by InBev…. Shop around a bit they even made cheap beer, the same price as soda, that is halfway decent. People want canoe beer.

  9. Bjorn

    One noticeable difference in cultures is pay transparency. Government salaries are public information that anyone can access through the state’s equivalent of FOIA; some government agencies even go further and just publish their salaries on their websites. Of course, private sector salaries, by contrast, aren’t public.

    • Alon Levy

      Yeah, so the private sector rampantly discriminates against women in pay, whereas the public sector merely discriminates in hiring and through hostile work environment. (But to be fair, the worst horror stories I’ve heard are about unionized private-sector blue-collar work.)

        • Alon Levy

          In STEM (and from what I hear also in very masculine working-class jobs) it’s more hostile work environment than anything. Good luck proving that when two of your colleagues kept hitting on you despite your repeated lack of interest and when your boss, who you need to be in the good graces of for a reference for your next job, told you to just deal with it, it’s illegal harassment. Quitting after six months because nobody respects you and everyone makes sexualized comments about you then gets rendered as “an intentional job choice” by a hackhouse whose main interest is making it harder for people to sue their employers.

  10. RossB

    I think it is easy to assume that private organizations do things better than the public ones. But a lot of that is simply competition. Google seems to do things well, but for every Google, there are dozens of failed software companies that tried to do the same sort of thing. If you look at companies that now have a virtual monopoly on things, it is hard to say that they are going a great job. Consider Boeing, for example. Since Alan Mulally left, things have been going downhill. Oh, they’ve made money, but there have been a series of problems related to making planes. Long delays and cost overruns on numerous projects — the type of thing that public agencies are famous for. Moral is very low within the engineering department, and has been for years. Likewise with manufacturing, as highly skilled work has suffered from cost cutting. Yet they have done fine, since their only real competition is Airbus.

    The point is, I wouldn’t hesitate to hire Mulally for any public project, big or small. He made the switch from making planes to making automobiles and helped turn Ford into the strongest American car company. But most of the people at Boeing that now run the show would likely struggle building high speed rail, just as they struggle making a safe airplane.

    • Alon Levy

      Sure, most private firms fail. That’s how US business culture works: unproductive firms fail, productive ones grow. It really doesn’t work in an industry with stable players, such as anything public, because that requires changing an existing failed business into a successful one, and this is something Americans aren’t great at. Big private oligopolies are in the same boat – the example you give of Boeing is one, and the collapse of the American auto industry is at this point well-known.

      • RossB

        I think the biggest difference between companies and public agencies is that they have different goals. Companies are built to make money. Public agencies are designed to help society. In many cases, companies help society as well, but it is pretty easy to see when they don’t.

        For example, let’s assume that a business titan took over the local bus agency and is given a lump sum subsidy from the city. Anything else they make is pure profit, with the assumption that what benefits the company benefits the city. The first thing he does is break the union. He eliminates most of the midday runs, and focuses on rush hour trips. He then jacks up the fares, knowing full well that well-to-do commuters will pay extra. The system is leaner and more profitable, but worse for the city.

        Obviously not all CEOs are like that, nor are all businesses like that. Some have long term, relatively altruistic goals. There are certainly business practices that government agencies should adopt. But there are just as many that they should avoid. There is a tendency to glorify business leaders in America, and think their business success easily translates to other realms. Our current president is unqualified to hold office, yet this goes ignored in part because he is terrible in so many other ways. The Republicans aren’t alone — the Democrats are flirting with the same fallacy, and giving a businessman with no government experience a chance to debate senators and governors.

        Without a doubt there are things that government agencies can borrow from businesses. It is worth noting that businesses can often borrow from public agencies, just as they borrow from other companies. The V. A. has one of the most cost effective health care systems in the world. It once had the most advance medical record system. But in general, I would say that businesses are better off borrowing from other businesses while public agencies need to look at other agencies (both here and abroad) to improve their practices.

        This is especially true when it comes to hiring practices. Part of the reason is that companies have a higher tolerance for corruption. Many of the extremely bureaucratic rules in government agencies are designed to eliminate things that most companies would just let slide. Part of the problem is the general mistrust of government. Minor problems are considered huge (because it is tax payer money!). Dealing with this effectively is a challenge that is likely common with charities and public agencies, but not with most businesses.

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