The Little “Nudges” that Would Make Even Churchill Proud
Last week, thanks to Kieron Boyle, Head of Social Finance and Investment at the UK Cabinet Office, who I was introduced to by Jonathan Greenblatt, head of the White House Office of Social Innovation and special assistant to President Obama, I had the privilege of visiting 10 Downing Street with a group of BLK SHP from the U.S. and the U.K. to discuss innovation, entrepreneurship, and social entrepreneurship with senior advisers to the Prime Minister and the UK Cabinet. It was a fascinating visit. As England teeters on the verge of a triple-dip recession, I actually came away inspired by the creative approaches and experiments leaders and people are now taking there. What follows below are some synthesized observations and insights.
Originally published on Forbes.
If there’s a bell curve of risk aversion by sector, government and philanthropy are at the far right end (by far). A high-level American diplomat recently described to me the risk aversion in Washington these days as “paranoia,” a fear of failure or making a mistake that leads to a state of near paralysis. Innovation and entrepreneurship are all but non-existent in Washington at a time when reinvention and renewal is needed most.
Yet, hard as it may be to believe given the current state of affairs, a trip to London and Number 10 Downing Street last week has given me renewed optimism that changes may be starting to bubble from the bottom up, in small yet significant ways. The insights come just in time for second-term Obama Administration officials to pay heed.
After all, being President is a thankless and nearly impossible job. While I have been vocal in challenging the Obama Administration to listen and collaborate better, you’re damned if you do, and you’re damned if you don’t these days.
Before turning to the optimistic news, here’s some background about thinking differently about the second-term innovation strategy.
Take government investment in new technology. The history of technology and Silicon Valley is closely linked to government investment and research monies sparking new industries. Hewlett Packard originally relied on government contracts to fund radio frequency technology research, while National Science Foundation grants helped fund Google’s early days.
While the Obama Administration should be applauded for its leadership and courage for investing in renewable energy, the problem with a strategy of making a lot of big bets is that one (really) bad big bet on Solyndra, which received a $535 million loan guarantee from the Department of Energy, became the object of pervasive and prolonged criticism.
Interestingly, the strategy of betting big, rather than small, is one of the signs that corporate innovation researchers Clayton Christensen and Jim Collins have found signals a risk of systemic organizational and financial decline. *(For more detail on these topics and problems, see The Innovators Solution By Christensen and Michael Raynor and How the Mighty Fall by Collins.)
Given the brutal context of national political discourse, it’s of little wonder that I don’t know of more than a handful of very talented people in my generation who have an interest in pursuing roles in government or running for office. I literally don’t know more than 10 people, and I’m fortunate to know many rising GenX and Millennial stars from my research and various experiences. The ones who hold a strong interest for politics and public life seem to be mostly driven by external ideas of who they are, rather than an authentic connection to either themselves or average citizens. That’s certainly different from most (though not all) past American eras, where an ethic of public service ran deep and was honorable.
The institutional problems are deep and systemic. The state of the media, lack of accountability within social institutions, and a well-documented corruption in the plutocracy, all reflections our cultural priorities, surely deserve significant blame. *(For more insight and analysis on these topics, I would recommend That Used to Be Us by Thomas Friedman and Michael Mandelbaum, and It’s Even Worse Than It Looks by congressional scholars Thomas Mann and Norm Ornstein.)
In what is likely the beginning of a painful triple-dip recession in England, compounded by an era of often ill conceived and poorly executed austerity measures, the middle and lower classes are hanging on by a thread.
Just ask the team at Shelter, a leading UK charity that provides a bevvy of services to keep people in their homes. Decimated by the previous recessions, these families have lost all their savings and are losing their homes in droves. Unlike in Continental Europe, there doesn’t seem to be much of a welfare state remaining in England, the only apparent safety net is a room with four walls. Who helps these people? Shelter, but its budgets are being slashed by austerity measures. Dickens would have a field day.
Just as innovation dries up the farther away decision-makers are from the problems they are trying to solve, and companies struggle when they begin to replace experimental cultures with that made them successful as entrepreneurial ventures with controls, processes, and systems, the problems in England are highly localized.
Senior UK policy makers (who are typically trained as statisticians, policy-makers, lawyers, or economists) often understand the limits of their policy-making ability sitting in Number 10 or nearby. Their hearts are in the right place and they want to solve citizens’ problems in new and innovative ways, yet they need political air cover from the Prime Minister and senior political leaders, as well as support from many other stakeholders to keep their ideas afloat.
Those closest to power in England will tell you that in this era, there’s an enormous need for innovation to come from outside government. Simply put: federal government cannot turn these deep-seeded social and economic problems around alone. What is needed is a new era of openness and collaboration across sectors – social entrepreneurship is truly rising to the fore across both sides of the Atlantic.
Alas, finally it must seem for patient readers, here is where the optimistic part begins. As Tip O’Neil famously put it: “All politics is local.” As problems and funding decisions get pushed down in an era of devolution of power, we’re seeing local councils in England start to innovate and experiment with fresh approaches to solving citizen problems, from the bottom up rather than the top down. We’re seeing that same pattern here in the United States as mayors and governors become the focal points for discovering new ways of administering, funding, and servicing Medicare, Medicaid, and the like.
Akin to the entrepreneurial philosophy of making small bets to discover creative approaches to serving needs, solving problems, and finding opportunities, experimentation has arrived to the federal ranks of England in the form of a black sheep idea: a “Behavioural Insights Team.”
This arm of the UK Cabinet Office, led by the respected academic, thought-leader, and social entrepreneur David Halpern, was established by David Cameron in 2010: “with a remit to find innovative ways of encouraging, enabling and supporting people to make better choices for themselves.”
The unit experiments like mad on everything from how to type tax collection letters in order to maximize participation to how to improve energy efficiency. Halpern and senior policy-making colleagues often reference Nudge by Richard Thaler and Cass Sunstein. Thaler has served as an advisor to the unit and the approach seems to be working, with results that include collecting an extra £200m of income tax and increasing payment rates by 15% after telling late payers in letters that their neighbors had paid their taxes. In addition, they’re finding good results from experiments in getting people into jobs 15-20% sooner in Essex borrowing from insights within US Elections data.
Critics in the press naturally ridicule the team, nicknamed the “nudge unit,” from time to time, yet Halpern’s credibility in influence circles only seems to be growing with the results.
Little things can often lead to large gains. Behavioral economists are developing their thinking and models on this front – what entrepreneurs and social entrepreneurs do in their sleep. It’s not only common sense, as I wrote in Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, an experimental approach to innovation is the only empirical way to keep innovating as an individual, organization or society.
Although I am no fan of top down austerity, David Cameron earned an important measure of respect from me this week for empowering an arguably quirky approach to solving problems in a new and different way. In such bleak times, he doesn’t have much of a choice, and that’s a good thing. We need a hell of a lot more black sheep like David Halpern working on the side of citizens with experiments if we’re going to begin to restore their faith in federal institutions. I’ll bet that Sir Winston Churchill would be quite proud. Perhaps we Americans can learn from our friends across the Pond. It wouldn’t be the first time.
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