I was one of those kids obsessed with counting stuff.
I collected business cards, and kept a running daily tally, stopping only when I reached 10,000, and after a friend of the family asked me why I was wasting my time on that when I could be learning a new language. I timed how long it took me to walk home from the subway stop in Toronto where we lived, logging my times in a notebook and getting a strange satisfaction out of beating my previous record by 15 seconds. I counted all books in the Hardy Boys series I avidly consumed. In fact, in high school, I began keeping a list of every book I read, a habit that continues 35 years later.
Starting in eighth grade, I began tracking my own modest earnings and expenses. Perhaps an early sign of fastidiousness that I periodically worked to overcome via reckless teenage stunts. (but our family still keeps a budget). In my twenties, my focus shifted to beating my personal best marathon time. I mostly didn’t set specific targets for myself. It was more about watching the numbers grow, or shrink, as the case may be. The intrinsic awards were enough. They pushed me to do better.
All that is fine and good. It is a truism that numbers affect our priorities and our actions. The standard way to judge success is by setting targets and measuring achievements.
Targets can be internal – a New Year’s resolution to lose 20 pounds next year, or do 40 squats per day. The proliferation of fitness apps that track how many steps you take every day, how many hours you sleep at night, and other metabolic processes – although of dubious reliability – are all the rage. All of these things drive behavior, in relatively benign ways.
Targets can also be external, of course, such as those set by a business, as in monthly sales targets or daily active users. In the development field, projects use results frameworks with a detailed breakdown of quantitative targets against which project goals are measured. These are all instances of using numerical targets to drive decisions.
Easily quantifiable targets are powerful motivators. Numbers are probably so compelling because they are, or at least seem, objective. They are mental shortcuts that are easy to “get.” They focus the mind, guide strategy, and help plan for the future.
Beware of the quantitative bias trap
What’s not to like about them? Well, quantitative targets, if not used carefully, and when not balanced by other goals, can lead to distorted outcomes. They can affect behavior in pernicious ways as well. The wrong incentives – divorced of context and isolated from other, less quantifiable goals – can have negative unintended consequences.
So it is that studies of the benefits of sleep tracking apps, that quantify hours of rest and create benchmarks in users minds (I have to get my eight hours in!) have found using them often worsens sleep quality. People become more anxious and stressed when the app shows they are not hitting their sleep target, even while the ability of these apps to correctly measure sleep has been called into question.
The observation that using numbers as targets has negative side effects has been made famous by the British economist Charles Goodhart. In what has become known as Goodhart’s Law, he states that “when a measure becomes a target, it ceases to be a good measure.” Why is this so? One of thinking about it is that ways are found of hitting the target that hurt or distort other important goals. Other aspects of a plan or policy may get deprioritized, given less funding. Anything that doesn’t have a target on its back loses the appeal of the hunt, and risks falling by the wayside.
Campbell’s Law, named after the social psychologist and experimental evaluation pioneer Donald Campbell, is a variation of this: “the more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.”
This is just not a management issue – it can have life and death consequences.
Back in 1993, Domino’s Pizza scrapped its 30 minutes or its free guarantee when it became clear the company was were putting drivers’ safety at risk (and after they lost a $79 million court judgment).
Which brings us to the current upheaval shaking the country and the world and the world: the bolt of awareness around racial injustice and police brutality sparked by the May 25 killing of George Floyd.
A recent Voxarticle on key police reforms in the wake of the Michael Brown killing in Ferguson, Missouri, reported that when the Justice Department investigated the Ferguson Police Department in response to the protests, it found that police “were encouraged to ticket as many people as possible with the explicit goal of raising as much revenue as possible from fines and fees. But to do this, police targeted the most vulnerable — mainly, black residents — with frivolous charges.”
While quotas of this type have been declared in some states, and departments won’t admit to using them, New York Police Department whistleblowers reported that, in order to meet their quotas, officers would often go after groups that have little political power.
This is one way that the numbers game turns ugly: targets and distorted power relations are a formula for disaster. A man with a gun – and a number in his head – versus a group without a voice.
It is unclear how much unwritten quotas, or the mere desire to get more “points,” drives police behavior. Maybe death is not the most common outcome, but it is not hard to see how this potent cocktail pricks at the wounds of racial injustice.
To put it plainly – when quantitative targets are the sole priority, qualitative aspects such as, well, dignity, freedom, and safety, to name a few, get undermined. These are unintended consequences, which make life a little worse, in the best case scenario. However, as we have seen, they also have potential strengthen systems of inequality and oppression, leading to the death of at least some.
Numbers matter. They drive us toward goals. I was a young counting aficionado and it did me little harm and maybe some good. But equally important are putting guardrails in place so that we don’t let numbers blind us, or others, to what actually matters.
Not only is the coronavirus assaulting our bodies, killing thousands, which is bad enough. It is also attacking our social and economic structures.
Scientists have found that once it enters the body, COVID-19 is capable of attacking almost any organ, with devastating consequences. It is doing something very similar to our economic systems.
Your money or your life
During the spring and summer of 2020, in the depths of the coronavirus crisis, human contact has become potentially life-threatening. Going to church, concerts, restaurants, ball games, just hanging out with friends…all the things that bring us together became potentially lethal, and were ordered to shut down. The slow pace of reopening and the hesitant return to normal life in many places highlights the ongoing fears people have of becoming infected.
The coronavirus has led to many needless deaths, in the sense that researchers have estimated locking down earlier could have saved tens of thousands of lives, notably in the US, UK, Brazil, Russia and other countries. In many countries, either by going into lockdown too late, or opening up too early, the health of the economy seems to have been given precedence over the health of the population.
Is there an inherent de-prioritizing of human life in some societies? If we consider just the US, the answer would seem to be yes. Add up the opioid deaths (67,000 in 2018) fatal shootings (over 15,000 in 2018), civilians killed by police (about 1,000 per year) not to mention falling life expectancy (a phenomenon unique among developed countries), one cannot but wonder whey so little has been done to address these types of deaths.
The disregard toward human life was not new, but has come into sharp relief during the crisis, which has so far claimed over 115,00 American lives (out of at least 420,000 worldwide).
Calculating risks
Of course, it is true that a balance must be struck between staying safe and living life. To quote Jean-Paul Sartre “to know what life is worth you have to risk it once in a while.”
There is a risk calculus to everything we do. We’re always making trade-offs. Shut economies down too tightly and for too long and the side-effects can start turning lethal. Clearly, the health of the economy indirectly affects our personal health as well. People avoid going to the hospital, women in abusive relationships are further endangered, the poor run out of food.
However, in some countries, as the crisis dragged on it became clear that leaders, keeping an eye on the election cycle and the stock market, have been cavalier about the human costs. The default justifications for doing too little were either professed beliefs that COVID-19 is not that serious, perhaps even a hoax? Or that people’s freedom should not be curtailed.
What does the coronavirus threat mean for society? Specifically, what does it mean for the capitalist system, to which most of the world’s countries adhere to one degree or another? One could argue that, amid the economic havoc it has caused, and the many needless deaths, the virus also presents us with an opportunity. An opportunity to shift our focus away from materialism, consumerism, profits and share prices, and place greater value on human aspects.
I will argue that this would not be wide-eyed, new age attitude, but a smart investment in one of the under-appreciated pillars of capitalism – human capital. And it is precisely human capital that the coronavirus is attacking.
Capitalism’s foundations
According to economic theory, capitalism is based on three factors: capital, labor and land. The first two, capital and labor, have been severely damaged by coronavirus.
With labor, the impact is obvious. Millions have lost their jobs and a large share of those jobs will never come back. Many businesses have shut their doors forever, others are having to adjust to diminished sales as customer numbers fall. Still more are rebalancing how they combine labor and technology and accelerating the move to automation.
What about capital? In economic terms capital is an asset, a good. Traditionally, capital is considered the physical and financial material necessary for producing goods and creating wealth. Capital is the raw material to be transformed into things we use and things we consume. This process of capital extraction and transformation produces new value.
In simple terms, labor and technology are the skills, energy and tools used to create surplus value from that capital. We take a basically inert substance, matter, and process it into something useful and more valuable than before.
Mix in property rights and freedom of exchange, and in very broad terms you have the basic building blocks of a capitalist system.
Human capital
In the 1950s the concept of capital was expanded beyond the physical and financial to what was called human capital. This refers to the health, education, and social networks of a population. This capital is not visible, per se, but it is a very valuable asset. Simply put, being educated, healthy and connected with others helps all of us to live better lives.
Human capital also increases productivity, it makes the labor input more efficient and effective. Without human capital, physical and financial capital are not very useful, although technology is able to substitute for human capital for certain tasks, as production processes become automated.
Another type of capital is social capital. This is formed out of the contacts which individuals have with others, their networks. These can also be extremely valuable. The Kyrgyz have a saying (which was used for the title of a World Bank study on the importance of social networks in that country): better a hundred friends than a hundred rubles.
COVID’s attack on capital
It is precisely the three core elements of human capital — health, education, and social networks — which COVID-19 has so successfully attacked.
In terms of health, it has infected over 6 million people, and killed over 400,000 as of early June 2020. On the education front, the virus has hobbled our schools, weakened the ability of children and university students to learn. And when it comes to networks — the confinement, social isolation, and closure of restaurants, bars and churches has severely restricted our human contact. And for the roughly 50% of the global population that is without internet access or smartphones, it has degraded their social interactions. Not everyone spends their days in Zoom meetings or happy hours.
Of course, even before the crisis, it seems our society gave greater weight to financial capital than to the health or education of our population. One could argue that police killings of unarmed African Americans, and the apparent disregard among police for human rights that have become apparent during the protests are yet another indicator that in America the interests of society take second place to other interests. (On could say that “black” human capital is valued less than “white” human capital.)
After the 2008 financial crisis, government bailed out the banks, not ordinary people. The numbers that we track are financial — the Dow Jones, GDP, interest rates.
Why don’t we take as much care of our human capital as we do of our financial capital? Somehow, we’ve let ourselves, as a society, become focused on efficiencies, cost savings, share prices and shareholder value. It has come to seem normal to many people.
Just referring to the US healthcare system and the health of the population as an example — are people truly free if they face the threat of catastrophic health bills should they become sick? Is it good for capitalism when labor is hobbled in this way?
Undervaluing human health and education
Human capital is intangible. Is it because economists have trouble measuring it, that we undervalue it? (For example, it is fairly easy to track years of schooling, it is more difficult to measure the quality of education, i.e. how much children are actually learning.) Is it because financial and business interests largely control our political processes? A combination of the above?
Why, for example, does health insurance have to be linked to be employment, as is the case in the US? Why do we in the US, have a system where millions still don’t have health insurance when all other rich countries do? A lot of people are afraid to leave their jobs because they depend on them for health insurance. That can hardly be called freedom of movement, an essential element of a free market system which the US prides itself on having. It is not optimal for the free market. Staying in a job you’d rather leave doesn’t stimulate risk-taking and innovation, two prized elements of the free market system.
It is not that we can’t afford it — the US spends more money on healthcare per capita than any country in the world. It just does not spend it very well. Life expectancy is lower than all other rich nations and, as noted above, has been falling for four years (it finally ticked up again in 2019).
Opposition to guaranteeing health cannot stem from some love for unfettered free markets, or an aversion to government support. Medicare is huge and popular! And we are happy to bail out financial institutions, businesses, car companies, when they were on the brink of collapse in 2009. We always seem happy to lavish support on the private sector in the form of tax cuts and tax breaks.
Now, it’s true that trillions of dollars in stimulus funding have been passed on to citizens. But this is a reaction to the crisis. Why should we not take better care of human capital during the good times as well?
An opportunity to change?
Let’s hope that the assault on human capital by COVID-19 will lead to a shift in values. A shift away from fixating on financial capital toward human capital.
What I would hope arises from this is a different way of thinking, a more human-centric attitude toward capitalism.
Under such a human-centric capital system, as much weight would be given to human capital as it is to physical and financial capital. This may seem an obvious choice to many liberals. However, the shift will only take place if the die-hard free market, pro-business factions come to recognize it as well: that human capital — a healthy, educated population — is valuable, should be cared for and protected. Just like a company’s bottom line. That would be a kind of victory, and a metric worth tracking.
