“Well written and an interesting perspective.” Clan Rossi --- “Your article is too good about Japanese business pushing nuclear power.” Consulting Group --- “Thank you for the article. It was quite useful for me to wrap up things quickly and effectively.” Taylor Johnson, Credit Union Lobby Management --- “Great information! I love your blog! You always post interesting things!” Jonathan N.

Thursday, November 7, 2013

Blockbuster Dissolves While Netflix Prospers: Evolutionary, Psychological, and Religious Explanations

In November 2013, the world learned that Blockbuster would be closing its remaining 300 video stores and even its DVD/VHS-by-mail service. Meanwhile, Netflix was making a foray into producing programming, effectively leveraging its streaming-video service. Why is it that one group, or company, of people fail to adapt while another seems to easily ride a powerful wave of change without falling? Drawing on evolutionary biology, I provide a context that distinguishes the two companies.[1] Within this framework, I proffer a possible psychological explanation involving the survival of a human being and the self-perpetuation telos (i.e., goal) of human genes.
At one point, Blockbuster had 9,000 stores. The company made the transition to DVD from VHS, yet both the company’s management and that of Dish Network, which bought Blockbuster in 2011 for $320 million at auction when Blockbuster was emerging from chapter 11 bankruptcy, were slow to grasp the velocity of the next generation as evinced in Netflix’s streaming-video online.[2] Even within Netflix, natural selection seems to have been working its way as the company developed a “mutation” of producing programming to rival—and even potentially replace—the television networks’ own programming. That is to say, a punctuated equilibrium, or evolutionary leap instead of gradual, incremental adaptations via slight mutations, can take place within a company rather than only from company to company to company over time.  
Relative to Netflix, even Dish Network can be viewed as being antiquated in its own mutational innovations. People accustomed to the business model wherein for a fee of less than $10 a month, they can receive as much streaming video as they wish would doubtlessly perceive even Dish’s “Blockbuster @Home” add-on (for an extra fee) available to Dish pay-TV customers and the company’s “Blockbuster On Demand” service available to the general public as strangely antiquated. For example, a business practitioner staying at a hotel while travelling could not but see the “On Demand” feature on the room’s television as rightfully belonging to yesteryear as he or she lays down on the bed, laptop perched on the chest, with a streaming movie from Netflix ready to go.
I submit that it is no coincidence that Blockbuster and its acquiring parent company—two groups of people, really—had so much trouble letting go an existing business model and associated strategy even after changes in the industry as well as the business environment had already begun to incapacitate the mindset undergirding the model and supporting strategy. Moreover, a mindset framing a strategic business model is itself lodged in a broader attitude not just regarding change, but also the self. A narcissistic or egoist personality disorder, for example, can be expected to include a proclivity or inclination to hold onto whatever ideology (consisting of values, beliefs, and basic assumptions), belief system (e.g., a creed), and “knowledge” the person has.
The pull of the self to hold onto itself is based on the unity-of-the-self assumption and the instinctual urge to survive. Survival can include the person’s dignity and how he or she is perceived by others. Where concern for the self is excessive even for the person’s own good, the person’s “field of vision,” or perspective, narrows artificially. As a result, the need for strategic change is apt to be missed. Rather than being oriented to finding a means of attaining a punctuated equilibrium, the person (and persons in the same local culture) finds his or her referent in the status quo—in the self-supporting or enabling “substance” composed of ideology, value, belief, attitude, mentality, and even perspective.
In short, people differ in the degree to which they clutch to whatever appears necessary to one’s self-identity and viability (and ultimately survival). A culture can easily form as a few people who clutch at what they “know to be true” at the expense of being invested in change (not to mention being open to or inclined toward it) share or infect other people close by as though via an air-born pathogen. One such culture tends to gravitate toward another like culture. Hence, Blockbuster and Dish Network. Meanwhile, other cultures form on the basis of the meta-assumption that change is good, even (and especially) when it manifests in a dynamic-oriented rather than static personality. Hence, Netflix.
Ironically, an orientation to, and thus value ascribed to, letting go of what a person takes to be crucial for the self to have substance and a supporting or framing architectonic enables the self to grow rather than starve. At a company level, a culture of such people is necessary to being able to serially adapt—not to mention find a punctuated equilibrium (via qualitative change)—especially when change is the only constant in the business environment (i.e., after the Victorian era). When change itself has become the status quo or default, a company’s very survival may entail such a mentality and culture.
Christians may recognize the paradox by thinking of the concept, agape, which is divine self-emptying love. Through grace, the divine love internal to the person manifests as the self’s voluntary self-emptying. This sort of love differs from that of caritas, which is human love. It is directed, or raised up, to eternal moral verities (Plato) or God (Augustine) and fueled by the same energy that manifests as garden-variety lust. After all, hot air rises. Although sex is no stranger to corporate games, it is not, at least from a Christian standpoint, fueling the movement toward change. From an evolutionary standpoint, however, sex (as well as sustenance and shelter) is very much involved in any adaptive inclination. The Christian explanation is in line with what the Buddhists coined as empty your cup.
Whether as a person or group, being focused on emptying one’s cup because only then can it be filled with new fluid is in turn premised on the assumption or belief that the self itself is fluid—like a river continually of water but never the same molecules at the same place. In contrast, the self of a narcissist is like a frozen mill-pond that suffocates any life within.
Whether from the standpoint of natural science or religion, groups of people can be distinguished by their respective attitudes toward change, which in turn reflect differing felt-understandings of the nature of the self and how it can best be fulfilled, protected, or sustained. The people at Blockbuster had to disperse at the possible expense of their livelihoods (i.e., sustenance) even as (and because) they were able to hold onto their firmly-held beliefs and assumptions. Meanwhile, the people at Netflix were not only sustaining themselves, but also prospering; they did so by prizing adaptation and, relatedly, a fluid, and thus adaptive, notion of self that in turn reflects favorably on their own selves, whether from an evolutionary, psychological or religious perspective.  

1. In taking this approach, I am following in the path-breaking footsteps of William Frederick. See William C. Frederick, Natural Corporate Management: From the Big Bang to Wall Street (Sheffield, UK: Greenleaf Publishing, 2012).
2.Roger Yu, “Blockbuster to Shutter U.S. Stores, “ USA Today, November 7, 2013.

Monday, November 4, 2013

The "Federal" Obamacare Marketplace: Could the E.U. Directive Have Helped?

By the end of 2012, the chief executives of twenty-six of the American states had decided not to set up medical-insurance exchanges as part of “Obamacare.” In the absence of such exchanges, the law mandates that the federal government create and run the exchanges itself. To the extent that the states’ rationale is that Obamacare violates the principles of federalism, one subtle consequence of the decision to go with the U.S. Government's internet-marketplace is likely to be more rather than less political consolidation at the expense of the wherewithal of the states and the federal system itself. 

The complete essay is at Essays on Two Federal Empires.

Chief Justice John Roberts: Federalism Beyond Medicaid

“As chief justice, Roberts has been extremely careful with the institutional reputation of the court.” So says one of the lawyers who filed a brief to unhold Obama’s signature health-insurance law of 2012. Even so, the Roberts court had since 2005 cut back on campaign spending limits, gun control laws, procedural protections for criminal defendants, and the government’s authority to take race into account in college admissions decisions. The question of the reach of federal power, which is at the heart of the case on the health-insurance law, has been less salient, particularly relative to the Rehnquist court, according to Sri Srinivasan, principal deputy solicitor general for the U.S. Government at the time of the case.

The last time the U.S. Supreme Court had “ruled that a major piece of economic legislation was beyond Congressional power to regulate commerce was in 1936, when the court struck down minimum-wage and maximum-hour requirements in the coal industry.” Not long after he joined the U.S. Court of Appeals for the District of Columbia Circuit in 2003, Roberts argued unsuccessfully that the commerce clause should not be used by Congress to protect an endangered species—a toad—which “for reasons of its own, lives its entire life in California.” That is at least predominately not an economic objective, however, and the Morrison and Lopez cases in the Rehnquist court had dealt with non-economic objectives through the commerce clause.

                            John Roberts, Chief Justice of the U.S. Supreme Court                       Brendan Hoffman/NYT

Roberts’ general view regarding the commerce clause can be grasped from what he said at his confirmation hearing to be the Chief Justice. “It is a broad grant of power,” he said. Congress “has the authority to determine when issues affecting interstate commerce merit legislative response at the federal level.” If he meant that Congress has the definitive authority to assess whether a proposed Congressional law fits within the commerce clause, Roberts was putting Congress in a conflict of interest in terms of Congressional power.

Concerning the conflict of interest, the vested interest that Congress has in its own authority can be expected to weigh heavily in any self-determination concerning whether the commerce clause applies to a piece of legislation. Separation of powers does not forestall the Court from its responsibility to interpret the U.S. Constitutional through judicial review of Congressional laws. Even if it can be assumed that lawmakers who voted for Obama’s health-insurance law believed the commerce clause justifies the mandate, those lawmakers should not have the final say in judging the matter of their own use of power. Otherwise, there is little in the U.S. Constitution that can limit government, and this is what a constitution does for a living.

Fortunately, Roberts did not leave the matter of the health-insurance mandate to Congressional judgment in the oral arguments. Like some of the other justices, he expressed concern over the power of Congress to create commerce by forcing citizens to purchase a product even so that the manner of payment for healthcare could be better regulated. Such a concern was hardly new. His observation on the following afternoon concerning whether the Congressional expansion of Medicaid violates the states’ sovereignty, and thus federalism, is more stunning as a rebuke on Congressional power.

At issue in the oral arguments over Medicaid was whether the discretion of the Secretary of Health and Human Services to withhold all federal funding for Medicaid should a state government refuse the expansion financed 90 percent by the U.S. Government constitutes coercion. Justice Breyer suggested that such a threat was not rational and thus could not stand as viable discretion, even given the statute’s allowance. However, Justice Scalia pointed out that a statute itself need not be rational. Even if coercion is not involved in offering a gift of federal money, the threat to withhold what the state had been accustomed to receive could constitute coercion because the states had already become dependent on the federal trough.

The reality is, the Chief Justice said, the states have “since the New Deal” cheerfully accepted federal money. “It seems to me that they have compromised their status as independent sovereigns because they are so dependent on what the federal government has done.” He could well have ended his statement with “has given.”  Of course, the “gifts” of federal money have come with strings, and the expansion of Medicaid that was at issue in the oral arguments is no exception. Indeed, the expansion is backed up by an explicit threat of withholding the existing funding should a state government refuse. Beyond the question of whether either the strings or the threat constitute coercion, Justice Roberts’ broad constitutional observation of compromised independent sovereigns transcends the issue of Medicaid. American federalism itself has been compromised.

The state governments, which together constitute a system of government within the federation, have become like dependent vassals from decades of taking money from the General Government of the Union. States implementing federal statutes constitutes decentralized consolidation, not federalism. The federal model constructed in convention in 1787 requires two systems of government, each of which is sovereign in its own domains of power authorized by a constitutional document. A reduction to one sovereign is like collapsing one lung, and the person is compromised. What were to be sovereigns having residual power and able to serve as a check on overreaching by another sovereign, the federal government—one of limited powers—had been compromised by dependency. As salubrious as gift-giving is, if the practice makes others dependent over time, sickness impairing liberty is bound to result.

In a unanimous decision in 2011, Justice Kennedy wrote that limiting the power of the U.S. Government “protects the liberty of all persons within a state by ensuring that laws enacted in excess of delegated governmental power cannot direct or control their actions. By denying any one government complete jurisdiction over all the concerns of public life, federalism protects the liberty of the individual from arbitrary power. When government acts in excess of its lawful powers, that liberty is at stake.” When a government in a federal system of public governance (e.g., the U.S. Government) is allowed to encroach on the domains of another system of government in the federation (e.g., the state governments), the precedent is established by the deed itself whereby the constitutional parchment is relegated or rendered wholly impotent in constraining government. As providing constraints on government is the job of a constitution, the constitutional basis of governance itself is compromised when one government in a federal system gets away with monopolizing the governmental sovereignty. Ultimately, the rule of law is compromised here by power aggrandizement—an addiction to power that operates in denial of constraints.

Regardless of whether the states were at fault in taking so much federal money or Congress had over-reached even in offering the gifts (gifts with strings), the federal system itself is out of balance, or sick, because the states are no longer governmentally sovereign. To prescribe a treatment, the medicinal focus must go beyond questions of fault to arrive at remedies oriented to restoring health to the system as a whole. That is to say, the focus must be on the overall system of federalism. Deferring to the patient (i.e., Congress), saying in effect, heal thyself, is a recipe for death. With the people largely unconscious, the media and popular politics myopic, and the presidency too often issue-oriented and partisan rather than oriented to the whole, Chief Justice John Roberts may hold the fate of the patient in his hands.

Adam Liptak, “In Health Act, Roberts Given Signature Case,” The New York Times, March 12, 2012.

Adam Liptak, “On Day 3, Justices Weigh What-Ifs of Health Ruling,” The New York Times, March 29, 2012. http://www.nytimes.com/2012/03/29/us/justices-ask-if-health-law-is-viable-without-mandate.html?pagewanted=all
Adam Liptak, “Appealing to a Justice’s Notion of Liberty,” The New York Times, March 30, 2012. http://www.nytimes.com/2012/03/30/us/justice-anthony-m-kennedy-may-be-key-to-health-law-ruling.html