Marina Gorbis's Blog, page 1567

Working Fathers Need Balance, Too

An interview with Joan C. Williams, Distinguished Professor of Law at the University of California and coauthor of the forthcoming book, What Works for Women at Work: Four Patterns Every Woman Should Know.

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A written transcript will be available by August 20.

Can Jeff Bezos and John Henry Teach Old Media New Tricks?

Transformationally speaking, technological innovation is easy. Culture change is not. Jeff Bezos knows this. If he wants to kindle his newly-acquired Washington Post into Amazon Prime, he's free to do so. Technically enhancing the Post will be a digital snap. Getting his paper — pun intended — to adopt, adapt to or embrace an authentically customer-centric Bezosian vision, however, will prove very, very hard.

The reasons for that resistance will have little to do with money but almost everything to do with the Post's proud, defiantly elitist and self-righteously professional self-image (a self-image equally ensconced in papers like The New York Times, The Boston Globe and Los Angeles Times, as well). That prideful culture is simultaneously responsible for the paper's greatest successes and most humiliating journalistic and commercial failures.

As a former reporter and columnist there, I genuinely admired and respected both my newsroom colleagues and our business counterparts. But the Post's brave new entrepreneurial owner undeniably embodies two values that were never part of the paper's cultural norms: (1) being data-driven and (2) providing measurably superior customer experience. That's simply not what newspapers do.

Almost everything that makes Jeff Bezos Jeff Bezos as an innovator is organizationally alien to what made The Washington Post The Washington Post as a newspaper. At the Post, reporters report, editors edit and ad sales people sell ads. Journalists tell stories and report news; they don't do UX. Newspapers are indeed in information and digital content businesses. But their decision-making is typically far less data-driven than the big box retailers whose advertising they're so desperate to get. As a rule, newspapers know less about their readers and advertisers than an Amazon, Google or Facebook does.

These institutions built their brands not by focusing on customer experience or using strategic analytics but by successfully defining the most important and newsworthy stories in their communities and beyond. Those days are officially gone. So are the business models that made them profitable. The competition has both bigger and better data while offering much better customer experiences. There's little these papers do that deserves to command a marketplace premium from customers.

Serious innovators look to Amazon, not The Washington Post, The New York Times, The Wall Street Journal or The Boston Globe for innovation inspiration. Being a better newspaper or having better reporters, editors, web masters and ad salespeople doesn't solve the problem. They're no longer fit for purpose. The whole is worth less than the sum of its diminishing parts.

So when Bezos writes, "We will need to invent, which means we will need to experiment. Our touchstone will be readers, understanding what they care about — government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports — and working backwards from there. I'm excited and optimistic about the opportunity for invention," he effectively acknowledges that the status quo he purchased is unsustainable and — more importantly — existing cultural norms cannot endure. Can elite — and elitist — journalists who professionally prefer to tell readers what's important reinvent themselves as interlocutors and explainers who can digitally engage to inform? Will editors who've learned how to motivate prima donna reporters be able to turn themselves into "crowdsourcing shepherds" capable of tapping the collective intelligence of reader communities into stories everyone tweets, links to and talks about? Can people who went into publishing precisely because there was no math learn how to take statistical advantage of petabytes of data to better customize, personalize or illuminate a customer app or experience? Will an industry that has institutionally treated customer feedback as an irritant — look at the online comments section of any major newspaper — finally have the wit and innovation to monetize their readers' best, brightest and most provocative comments?

The answers, as Bezos surely knows, have little to do with the Post's technical abilities to interoperate with Amazon Web Services and everything to do with profound cultural transformation. You can't lead at Amazon unless you're willing to be data-driven and relentlessly invested in improving customer experience. Will that Bezosian ethos be true for the Post in three or four years? Or will Amazon's founder be demonized and dismissed as someone who "just doesn't get" what elite journalism is supposed to mean?

These cultural challenges aren't unique to the Post; they're endemic to the industry. Nate Silver, arguably the most innovative data-driven journo-blogger in America, recently left The New York Times for ESPN. John Henry, the billionaire investor who brought Bill James and "Moneyball" insight to the Boston Red Sox — and winning the World Series in the process — just purchased The Boston Globe from The New York Times Company. Could a Bill James/Moneyball approach transform newsroom culture and best practice much the way it did for baseball? Of course. Then again, there's already a Bill James/Moneyball innovator in the daily news business; it's called Google. Bezos knows about competing with them, too.

For now, Bezos is keeping the current leadership of the Post in place. The Washington Post I know was a "lead by example" place. What data-driven decision and customer experience leadership examples will they now set? What do they want to learn from their new owner to help transform their old newspaper? How will they reinvent themselves?

Because if the paper's leaders don't embrace and enact Bezos' values, you can be sure the newsroom won't either. That would truly be the end.

The Cyber Threat to Your Business

Cyber threats are growing in their frequency and severity, and every organization in both the public and private sector is at risk.

In this HBR webinar, cyber security expert Scott Shackelford reviews the many different types of cyber risks that exist, the international dimension to these risks, and how to best assess and manage these risks. Shackelford focuses on traditional categories of cyber crime and analyzes how cyber threats are impacting different industry sectors.

Millennial Women Aren't Opting Out; They're Doubling Down

Wonks have zeroed in on a detail of last Friday's lackluster jobs report and a recent report from the Urban Institute to discuss a notable data point: a small decline in the number of twentysomething women entering the workforce. Ezra Klein and Evan Soltas of the Washington Post write, "In particular, [labor force entry has] suffered among women — and it's really suffered among young women — who are a lot less likely to enter the labor force than they were in 2002 and 2003."

The question is: why?

As Papa Kwaku Osei at Quartz writes, "The labor force participation rate hasn't been falling because of discouraged workers, but because the very people who used to look for jobs are now choosing to go to college. And most of them are female millennials." This is interesting from the perspective of the jobs report, but let's not lose the bigger picture: the trend toward higher college enrollment among women dwarfs the decline in labor force participation. Indeed, while the Quartz slug reads "opt out," these women are actually doubling down.

This investment in education makes sound economic sense. While the youth unemployment rate has remained high, post-recession, the more education you have the more likely you are to work. "For those [aged 16-24] with less than a high school diploma, 14 percent worked full-time, compared to 66 percent with a bachelor's degree or higher," notes Diana G. Carew at the Progressive Policy Institute.

Indeed, when you look at the rate at which young women have flocked to college in the last ten years, and compare it with the rate at which they're delaying entry into the workforce, you realize that most of these women are working and attending college at the same time.

This raises a bigger question. Why does our monthly jobs conversation cover such a paltry part of the picture? It's well known, at this point, that the headline unemployment rate only covers those who are actively seeking work — thus, discouraged job-seekers aren't even counted. For a fuller picture you have to dig deeper into the Bureau of Labor Statistics' monthly report to get at "alternative measures of labor utilization" such as U-5 and U-6 unemployment. Most media coverage of the jobs report still mentions only the headline number, although the pieces cited above are good examples of trying to get beyond it.

But even nuanced coverage struggles to get beyond the measurement limitations of the jobs report. It doesn't cover those who are either actively improving their marketable skills in college (and most of the women in college are not studying liberal arts topics at $40,000-a-year universities, but studying pharmacy or medical technology or other immediately practical subjects at more reasonably priced community colleges). It also doesn't include people who are actively contributing to GDP by working as volunteers or interns — roles that have become increasingly attractive to cost-cutting companies, and to experience-desperate would-be workforce entrants.

The employment picture for America's twentysomethings is grim enough, with a youth unemployment rate that has been in the double digits since 2008. That's a pretty big hurdle to overcome whether you are female or male.

But perhaps the lesson we should be taking from this "nontroversial" jobs report is that the news isn't all bad. In fact, some of what looks like bad news might actually be a sensible investment in the future, when there are few other options on the table.

A Question That Can Change Your Life

For years I've exercised every day — doing weights, cardio, yoga — but despite my continuous effort, I haven't seen much change.

Until a few months ago.

Recently, my body has changed. My muscles are stronger, more defined, and I've lost five pounds along with a visible layer of fat. So what did I do differently?

Let's start with what I didn't do: Spend more time exercising. In fact, I've spent less. What I did change is how I use the time I spend working out.

Instead of doing the same old workout, day after day, I'm mixing it up with new routines. I'm focusing my effort more wisely — confusing my muscles with different exercises, adding balance challenges, power moves, and intervals.

The rapid results I achieved by changing my exercise routine made something very clear to me: We habitually squander time and effort on behaviors that do little to move us toward the outcomes we're seeking. Spending an hour on a treadmill watching TV had no visible impact on my fitness. But when I used that hour differently, I saw improvement.

It's not that we're lazy. We put effort into what we do. I ran on the treadmill every day. But, like my daily run, our efforts often don't translate into optimum results.

The basic principle is simple: We're already spending a certain amount of time doing things — in meetings, managing businesses, writing emails, making decisions. If we could just make a higher impact during that time, it's all upside with no cost.

So here's the question I'd like to propose you ask yourself throughout your day: What can I do, right now, that would be the most powerful use of this moment?

What can I say? What action can I take? What question can I ask? What issue can I bring up? What decision can I make that would have the greatest impact?

Asking these questions — and answering them honestly — is the path to choosing new actions that could bring better outcomes. The hard part is following through on the answers and taking the risks to reap the full benefits of each moment. That takes courage. But it's also what brings the payoff.

I was once sitting in a meeting with the CEO of a large bank and his head of HR. Right before the meeting, the CEO had told me that he had lost confidence in his HR chief after he had made a number of blunders without accepting any responsibility. "He really needs to go," the CEO told me.

Then, during the meeting, the head of HR asked the CEO for feedback. He's opened the door, I thought to myself. But the CEO said nothing. That led to more dysfunction as the head of HR stayed on, continuing to disappoint the CEO, but without getting straight feedback.

It's easy to judge the CEO. And he certainly should have been bolder. But how many of us miss similar opportunities out of fear or nervousness or even simply concern for hurting other people's feelings?

While the CEO's missed opportunity was a glaring omission with painful consequences, it is, unfortunately, not unusual.

There's some good reason for that: Sometimes the bold move can backfire. I know a similar situation to the one above, where a VP level person asked her employee for feedback, but when the employee answered honestly, he was shunned and treated poorly afterwards.

Rejection, failure, even ridicule — those are the risks of making the most powerful use of a moment. But in my experience, boldness, combined with skilled communication, almost always pays off because it moves the energy of a situation and creates new possibilities in otherwise old ruts.

Having the courage to take the kind of bold action that creates new opportunities is, possibly, the most critical skill a leader can have. It's why leadership development should involve experiences that hone emotional courage, and the communication abilities necessary to use it productively.

I recently saw a short video that perfectly illustrates the risk-reward payoff of courageously using a moment well. Billy Joel was speaking at Vanderbilt University when a young student, Michael Pollack, raised his hand. When Joel called on him, Michael asked if he could play the piano to accompany the musician for a song. A silence followed. Michael had taken a big risk just by asking and you could feel the tension and suspense in the room. After a pause, Joel said "OK" and the video of their astounding spontaneous collaboration has now been viewed over 2.5 million times.

How often have you been in a similar situation, at one time or another, wanting to say something or do something, yet letting the moment pass by? Next time you're in that situation, pay attention to it. Notice the feelings that come along with it. Observe the physical sensations in your body. Can you feel your heart beating? Can you connect with the conflicting urges to act and not to? Getting in touch with those feelings is the first step to acting in the face of them.

Woody Allen famously said that 80% of success is showing up. Maybe that's true. But, if it is, then I'd say the other 20% is the most important. Simply showing up and watching TV on a treadmill — that's not enough. Your greatest opportunity is to use your time in a way that will garner the most productive return. To take risks that will shake things up.

What can you do, right now, that would be the most powerful use of this moment?

Emerging-Market Engineers Power Global Innovation

Recently, Thomson-Reuters published its latest list of the Top 100 Global Innovators honoring the leading organizations and companies most responsible for sizeable, influential patents worldwide. A quick scan of the list indicates that all 100 organizations are located in developed countries. The United States has 47 entries, Japan 25, Western Europe 21, and South Korea 7.

From this list, some readers may infer that innovation is largely the realm of engineers and scientists working in developed countries for large companies, assuming that innovators from countries such as India and China don't matter after all. While we believe that Thomson-Reuters' methodology is meticulous and logical, we warn against this faulty assumption. Here are three main reasons why.

Captive R&D Centers

First, many of the Top Innovators employ engineers in emerging countries such as India and China. The Lullaby Baby Warmer engineered and built by GE Healthcare engineers sells well in Europe—but engineers in India designed the device. Working at Google's India labs, Lalitesh Katragadda and Manik Gupta conceived of and designed Map Maker, a popular online application that enables users to correct and enhance maps. (Even before the US government released photos of the site of Osama Bin Laden's final hideout, users worldwide pinpointed the location using Map Maker.) We estimate that tens of thousands of engineers and scientists working for top innovators are actually located in their offshore technical centers in the BRIC countries (Brazil, Russia, India, and China); these are often called "captive" R&D centers or offshore R&D locations. And this estimate does not count legions of foreign-born and foreign-educated techies who populate R&D centers in hotspots such as Silicon Valley. Over the next decade such engineers from emerging countries will play an increasing role in global innovation. Some will continue to work for their current Western employers, while others may lead startups or help catapult Chinese and Indian companies to higher positions in the innovation value chain.

The Top 100 Innovators also benefit from combining the power of their brands with the patents and engineering skills of third parties. Until the early 1980s, most innovation was performed inside the four walls of large corporate central labs; AT&T's Bell Labs in New Jersey, 3M's Innovation Center in Minnesota, and the Skunk Works of Lockheed Martin are among the legends of innovative horsepower of large corporations. Our next two insights examine ways in which this lab-centric innovation model has changed.

Offshore Outsourced Product Development

Let's examine one specific aspect of Otis Elevator, a unit of the Top 100 innovator United Technologies Corp. The 161-year-old Connecticut company is the world's largest designer and builder of vertical transportation systems such as escalators and elevators. Its Gen2 "machine-room-less" product replaced woven ropes with flat polyurethane-coated steel belts for savings in noise, energy consumption, and space, eliminating the traditional rooftop "machine room." (One critical element of high-capacity belt elevators is the load bearing termination assembly, which must withstand starting and stopping loads of up to six times the stated weight capacity of the device.) Six of the eight inventors of this Otis patent are Indian. In fact, these six Indian engineers were not employees of Otis at all, but rather on the payroll of an outsourced product development company headquartered in Andhra Pradesh, India. We are not saying that Otis' American engineers are not innovative—the bulk of the breakthroughs of next-generation products originated inside the company—but forward-looking leaders at United Technologies recognize that engineers in faraway places and some who may work for third parties can also contribute brilliance to Otis' product line.

We are suggesting that companies like Otis who embrace such external brilliance will have a compelling competitive advantage over those innovators who continue to look exclusively inward. Offshore outsourced product development gets less press than outsourced IT and call centers, but it has the ability to create additional revenues for nimble innovators. According to a Booz study, such external R&D in India alone will exceed $37 billion annually by 2020.

Original Design Manufacturers

Finally, much of the innovation currently marketed by the big brands originates in relatively quiet and often unnamed Original Design Manufacturers (ODMs). For example, many notebook computers are designed and built by Compal Electronics of Taiwan. The company's clients include Top 100 Innovators such as Hewlett Packard, Fujitsu, Siemens, Sony, and Toshiba. Another Taiwanese ODM, Quanta Computer, serves innovators such as Apple.

Another ODM, Jabil Circuit, headquartered in Florida, is not exactly a household name. But the $16 billion company operates in 60 countries, including Shenzhen, China, and Pune, India, employing a large number of engineers. Jabil and its peers often simplify the work of design, engineering, and innovation for their clients by creating "reference designs" that can be tailored by the big brands. One such example is a rack-mounted storage server system for the "cloud computing" market. Known as Sandy Creek, the design combined the Intel Xeon enterprise chip with current storage technologies, and was intended to be sold by Jabil's clients and not by Jabil itself. In another example, as illumination powered by light-emitting diodes (LEDs) has become mainstream, Jabil's materials engineers created a novel heat sink made from conductive plastic to keep the LEDs from overheating. In both examples, Jabil created a new product capability.

Utilizing the ODMs has enabled many well-known innovative companies to magnify their power in the marketplace and conserve their own engineering talent for their most crucial projects that cannot be outsourced.

The number of patents awarded to an organization is seldom the sole measure of its home country's level of innovation. American innovation is often powered by the willingness of many corporate and technical leaders to embrace good ideas from anywhere in the world. Whether good ideas originated inside a company or country, the ability to convert these ideas to market-shaping products in a globally competitive environment ultimately determines long term success. Innovators from emerging countries will increasingly play a larger role in all our lives.

The Building Blocks of Successful Corporate IT

The job of Chief Information Officer has never exactly been easy. But massive disruptions in business models, technology, and the work force have been throwing up massive new challenges for CIOs and other technology leaders.

Their organizations face disruption from both traditional and non-traditional competitors, and constant change. If they work for a product company, it may be looking to services revenue for growth. If they work for a service firm, it's probably seeking new revenue from information-based differentiation. Meanwhile, information-based businesses — which used to sell, you know, information — now sell outcomes and peace of mind. We are in the midst of a digital business transformation in all industries.

On the technology front, the CIO's once-tight hold on the devices and software employees use has evaporated (except perhaps in the financial world, where regulation keeps legacy systems in place) as markedly better and more adaptable consumer tools have conquered the workplace.

Meanwhile, CIOs must cope with five generations of workers — digital natives, digital immigrants, digital vagabonds, digital voyeurs, and analog holdouts — must work side by side. These workers bring different values on how to work, where to work, what to work on, when to work, and even why they work.

Consequently, CIOs and business leaders with a technology focus face more cacophony and challenge than ever before. On the plus side, though, they can play an increasingly key role in orchestrating and driving overall organizational success. Despite outward differences by industry, organizational size, and geography, we've seen certain commonalities in those who successfully lead corporate IT amid rapid change. The persona of the next-generation CIO is evolving from Chief Infrastructure Officer through Chief Integration Officer and Chief Intelligence Officer to Chief Innovation Officer. Skill sets are changing and IT leaders must adapt or die (or at least go into another line of work).

Understand the three organizational building blocks

Many CIOs are of course already well aware of all this. Others in their organizations, however, are often less so. In our research and CXO panels, CIOs tell us there is a high correlation between organizational alignment and successful corporate IT. For a CIO or other technology leader to make the move successfully from infrastructure to innovation, three key building blocks must be in place.

Organizational DNA. Market leaders and fast followers seek transformational change; cautious adopters and laggards dip their toe into incremental change. Market leaders and cautious adopters proactively seek change; fast followers and laggards take a reactive approach. (See accompanying chart.) CIOs in market leader and fast-follower organizations can move quickly and push for a great amount of change. In cautious adopters, the politics are trickier — but not impossible. And if you work for a laggard, good luck!
Reporting structure. CIOs who belong to the executive management team can play the strategic role that's key to success. As a member of executive management, a CIO can serve as both a utility and a strategic adviser to the business. Unfortunately, there's a trend afoot to have CIOs report to the CFO, which relegates the position to a purely cost-centric, tactical role.
Budget. At most corporations, infrastructure consumes anywhere from two-thirds to three quarters of the technology budget, leaving little over for integration, intelligence and innovation. Corporate IT success requires a reduction of infrastructure to 50% of the budget in order to fund the other, more forward-looking areas.

Having the right building blocks in place is essential to a CIO's — and organization's — success. Corporate boards should take note. It's not just CIOs who need to evolve. Organizations need to change as well to ensure that their technology investments lead to successful corporate IT.

Reinventing Corporate IT
An HBR Insight Center





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Does Your Company Need an Instagram Storefront?

As the internet continues to make it easier to connect with potential customers, some entrepreneurs have decided that Instagram isn't just for "selfies," but for marketing. Blogger Jason Kottke reported last month on Kuwait's "booming Instagram economy," where anyone with an Instagram account is simply putting a price tag on an item, taking a photograph, and selling it via the photo sharing online social network.

Everything from Manga to make-up, and more is being sold in this very simple and direct platform, leveraging additional free technology like WhatsApp (customer service), PayPal, and Square (transactions) to make the business infrastructure as simple as possible.

Not unlike eBay and the power-sellers it spawned, Instagram has the scale, stability, and user trust to create a viable marketplace. Once upon a time, if you wanted to sell online you needed a sturdy e-commerce site with analytics, a robust hosting facility, and a web team to create, design, merchandise, market, and more. Today, you need a couple of free accounts on some of the major online channels along with the persistence to keep at it. Is this the digital equivalent of a garage sale, or the next generation of business?

The answer is likely somewhere in between. It's doubtful that those in the upper echelons of the massive consumer packaged goods companies are going to care about this, or that Sephora and Walmart see this as a competitive threat, but the barriers to entry for someone to start and market a new business continue to be lowered.

These Instagram businesses may not be the next big thing, but they could well be the nascent stages of what is the next big, small thing in business today. On April 23rd and 24th of this year, the American University of Kuwait hosted a two day conference, featuring case studies, how-to's and networking for those wondering what it takes to build a business on Instagram. The Insta Business Expo, featured a slew of new entrepreneurs who built and grew their respective businesses through Instagram.

While this may seem inconsequential in the grander scheme of global economics and business, consider the global reach of Instagram, the burgeoning ability to use 3-D printing to create or augment existing products, and the desire from consumers for more unique products and services. There is also potential here for more traditional brands to try moments of commerce; an Instagram storefront could help validate a new product line or market ancillary products.

Instagram should not be underrated as an engine of marketing, considering the engagement beautiful images can generate. Today's Instagram entrepreneurs have uncovered an easy way for brands to quickly share new inventory, and a very simple way to conduct business from a smartphone. If your brand has the goods, you might want try out an Instagram store of your own.

How Quirky Startup Names Became an Internet Aesthetic

There are 102 startups whose names end in "ify," many of them probably in imitation of Spotify, says the Wall Street Journal, quoting branding consultant Christopher Johnson. Newcomer businesses include notifications system Xtify, as well as Stackify, an information-technology service provider. Quirky names for startups surfaced about 20 years ago in Silicon Valley, with the birth of search engines such as Yahoo, �which originally stood for Yet Another Hierarchical Officious Oracle. The mania for odd names was fueled by a lack of available short, punchy URLs, but it soon developed into an internet aesthetic.

How a Virtuous Housing Circle Turned Vicious

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As we near the fifth anniversary of the 2008 financial crisis, we should now have the critical distance to distinguish the real causes from the stereotypical villains, namely, Wall Street greed and unfettered competition. The latter culprits are officially blamed in the 2010 Dodd-Frank Act putatively designed to prevent another crisis: it's called the Wall Street Reform and Consumer Protection Act. The act is unequivocal: Wall Street caused the problem, consumers were harmed, and the federal government is here to help.



But in a free market — fettered by a reliable rule of law but little political micromanaging — would you expect "NINJA" loans to exist? These notorious loans were available to some borrowers with "no income, no job or assets" as late as 2007. Even if we assume that lenders are fueled by avarice, is it likely they would give out loans that they have little reason to believe will be repaid? Surely not. Something clearly had scrambled the normal market incentives in the mortgage bazaar. That something was a wide range of mandated "affordable housing goals," enacted over a couple of decades across many government departments, all designed to increase homeownership among lower income Americans.

The whole story is a long one, but the basic facts are simple. Thanks to the work of Edward Pinto and Peter Wallison of the American Enterprise Institute, and later to the SEC, we now know that as a result of these efforts to expand homeownership, by 2008 about 27 million mortgages were "nontraditional" and relatively risky loans. That was half the mortgages in the United States.

The numbers alone suggest Washington's visible hand. The government-sponsored (and now government-owned) enterprises Fannie Mae and Freddie Mac held 12 million of those loans — which they bought on the secondary market under stiff federal quota requirements. FHA and other federal agencies (such as the Veterans Administration and Federal Home Loan Banks) held 5 million, and Community Reinvestment Act and HUD programs had another 2.2 million. That's a total of 19.2 million risky loans held by entities controlled by or within the federal government, leaving 7.8 million for Countrywide, Wall Street, and so forth.

Let that fact sink in, because this is the one that shatters the mythology surrounding the financial crisis. Two-thirds of all risky loans in the system, we've since learned, "were held by the government or entities acting under government control," and they existed largely because of aggressive government housing policy.

The large-scale effect — a meltdown in the financial sectors involved in mortgages and mortgage securities — is known to all. The effect on private financial virtues has been largely ignored.

All things being equal, homeownership correlates with many good things. On average, people who own rather than rent their homes commit less crime, perform better in their jobs, vote, take more interest in their community, and keep up better with house maintenance. Homeownership is also a perennial element in the American Dream. So it's easy to understand why legislators and presidents would want to encourage homeownership among lower-income earners. But beneficial government policy attends not merely to good intentions but to tangible consequences. That requires careful economic reasoning. Affordable housing policies failed that test.

In housing policy, politicians left, right, and center made the classic mistake of confusing correlation with causation. There's a difference between merely having property you've gotten easily and disciplining yourself so that you can acquire and keep it, just as there's a difference between earning a million dollars from hard work and winning a million dollars in the lottery.

Since homeownership had correlated with fiscally virtuous behavior, policymakers imagined that they could boost such behavior by boosting homeownership. But mere ownership doesn't magically make people financially wise, capable, or virtuous. Instead, in a country with property and other basic rights, wise and virtuous behavior makes it possible for people to accumulate enough capital and credibility to be able to get a home loan. This incentive has spurred a virtuous circle among countless American immigrants. The dream of buying a house encouraged good financial practices, hard work, and thrift. Once people owned their homes, they valued them all the more because of what they'd had to do to get them in the first place. The equity they put into the loan spurred them to stay on the straight and narrow.

In a healthy housing market, people get a mortgage loan because of what they have already done — they've worked hard, kept their jobs, paid their debts, delayed gratification, and saved for a down payment. In this virtuous circle, wise behavior makes it possible to acquire a home, and acquisition of a home reinforces wise behavior.

When government short-circuited that loop of incentives, a vicious circle of bad financial decisions was the result. A meltdown was inevitable.