Cloud Problems
Bureaucracy is precisely the wrong approach for solving society's largest problems.
Guru Madhavan holds the positions of Norman R. Augustine Senior Scholar and senior director of programs at the National Academy of Engineering. He has written a book about what he calls Wicked Problems. Here he is writing for National Academies:
“Life comes with pernicious problems, some with recognizable plots. We excel in solving the well-behaved ones, but intractable problems create more questions. In a 1965 lecture, the British philosopher Karl Popper classified problems using the metaphors of clocks and clouds. He compared systems that obey logic to clocks and those that defy logic to clouds. Unlike a timepiece’s predictability, the shifting subtleties of clouds reside in their myriad forms and shadows.”
Developing a mobile app that can help us summon a ride is a clock problem. Cloud problems are complex and don’t lend themselves to linear thinking. MIT Tech Review has a good description:
‘Cloud problems offer no such assurances. They are inherently complex and unpredictable, and they usually have social, psychological, or political dimensions. Because of their dynamic, shape-shifting nature, trying to “fix” a cloud problem often ends up creating several new problems. For this reason, they don’t have a definitive “solved” state—only good and bad (or better and worse) outcomes. Trying to repair a broken-down car is a clock problem. Trying to solve traffic is a cloud problem.’
Madhavan refers to what he calls “wicked problems” as the most difficult-to-solve cloud problems:
‘“Wickedness” is Madhavan’s way of characterizing what he calls “the cloudiest of problems.” It’s a nod to a now-famous coinage by Horst Rittel and Melvin Webber, professors at the University of California, Berkeley, who used the term “wicked” to describe complex social problems that resisted the rote scientific and engineering-based (i.e., clock-like) approaches that were invading their fields of design and urban planning back in the 1970s.’
Ironically, early engineering was better disposed to attack cloud problems because it predated today’s specialization.
“Sophisticated food production, grid-town planning, drains, dams, and dockyards were a testament not merely to civil engineering but to a form of civic engineering. They improved both standards of living and thinking. Systems planning to those engineers meant braiding commerce and culture, from recreation to conservation. Many Native traditions have applied such overarching awareness. Prominent successes of industrial systems engineering, including telecommunications and missile defense systems, were evident during World War II. The applications reached a broader scale between the 1950s and the 1970s in the defense, aerospace, urban-planning, and manufacturing sectors.”
Here’s the key point:
“Systems engineering, like civic duty, occurs under the constraints of costs, schedules, and performance requirements. While systems engineers often focus on the needs, desires, end points, and context of a problem set, they know that local fixes will not produce a globally viable solution. An engineering process based on cost, schedule, and performance requirements works well for aircraft assembly. Once that plane begins to fly, however, it enters a broader social system with different levels of complexity. Should we add capacity at a near-city airport or build new facilities farther away? Each option now involves considerations far afield from aircraft yet central to the aviation system. That’s why systems engineering often works best when it’s not expected to produce an “engineering” solution.”
Local solutions may not be globally optimal.
For bureaucracy, everything is a clock solution. While civilization started with simple building blocks, their combination and proliferation has transformed the world into a complex, adaptive system. Engineering for local solutions, most often at the behest of specialized experts, leads to distortions that result ultimately in globally sub-optimal outcomes. With their silos of partial equilibrium thinking, bureaucracies aren’t full of people considering the broader, dynamic consequences of policy; they focus only on the immediate outcome for their small piece of the puzzle.
American healthcare is a good example of this. More than a decade after the passage of the Affordable Care Act, more than 25 million Americans are uninsured. This is roughly the size of the population of Australia. How can that be? Wasn’t the intention of this legislation to ensure that everyone in the US had healthcare coverage? How is this possible given the steady waves of subsidies?
As unsatisfying as this result is, it should be noted that before passage of ACA, 16 percent of the US population was uninsured. Today, that number is just over 7 percent. This is an heroic accomplishment, but 7 is not zero.
According to the US government, the law had three priorities:
· Increase the availability of affordable healthcare insurance
· Expand Medicaid coverage
· Support innovation designed to lower the cost of care
Various programs subsidize households that consume healthcare through Obamacare marketplaces. They do so based on family income in relation to the federal poverty level. There is also Medicaid. The qualifying income level has increased as a percentage of the federal poverty level to 139%.
For the private sector, the US healthcare bureaucracy deems a corporate healthcare plan to be affordable “if its least expensive self-care option is less than 8.39% of a household’s income” while covering at least 60% of the anticipated workforce medical costs. Private employers who don’t meet this affordability threshold face IRS penalties. In Orwellian language, these are called “employee shared responsibility payments.”
Just because there is an increase in healthcare coverage does not translate necessarily into globally better health outcomes. The US healthcare system is still riddled with myriad problems including:
· Healthcare providers are under financial pressure due to reduced subsidies, falling reimbursement rates from public plans, inflation, and emergent competition from alternative facilities such as outpatient care
· Independent physician practices are disappearing as the industry consolidates in response to these challenges and the additional burden of administrative compliance
· It is increasingly difficult to staff healthcare facilities
· Growing insurer losses on Medicaid plans may be more difficult to cross-subsidize in the event of economic weakness
· Rising prices for prescription drugs add to the fiscal woes of insurers and governments alike
For all this money and despite the Herculean planning and intervention, the Commonwealth Fund reports some startling figures when it comes to healthcare outcomes compared to those of other high-income countries:
· “The U.S. has the lowest life expectancy at birth, the highest death rates for avoidable or treatable conditions, the highest maternal and infant mortality, and among the highest suicide rates.
· “The U.S. has the highest rate of people with multiple chronic conditions and an obesity rate nearly twice the OECD average.
· “Americans see physicians less often than people in most other countries and have among the lowest rate of practicing physicians and hospital beds per 1,000 population.
· “Screening rates for breast and colorectal cancer and vaccination for flu in the U.S. are among the highest, but COVID-19 vaccination trails many nations.”
For a country that “spends three to four times more on health care than South Korea, New Zealand, and Japan” on a per capita basis, we are not getting the results that we should expect.
Perhaps we are not getting what we want because we’re spending so much.
A cloud-based approach would suggest that the problem may be as much a cultural one as anything else. Perhaps the core issue here is that people don’t take care of themselves the way that they do in other countries where the healthcare system is not as obtrusive. In those countries, people may be more active. They consume fewer calories. They have less stress, or a greater sense of family and community.
In the US, instead of dealing with the root causes of our individual health problems, we wait for them to manifest before seeking help at much higher cost. By subsidizing healthcare, we have increased the demand for it massively.
The various chronic diseases that plague Americans may be a direct result of the fact that “Health care spending, both per person and as a share of GDP, continues to be far higher than in the United States than in other high-income countries.”
That is to say, our corporatist approach to healthcare may create moral hazard. Why should I take care of myself if I know that I have access to healthcare if and when I need it?
Perhaps the 7 percent of the population who do not have healthcare coverage elect not to pay premiums, confident that the new rules enable them to sign up for healthcare at the first sign of trouble, without risk of discrimination for pre-existing conditions. This contributes to the adverse selection problem in that the people who need healthcare coverage the least are unavailable to subsidize the care of those with immediate demand.
The bureaucrat wants to protect people with pre-existing conditions from discrimination. The human being sees an ability to arbitrage the system. Why buy the cow when you can buy the milk only when you need it?
Our linear thinking frustrates our approach to a non-linear problem. One example is the hysteria around GLP-1 drugs such as Ozempic.
‘"Today's report makes it crystal clear: The outrageously high price of Wegovy and other weight loss drugs have the potential to bankrupt Medicare and our entire healthcare system," Mr. Sanders said. "The unjustifiably high prices of these weight loss drugs could also cause a massive spike in prescription drug spending that could lead to an historic increase in premiums for Medicare and everyone who has health insurance."’
It may be the case, however, that these drugs attack inflammation in a way that substantively reduces the prevalence of related diseases such as autoimmune disorders, cardiovascular diseases, gastrointestinal diseases, and lung diseases in the United States, leading to a disproportionately larger overall reduction in healthcare costs over time. Not only that, but the economies of scale in consumption that wider usage of these drugs create may lead to production efficiencies that bring prices down faster.
The industry was stoic in its response to this one-dimensional, tendentious pearl-clutching.
‘"It's easy to oversimplify the science that goes into understanding disease and developing and producing new treatments, as well as the intricacies of U.S. and global healthcare systems," a Novo Nordisk spokesperson told Becker's in April. "However, the public debate doesn't always take into account this extremely complex reality."’
It’s not just healthcare. We see rampant bureaucratic failure in all kinds of fields of public life. Look at Michael Shellenberger’s book San Fransicko, for example. It breaks down the absurd failure of the giant homelessness-reduction complex to make anything close to progress. Or the epidemic of drug abuse. Or the decline of the white working class.
Let’s not even begin to discuss the failure of massive public school expenditure to produce an educational system that competes at the highest levels globally. (If we were to think holistically about education, we’d have to include messy factors such as family composition, culture, and the length of the school year, just for starters. There’s no point on stepping on that rake here.)