Downstream effects

Better decisions can be made by taking a moment to think about downstream effects.

When Wal-Mart cut costs by removing store employees, they just ended transferring the massive burden of stopping shop-lifting to the local police.

In an attempt to improve their demographic balance, Russia tried paying women money to have kids. But, they found an increase in abandonment rates. After collecting their pay outs, women were dropping these kids in orphanages. Sweden’s answer to helping improve demographics was to have an incredible range of maternity benefits. A Swedish woman can take 16 months of maternity leave (13 of them paid at 80%) until her child is 8 years old. If she has 3 children, that’s 4 years of leave. Sadly, women in their twenties are among the largest unemployed groups in Sweden.

On the flip side, Google outsourcing TensorFlow, an open source machine learning library, helped a Japanese farmer and former engineer create a system for sorting cucumbers.

And, the African Great Green Wall initiative is likely to have long term ripple effects beyond just preventing the Sahara desert from increasing in size. When 21 countries come together to plant trees, there’s plenty Africa and the world gains from the effort.

downstream effects, externalities, unintended consequencesThanks to The Economist for the image

Every one of these stories is a story about the downstream effects of decisions. In Economics, these are called externalities or unintended consequences. Every decision we make has unintended consequences. In some cases, the negative downstream effects can be so powerful that they can just override any positives from the first order consequences of the decisions.

As a result, we must discipline ourselves to push all decision making conversation into the realm of downstream effects. All company destroying decisions started out as good ideas in the short term… with bad downstream effects.

4 thoughts on “Downstream effects

  1. Thx for your daily posts. Understand the point you are making today but don’t agree with the comments on Swedish paternity leave. Sweden (and Scandinavia in general) is a great example of how to create a rich (one of the wealthiest regions in the world) and egalitarian society (it has already had several female prime ministers). This is among others based on women’s participation in work life, which is very very high, and men’s participation in raising children is also encouraged (they also get paternity leave). It is good work life balance. Plus it has positive demographic effects. Plus it is good for wealth creation. Downstream effects – externalities – of maternity leave are positive. It is good at the individual level, at the family level and at the societal level. Just as a general comment to how Scandinavia is viewed in the US: they call any country with such mechanisms, socialist – a derogatory term – but Scandinavia is an open society and an open economy – I would argue its people are more free than in the US – and it is closer to Rawls view of a just society, that you wrote about not too long ago.

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    1. Hi Hamed, your point is well taken. I picked that stat up from Geopolitical researcher Peter Zheihan’s work on demographics in his book “The Accidental Superpower.” He might be wrong, of course. And, if that’s the case, I stand corrected.

      I think Sweden does a lot of things right (for whatever my point of view is worth :)). And I defintiely don’t think the US does maternity benefits right. That said, I wonder if the answer is somewhere in the middle?

      And I don’t disagree on the just society. I don’t know enough to knowledgeably say otherwise. 🙂

      Thank you for taking the time to write.

      (Link to the excerpt here – https://books.google.com/books?id=vn-BAwAAQBAJ&pg=PP111&lpg=PP111&dq=peter+zeihan+sweden+maternity&source=bl&ots=Y3cacPdTq6&sig=5Pjb4NBoMtUmOjs-bre-LIiC0zg&hl=en&sa=X&ved=0ahUKEwi6toO-1PPOAhVM92MKHQp7DVcQ6AEIJDAB#v=onepage&q=peter%20zeihan%20sweden%20maternity&f=false)

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      1. You are very knowledgeable – that’s clear from your blogs – and modest. I just think there is a lot of positive externality in taking care of the “weakest” in society. The emancipation of women is a great example. But I think it extends to other vulnerable groups in society such as disabled. I think you can gage a lot about a society from how they treat for example women and disabled. In terms of lost wealth creation, tolerance and just how advanced a civilization it is. Thx for your blogs – enjoy following you.

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      2. I agree about the treatment of vulnerable groups 100%. No doubt about that.

        Thanks so much for taking the time to write, Hamed. I really appreciate it.. and it serves as a big part of the learning experience for me. 🙂

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