By Greg Satell
Aristotle once wrote, “Happiness is the meaning and the purpose of life, the whole aim and end of human existence.”
I think most people would agree. After all, who wants to be miserable?
So it’s strange that happiness is something we pay so little attention to. When the OECD ranked the US #1 out of 36 countries in terms of household wealth, but only 12th in life satisfaction, the response was… nothing. No blue ribbon panels or congressional committees or even a furrowed brow. Compare that to the sanctimonious handwringing that accompanies a slight dip in GDP or a weak jobs report or even a mildly troubling manufacturing index and it becomes clear that, while we say we pursue happiness, we do very little to produce it, or even measure and monitor it. Is it any wonder than we’re ever more prosperous but no more happy?
A growing awareness of the problem, along with some smart technology, may be leading to some impressive solutions.
A Personal Story
When I moved to Eastern Europe in the mid-nineties, the first thing I noticed was how poor everyone was. It wasn’t just incomes that were low, housing and food quality were horrible (I got food poisoning on a regular basis that first year), streets were dirty and stores lacked products.
Yet as I settled in, learned the local languages, travelled widely throughout the region and visited people in their homes, I began to realize that many of them were genuinely happy, even if their living conditions left much to be desired. What’s more, they were generous, readily sharing what little they had. It took awhile, but I began to realize why.
Much of what we need doesn’t require money (or at least not much of it). Those who don’t go to fancy nightclubs can visit friends at home. A doctor doesn’t need a Mercedes to serve her community, just skill and caring. Favors can be traded, goods bartered. Gifts, even modest ones (like the bottle of shampoo someone gave me one Christmas), can be given and received enthusiastically.
The Clothesline Paradox
Tech visionary Tim O’Reilly calls the phenomenon I experienced in Eastern Europe the Clothesline Paradox, based on an argument for alternative energy dating from the 70’s. The basic concept goes like this: If you put your clothes in the dryer, the activity gets counted as part of the economy, but if you hang it up on a clothesline, it just disappears.
O’Reilly sees the dilemma as a fundamental confusion between value creation and value capture. We find it easy to put a value on the activity of Goldman Sachs and Morgan Stanley (except, of course, when they crash markets), but very difficult to calculate the contribution of Tim Berners-Lee, who created the Internet and gave it to the world.
On an individual level, it is easy to see why a highly paid investment banker works a 90-hour week, but somewhat harder to quantify the pleasure and sense of accomplishment a hacker gets from contributing code to Linux, Apache or a host of other open-source platforms that have become crucial to the information economy.
Economists call situations like these externalities and try to account for them by calculating their economic contribution, but the concept is a clumsy one. Some kid creates a viral video and uploads it to YouTube and money ends up at Comcast or another Internet service provider in the form of higher usage fees. Who gets the country club membership?
When Profit Doesn’t Suffice
Anybody who has ever run a business knows that accounting has its limitations. You try your best to make the numbers work, to allocate costs in a sensible way and to reward true performance, but you know that ultimately good management is about judgment, not calculation.
For example, as Irving Wladawsky-Berger describes in a recent blog post, when formulating IBM’s Internet strategy in the ‘90’s, he had to look beyond direct revenues because much of the benefit would be thinly distributed across the company. Narrowly looking at the profit and loss of the Internet initiative would have seriously damaged the well being of the enterprise.
This is often known as the profit paradox. Just as societies who excessively focus on GDP can harm the general well being, managers who pursue only profits often earn less for their enterprise. Once we start pretending that what we can’t easily measure doesn’t exist, we begin to sow the seeds of our own destruction.