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From the Conversations with Tyler podcast:

COWEN: If I visit every major country in Europe, what I observe is the highest living standard is arguably in Switzerland — Norway and Luxembourg aside. Switzerland has one of the smallest governments, and they attempt relatively little redistribution. What is your understanding of Switzerland? What if someone said, “Well, Europe should try to be more like Switzerland. They’re doing great.” Why is that wrong?

PIKETTY: Oh, Switzerland. It’s a very small country, so it’s about the size. . . . Actually, it’s smaller than Île-de-France, which is a Paris region. Now, if you were to make a separate country out of Île-de-France, GDP per capita, I think, would actually be higher than Switzerland. Of course, you can take a wealthy region in your country and say, “Okay, I don’t want to share anything with the rest of the country. I’m going to keep my tax revenue for me. I’m going to be a tax haven based on bank secrecy.” That’s going to make you 10 percent or 20 percent richer. I’m not saying —

COWEN: It’s been a long time since Switzerland relied on bank secrecy, right? Following 9/11, that Swiss advantage largely went away.

PIKETTY: Oh, that’s wrong. Oh, you’re wrong on this.

COWEN: It’s the US that’s the secrecy haven.

PIKETTY: No, it still brings . . . No, no, I can tell you in terms of the banking sector and the status as a tax haven still brings an additional income of at least 10 percent or 20 percent to Switzerland. But I agree with you, Switzerland would still be rich even without this. But they would be a bit poorer, and they will certainly not be richer than if you compare to, say, the Paris region GDP per capita or the London region, if you take the wealthiest region. It’s important to compare countries of comparable size, regions of comparable size….

COWEN: But Switzerland is a real country with a diversified economy.

PIKETTY: Yes, sure.

COWEN: Very little of it is poor.

PIKETTY: The Paris region is a real region.

COWEN: But that’s a clustering effect within France. France is much poorer than Switzerland. Could not France bring Swiss prosperity to —

PIKETTY: This is not comparable in size. I don’t think it makes sense. Again, if you want to compare a region of about 5 million,10 million inhabitants — which is the size of Switzerland — you find many other regions with comparable GDP per capita all across Europe.

There are many good things with Switzerland, by the way. I think the local democratic system has lots of good aspects to it. The education system has . . . I think there’s a lot to learn from each of these experiments.

I feel lame excerpting this part since it’s the same part that Tyler excerpted, but Switzerland is one of my obsessions so here we are.

A couple of observations…

At least as far as I can tell from the internet, Piketty is wrong about GDP per capita. The latest GDP per capita I could find quickly for Île-de-France was $69,423 in 2016 (from Wikipedia). Swiss GDP per capita was $83,073 in 2016 according to the World Bank. The Swiss figure is in 2020 US dollars. I’m not sure what year the Île-de-France figures are in, but if you assume it’s 2016 dollars, then that would put the Île-de-France GDP per capita figure at $74,862 (based on this admittedly less than fully convincing website). Still less.

This doesn’t invalidate Piketty’s point larger point about scale . Before I lived in Switzerland, I had several people who had lived there mention how small of a country it is when comparing it to the US. At the time, I would roll my eyes.

But having lived there, I’ve changed my mind. It is a really small country and this seems to make some problems more tractable. US federalism and Swiss federalism get compared a lot and they are similar in many ways. But Swiss Cantons, which relate to the Federal government the same way that US States do, are closer to US counties in terms of population and land mass. There’s a lot more consensus about how things should work at the US county level than there is at the US state level, which makes choosing a direction easier. (Aside: You could argue that the implication here is that even more US governance should happen locally, but I wonder if at some point that would erode the benefits of scale that the US enjoys.)

Even with the caveat of size, I still think Switzerland is super impressive. The way I describe it to Americans is that the entire country is like the wealthiest US suburbs. Everything just works. The infrastructure is well maintained. It’s clean. The bureaucracy is friendly and easy to navigate. It’s safe enough to leave your door unlocked. There aren’t that many places in the world where 8 million people live that you can say that about.

The last thing I’ll say is that I don’t think the Swiss secret is simply less government and less redistribution, although I do think these are assets for Switzerland. If I had narrow it down, I would say that the political culture of trust and compromise and the high investment in human capital are the driving factors. If anything, I think these are what allows the government to be both small and effective… which I think places me closer to Piketty’s answer than Tyler’s question.

From Daniel Cox at the Survey Center on American Life:

College graduates live increasingly different lives than those without a college degree. They are more socially connected, civically engaged, and active in their communities than those without a degree. I find that college graduates have more extensive systems of social support and a larger number of close friends. Consequently, they feel lonely and isolated less often.

The whole piece is interesting. The message is pretty clear that American Society “works” for people who go to college in a way that it doesn’t for those who don’t. The differences in levels of social integration are striking and somewhat confusing. It’s intuitive to think that this is just financially driven; if you have more money and stability, it’s easier to make friendships and get involved in the community… but it’s also not clear that this is the root cause (at least from this work).

Some other things that stood out to me…

The relationship between litter / graffiti and trust in one’s neighbors:

Americans living in neighborhoods where trash and graffiti are common express far lower trust in their neighbors. Less than half (45 percent) of Americans who say garbage or litter are everywhere in their neighborhood say they have a great deal or a fair amount of trust in their neighbors. Eight in 10 (80 percent) Americans who live in places where there is no trash or graffiti nearby say they trust their neighbors at least a fair amount. This pattern holds across community types. Feelings of trust are higher in places without trash, litter, or graffiti marring the physical environment, whether that’s a dense urban neighborhood, a suburb, or a town.

A similar dynamic exists with tap water:

Americans who trust their tap water express a stronger connection to their community and the people who live there than those who do not trust their tap water. A majority (58 percent) of Americans who say they would be very comfortable drinking water from their tap say they feel closely connected to their neighborhood—a feeling shared by only 44 percent of those who say they would be very uncomfortable drinking unfiltered tap water.

Both of these are pretty intuitive if you think about it — if a place is dirty, you probably aren’t going to feel comfortable there. If you don’t think you can trust the tap water in a place, you’re unlikely to feel really at home there.

Being involved with a place of worship seems to help with social integration, which makes sense:

Regardless of educational experience, Americans who belong to a religious congregation are much more active in community life and report stronger social connections. Overall, Americans who are members of a place of worship are much more likely than those who are not to volunteer in the community at least a few times a year (47 percent vs. 23 percent), talk to someone in their community they do not know well (64 percent vs. 54 percent), and attend a community meeting or local event (60 percent vs. 41 percent). They are also more likely than others to feel connected to their neighborhood and the people who live there (58 percent vs. 46 percent).

But so does living near stuff to do:

Simply living near a public park, library, coffee shop, or bar is strongly associated with greater community engagement, higher feelings of social trust, and connection to the community.

So to summarize:

• there’s clearly a relationship between going to college, participation within society, and trust — it’s not clear what the driver is here.

  • my best hypothesis is that the people that are naturally inclined to go out and do stuff are now being routed into college (that’s the default path and you have to work hard to get off of it) and that this accounts for most of what we’re seeing, but I can’t prove this.

• it seems like having communities that are clean and that provide quality basic services is correlated with trust

• being involved with a religious organization is correlated with participation

• living near stuff (reducing the friction of participation) is correlated with social trust

Over the weekend, I read We Don’t Sell Saddles Here where Stewart Butterfield outlines how Slack plans to take over the world. It’s a great piece and worth reading if you’re planning on launching a new product. It really captures the dynamism that Slack had in the early days.

This part in particular stood out to me though:

The best way to imagine the reward is thinking about who we want our customers to become:

* We want them to become relaxed, productive workers who have the confidence that comes from knowing that any bit of information which might be valuable to them is only a search away.

* We want them to become masters of their own information and not slaves, overwhelmed by the neverending flow.

* We want them to feel less frustrated by a lack of visibility into what is going on with their team.

* We want them to become people who communicate purposively, knowing that each question they ask is actually building value for the whole team.

As someone who uses Slack every day, I had a visceral reaction to each of these propositions. I never feel relaxed when using the app and I almost always feel overwhelmed by the flow of information.

The app became what it set out to fix — in many ways, the reduction in friction, which made it so addictive, made many of the problems it set out to solve worse.

Sometimes you have the opportunity to give a user an insanely great product. The organizational support, project funding, and technology all line up to give exceed user expectations. These are rare opportunities — enjoy them!

Most of the time you’re missing one of the key ingredients: project funding, technology, or organizational support.

Frequently the limiting constraint is a political one. You can’t launch the new product to all users because the sales team is afraid of how enterprise partners will react. You have to launch sooner than you want because a leader has drawn a line in the sand. A partner team won’t change their roadmap to help you with a dependency.

These political constraints can be the most frustrating because they seem arbitrary. But that doesn’t make them any less real. The best product leaders I know play the long game. They make the case for the best theoretical path, but are willing to accept the best one available. Then they move on to the next iteration. After all, iconic products are built one well thought-out iteration at a time. This flexibility gives them credibility with others, which gives them more space to operate in the future.

It’s common for companies to talk about product managers as mini-CEOs, masters of their own feature set. In many situations I’ve seen, this is actively unhelpful because it doesn’t prepare the product manager or their stakeholders for the reality of what the pm is being asked to do: find the possible, the attainable, the next best.

Delightful treatment of the idea that efficient markets produce products that work by Dan Luu.

The whole thing is worth reading, but the most interesting section to me was the one on trust in between firms and within firms.

Coming back to when it makes sense to bring something in-house, even in cases where it superficially sounds like it shouldn't, because the expertise is 99% idle or a single person would have to be able to build software that a single firm would pay millions of dollars a year for, much of this comes down to whether or not you're in a culture where you can trust another firm's promise. If you operate in a society where it's expected that other firms will push you to the letter of the law with respect to whatever contract you've negotiated, it's frequently not worth the effort to negotiate a contract that would give you service even one half as good as you'd get from someone in house. If you look at how these contracts end up being worded, companies often try to sneak in terms that make the contract meaningless, and even when you managed to stamp out all of that, legally enforcing the contract is expensive and, in the cases I know of where companies regularly violated their agreement for their support SLA (just for example), the resolution was to terminate the contract rather than pursue legal action because the cost of legal action wouldn't be worth anything that could be gained.

If you can't trust other firms, you frequently don't have a choice with respect to bringing things in house if you want them to work.

Although this is really a topic for another post, I'll note that lack of trust that exists across companies can also hamstring companies when it exists internally. As we discussed previously, a lot of larger scale brokenness also comes out of the cultural expectations within organizations. A specific example of this that leads to pervasive organizational problems is lack of trust within the organization. For example, a while back, I was griping to a director that a VP broke a promise and that we were losing a lot of people for similar reasons. The director's response was "there's no way the VP made a promise". When I asked for clarification, the clarification was "unless you get it in a contract, it wasn't a promise", i.e., the rate at which VPs at the company lie is high enough that a verbal commitment from a VP is worthless; only a legally binding commitment that allows you to take them to court has any meaning.

Of course, that's absurd, in that no one could operate at a BigCo while going around and asking for contracts for all their promises since they'd immediately be considered some kind of hyperbureaucratic weirdo. But, let's take the spirit of the comment seriously, that only trust people close to you. That's good advice in the company I worked for but, unfortunately for the company, the implications are similar to the inter-firm example, where we noted that a norm where you need to litigate the letter of the law is expensive enough that firms often bring expertise in house to avoid having to deal with the details. In the intra-firm case and you'll often see teams and orgs "empire build" because they know they, at least the management level, they can't trust anyone outside their fiefdom.

While this intra-firm lack of trust tends to be less costly than the inter-firm lack of trust since there are better levers to get action on an organization that's the cause of a major blocker, it's still fairly costly. Virtually all of the VPs and BigCo tech execs I've talked to are so steeped in the culture they're embedded in that they can't conceive of an alternative, but there isn't an inherent reason that organizations have to work like that. I've worked at two companies where people actually trust leadership and leadership does generally follow through on commitments even when you can't take them to court, including my current employer, Wave. But, at the other companies, the shared expectation that leadership cannot and should not be trusted "causes" the people who end up in leadership roles to be untrustworthy, which results in the inefficiencies we've just discussed.

People often think that having a high degree of internal distrust is inevitable as a company scales, but people I've talked to who were in upper management or fairly close to the top of Intel and Google said that the companies had an extended time period where leadership enforced trustworthiness and that stamping out dishonesty and "bad politics" was a major reason the company was so successful, under Andy Grove and Eric Schmidt, respectively. When the person at the top changed and a new person who didn't enforce honesty came in, the standard cultural norms that you see at the upper levels of most big companies seeped in, but that wasn't inevitable.

I’m not sure at the moment how much I agree with his approach to build vs. buy decisions but I know I agree with his assessment that the essential ingredient for productivity is trust.