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Saturday, December 3, 2022

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Churn

Churn

Youth leans toward the novel, and age toward the safe. Entrenchment is the preferred strategy of incumbents. “Change is good” … unless you’re already killing it. In Google’s first decade, the company seized the search engine market, launched Maps, Mail, and Chrome. The company’s track record of abandoned projects ever since is so extensive, there’s a website dedicated to it. Stagnation? Maybe. But over that time, playing defense has earned $1.4 trillion in profit for Google’s shareholders.

Meta has been playing defense since it dropped the “The,” and every failure has made the Zuck angrier. His accumulated rage has resulted in a $60 billion fit of “I’ll show you,” despite every signal that can hold light pointing to a cosmic failure. Like … a failure of the ages. A tech failure to end almost all failures. Bad. The … Metaverse.

Tech companies aren’t the only ones that attempt to build moats at the cost of innovation. Politics rewards durability. Incumbents remain incumbents via a system that tilts toward the status quo. The U.S. House reelection rate in 2020 was 95%. The mortality rate for Americans the (average) age of our representatives is approximately 2%. Meaning, with a two year term, it will soon be a coin flip whether they were voted out or left the rotunda feet first. The result: A daily occupation of our nation’s capital (and our capital) by a group that is a cross between The Golden Girls and The Walking Dead. Our leaders are too old.

There are real benefits to age, specifically experience and perspective. But that additional perspective and experience comes at a cost, as our representatives have a difficult time understanding new technologies and how society has changed. Folks who have ideas for change and the hunger to set them in motion are shut out, left with staff roles or positions in private enterprise.

In business, entrenchment is profitable for shareholders, though eventually an innovator will rise. In politics, the biggest winner is often the politician — and when governments are dysfunctional or allocate scarce resources poorly, we all suffer. We need more churn.

Moving Day

We should impose term limits on our elected officials and judges. The House and Senate have virtually become life-tenured positions, in which members accrue wealth via insider trading and devote their time in office to … their time in office. (Congresspeople trading stocks is blatant insider trading, full stop.)

America is similar to most countries in that our legislators keep getting re-elected indefinitely. A key difference: Our Supreme Court justices can remain until death. This is rare. Most developed nations either have judicial age limits — the U.K., for example — or term limits. In Germany, justices on the Federal Constitutional Court are appointed for a single 12-year term.

Term limits would improve the functioning of the Supreme Court and remove the toxic jockeying for seats we’ve seen in recent years. Give each of the nine justices a single 18-year term, staggered so an empty seat comes up in the first and third years of each presidential term. (Early departures would be filled through the end of the term to keep the schedule.) When life rarely exceeded 60, life tenure was a defense against politicization. With justices sitting for decades and into their 80s, life tenure makes it worse.

Term limits are also effective in business. Companies with more outside directors who have extended tenure produce significantly fewer patents and these patents receive fewer citations. These businesses also register lower R&D productivity (i.e., they’re less innovative). Yet only 6% of the companies in the S&P 500 have formal tenure limits on directors. Entrenchment begets entrenchment — not a single S&P 500 board has fired its CEO since 2020. On every public board I’ve served on there are directors who’ve served the company well — and should have stepped down a decade ago.

Hard Cap

Term limits would go a long way toward reducing the instinct to entrenchment that’s endemic to our government. But we should recognize the need for another limit, one that reflects biology. Mandatory retirement ages. (Cue the “like your work, but was disappointed” comments on this post.)

From AI and genomics to Auto-Tune and TikTok, the issues facing elected representatives are evolving … faster and faster. I try to stay up on everything happening in tech, and it’s getting harder as I get older. It’s true that age can bring wisdom. (It doesn’t always.) But wisdom can’t erase a biological truth we’re less comfortable with: Age makes us stupider.

By the time we hit 40, our brains begin to deteriorate. Literally. The prefrontal cortex thins, the cerebellum shrinks, neurons become physically shorter, and arterial walls harden, decreasing blood flow. The decline is slow at first — we lose roughly 0.2% in brain volume per year. By 60, that number reaches 0.5%. Soon the rate of brain atrophy looks like Moore’s Law. We used to know this, but then decided that engaging in a discussion on the topic renders you an ageist. And being accused of an “ist” means you risk sanctioning, or worse. Ageism is not politically correct. But neither is biology.

Ours is the oldest government in U.S. history. Almost a quarter of Congress is older than 70. If he’s re-elected — and lives out his term — President Biden will leave the West Lawn on Marine One for the last time at the age of 86. This is fucking ridiculous. BTW, an obese 82-year-old (Trump) wouldn’t be much better. The Senate Majority Leader is 71, the Senate Minority Leader is 80, and the Speaker of the House is 81. Two hundred years ago, the median age of a Congressperson was 44; today it’s 62. Put another way, the average representative is 24 years older than the average American (38). It’s true we live much longer today, but your modern brain doesn’t care that it’s less likely to die from sepsis or smallpox. When George Washington took office at 57, he was old for his time, but his brain was still just 57. Indeed, the founders had little need to include upper age limits in the Constitution — hardly anyone lived past 70.

The situation is, again, unique. Our government is older than that of any other nation. In China, the average member of the National People’s Congress is 53. In the U.K. Parliament, it’s 51; in Germany’s Bundestag, 47.

The notion of someone clinging to power for decades conjures a cartoon of a Third World dictator. However, it’s us. Specifically, the U.S. Congress. The news out of Iran this month is stirring, but the counterpoint to all these young people finding their voice is the 83-year-old Supreme Leader sending out thugs to beat them. Khamenei was 39, in his prime, during the Iranian Revolution in 1979. The women protesting in his streets today are much younger than that — many of their parents weren’t even born in 1979. Who has the more legitimate claim on the future of Iran? The young Iranians in the streets, or the octogenarian having them beaten? In the U.S., people under the age of 40 have seen their wealth, as evidenced by their share of GDP, cut in half. Why? Network effects? Globalization? No. Because their government does not represent them. The dysfunction of the governments in Iran and the U.S. has many factors, and one of them is that they simply won’t retire. We need to age-gate the most important elected offices.

I’m not alone in calling for age limits. Former President Jimmy Carter expressed concern over the age of the 2020 presidential candidates, stating: “I hope there’s an age limit … If I were just 80 years old, if I was 15 years younger, I don’t believe I could undertake the duties I experienced when I was president.” Who else agrees? Six in 10 Americans.

Yes, it’s ageist, and so is biology. Science doesn’t care about our feelings. And yes, a bright-line rule would exclude some good candidates. We have a 79-year-old president who is registering one of the most productive terms in U.S. history. Also, we’ve seen the footage of our Speaker’s steady hand at 80 years old on January 6. But what you didn’t see in that video was the brilliant 56-year-old who didn’t have the experience but did have the perspective of someone who hasn’t spent 43% of her life in Washington. What else wasn’t shown in that video: a government more concerned with governing and less with re-election that may have averted this mess.

It’s not just about cognitive decline. Ours is supposed to be a representative democracy, and the “representative” part matters. A politician of any creed, color, or gender can effectively represent a diverse community. But a government body, an assemblage of what should be our best and brightest, must represent our diverse experiences within a range, or it will not be regarded as credible, legitimate, or, most important, a body people want to join. Age is a component of this, an important one in our changing world. Fifty percent of the US population is under the age of 38. Among our elected representatives, that number is 5%.

Peace With Honor

One of the most difficult conversations I’ve had with my dad was telling him he should stop driving. Telling the man who taught you how to drive that his neurocognitive architecture isn’t fit for a basic life function — and will never be again … that’s something nobody is ever ready to hear. But someone needed to tell him, because in his view, he was fine.

Dynamic firms lose customers when they shed slow-growing products, fire employees who aren’t contributing, lose employees whose human capital could be more productive elsewhere, and change plans to evolve with the market. There is no growth without churn. Survival is the ultimate teacher, but its incorrect lesson, as we age, is: more of the same.

A more physically and mentally robust leadership. A representative democracy that’s better able to shape policies that stanch the record transfer of wealth from young to old. New people, new ideas. Churn.

Life is so rich,

P.S. For more thoughts on what we can do better, join my free lecture on Adrift next Tuesday from 12-1 p.m. ET. Sign up and I’ll see you there.

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