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 Innovation/Global Risk

America: Failed Welfare State #2

By Shlomo Maital  




   Pay for this…




 …and get this!

Would you say that a nation that spent $8,000 per person on health care (double that of Canada, or France) would qualify for the title “welfare state”?

   That state is America.  And according to Ezra Klein, writing in The Washington Post, the reason is simple.  Prices.   Health care costs in America are double those elsewhere.

   Spending (on anything) is defined as price times quantity, P Q .  When spending is high, there are only two reasons. Either Q (quantity of health care) is very high, or P (price of a unit of health care) is very high.  For America, it is clearly the latter, P.  Klein cites a study showing that for the prices of 23 medical services and products, Americans pay a higher price than elsewhere.  America, in health care, is paying Maserati prices for VW returns. 


   In Canada and Britain, health care prices are set by the government.  In Germany and Japan, they’re set by providers and insurers, with government mediation. In America?  It’s a free-for-all. Providers can charge what they can get away with. 

    Klein notes that two of the five most profitable industries in America are pharmaceuticals and medical devices, with margins of about 20 per cent.  They beat out even the financial services sector for profitability. 

   So, yes, America is a welfare state, because it spends fortunes on the health of its citizens. But it is also a FAILED welfare state, because it gets so little for all that money. Why? Because it privatized (for-profit) what is basically a public good – health.  According to health care expert Uwe Reinhardt, of Princeton University,  “the money we (Americans) spend on health care is money we don’t spend educating our children, or investing in infrastructure, scientific reseach and defense spending.  So  what this means is we ultimately have overmedicalized, poorly educated Americans competing with China, that’s not a very good investment.”

   President Obama blew all his political capital on a health care bill.  Problem is, it does not at all address this P’s and Q’s issue, of slashing health care prices.  And that is the core issue. If there was smaller “P”, then more people could get more “Q”.  It’s not a bad bill.  It simply misses the key point.    


 Innovation/Global Risk

Breaking the Chains of Habit

By Shlomo Maital



  The guru from Omaha, Warren Buffett, famously said this:  “The chains of habit are too light to be felt – until they become too heavy to be broken.”  How true!  We live not by free will and conscious choice, but by inertia and by habit. And when we come to innovate and create – again, the rutted conventional thinking of habit dominates, without our realizing it.

   In his March 7 column, in the Global NYT, David Brooks summarizes a new book by his colleague Charles Duhigg,  The Power of Habit.  Duhigg cites evidence from Duke Univ. research, showing that “more than 40 per cent of the actions we take are governed by habit, not actual decision.”  “Habit” is defined as something we do because we have done it in the past, not because we have thought about it and made a clear conscious decision.  “Habits are ingrained so deep in the brain,” observes Brooks, “that a patient with brain damage sitting in his living room can’t tell you where the kitchen is, but if he is hungry he can get a jar of peanut butter out of the pantry.”  That’s me.  I LOVE peanut butter and head for it without thinking.

    Duhigg writes about how to instill good habits, or how to remove bad habits.  And this turns out to be immensely difficult.   We are supposed to “coolly appraise our own unconscious habits, and devise oblique strategies to alter the triggers and the routines.”   The key to this is:  cue, routine, reward.  All of those three can be structured and controlled – but it is not easy.   

    I think the issue of habit is one of the toughest ones innovators face.  Some habits are good – for example, regular waking and sleeping hours, or regular (long) working hours.  Many habits are not good, just because they are habits.  How can we break unnecessary habits while retaining a few constructive ones?  How can we bring non-habitual thinking to creative endeavours, while using habitual thinking in other realms?  Can the brain be partitioned in this way? 

    The key to this tough dilemma is, I believe, awareness.  Try to make yourself aware of choices that are driven by inertia and by habit.  Once you are aware, when you seek to be creative, you can spot habitual thinking and say to yourself,  uh uh, no way,  this is what everyone does, this is what I always do,  not this time.  Try ‘reversal’ (thinking and doing the opposite).  Try the Drucker system of listing the ‘assumptions’ (especially unwritten ones) that drive habit thinking and action.  And, finally, exercise your brain.  I am writing a book titled Build Your Creativity Muscles, with 100 exercises for smashing habit-driven thinking.  More about this later….

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
March 2012
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