Wednesday, July 11, 2007

Insecure Incentives

Political agents have a notoriously hard time admitting they've made a bad decision. The basic incentives they face mean honesty is punished if it ruins a perception. Companies sometimes face this world--they are often fearing for the integrity of their brand--but it usually takes a back seat to the truth. Customers aren't stupid and bad have to be temporary. The political world has no such profit motive and thus no such reality check.

Enter a recent test by federal inspectors revealed TSA a dismal failure in security.
In one test, TSA inspectors hid the components of a fake bomb in carry-on luggage that also contained a bottle of water. Passengers are prohibited from carrying containers holding more than three ounces of liquids, gels or aerosols through airport checkpoints.

The screeners at Albany International confiscated the water bottle but missed the bomb. In all, the inspectors slipped four banned items through the main checkpoint during the test, sources said.
On the release of these failures Ann Davis, a TSA spokeswoman, defended the organization
We don't discuss the results because they tend to paint an inaccurate picture of the competency of our work force. The tests are designed to be incredibly difficult and TSA does anticipate a fair level of failure.
Which is sort of like Google saying "Well, the test we have to ensure the security of our information are hard so it's ok if we don't pass. It's not like hackers are smart."

I know I'd feel safer.

HT: Mike Mills


Jacob said...

So you're saying that a company like Diebold had no incentives to restrict access to their e-voting machines to independent testing agencies?

No company has had an incentive to cover up the loss or misuse of sensitive personal information?

You can't think of a time when financial data has been inflated or misrepresented in order to trick investors?

Don't think I'm defending the TSA. I loathe the TSA - but the geovernment's hardly got an exclusive right to those type of incentives.

David said...

The point is not that the government is a complete mess and the private sector makes everything ok. The point is that the government is much more likely to persist with mistakes and have a harder time admitting they were wrong.

When a company engages in a course of action that turns out to be the wrong one, they have a strong incentive to admit the problem and change course (thanks to competition and the rewards of wealth). When political agents do the same thing, they have a strong incentive to blame others and avoid admitting failure. Their power lies in how people perceive them, not in adapting to the underlying reality of a situation.

Anonymous said...

"The point is not that the government is a complete mess and the private sector makes everything ok."
Sure sounds that way to me. Next time you play Civ4, remember the quote when Corporation tech is developed, "Corporation: n. An organization designed to maximize personal achievement and minimize personal responsibility". When a company makes a mistake (and that happens more often than one thinks) blame is spread so thin that no one really takes responsibility and the costs of fixing that mistake gets passed onto us, the consumer and not paid by the ones who messed up.

For example we have the Xbox problem. If you haven't heard, the new Xboxes are experiencing hardware failure. Like the infamouns "blue screen of death" we have the "red ring of death" but now it means the console itself if fucked.

Now to be fair MS did a wonderful thing in extending the warranty and refunding repair costs of those who already paid. Everyone knows the problem is with overheating, but MS has not 1) quickly admitted it was a defective design and instead used vague terms and euphemisms 2) has not told us who was involved in the decision to put the shoddy hardware into the machine in the first place.

MS did it for the same reason as politicians, public perception. The only difference is that politicians do answer to the people. Individuals in corporations spread blame and avoid responsibility to hold onto their jobs, just like you accuse politicians of doing.

Really, how often does a company hold a press conference and say, "Yeah, we really screwed the pooch. I take full responsibility."? Please, find me some examples where it was said and done.


Anonymous said...

I also want to point out that MS got so much good press by taking responsibility because it's so rare that a corporation steps up to the plate.

Car companies have recalls, but no one takes responsibility. They blame it on their suppliers, suppliers blame their own suppliers or unions or someone else. Still, if what you said was true, then why do recalls still happen? And what do you want to bet the management of these car companies which still have recalls get big bonuses? How is that taking responsibility?

Jenny said...

So the next time the FDA prohibit the sale of something because of poor test results, is the company going to quote the TSA lady?

David said...

Jason, listing times when a company screws up does not prove your point. But to point out something in your challenge, you assume that press conferences equals admission of guilt. But companies admit they are wrong without speeches all the time: they pull products and/or lower prices. (Granted, they lower prices for other reasons, but when it comes to the discount bin, they are effectively saying "Wow we shouldn't have bought this and/or sold it at the listed price so here's a discount."

No one suggests that a particular person won't want to take responsibility for a bad act. But the stockholders and heads have an incentive to seek that person out and fire them. The public doesn't have that incentive (costs are disperse thus it's not really worth the effort to investigate).