The contrast of stories on today’s New York Times front page cannot be more stark.
This story discusses the unemployment situation in the Euro Zone, which can not be more serious. One set of facts will represent the whole — unemployment in Spain is 24 percent, in Germany 5.7 percent. The second story discusses Obama’s attack on the G.O.P. budget, which he calls radical. What’s going on?
The two stories are closely related because they each reference macroeconomics. The Europeans decided to attack the recession and deficits with austerity despite the fact that economists from many corners of the world (ok, Paul Krugman and some others) called it a non-starter. What they got was shrinking economies and rising unemployment, no surprise to the Nobel winning Dr. Krugman.
Republicans in Congress recently passed a draft budget ladled with draconian cuts that would accomplish the same things that the Europeans have. The U.S. recovery, such as it is, owes its existence to the stimulus program put in place in 2009. At the time there were calls for more not less stimulus from Democrats and at the same time less from the Republicans. What we got was almost enough to give us a glimmer of hope in the election year. Will it last?
It hardly makes a difference that the Americans and Europeans have now run a controlled social experiment — which is very hard to do — and that the evidence clearly favors stimulus. In this election year, I don’t expect much to change but if I was Obama I’d make sure the country knows about that little experiment.
This does give me an idea though. Stimulus means spending money you borrow at the bottom of an economic cycle in order to rev the economy. But for many, probably most, people, deficit spending is counter-intuitive. It doesn’t make sense.
This may be because we are thinking about economics with the automatic part of our brains. In a piece I will publish tomorrow, I discuss Nobel Prize winner, Daniel Kahneman’s book “Thinking Fast and Slow” which analyzes what he called System 1 (fast) and System 2 (slow) thought processes.
It turns out that System 1 is what we operate with most of the time. It’s the autopilot that lets us drive while on the phone and almost never have an accident. System 2 is the process you use to do algebra and, well, understand Economics. The irony is that System 1 doesn’t know anything about Economics or math in general, but people never seem to be troubled when they use System 1 thinking on tough subjects. Just look at the Euros and the G.O.P.
We need more System 2 thinking in this world but politicians are increasingly trying to satisfy their fringe elements, a long tail to be sure, rather than the big middle. How can we get everyone back to the center? Take a look at Thomas Friedman’s recent piece from down under.
Bye for now.
Gary Lemke over at CRM Advocate does some nice work. Every day he asks a thought provoking question related to CRM and asks readers for their “take” on the issue. Over the years he’s exposed me to a lot of good thinking and I encourage you to take a look at his blog.
A few days ago the subject was Daniel Kahneman, a psychologist who won a Nobel prize — in economics. Kahneman and his colleague Amos Tversky laid the foundation for behavioral economics and challenged us with the idea that, while economics studies the rational behavior of individuals in the marketplace, we are not always very rational. That means at least some of the time we are doing logical things for emotional reasons out there in the good old market. Without fingering any single behavior this idea nonetheless explains a lot.
So with Kahenman as the basis, Lemke asks how often we do things in the marketplace that are emotional vs. rational. He says,
“Now, let’s use to 80/20 rule and suggest that most customers in search of service (for example, calling the call center) lead with emotion. And let’s use the same 80/20 rule to suggest that business objectives and business processes drive primarily rational behaviors understanding that individual employees still possess emotional attributes.
The startling conclusion (and graphic) is that only about 16% of the time are both sides dealing in a rational/rational manner. The big winner at 64% is “rationally dealing with the emotional” i.e. rational vendor dealing with emotional customer.
Yikes! This doesn’t make any attempt to grade emotion from under control to crazy but it’s still valuable.
I don’t know if the 80/20 rule obtains here, but as I told Gary, it sure feels right. If that assumption is even close (and I bet it is) then it is the best explanation I’ve seen for a focus on the customer experience. Forget the rules, the metrics for call handling time and all the rest. More likely than not you are dealing with an emotionally driven customer who needs some TLC. Dispensing TLC all day is a hard job and perhaps this is one of the silent reasons driving people to social networks to solve problems. What better place to find someone who empathizes with you?