Achieving results in the physical world, with Adam Jarvis of “Public Service”

This week, Patrick is joined by Adam Jarvis, author of the Public Service substack and a New Zealand civil engineer and public sector veteran. They discuss how political capital constraints, funding misalignment across government levels, and accumulated regulatory "scar tissue" make infrastructure projects extraordinarily difficult.

Complex Systems now has video episodes as well. Watch this episode and subscribe at: https://www.youtube.com/@patio11podcast

[Patrick notes: As always, there are some after-the-fact observations sprinkled into the transcript, set out in this format.]

Timestamps

(00:00) Intro
(01:55) Understanding local government functions
(04:17) Challenges in public sector projects
(04:55) Political capital and project delivery
(07:35) Funding complexities in public projects
(10:08) Regulatory and legislative hurdles
(23:27) Historical engineering feats (i.e. Chicago)
(26:41) Talent mobility
(33:19) Modernizing hiring practices
(34:26) Agglomeration effects and brain drain
(37:16) Challenges in public sector employment
(41:06) Labor mobility and job security
(47:14) AI and automation in the public sector
(53:34) Risk aversion and bureaucratic processes
(01:02:10) Optimism for future reforms

Transcript

Patrick: Hideho everybody. My name is Patrick McKenzie, better known as Patio11 on the Internet. I'm here with my buddy Adam Jarvis. Adam writes the Public Service Substack. He's also worked in public service for the last several decades in New Zealand at the local level. 

So we're here to talk about the challenges of local government, of achieving projects in the physical world and how it is not entirely appreciated by people who are outside of it. I feel like tech and adjacent spaces are critical of government for the right reasons some of the time, but often misunderstand how the institution works. So I wanted to have a subject matter expert on that.

Adam, welcome to the discussion.

Adam: Oh, thanks for having me.

Patrick: Do you want to give people just a little bit of background? I suppose we could go as broad as what does local government do, but let's give people some context. What's the size of local government you work in and what do you work on?

Understanding local government functions 

Adam: Local government across the Anglosphere takes on a range of different roles—sometimes involves police, fire, education. In New Zealand it's more limited to essentially public infrastructure around stormwater, potable water, wastewater, transport, local transport initiatives. Not so much state highways, but local roads, libraries, waste collection, cemeteries—in general, the sort of day-to-day things that most people are interacting with when they think about the city. How the city's designed, how the sort of public spaces look, how they're maintained and those sorts of things.

Over the last 10 years, I've been really quite privileged to work for an institution in a city of about a hundred thousand. The local government in New Zealand is of a size that has, on the one hand, the resources to be able to achieve some quite innovative things. We can talk a little bit about some of the constraints of institutions that are smaller and really struggle with talent retention if you're interested. But on the other hand, it's large enough to have resources, but it's small enough that you can go and talk to the mayor if you need to, or the chief executive, the people on the ground. We're highly connected and that's given me the opportunity to do some really interesting things.

I've reintroduced locally extinct bird species to our city. I delivered the city's first separated cycleway. We've reformed the way that we do particularly low carbon investment, taking a sort of more robust cost-benefit type approach, which I then used as a stalking horse to change the way that our council invests more generally. So it's been a real privilege and it's an area I'm passionate about and keen to see continue to improve.

Patrick: Just zooming in on one of those, because unfortunately there is a close parallel in a local government that is quite local to us—as we are recording this, we're recording this in Berkeley, California and just across the San Francisco Bay. My sense of SFBA geography is terrible, but San Francisco also did a separated bicycle lane, which you might or might not have read about. I'll drop people links in the show notes to the official write-ups on that.

Challenges in public sector project delivery 

But achieving results in the physical world is non-trivial relative to many other projects or just writing something. What's the timeframe look like on a project like a separated cycleway?

Adam: Sure. I think before we get into that, one of the things that people misunderstand about delivery in the public sector relative to the private is that there's an element of essentially political capital that is just critical to understand.

And so before you get into timeframes, you really need to understand the more important factor of delivery. Because depending on the context of a cycleway, you might be able to do it in six months, it may take years, depending on the sort of environment that you are in, how much support you have, how much ability there is to do something quick that maybe is not all bells and whistles, isn't kind of beautiful infrastructure. Maybe people will complain about it because it looks ugly. But you're using that to test ultimately the alignment rapidly such that you can then, once you've sorted out and disappointed virtually everybody, but at a sustainable rate—so the cycling community's not happy with it, but they could live with it. And the drivers that use that route, you've resolved issues around parking or loading zones and all of these kinds of things that we don't think about until they're disrupted.

If you can go through a process—in a matter of weeks, really, from the first time you get on the ground, maybe six months of prep—rapidly iterate and then deliver the kind of bricks and mortar, or more concrete, the concrete of the physical infrastructure, the permanent installation, rapidly. But what tends to happen instead is the more that you have formal process that is long and particularly process that is imposed upon a local government by, let's say, a funding agency, whether it's the state or the national government or what have you—this is how we select projects. And you've got to do a series of business case processes, which will become so complex that they need substantial consultant involvement, hundreds of thousands of dollars, even just before you get into actually planning the route or any specifics about where the cycleway will actually go between one block and the next. You might be looking at years of process to get there.

Funding complexities in public projects 

Patrick: I'm glad that you mentioned funding because it is often unclear for end users of a particular thing. In private industry there might be a complex capital stack, but it's typically sitting behind the entire organization. And then the organization is doing funding from one unified budget. This largely doesn't carry over to the public sector, particularly not in Anglosphere nations. There is often a capital stack, as it were, coming from some combination of local property taxes, one hop up, and then national funds, which are often administered independently of each other. And due to constraints in the funding environment, a group within the government that wants to get a particular project accomplished might be attempting to map that against multiple different sources of money at multiple levels with perhaps orthogonal things that they want out of it.

[Patrick notes: See the episode with Dave Guarino, and broadly his work, for how “the feds fund but the states administer” creates ongoing issues in the U.S. context for e.g. public benefits programs.]

Adam: Yes. And probably going further—often one of the real problems that we have at the moment is the fact that every policy, every funding arrangement is often, even just from one source, there's maybe eight different objectives that a project needs to meet. Which is essentially impossible to—there's a complex system of trade-offs in theory that would need to be made around these eight different objectives, let alone the slightly different objectives that the other funding agency has or the local government has, or the community has.

And so in practice it's a game that is played because there is no—often the political process creates a situation in which there's no clear majority opinion on this particular policy that this is the priority followed by this. Instead, in order to meet different pressure groups and constituencies' values, instead you get a set of objectives that's kind of everything to everybody and nothing to everybody as well.

[Patrick notes: Memorably described in Abundance as the Everything Bagel approach to public policy, and identified as a particular pathology of e.g. blue-leaning policymaking in the U.S.] 

Adam continues: So instead of needing to clearly demonstrate this—although that is the case in some cases, or in many cases there are—there's an implicit, that would be a way to put it, objective that needs to be met if you talk to the right bureaucrats or what have you. Or we want X, but nevertheless, the process is one that whatever it is that you want to do, needs to be contorted in eight, probably more depending on how many agencies are involved, different ways.

The burden of regulatory and legislative bandaids

Patrick: Yeah. And we're sitting on top of a hundred plus years of organizational scar tissue. 

I love this metaphor. I think I originally heard it from Jason Fried who was talking in the private sector context. 

[Patrick notes: From ReWork: 
Policies are organizational scar tissue. They are codified overreactions to situations that are unlikely to happen again. They are collective punishment for the misdeeds of an individual. This is how bureaucracies are born. No one sets out to create a bureaucracy. They sneak up on companies slowly. They are created one policy—one scar—at a time. So don’t scar on the first cut. Don’t create a policy because one person did something wrong once. Policies are only meant for situations that come up over and over again.]

But everything that has gone wrong in the government for a hundred years has a regulatory or legislative bandaid attached to it. And we were sitting atop strata of sediment.

It is extremely easy for legislators to write into law requirements that anything which uses national funds will do this process to counter corruption. Also, we would like this process for, generally speaking, we have some public goals with respect to public employment and perhaps equity concerns. We also have some environmental concerns and in particular, there was this one person in the 1970s who really cared about birds. And so please answer the questionnaire about bird habitat and etcetera, etcetera.

[Patrick notes: Conversations with my father about suburban Chicago real estate projects frequently mentioned that one of the various frictions you had to overcome to get pedestrian projects done involved e.g. an environmental assessment that the wastewater management didn’t disrupt migratory birds.

Does anyone care about wastewater impacts of a parking lot? Not really, least of all the birds. But that sentence is not a responsive submission to the requirement. The responsive submission costs, oh, $20,000. It’s real work for an engineer, no less than putting asphalt on a parking lot is real work, but it is work which we burn to no productive purpose.] 

Some of these are perhaps not proximate to the fundamental concerns that are driving the marginal project, but they are the law and it is very difficult as people within the government to not obey the law. So one feels constrained.

Adam: I mean, just, there's the classic example of HS2 and the various work of the high-speed rail in England being kind of a forever project, like the Californian high speed rail. Rail projects are just like this—this is such a great example of them because they're spatially very large. They're large across time. So each layer of process is like multiplied by all the different environments that you're going through. The fact that this project is expected to be built over multiple years means that series of regulations—you end up with, let's say, just on the pure math of it, 40 times the work involved. And I don't know an awful lot about it, but there's the case of the Biden clean investment, which as I understand it, none was spent—none of that allocation was spent.

Patrick: I think it's a complicated story where the ground truth is something different than the one that is articulated for political consumption. But broadly, like we were discussing, there is this funding phase before the planning phase, before the implementation phase. And the structural reality of the American funding phase is that you will end up in a proposal cycle and then a budgeting cycle, and then a deployment cycle, which does not necessarily align with say, one's desire for state capacity or one's electoral timelines. And so there is, unless you invoke emergency authorities, in expectation a project decided on at X will not possibly spend money before Y. 

There is some level of dysfunction on top of that base iron law. And that iron law is itself a form of dysfunction. [Patrick notes: One can’t move fast if one’s funding sources presume a 3 year minimum cycle time and one will, at no point during that cycle, feel as if one is uniquely causing the project to run slowly.] 

Adam: Right. So one of the interesting things here I think is that politicians, or public stakeholders generally, are incentivized to see that their thing is implemented and the mechanism through which that occurs is like legislation, either primary or secondary. But at no point is there—what that system of incentives creates ultimately is one in which every single project is viewed myopically. So rather than taking a step back where we might say, okay, what do we want? We want cleaner rivers. How would that be most effectively achieved? Is it through spending half a billion dollars of a small town's money on making marginal improvements to their wastewater treatment plant? Maybe. But we should also, in an ideal world, look at okay, well, can we introduce—where are the sources of pollution in this river? What are the most effective ways to reduce nitrogen levels?

But if we were to spend, let's say, half a billion dollars on clean water infrastructure in this catchment, you could almost guarantee that it would not be whatever it was that that process has created. Because we are consenting a new wastewater treatment plant, so therefore every single desire for improved social, environmental, economic outcomes is kind of channeled through this particular project. Which blows out costs enormously and timeframes even before you get to building.

Patrick: It also does something which has been described in other places as promiscuously distributing vetoes, where the alignment of political capital in a particular community or nation results in there being, for anything that you do, the groups or institutions which are primarily responsible for it, but there are any number of other stakeholders who would—I think the cynical way to say it is attempt to get their piece of any additional funding or opportunity, which comes along. 

A perhaps less cynical way to phrase it is they are valued stakeholders with regards to things that the local polity has decided that it values. And one maintains that status in society by always having a comment on the new thing that is coming down the pike.

And so it means that the number of people that you have to consult with respect to the new thing that is coming down the pike grows larger and larger over time. And one's incentive as someone who is being asked to comment on these things is to always have just a little bit of a disagreement and a little bit of, oh, we're going to need some modifications, or you stop getting asked to show up in the next iteration of the game.

Adam: Or even less cynically than that. One could say that the complexity of modern society is so great that ideally you might bring these people together—or maybe the political process in a way is intended to do this itself—and ask them, like in general, we have this capacity for this many resources, this sort of capacity, how would that be allocated most efficiently to achieve your particular outcomes? But because that conversation is impossible to have because we are just doing so many different things, people have limited attention spans or limited attention, rather, in general. Instead, if you want to see an outcome, you value your river or your local community or whatever, the only way in effect that you're going to be able to have the sort of influence that you like and make marginal improvements is to involve yourself in that kind of fashion.

So we're—there's a gap there that remains to be filled. And I don't know, I'm hopeful that kind of modern systems, potentially AI might be in a position to help grease those particular wheels in order to enable that to happen more. But I can definitely see how we've gotten into the position that we're in. Just through the incentives that you are talking about, or just more generally that something comes up and I want—I value so and so, and I want that to be expressed in this project because if everything is done myopically, then you need to go with the flow and advocate for things in each individual circumstance, or you will achieve literally nothing.

Appreciating the infrastructure we take for granted 

Patrick: I also think that for a variety of reasons, we have the day-to-day keeping the lights on work of running industrial civilization, which people often only appreciate when it's gone. I think running tap water is a wonderful thing, and I think many people think running tap water is abundant in nature. 

And it turns out that there are—let's just, you have the benefit of being a civil engineer. What's the bus number on tap water for a town of a hundred thousand people? Like how many people would need to stop doing their job before tap water ceased?

Adam: So I think in our town, a hundred thousand, the entire system, not including when you would bring on consultants or contractors to do a major renewal project—so, leaving aside kind of long-term capital maintenance, but rather just the ongoing operations—it's a team of probably eight people or something like that. Between the treatment technicians that are actually just monitoring ongoing dosage of chlorine and so on, quality tests, a couple of engineers. And maybe some that would include probably overheads as well of like the finance team that helps.

Patrick: And so probabilistically speaking, if two to three people that have differentiated technical skills or similar, simply stopped doing the water work, we would stop having the water after a period of what, probably days?

Adam: Yeah, yeah, yeah. I remember when I started my career, I actually worked initially as a water engineer in Auckland, our largest city. And I just very vividly recall the first time I opened up our GIS system and turned on the layers related to the underground infrastructure. And I highly recommend anybody to do it. Just spend—go look at your local city's GIS and just turn on those layers and just get a sense of the scale of what's being built and what is being maintained under the city. You know, just so that you can turn a tap and push a button and the water goes away again.

We're talking about thousands and thousands of kilometers of pipes, valves, pipe bridges—every little stream or road sometimes will have some—there's all manner of infrastructure required beyond just a length of pipe in order to make the—air bubbles accumulate in high points in the pipe need to be released. Otherwise, pressure increases or flow rates reduced, then that needs to be constantly checked and maintained. Otherwise, just an entire portion of the city is without water. And then you have reservoirs, treatment plants, and it's—yeah.

It inspires a certain sense of awe almost in me in a way when I think about the fact that a very small group of people in each individual town, and collectively as a society have built this thing such that people can ignore it and just have the most fundamental component of life—safe, clean, drinking water, whenever they please.

Patrick: I think that's exactly the word I look for when discussing infrastructure and think that some sub-components of that are, we do not appreciate how we live in an age of miracles. And we also don't appreciate that, like you said, kilometers of pipes with flow meters and various widgets attached to them, and that that was very intentionally designed by people that none of it is by accident. And by a centimeter, by centimeter, I suppose, near my neck of the woods, it is all—well, there is probably a plan written down somewhere that has it all laid out, and then there's a slight difference between that plan as built. But it was laboriously designed often before computer-assisted design.

Adam: I would say it actually tends to be more iterative over time. It's—growth patterns of cities, there's quite a large subject that's kind of fascinating. We could go into, but cities have grown very organically over time. Most places that have done some enormous kind of top down modernist type of—there's a general consensus now that that kind of approach has failed. Instead, what you tend to get is a more—we look 10 years out perhaps, maybe 30 years out. Where is growth happening? What kind of infrastructure can we—and then we kind of go back through the existing infrastructure and look at, okay, well what kind of capacity is going to need to be introduced here?

Patrick: And not saying that the entire town is planned out in advance of need, but that every decision at a fractal level—does this pipe go up or down? Does it have a junction here?—was making that decision intentionally at some point.

Adam: Isn't it a funny thing though, in the older cities, probably a lot more than you realize is not on any plan anywhere. Certainly the case—there would be times, again, my first job out of university where we'd be called out, there'd be water just spraying up from somewhere. We'd look on GIS, there'd be nothing there. But clearly there is. You get a digger out and find some like rusted old piece of cast iron that has been connected and pressurized well past its use-by date. But record keeping—it's extremely difficult to keep track of all that thing. Surveying—you think about the level of precision required to understand in the 1900s where exactly everything was relative to a city plan, let alone in the Z axis, which is often where the difficulties lie.

Historical and modern infrastructure challenges 

Patrick: Speaking of Z axis, in my hometown of Chicago, the persistent water quality issues were difficult to solve given the physical geography of the city. And so the most achievable option for re-engineering that was, okay, we think we should just move the Z axis three meters upwards. And so engineers in, I believe the late 1800s, elevated the city of Chicago by approximately three meters. 

Adam: Wow.

Patrick: And I love reading history like that because it actually happened. We somehow had the capacity to do that. That's phenomenal. Prior to computers and similar existing or even, one would assume at that time, very, very little ability to even use like fossil fuel based sources of work. [Patrick notes: We lifted 35,000 tons using jackscrews powered by an inefficient engine for turning agricultural outputs into mechanical work.] 

And yeah, we did it. We took what was then a fairly sizable city and raised it. The sheer physics involved are staggering to say nothing of the political or economic implications.

Adam: In my case in New Zealand, we get the opposite end where—you're talking about a nation where New Zealand Europeans perhaps only, like in the case of the early 1900s, New Zealand Europeans had only really been there for a hundred odd years. Maori, a few hundred years more, and extraordinary isolation. Both—in general, if you look where New Zealand is on a map, it's absolutely in the middle of nowhere, assuming it's on the map at all. A little joke there, but—and then fractally, you end up in a position where even for a fairly significant city, you can go out into essentially the bush we call it, which is kind of like essentially it's a rainforest full of dense vines and essentially impenetrable. And then way up in the middle of nowhere, there's like a 120 meter tall concrete dam that was built in 1911 to supply a fledgling city 30 kilometers away. And for modern machinery, before certainly anything to do with GIS or any—people achieved this. And again, there's a certain sense of awe when you kind of appreciate their context.

But I think, we were talking about this a little bit offline, is the idea that I think all manner of things were done through the public sector to address needs that everybody could see were important, let's say a hundred years ago. Even as recently as kind of in the early post-war era, where we want electricity lines that are all being built out rapidly and so on, because we want electricity obviously. And over time that kind of capacity, that dynamism that was in the public sector is perhaps quite rightly—and you could make the arguments—shifted to the private sector. And people have built all kinds of wonderful things, particularly here in Silicon Valley.

But because there's been a gap in transmission of knowledge, of process, of understanding of how to do that kind of thing. And then to come back to your point, instead we've got accumulated scar tissue and I think we're at a period now as we go through another period of great change of changing demographics. Some cities are being emptied out. We think about Detroit and facing enormous challenges with accumulated debt load and both financial, but probably more importantly, even more importantly, just technical debt of these kind of pipe systems and so on that were built for a city fundamentally of a different size. And extrapolating out this idea across the public sector more generally, I feel very strongly that far more attention needs to be paid once again to just setting things up for another few, for the next few generations that come after us to—times once again to build these great dams, but perhaps not quite in that fashion and not necessarily a dam per se, but to revivify what we're doing.

Patrick: I feel with moderate confidence that one of the factors that we are having here is that—I've described this concept on Twitter occasionally as The Sort, which America has engaged in quite enthusiastically in the course of the last few generations.

[Patrick notes: I’ve been asked whether The Sort was my own formulation, and to the extent that two capital letters is a contribution to collective understanding, I picked those two. The stratification of American society, the increasing returns to geographic concentration, the outsized portion of the economy occupied by superstar firms, those firms’ hiring strategies, etc have all been covered in many, many places. The Big Sort talks about the red/blue political implications of a subset of this, but IMHO when I use The Sort I mean something which is more profound, even, than that.]

I think other nations have their own version of it. At one point when our forefathers were busy setting up things, society was lamentably inefficient in identifying talent and sending it to work in various places through a variety of mechanisms, some of which we've rightly looked back at with horror. Society discriminated against women, many groups in various societies, etc. And just fundamentally they were not very good at looking across the range of the population and saying, you, you look like you could be a very productive civil engineer. Or you, you look like you could work very well in finance.

But as a result, people got attached to projects through a variety of social processes and some of those social processes favored certain institutions. So if you grew up in the third largest city in Illinois, you were likely to stay very local to there and be tracked into very local positions. And if you both grew up there, had some amount of ambition, some amount of social capital and bluntly, but descriptively were in the right demographic situation, you might end up as a public works administrator. 

And then society got much better at running The Sort.

And the positive ramification of that was we ran a nationwide and increasingly worldwide semi-meritocratic process to identify smart people earlier. We will track them into high status institutions by a variety of processes, which use some amount of high stakes testing, and then we will sort of track them from that high status institution to a very dynamic sector of the economy, whether it be finance or tech or similar. And that was an economic engine for us for many years.

However, it meant that in my grandfather's grandfather's generation, someone who might have been in public works in a small city in Illinois, will likely be identified very early in their life as a go-getter and basically tracked into Google, or tracked into finance in New York or similar. And so we have this enormous batch of cultural projects, which we are the inheritors of, but we experience in the present that it is very difficult to create something of their like, despite not having lost the knowledge, it's just the people who would do it are in other places.

Agglomeration effects and brain drain 

Adam: If I can just add something about mobility, another factor that we've experienced in the last couple of decades is agglomeration effects. And so I think we deal with this both at the subnational levels and at the national levels. The phrase "brain drain" is sometimes used, for example, in New Zealand.

Patrick: I hate that phrasing of things as someone who immigrated for economic reasons in my adult life and then have immigrated again back to my nation of birth.

[Patrick notes: I do not agree that every nation has something akin to ownership of people who happened to be born there, and many discourses about brain drain assume a quasi-ownership model. I have an immense regard for the U.S. and loyalty to it, and always will, even if life ends up taking me to another nation I have a great deal of regard and love for. But I look at other nations, which purport to be annoyed that the talents of their citizens are being misappropriated by e.g. the U.S. when it offers them appealing jobs at appealing prices, and say that they should order their affairs to give better opportunities to their citizens versus complaining about those that do.]  

But be that as it may, there are smaller communities which typically don't have extremely dynamic industrial sectors. And then there are some descriptively larger cities that do have dynamic industrial sectors, or even in the public sector, they have high status government institutions, which are doing national government policy.

So, for example, if you look at Japan, the Japanese population is contracting over time. This is very well known domestically and internationally. The population of Tokyo, on the other hand, continues to go up.

[Patrick notes: If you want to be very precise you can drill into whether Tokyo means Tokyo-to or the greater metropolitan area or make a poindextery observation that it decreased by rounding error in some recent years. I’m referring to the general shape of this graph:

] 

And this is partly because all of the big companies and all of the jobs are in Tokyo, and if one is working in the government and one is ambitious, one would probably prefer to work at the Ministry of the Interior in Tokyo.

[Patrick notes: My apologies, I guessed wrongly at the English name for 国土交通省: Ministry of Land, Infrastructure, Transport, and Tourism. Probably got confused with 総務省 (Ministry of Internal Affairs and Communications). This recovering salaryman feels appropriately mortified for the lapse.] 

The career paths of Japanese public servants is a thing that I cannot speculate on for a great deal of detail, but working at the Ministry of the Interior and then going on the various career paths that will be offered to you after that is generally speaking, higher status, results in higher pay, etcetera, than simply going to work for Ogaki City Hall, my town of residence in semi-rural Japan. And being one of three people that is making sure that water continues to get to people.

Aging population and resource allocation 

Adam: Assuming that there's any role at all for you there, right? Because what's alongside this contracting population problem is also that we are also living longer as well. And so at the same time that a city maybe has less resources to maintain the infrastructure that it has, the service levels that it has, the rating base is shrinking. People that are there are seeing this are not necessarily in a position to kind of jump out of the public sector into a different role, opening that role for someone else. Instead, every incentive, if you want to stick around in those towns is to stay in that role until you retire. And resources for internships or more junior level roles that once existed probably aren't there anymore because it's difficult to justify the value that those have. So if you're wanting a role in the public sector, even then chances are you're going to have to leave.

Structural factors in public sector layoffs 

Patrick: And there are other structural factors in the public sector, which are downstream of political choices of the polity. I'm afraid I don't know how they work in New Zealand, but for example, at the federal level in the United States, if there are layoffs, it has to be the low seniority employees first with some asterisks that one can make with regards to like preferences for veterans and similar.

[Patrick notes: It is underappreciated by some people in tech how much of the U.S. government workforce is made up of veterans. We cycle a few million people through the armed services and then want/need them to have a job to come home to. That seems quite just and wise, and is supported by a supermajority of the American polity in any event.]

Adam: Sure.

Patrick: But net on net, if you assume that there are over a timescale of decades some years which are pretty flush in which there's a lot of budget, and then some years which are either less flush or for whatever reason a political imperative is to contract the size of the government, then that contraction will typically happen at the descriptively younger workers, descriptively lower ranks on the totem pole and not near the top.

Hiring and firing in the public sector 

Adam: Sure. And relatedly, just coming back to a point I was talking about earlier in terms of hiring, I think we also haven't really begun to come to terms with the fact that—maybe this is specifically in New Zealand, but I think across the Anglosphere—getting a bad hire in the private sector is, you know, a bad fit. Maybe no judgment on this particular individual, but they're just not the right person for the role. That is orders of magnitude, from what I gather, easier to rectify than in the public sector. Where essentially you're in a position where you have to restructure the entire organization.

You cannot fire somebody because they're the wrong person unless they're committing like an HR type offense—criminal problems, something of that nature. But if there's simply just, "Hey, it's our bad. We hired the wrong person for this. You're a great person," essentially that person is there for life. Until somebody makes the decision that we are going to completely shake up the entire group or unit that that person is involved in and have to specifically remove that role as well. You can't simply have this—there's case law around this. So you can't replace that role with a similar role somewhere else or anything like that. The role actually has to be disestablished.

Patrick: Yeah. I came up in the social system that is being a Japanese salaryman and large, traditionally minded Japanese employers feel, and to some degree are by law and regulation constrained from ever firing someone in a particular job class. And so they've come up with what, when you describe this to Americans, sounds like a perverse institution—but it's a room designed to cause people to want to leave your organization where you subject people to a degree of essentially psychological torture. They make it very clear to them that they are unneeded, in some cases, giving them newspapers, asking them to copy out the newspaper longhand, and then ripping up the copy in front of their face at the end of the day to just demonstrate to them how little value they're creating.

And when I heard that word for the first time, and even experienced the reality of it in Japan, that sounded wild to me. And then I realized that New York City has the same institution called by a different name, obviously, because they don't speak much Japanese in New York City—for school teachers who have run afoul of the administration for reasons such as, I don't know, it turns out being drunk in class is not that effective at achieving great student outcomes. But which makes it—various contracts and labor protections and regulations and laws make it difficult to get rid of that person. And so they have a parallel institution where they will warehouse someone for a few years while trying to convince them to quit.

Talent mobility and its impact on public sector 

Adam: So I have some degree of sympathy for these rules, but coming back to this idea of scar tissue, I think in a world of low labor mobility where you're tied to a particular town, let's say, and there's the local steel mill or what have you, which is the primary employer, and all of your friends and all of your family are there, and you intend to stay there for the rest of your life, and you're in an economy with like low sort capacity to open some other kind of role, retrain you later—actually the power balance in that sort of situation is very much on the company without, in the absence of labor protection laws and so on. And so actually I think in that sort of world that people lived in in the early 20th century, those kinds of things were, I think, a lot more reasonable than they are now. Where the power balance is not so much "you shall do what we say, or you'll be fired from the steel mill and thus effectively be made destitute."

Patrick: Yeah. And I'm glad you said that and would elaborate that particularly for sort of specialization where the government is essentially a monopsonistic employer.

I suppose the most obvious example would be military, because no one needs a fighter pilot unless they're in the Air Force. But for civil engineers and water engineering, for example, I suppose there's quite a bit of water engineering done in private industry, but water engineering done for a specialization that would cause you to be working on like city systems—there is one employer for the city and you're stuck with it. And if one believes that there is low labor mobility, if there is no liquidity between cities or other things, then that person would find themselves in a very untenable situation if they specialized for 18 years and then were cut for reasons fair or foul.

And so in part to convince people to spend your one shot in life on getting sufficiently expert at water systems such that you can be one of the three individuals who prevents all of us from dying of thirst 18 years from now, you do have to like pre-commit to them to give some level of protections. So again, I intellectually appreciate that it is sort of more rational than it might seem to someone in the most free market part of an economics department. And also hold at the same time as, it seems a little bit ridiculous that we end up with teachers who are drunk in class and continue having jobs for many years after that fact.

Adam: Yeah. So I mean, it's one of those things where there's a need for a host of reform in these places, but it's often not some black and white thing that's required here, but just a subtle realignment based on the environment that we now find ourselves in. Where yeah, if somebody's drunk in the classroom—I don't know if I've known that example before or anything of that magnitude in New Zealand, but even just simply that I think we need to reaffirm the idea that our foremost duty is ultimately to the public, and that our institutions should, as part of that, look after the people that they hire. But that actually we need to get in the first instance, better at hiring. And then also better at firing in those cases where it's necessary and in such a way that those people can leave with their head held high and with grace. That potentially there's no judgment there of them personally, but actually it was our fault, which I think—as I said, thinking of how Stripe have been quite inspired by the efforts in that regard of that institution that we could learn from.

Patrick: I think there's definitely a—I am not speaking for anybody but myself with this, but there is certainly a dignity to labor element that I feel certain social systems in the world do better and certain social systems in the world could stand to improve on. And indeed some of the zone of the achievable in say American politics might be increasing the level of felt dignity while decreasing the level of structural protections might be a trade that everyone benefits from. But things such as, if one makes it the rule that one is only able to fire someone for gross moral turpitude or incompetence, then the fact of firing someone is a signal of gross moral turpitude or incompetence. And so one will be disincentivized at the margin to do things where this organization's work style and your organization's work style are—no judgment on either of us—just not that compatible. There are many other organizations in the world perhaps pursuing your job and you pursue your fortune at one of the other ones, and you will be happier. And we will be happier, is a no judgment thing that you could tell people.

And I'm a very low conflict individual. Some people enjoy having boisterous debates that might involve shouting at their workplace. And in a place where everyone is a low conflict individual and the corporate culture is quite averse to conflict, having a very shouty person—you are not being fair to that person. You're not being fair to the ones around them. And similarly, there might be a high conflict place where I would be less than an effective employee and perhaps they would shout at me and ask me to leave. But if one makes it the rule that you literally need to violate the law to be exited from this place, then the cases that are closer on the margin of you haven't stolen from the public purse, you haven't abused one of your colleagues, you haven't committed gross felonies or misdemeanors in front of us, you're just ineffective at your job—like you will be there.

AI and automation in public sector jobs

Adam: Or increasingly, the capacity's already there thanks to the people in this city to automate a lot of work that we used to do is now redundant. And that can be—text data can now be processed in a similar fashion to numerical data. And yet we've got hosts of people that five years ago were necessary to be able to take data, text data from one format and put it into another. And that's something that we're going to have to grapple with.

Patrick: AI is rolling down the hill like a boulder at us on this one because just like unfortunately, but descriptively, there are many people who are currently doing data processing jobs, which could be done better by a computer, but that has not been done due to the portion of public sector hiring, which is a jobs program and an unwillingness to redeploy them towards other things. It's always easier to keep the department doing what the department has always done. There are relatively large portions, I would say, of the public sector where they're not doing data processing simply—and here's the stack of forms, I type them into my machine and they process business rules on them—but they're doing one level higher than that. Like making decisions based on that. Drafting documents would be one such case.

Adam: Drafting documents—not that a decision maker, but themselves, but are there to support. But by taking a set of ideas, let's say, putting that into a format that's suitable for public consumption, like a new stormwater strategy or something of this nature. Not specific.

Patrick: Yeah. Or gathering—even just the work of, like, we have public commentary periods in many parts of the United States political process, and one of the jobs that staff has to do is to take the public comment, which might come from everyone from the man on the street to a distinguished professor in relevant field. And might be literally any length from a tweet up until this person submitted a five page written declaration, which has multiple supporting appendices to it, and distill that into a report for the city or for the benefit of policymakers. And that sort of work will be more tractable to computers than one expected a few years ago.

Adam: Yes, absolutely. And just coming back to this, the stormwater strategy type idea, I think there's really a lot of value there for far more human attention to be placed on the actually interesting parts of it. But that as long as we have a structure where your job is to deliver this, even if that—I think there's a set of incentives there for that person, even if they would be more interested in doing the higher level work where human attention is adding value—to nonetheless push back against that component of their job being automated by an AI. Right? Because we are not kind of—the deal isn't made explicitly of "No, no, no. You do that and then do something else instead." Out of purely rational concern to preserve their job, they seek to inhibit that adoption not only for themselves, but generally.

Patrick: Yeah. And this goes up the chain fractally as well. Humans are related to the monkeys, and we still have the monkey OS running in our brain a little bit. And if you wield a larger tribe, you are more powerful than someone who wields a smaller tribe. And so one of the longstanding pathologies of government budget is—regardless of your needs in the coming year, you will not be a successful administrator for very long if you ever ask for less budget than last year. In part because if you ever ask for less, someone will gladly ask for more, and you will never get the budget that you concede back. But for the same reason, if you have a hundred people in your organization, that is some amount of status. And acceding to a reorganization where you would now be managing 70 people with 30 released to do more important things for the public rather than filing the forms they were filing last year is not directly incentive compatible. And so people might be disinclined to do that.

Adam: I think also just there's overlapping problems here because one of the difficulties of that—let's say labor mobility issues that we were talking about earlier—is a collapse of interpersonal trust within these institutions as a result of the fact that you just probably don't know your manager all that well for all that long. And so to be able to tell him or her, "Oh no, I could do this via AI and I would like to have the opportunity to do Y and Z instead," is a very difficult conversation to have with somebody that barely knows you. Whereas if you've been in an organization for 20 years and you've worked with this person, I think that's substantially more tractable.

Patrick: And I think in addition to interpersonal trust where the crisis in institutions that people have identified in the last couple of years, which there's any number of factors in it, including like the institutions demonstrating less capacity to get things done, a changed media environment, increasing politicization, etcetera, etcetera. But institutions viewing other institutions have a lower degree of regard for them than they did in the past, I believe. Is that commensurate with your experience?

Risk aversion and process overload 

Adam: I can certainly think of a range of specific examples of that. I don't know if I could comment that that was a general trend. I suppose it's only natural—if the thesis of yours or others is correct, that there's a diminished capacity, then yeah, I mean that natural flow in effect would be lower trust. But I think it's also related to this idea of a declining appetite for risk. And imagine you are—thinking back to this person, this executive public executive who's coming in and out of different roles every two years, they come in, something goes wrong. What you would do if you were intending on going to a different role elsewhere is to implement a new process. So you go, "Oh, this wasn't my fault, but we've got this new process that's going to make sure that this can never happen again. Because we're going to go through a design review externally." And then you end up with more and more like waterfall type processes where you've got these checks and balances and so forth, but at nowhere along the line, it's very difficult as well in that kind of environment to make any kind of argument that the optimal number of failures is not zero.

Patrick: As I mentioned in the original essay about that, and I'm snow cloning a line from Dan Davies, an author who we also had on this podcast previously. But it is not maximally straightforward but possible in private industry to say, you know, we could tolerate a few more fraud losses if it increased our revenue. It is intensely difficult in the public sector to say, actually, I think a little bit more crime might be useful at the margins we're at. It wouldn't be too bad if welfare fraud was up by 10 basis points.

Adam: Well, I mean, even leaving aside criminal activity, I think it's almost impossible to have that conversation with respect to just, let's say failure in general. Where if you're the executive who deliberately reduced like the risk management process in order to streamline it, and as a result of that something happened, which inevitably it will, then all that blame for that is going to fall on you as if you caused it yourself. Right. And there's no good standing in front of the media saying, "Well, yeah, but you know, in general, over the next 30 years, we expect costs to decline."

Patrick: There's a bit of stare decisis—stare decisis is a word often used in the United States legal system about letting the thing that has come before stand. [Patrick notes: This is a bit of Latin that well-educated Americans are expected to know which I recently learned is not a bit of Latin that well-educated Anglosphere-ex-America people are expected to know.] 

But for example, if you are the regulator who approves, I don't know, self-driving cars without an extremely laborious study of safety, then the first time a self-driving car kills someone, it was like you personally stabbed that person in the chest. Whereas if you are merely the inheritor of the existing roadway system, which we all know will kill, you know, statistical average in the United States is probably 30,000 people a year, then, well, we've always lost 30,000 people a year to roadway safety. And so you're not personally responsible for that.

Adam: So can I give you some really great examples of this risk aversion and layers of process being created? This is not related to myself or any institution that I worked for personally. But during university as a training civil engineer, you meet a lot of other civil engineers and we catch up from time to time. So you get a lot of interesting insights into other institutions.

So there's one particular colleague of mine—sorry, friend, fellow student at university who also trained to be a water engineer. Who, when they started their career at a particular council, the process for replacing a length of pipe that had come up for renewal was that you take the form that was done the last time you had to replace a length of pipe, update the map, note any differences, and then go out to a contractor that you probably had some degree of relationship with that would be renewed every three years. So you'd go out to market every three years and say, "Okay, we want a new maintenance contractor." But in the meantime, that schedule of prices being done meant that the process for this engineer working as, at the time, an intermediate engineer rather than pure graduate was the morning's work. To do all of the planning work, get the contract out, get people beginning to order in the parts required, everything else. Obviously the execution of it would take some time, but essentially you're talking about a morning's work for an intermediate engineer. So we might put a value on that of after overheads a few hundred dollars.

So now at a different institution, the same engineer, the process is now so convoluted that the price involved for just the planning and the contract procurement and all the rest of it—to get to the point where you could replace that length of pipe in that city—is greater than the total cost of the project 10 years ago at the start of his career. So before any actual work has been done, just the design review, which is done through a panel of external consultants who decided amongst themselves, which work, at what price it would be. I look forward to having this person on once they leave the particular institution to kind of do a debriefing on some of this. But this is again and again the sort, the same trend that I see right across New Zealand and as far as I can tell the Anglosphere in general and possibly the world—just as a result of the sort of incentives that we have. Well, I didn't necessarily see much in East Asia. But this is where we are going. And at no point is anybody incentivized to sort of step back and go, "Hold on. This is completely nuts. Our delivery rate now is 10% of what it was or what it needs to be in order to just renew our infrastructure at a timely rate such that every hundred years all of the pipes get replaced. We are now 10% of that." And as a result, walking through the capital of our nation, in Wellington, there are just routinely large amounts of water spilling around the streets that when you observe the behavior of Wellingtonians walking around with such kind of casualness that you could only assume it's been going on for months.

Patrick: This is sometimes referred to as Baumol's cost disease, although I think he has a different explanatory mechanism than that has come to mean as a meme in communities like this one. I think one sub-genre of this is that not much technically speaking has changed about the pipe that we were buying 30 years ago versus the pipe we buy today.

But if we were buying one pipe and one piece of paper 30 years ago, we're now buying one pipe and 12 pieces of paper. And it turns out we are very willing to—okay, perhaps not descriptively speaking accurate with respect to pipe specifically, but going with the metaphor—we are willing to purchase the pipe from, without loss of generality, China and the cost of the pipe has gone down. But we are very unwilling, for good reasons, to import the Chinese regulatory state into our nations. And so the cost of the piece of paper does not decrease.

And so as you play that game for a little while, the total cost of it, as you mentioned, the cost that is attributable to regulatory overhead will swamp the cost that is the minimum necessary of labor and goods necessary to create something in the physical world. And at some point, one has to ask what are we doing?

Optimism for public sector reform

But you've mentioned that you are working towards some level of reform for the civil service generally, or at least optimistic about it. And I also hope to share some optimism because otherwise what are we doing here? What gives you optimism that we are not just in this downward spiral and capacity that we could actually have nations that are with accomplishments that are worthy of those great nations?

Adam: Great question. I tend to think of, in the first instance, I'd say I'm optimistic because I see that this could just be—this is part of like a natural, or you can almost think of it as cyclical in a way. We talked about that dynamism shifting from the public to the private sector, some of these structural incentives that work and so on. And I think too about the need, let's say 20 years ago around reforming some of these systems is probably pretty low. The capacity for a growing population and rapidly growing economy to support some degree of dead weight loss because systems weren't then quite as optimal as they could have been. And there was an extra piece of paper to use your metaphor—we doubled the amount of paperwork while in actuality in terms of the sort, probably, possibly even, you could say a good thing from the perspective of society as a whole, because the people that could have spent an inordinate amount of time and energy resolving that issue probably better off being here or producing something new and something of value rather than the maintenance of infrastructure in the state.

But I think we're at a point now where the problems of that complacency are becoming increasingly obvious. I think you've got a new generation of people keen to talk about them and just bring attention to some of these sorts of issues. And I think in terms of like a—each generation has its own challenges. And one of them for ours is going to be, okay, well how do we in some cases rationalize the state? There's a great example of—you're talking about Japan earlier and depopulation. We have this occurring in some of the more rural areas of New Zealand already due to fertility decline and net migration. But we have local governments that have a roading budget larger than their revenue. And so they do other things as well, but are entirely reliant on central government subsidies in order for those roads to be continued to be maintained. And at some point we need to be—there's, it's inevitable that we're going to go, "Okay, well the population of this place is half what it was. There's going to need to be some tough calls at some point." Do we let those roads degrade a little bit and go back into sort of a gravel—there's some degree of rationalization, as I said, is important.

But more generally, I think just interested, talented people seeing problems, thinking about the future of their nations, maybe hopefully the future of their kids if they end up having them. And that problem's going to need to be resolved. And just, I'm really optimistic just in that sense of the amount of attention and the rate of change in the amount of attention being paid to these sorts of things and the sophistication of the conversation. That it's particularly obvious in places like this, but then the internet, I think really is enabling of quite sophisticated, nuanced conversations about some of these global issues that maybe weren't possible internally within one particular organization and one particular place at a particular time 30 years ago. So, I mean, that's one source of optimism. I'm like, I think it's highly—I'm convinced that everything's going to be okay. I think it's going to require a lot of people essentially like fulfilling their duty in a way, maybe as they see it. But nonetheless...

Patrick: Yeah, I think it's nice to hear someone say, forthrightly that the internet can be net positive for civil society in terms of debates and similar because that is definitely not the received wisdom with respect to the impact of social media on the political conversation. But I think you are fundamentally accurate that the old way had some things to recommend it and some things to extremely anti-recommend it. There was a great deal of elitism that decisions were made in the metaphorical and sometimes very literal smoky backroom that, as recounted in many histories of large public works projects. There was a great deal of experimentation done on society by a very small number of people who may not have gone about getting the consent of the citizenry of those experiments. And it's a bit unclear to me what the exact mix of things going forward will be. But it is nice that we can now have a broad based discussion in society in places like everywhere from the Thompson and Klein abundance book here in the United States, which is a bit politically inflected, but they're talking about a reinvention of the government and decreasing the amount of particular bureaucratic processes while still wanting—I believe it would be characterizing them fairly to say that they want a very active and empowered state and a large public safety net, and then some amount of enthusiasm in many places for, oh, the best and brightest wherever they found themselves in the economy could, through a variety of processes, spend some time in government or adjacent to government to reduce the amount of dysfunction we're seeing and just generally speaking, increase state capacity.

And I think that's a topic that we could go another 12 hours on. But unfortunately all good conversations must come to an end. And where can people find you on the internet?

Adam: So I write the Public Service Substack, and then also on Twitter at alethios3.

Patrick: Thanks very much for your time today and for the rest of you, we'll see you next week on Complex Systems. Cheers.

Adam: Thank you.