Playing with Other Peoples’ Money

I have started following Charles Marohn’s blog, “Strong Towns,” and am gratified to see that great minds think alike. In his most recent post, Marohn applies the thinking of Nassim Taleb, author of “Antifragility,” to the discipline of building more prosperous, livable and fiscally sustainable communities.  (See my post, “Fragility, Antifragility and Virginia.”)

One of Taleb’s big themes is distrust of “experts” who do not have “skin in the game.” Marohn examines his own career as an engineer, planner and consultant. How often did he have any downside risk if he was wrong, he asks? Would he have damaged his career or earnings if his forecasts proved unfounded? Never, he says.

What makes us so confident that investing someone else’s money to build an entertainment district, expand a highway, extend a utility line or construct a stadium is a good investment? We never calculate — let alone track — the public’s actual return-on-investment (dollars in versus dollars out over multiple life cycles) when we do a project. We never even ask the question. And most critically, we never learn from our mistakes — there is no feedback mechanism other than total collapse (which we would just blame on someone else anyway).

We engineers, planners and other “experts” do projects because that is what we do. Period. There is no other deeper wisdom at work here.

I would add only that politicians, more than anyone (except Wall Street bankers) like to play with other peoples’ money. Unlike Wall Street financiers, they have no skin in the game. Politicians reap the up-front rewards from launching projects but they rarely stick around long enough to deal with the cost overruns. As Marohn rightly says, no one calculates the Return on Investment of public dollars, and the only feedback we get is financial collapse.

— JAB