This week, my co-author and I, Nick Martin, released a new paper: The Price of Crisis: Eminent Domain, Local Governments, and the Value of Underwater Mortgages, forthcoming in the Temple Civil & Political Rights Law Review. In it, me make several claims. First, litigation, (often just the mere threat of litigation) has done more, to date, to remedy the problem of underwater mortgages than any other legal strategy. Second, local governments have played a role in using such tactics. Third, eminent domain is akin to such tactics, and even the threat of using eminent domain might be enough to bring banks to the table to reduce principal balances on underwater mortgages. Finally, we discuss the going price for distressed mortgages on the current market: sixty cents on the dollar. We argue that, if localities were to seize underwater mortgages through eminent domain, this should be the price, roughly, that they would have to pay to compensate mortgage holders for the taking. The paper is available for download here.
This week, the Empire Justice Center released a new web-based application to help homeowners facing foreclosure. It takes an “analog” foreclosure guide previously prepared by Empire Justice and creates a digitial, interactive version of it. I had the good fortune of working with Empire Justice, students and faculty at the University at Albany’s College of Information and Computing, Albany Law students, homeowners and legal services practitioners to bring the project to fruition. Through it, homeowners in arrears in their mortgages and facing foreclosure, who may not have access to a lawyer, will have free, step-by-step guidance, fillable documents, and other forms of information that can help them navigate the foreclosure process, and, hopefully, avoid losing their homes. This application is just the beginning of what I hope will be an ongoing partnership to develop these sorts of programs that can help expand access to justice and get critical information and guidance into the hands of low- and moderate-income consumers. View the application here, and the press release about the launch here.
In my recent op-ed for the National Law Journal, I discuss the need for upper-level classes in law school that afford students a chance to learn the art of the legal profession, and not just the tools of the trade. Read: As School Year Begins, Think Outside the Tort.
The latest salvo in the inequality wars comes from an unlikely source: the credit rating agency Standard and Poor’s. In a recent report, S&P’s researchers warn that economic inequality in the United States threatens to dampen economic growth. Some of their key findings include the following:
At extreme levels, income inequality can harm sustained economic growth over long periods. The U.S. is approaching that threshold.
Standard & Poor’s sees extreme income inequality as a drag on long-run economic growth. We’ve reduced our 10-year U.S. growth forecast to a 2.5% rate. We expected 2.8% five years ago.
With wages of a college graduate double that of a high school graduate, increasing educational attainment is an effective way to bring income inequality back to healthy levels.
It also helps the U.S economy. Over the next five years, if the American workforce completed just one more year of school, the resulting productivity gains could add about $525 billion, or 2.4%, to the level of GDP, relative to the baseline.
They also express concern that “extreme policy measures,” like dramatic increases in taxes on the wealthy, could “backfire” and not produce favorable outcomes.
Others have drawn this connection between economic growth and economic inequality. John Kenneth Galbraith saw this connection, and considered it one of the chief causes of the Great Depression. Why inequality is troublesome and could lead to economic recession or worse is that wealthy individuals tend to spend less of their wealth on consumer goods. When a greater percentage of income is absorbed by a smaller number of the wealthy, less of that money goes back into the economy in ways that spur consumption of consumer goods. Conversely, when lower- and middle-income people have more income to spend–like through such mechanisms as increases in the minimum wage–they tend to spend more of their income and wealth on consumer goods, strengthening consumption, demand and economic activity.
Perhaps the Standard and Poor’s report will wake up some who, to date, have been unwilling to listen to liberal, anti-inequality economists like Paul Krugman and Thomas Piketty. When even your friends turn on you, it might be time to rethink long-held beliefs.
This year’s World Cup, in addition to exhibiting many extremely tight games, and one extremely embarrassing blowout, was a showcase for the growth of the “sharing economy”: peer-to-peer, web-based platforms that allow individuals to sell products and services to others. Through just one of these sharing economy platforms, airbnb, a pioneer in the sharing economy, roughly 120,000 people rented rooms in homes in Brazil to watch the games.
The key hurdle for any sharing economy hub is its ability to develop trust between sellers and prospective consumers. According to Nobel-prize winning economist Kenneth Arrow, “[v]irtually every commercial transaction has within itself an element of trust.” Few transactions exhibit the importance of trust like those that take place in the sharing economy. Outside most systems of regulatory oversight, these transactions function almost exclusively on trust. Indeed, renting of rooms, lending out cars, accepting a ride in a car with a stranger, which are all effectively beyond the watchful eye of government: these are transactions that require trust. And the sharing economy is finding ways to develop this trust among its participants.
In order to create this trust, these sharing economy platforms are looking to replicate the “reputation markets” of small towns that help keep predatory conduct in check. In such close-knit environments, individuals who trust each other, who can engage in face-to-face communications, and who often have personal experiences with businesses in the community, can share information about such businesses. Car service companies like Lyft and Uber are using this type of peer-to-peer communication to create an average score for their drivers. This score is generated by users after they complete a ride. If a driver falls below a certain average score, he or she is no longer able to accept rides through the platform. Some platforms are taking similar steps—like asking customers and providers to link their respective Facebook pages—to give participants a window into the lives of their prospective business partners.
One company, Relay Ride, a car sharing platform, is attempting to replicate that reputation market by taking face-to-face communication one step farther. Relay Ride has learned how to bring users and producers together so that they can create a personal connection before engaging in economic relations. The company’s CEO Andre Haddad, quoted in a recent article in Wired Magazine, explains how Relay Ride learned how to create a bond between those who are lending out their cars and those who would borrow them: they had them meet face-to-face. According to Haddad, “[t]hey really liked that human connection.” Face-to-face interactions such as these help to lower social distance and create trust. “People strike up a conversation and realize they have something in common, which boosts trust and makes people feel accountable,” says Haddad. “They are going to have to return this car to that person and look them in the eye.”
Even in a global economy, trust is still central to economic exchange. Platforms in the sharing economy are looking for ways to embed trust within their networks of producers and consumers. These systems are not perfect, and predatory conduct still exists, but the expansion of the sharing economy will depend on its ability to replicate that small town reputation market on a global scale. The success of the market in doing so to date bodes well for its continued growth as well as the exploration of new markets and sectors where sharing can occur in effective and mutually beneficial ways.
Matt Yglesias’s new post on Vox suggests that Democratic leaders agree on strategies for combating inequality, but argues also that disagreement does exist over whether to promote an anti-inequality message. Yglesisas posits that Democratic leaders don’t all agree that an “inequality agenda,” like the one President Obama touted last year, is really something the party should get behind. While he may be right that Democratic Party politicians don’t agree that inequality should be at the center of the party’s message, I’m not so sure all Democratic party leaders agree on the range of tactics that could be deployed to combat economic inequality. Raising the minimum wage? Repealing the carried interest tax loophole? Overturning Citizens United through a constitutional amendment? While Democratic voters probably support all of these measures, would one find unanimity on all of these issues among elected officials in the Democratic Party, either at the federal level, or in the executive mansions and state houses across the country, where some of these tactics–like increases to state minimum wage laws–could be deployed, and in which any constitutional amendment would have to pass? I’m not so sure. There may still be some fissures on the substance after all. There’s certainly lots of agreement, to be sure, but the inability of Democratic elected officials to fully embrace some of these items at the federal and state levels may reflect more than just a failure to get on the same page in terms of messaging. Untangling the inequality knot will not be easy, and will require bold tactics and an aggressive strategy. Getting agreement on such tactics among Democrats would appear to be one essential step towards reducing income inequality. Then the inequality agenda can move on to recruiting Republicans.
The New York Times recently published a mosaic of images of the more than 40,000 properties in Detroit that have been in mortgage delinquency in recent months. Here is the site’s description of these images.
This mosaic, created with images from Google Maps Street View, shows one of the many enormous challenges facing Detroit as it tries to climb out of debt. As of January, the owners of these properties collectively owed the county more than $328 million in unpaid taxes and fees. Since then, some have paid their debts, entered in payment plans or qualified for assistance. But 26,038 properties, shown with a , remain in jeopardy, and many are headed for public auction.
Tragic. Staggering. Heartbreaking.
“The way we’re working isn’t working” is the opening line of an op-ed piece, co-authored by Tony Schwartz, President and CEO of The Energy Project, a consulting group that strives to help workplaces become healthier, happier and more productive. It’s also the title of an excellent book, also co-authored by Mr. Schwartz, on the same subject. In the piece, like with the book, Schwartz tries to chart out a new direction for working, one that is more efficient, productive, fulfilling and rewarding.
Schwartz and his co-authors collaborated with the Harvard Business Review to survey thousands of employees to understand what makes people engaged and productive at work. They conclude as follows.
Employees are vastly more satisfied and productive, it turns out, when four of their core needs are met: physical, through opportunities to regularly renew and recharge at work; emotional, by feeling valued and appreciated for their contributions; mental, when they have the opportunity to focus in an absorbed way on their most important tasks and define when and where they get their work done; and spiritual, by doing more of what they do best and enjoy most, and by feeling connected to a higher purpose at work.
For employers, the authors offer the following advice:
The more effectively leaders and organizations support employees in meeting these core needs, the more likely the employees are to experience engagement, loyalty, job satisfaction and positive energy at work, and the lower their perceived levels of stress. When employees have one need met, compared with none, all of their performance variables improve. The more needs met, the more positive the impact.
This guidance sounds a lot like Dan Pink’s description of what motives us from his book Drive: The Surprising Truth about What Motivates Us. According to Pink, we are driven by the desire to improve something important to us (Mastery), to be self directed (Autonomy), and to produce something beyond ourselves (purpose).
The workplace can be so much more than just a place to earn a paycheck. It is a place where individuals can pursue fulfillment and meaning: a place to apply one’s skills and experience, to be creative and support the creative pursuits of others. Importantly, supporting workers’ pursuits in these ways makes them better and more productive workers, results in less worker turnover, and this helps workers experience less stress. Employers should strive to tap into and support their employees in ways that help them find mastery, autonomy and purpose.
The Schwartz, et al., piece mentioned earlier is entitled “Why You Hate Work.” It also sits at number one on the “Most Emailed” list on the New York Times website this morning. For a day at least, it seems to be resonating.
Everyone, from the lowest paid laborer to the highest paid CEO wants to get something meaningful out of his or her work. I’ve been on the low end, and one can try to do the best one can do at one’s job, regardless of the pay or the status. One can strive to take pride in the work and a job well done. As a knowledge worker today, I am fortunate enough to have a position where I can find mastery, autonomy and purpose. As a manager, I strive to support those with whom I work so that they, too, can derive pleasure and purpose from their day-to-day efforts. It seems clear that finding the value in the work, and finding support to find that value, are critical elements of an effective and satisfying workplace.
In a recent episode of Mad Men, two of the show’s most interesting characters, Don Draper and his mentee-turned-supervisor Peggy Olson, creative types with considerable gifts, exhibit both their perfectionism and their inability to settle. The exchange reveals a lot about the creative process, what it takes to excel, and the grit needed to produce one’s best work.
Peggy has been given a plum assignment: to come up with an ad campaign for a fast food restaurant. As is typically asked of Peggy, the firm wants her to give the ad a “woman’s touch.” She comes up with an idea that many on the team like. When it comes time to pitch the idea to the client, her bosses let her know that Don, the more experienced pitch man, will present it. Don says he is more than happy to make the presentation, if that is what Peggy wants him to do. Peggy reads between the lines and has concerns Don does not believe her idea is the best one out there. Truth is, she agrees. She fears that he’s got a better idea that he will slip in with the clients should they not like Peggy’s, and then he will be seen as the hero.
Peggy knows there is a better idea for the campaign and she wants to know how to get there. Most importantly, perhaps, she wants to know when she will know when she’s got the right idea. For Don, “that’s the job” he tells her: in creative pursuits “living in the not knowing” comes with the territory. As baseball great Lou Piniella once said about managing in baseball: “You have to learn to get comfortable being uncomfortable.”
Don starts to list what he calls are the “pros and cons” of Peggy’s existing pitch. He highlights that the pitch is almost done, it’s good, the account manager is overjoyed and the client is on board. “Those are the cons, and you know it,” she growls. Both Don and Peggy know they are the ones who can come up with the best ideas, not the market. They seem to appreciate a line often attributed to Henry Ford, which Steve Jobs was fond of quoting: “If I had asked people what they wanted, they would have said faster horses.”
Peggy confronts Don and tells him to tell explain his creative process. She asks him, in effect, “What Would Don Draper Do.” Don, who is often at his most authentic in front of Peggy, reveals how he would go about getting to his best idea. First, he admits he would probably abuse his staff. Second, he would take a nap. Third, he would start all over to see if he would end up in the same place. (Let’s hope that first part isn’t essential.)
They drink and talk together and Peggy ultimately reaches a better idea through Don’s process. While getting to that better idea is important, what is more important is why they felt they needed to get to one in the first place. If they had not demanded more of themselves, Peggy and Don would not have improved the pitch. They did not accept average.
In 2012, Thomas Friedman wrote about what he called “the end of average”:
In the past, workers with average skills, doing an average job, could earn an average lifestyle. But, today, average is officially over. Being average just won’t earn you what it used to. It can’t when so many more employers have so much more access to so much more above average cheap foreign labor, cheap robotics, cheap software, cheap automation and cheap genius. Therefore, everyone needs to find their extra — their unique value contribution that makes them stand out in whatever is their field of employment. Average is over.
In a more recent post, he adds three more words to the list of things that are over: “privacy,” “local,” and “later.”
The reality is, with global competition, low barriers to entry to markets, a hyper-connected world, and a sluggish economy, more and more what is needed today is the personal drive and the expectation of excellence Peggy and Don exhibited.
Throughout the course of the show, Peggy and Don have both attempted to overcome tremendous obstacles to rise out of modest means to excel in their profession. While both still confront their demons, and handle some of them better than others, they both exhibit what Paul Tough calls “grit,” a combination of personal characteristics including resilience, curiosity and optimism that are essential to success.
More and more, young people are finding that achieving professional and economic success and personal fulfillment is becoming harder and harder. They will have to work diligently, expect excellence from themselves, demand more from their teachers and mentors, accept failure and learn from it, and, most importantly, never settle.