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The Most Unhealthy Industries

Apr 10

  • Professional Sports
    Start with the fact that most owners see their professional sports franchises as something of a hobby. They usually purchase their teams after having made their real money in some other business, which means they are often driven by the desire for fun and control, rather than common sense economics. Add to that the fact that professional sports leagues are monopolies, or oligopolies, depending on how you look at it, and you have a recipe for protecting even the most unsuccessful enterprises from failure. Finally, as an artifact, consider that professional sports is one of the last bastions of royalty in society, a place where owners are still referred to as ‘Mr. Soandso’ instead of simply ‘Fred.’ Who does that anymore?
  • Government
    This one seems obvious, I realize, but it’s worth exploring. The issue is certainly not that the people who work in government are inherently dysfunctional. It is a far more structural problem. For one, government is, by definition, regulated, meaning that it is ripe with limitations and rules, something that only a truly heroic leader can challenge. Second, most government enterprises are not funded based on evidence of achievement, but rather through a budgeting process that is, unfortunately, political. Again, this is not the fault of the people who work there. Finally, and this is related to the points above, most government entities are motivated to survive rather than thrive.
  • Universities
    Notice that I didn’t say schools. I’m talking about higher education here. Colleges and universities are often, no, almost always, unhealthy because they share many of the same characteristics of government—regulations, rules, politics. Even the private ones are this way. Why? For one, their funding is much more complex than an organization driven by consumer feedback and near-term performance. Most schools get money from the government, from donors and from alumni. That means they aren’t as motivated to please their primary constituents—parents and students—because they can survive customer displeasure far, far longer than a market-driven company could. Second, there is the issue of tenure. If universities are primarily academic institutions, then their most critical employees are professors, and many of them cannot be fired unless they do something egregious. As a result, many schools stop ‘managing’ their professors, and that means there is little control over the ‘product’ they are providing to customers. That’s a real recipe for an unhealthy organization.