An example of “too big to fail” never mentioned in discussions of the financial crisis are big public-works projects: In spite of staggering cost overruns, which occur in practically every project, they are never stopped. The latest example is London’s Crossrail, a new train crossing London. Original estimated cost: 3 billion pounds. Current estimated cost: 16 billion pounds. And construction hasn’t started!
I heard a talk about why this happens. I think the speaker said there was no motivation to be honest. The companies that underbid dishonestly pay no penalty; the politicians that approve their dishonest bids risk nothing. Curiously, in notoriously corrupt China, this sort of thing doesn’t seem to happen (although my Chinese isn’t good enough to be sure). Maybe Dubner and Levitt will write about this in Superduper Freakonomics.
At a talk by Laurie Garrett at the UC Berkeley School of Journalism, I made this point about science journalism: There is no motivation to be honest. The scientists dishonestly inflate the importance of their work, and pay no penalty for doing so; the reporters dutifully write down their lies, and benefit by doing so (because it makes the story seem more important). No, no, this doesn’t happen, said Garrett. Of course it does. The most visible examples are the press releases that accompany the Nobel Prize in Medicine and Physiology, the most prestigious prize in all biology: the whole field should be embarrassed by the claims about the practical importance of teleomere research, which Nicholas Wade dutifully repeated in the New York Times.
There should be some term for these screw-the-public-they’re-too-stupid-to-realize-it situations.
Hi Seth,
I enjoy your blog greatlly. How about “Boondoggle”? as in a boondoggle project, from Wikipedia: “It also refers to government or corporate projects involving large numbers of people and usually heavy expenditure; at some point, the key operators have realized that the project is never going to work, but are reluctant to bring this to the attention of their superiors. Generally there is an aspect of “going through the motions” — for example, continuing research and development — as long as funds are available to keep paying the researchers’ and executives’ salaries. The situation can be allowed to continue for what seems like unreasonably long periods, as senior management are often reluctant to admit that they allowed a failed project to go on for so long. In many cases, the actual device itself may eventually work, but not well enough to ever recoup its development costs.”
I want to say that term is “bailout” but that’s overloaded by the connotation that these things are necessary or inevitable. The story is all wrong.
“Freedom Torches” would be another one. Not very direct but you get to tell the story of the original PR man promoting cigarettes for mommies. It’s got that cynical overtone such a term needs.
Or maybe go the other way with morbidly blank words like, “optional public crisis”, “public insurance,” or “noncompulsary emergency event.”
Haven’t you heard of the Three Rivers Dam?
Nathan, trying to figure out what you are talking about I got this:
could you provide a link?
“boondoogle” isn’t right because these projects do work; they just cost vastly more than estimated.
I suspect that Nathan meant “Three Gorges Dam”
Pretty puzzling that being in China you could not identify the matter.
Thus the chinese gov’t “control” over news is pretty effective.
“There should be some term for these screw-the-public-they’re-too-stupid-to-realize-it situations.”
I think they are called “government projects”.
There may be good reasons sometimes as to why these projects do change in their price tags over time. I have seen several projects like this and clearly remember a prof at MIT showing us why (I need to dig his name up, I think it was Michael Golay, https://web.mit.edu/nse/people/faculty/golay.html).
The idea was that in a government projects, the customer (the government) ends up changing the requirements of the project many times over the life of the project. These changes of requirements are extremely bad with regards to the flow of execution of the project.
In the space business for instance, there is one example that is pretty interesting: Spacelab, a large cylinder that goes in the shuttle’s belly for astronauts to do their experiments. A company ended up designing the same cylinder and eventually sold the services to this new cylinder to NASA. It was pretty obvious that the company’s cylinder had cost much less than the original Spacelab built inside NASA. However, as is often the case in comparing gov and private projects, it is a somewhat an unfair comparison as the second cylinder was built with the knowledge of what the first cylinder final requirements were. The big lessons are that in extremely complex projects, sometimes you should not allow your customer to be able to change your requirements as you go.
The big lessons are that in extremely complex projects, sometimes you should not allow your customer to be able to change your requirements as you go.
Wait til you enter real professionnal life.
Retired consultant.
It is a big lesson for the customer (the government in this case). O agree, consultants can and do strive in this environment.