Wednesday, April 13, 2016

A blue ocean of retirement savings




                If there is one thing I find difficult about this class, it is that I am, frankly, not that interested in the private sector. It is not that I do not think profit motives can lead to public goods; honestly, something about the idea of a “profit motive” just comes across icky and individualistic to me—the latter word of which, I think, my subconscious conflates with “greedy”. I’m more about communalism. Whether on a superficial level or not, I’m into egalitarianism and populism.
                All for one and one for all, and whatnot.
                It is because of this that I, in brainstorming these blog posts, always immediately try to think of ways in which to retrofit concepts from the course onto public sector initiatives. And, in mulling over this particular post, I realized that what I like about the examples of “blue oceans” and “disruptive technologies” we’ve read about is that they are, in various ways, democratizing. The Model T is an obvious example of this, as is, in some ways, Circ du Soleil: yes, some aspects of the experience of going to the circus were fancied up a bit by the group (nice seating rather than decidedly more democratic benches), but the entertainment component of the circus was broadened to appeal to theater-lovers, musical-lovers, and narrative-lovers.
                Bearing in mind that not all of the tenets of blue oceans apply[1], it occurs to me that a sort of Obamacare-like system applied to pension plans might create a wealth of opportunity for individual investors to enter the pension fund market, while doing a world of good for those who are not adequately saving for retirement—effectively democratizing pension investment by making it easily available and logical to folks. Fundamentally, the idea is that investors, thoroughly vetted by a system established by the government (whether federal or state-by-state), would display information about their pension portfolios on a central website, through which individuals could sift, ultimately choosing a plan for investment in which they could invest a portion of their yearly salary. The government would incentivize such a program by giving a tax break to those who took the time out to select a pension plan.
                Having written all that, I make the disclaimer that the plan itself is not novel—the bones of the idea are discussed in a chapter of the book Nudge by Richard Thaler and Cass Sunstein. With that said, given the theoretical strategic frameworks discussed in this week’s readings, I think the idea has a lot of merit. I’m not sure it would necessarily disrupt the business for pension funds—but I do think there is clearly potential to create a serious market for those facing greater barriers to entry in the pension fund market (as well as incumbents), while capitalizing on a social good that might accurately be described as a need.
In short, I think pension reform is an area where blue ocean- and disruption-esque strategies might be employed in the service of using a profit motive to do a public good.



[1] There isn’t a component of incumbency—e.g., the system would not be created by those currently in the market, for example. Moreover, the plan doesn’t create new demand so much as capitalize on what might be ineloquently described as a "latent necessity".

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