Regional Strategic, Ltd. engages in issues of regional economics: economic impact studies for existing enterprises and new initiatives, business planning and pro forma financial projections for new and growing businesses, and market and policy analyses (they are pretty much the same animal, really). We like project work. Every challenge is somewhat unique.
Almost all of our clients are looking to persuade someone: investors, taxpayers, development boards, potential clients, etc. We help them find, create, and interpret the information and data needed to support their interests. Upon occasion, we are asked to evaluate analytical studies done by others that our clients would like to challenge. It is still a persuasion game. It is just sometimes adversarial.
A term that often comes up when I talk to clients is the “Movable Middle.” The idea is that if a client can pull some of the middle of a population in their direction, they can generate sustainable growth or drive sustainable changes in policy.
In marketing situations where the client is only a small fraction of an industry made up of similar small players, this is healthy competition. It is reflective of Adam Smith’s 18th century observation of the “Invisible Hand” – where the individual actions of many small participants will continually move the marketplace towards a better solution for all – a mutually beneficial movement of the middle as a whole. In this case, small movements at the middle or average will be offset by multiple other small movements. The overall middle may actually move, but trends in the middle will reflect trends in the population as a whole. The population remains stable.
The situation can be very different where there are major players with market power. They can peel off so many participants in the middle that other market participants cannot accommodate within the existing population distribution. In these cases, moving participants away from the moveable middle affects the existence of the middle, itself. This can make the population less stable.
This is a particular issue in politics, where individual parties are actively attempting to split the middle in order to attain dominance. In political contexts the idea is that a group will never win over the core members of the other persuasion, but they should be able to whittle away at the population in the middle – to draw these denizens of the middle towards the clients’ points of view. This becomes increasingly critical as the number of competing entities diminishes.
You don’t have to remember much of your college statistics course to visualize this. Most of you remember the graphic below – the infamous bell curve. It is a standard normal population distribution where the mean (average) and the median are the same. They sit in the center (at the peak) and two-thirds of the population sits in close proximity to the mean. This is the starting point for an introduction to statistics course, and this type of population is the basis for most of the statistical analysis any of us has done.
In a marketing context, it may represent public perceptions of an industry-standard product where most people are generally satisfied with the product, some people really love it, and a few people really hate it. In a political context, it might represent a population where the majority of members generally wants the same things but sees multiple ways of getting to those things. It is easy to survey a standard normal population. With a normal population, a random survey of the population is sufficient as long as enough inquiries are made to assure reasonable representation of the central core and the outliers.
The center of the bell is the “Moveable Middle.” The term generally does not mean moving the entire middle. It means moving some members of the population away from the middle. A client might want to move someone slightly right of center to slightly left of center or move someone slightly left of center to farther left of center. This flattens the bell curve, increasing the variance and, perhaps, moving the mean away from the median and the highest point on the bell. The graphic below shows what this might look like.
Our population is no longer uniformly distributed around the mean. We have encouraged distinctions among the members that may depend on several specific factors (age, income, sex, gender, religion, etc.) We can no longer look at the population as homogenous. Also, since we actively advocated for and encouraged this movement, we can no longer look at population members as independent. The answer or perspective of any member we survey may be directly dependent upon the attitudes and perspective of other members we survey. We can no longer assume that each member sampled generates an independent data point for analysis.
At this point, we can no longer just pull a random sample from the population and survey the sample because members of our population are no longer randomly distributed or independent. We need to develop a sample frame. A sample frame is a set of rules regarding what we think we know about the distribution of the population. Do we expect that suburban middle-aged males, in general, have a common worldview? If so, we might treat them as a pool to sample. Do we expect that retired folks living on Social Security have the same interests and needs? Ditto. The more observable actionable distinctions we see within the population, the more detailed or complex the sample frame becomes.
Once we identify our frames of reference, we decide what a given group’s weight is within the population. We sample each group in accordance with the perceived weights. Then we combine our sampling responses to simulate the interests and opinions of the entire population.
Setting up and weighting the sample frame is not scientific. It is based on insights derived from science and observable facts on the ground, but it is not scientific. It requires some special insights and knowledge regarding the non-normal non-independent populations to be surveyed. This is why multiple seemingly redundant surveys of what appear to be the same populations regarding what appear to be the same questions and preferences often generate different results.
So-called “Gold Standard” pollsters or survey firms are “Gold Standard” because they have a track record of correctly setting up and weighting sample frames for evaluating non-normal non-independent populations. None of them are perfect, but they are regarded as consistently better than the rest. This is based on their ability to translate insights and facts on the ground into sampling frames that consistently mirror results revealed after the fact.
In any event, the difficulty in constructing sampling frames increases as we continue to move people away from the middle of the population. The graphic below might show a continuing population movement away from the middle. It may actually be a case where the population has split into two populations. In that case, if each population has a normal distribution and its members are independent, surveying either population becomes simpler, again. If both populations are of interest, however, from a political or marketing perspective, we still have the growing problem of developing accurate and informative sampling frames to evaluate the interests of the two populations together.
These issues are real regardless of whether we are marketing goods and services or political ideas. The wider implications are different in the two cases, however.
If we are trying to move the middle when marketing goods, we want to differentiate the market into two populations (ours and everyone else’s). For decades, Mercedes Benz attempted to split the automobile market. They tried to create a distinction between driving a car and driving a Mercedes Benz. Splitting the population would have made their information gathering easier. Two distinct populations could be polled separately, because they would be clearly identied. Mercedes drivers could be polled to find out what would enhance their experience. Car drivers could be queried regarding what it would take to move up. Separate polls would drive separate marketing campaigns. Successfully splitting the market would, in many ways, simplify the marketing game.
This has very few society-wide downsides when marketing goods and services, because we can each acquire the goods and services we want, regardless of the purchases of others. In the political marketplace, however, the population as a whole decides to buy one package of policies. Determining which package of society will “Buy” would ideally be made by an educated and informed electorate, similar to the assumption of perfect information in the theory of competitive markets. Unfortunately, the attempt to “Move the middle” in politics effectively reduces the amount of useful information in two ways.
The first of these is passive. As we move from a normal distribution in the first graphic above to the double-peaked population of the last graphic, it becomes harder to effectively poll or survey the population with regard to their community interests or to weight the importance of these interests across groups within the population. As discussed above, this is a result of the split in the population no matter how the split came about. The result, however, is that different polls regarding the same issue or group of issues will give significantly different results depending upon how the pollster designed the sample frame. Individual poll results will increasingly depend on the subjective insights of the individual pollster. The information provided to the electorate and to policy makers will be inconsistent. Decisions made on the basis of that information will become increasingly inconsistent. Governance on the basis of these decisions will become increasingly inconsistent.
The second of these is active. If we assume the population is differentiating because of an active information campaign to draw members of the population away from the middle, we almost have to assume this information is not representative of the population as a whole. We also might assume that some of this information is developed in the form of opinion surveys where sample frames were defined in such a manner as to generate favorable results. As we discussed above, in a differentiated or split population, the accuracy of polls has a lot to do with the pollster’s definition of the sample frame. All-star pollsters are those who are adept at correctly reading the population and developing appropriate sample frames. Policy influencers, however, can also be adept at defining sample frames that generate directed results, even while utilizing acceptable statistical techniques and avoiding the use of leading questions.
Regardless of whether the active or the inactive effects predominate, the erosion of useful information caused by moving population members away from the “Moveable Middle” will decrease the value of information provided to the electorate and policy makers. As a result, decisions made by the electorate and policy makers will be increasingly inconsistent. Governance based on these decisions will become increasingly erratic and ineffective.
This will go beyond politics. It will inevitably affect economic planning, investment, and growth.
Increasingly erratic and ineffective governance generates environments where it is increasingly difficult to plan. An inability to plan generally results in a reluctance to take risks. Increasing risk aversion tends to retard productive investment. A dearth of productive investment reduces production. Reduced production restricts income.
Remember that the expected return on any investment is the product of potential returns and the probability of attaining potential returns. A major determinant in that probability is government stability. Long-term productive investment tends to be made where there is an expectation of government stability over the lifetime of the investment.
In uncertain environments, investable funds tend to fine their way into financialization (placing bets on future policy direction by buying and leveraging shares or derivatives of existing productive assets), or the pursuit of returns directly through the exploitation of favorable government policies (rent seeking). While both may generate income for the participants involved, neither generates productive value or wealth for the economy as a whole.
None of these observations changes the fact that it is in the client’s best interest to try peeling the population in the middle away and towards the client’s ends. The society-wide implications, however, particularly in a political context, are important issues to consider.
P.S.
All of the images in this post were taken from an online article by Andrey Akinshin, “Normality is a Myth,” dated October 9, 2019 and downloaded from https://aakinshin.net/posts/normality-is-a-myth/ on November 20, 2024.