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Why do we undercapitalize white-collar workers?

Michael O'Hare, professor of public policy | May 10, 2011

The  paper SF Chronicle has a front-page story about the crisis of deferred maintenance at California’s state universities.  I’ll put up a link when it’s available online; meanwhile, things are as bad as you think. Dangerous things like leaks into electrical cabinets, power outages, a blackboard that fell off the wall and injured a grad student last fall; “broken windows” things like, um, broken windows, overgrown plantings, and a couple of times this year, a lawn outside my building so overgrown that when I walked through it, I flushed a rabbit and two small undergraduates. The story says Berkeley and UCLA are now listing almost $1.5b together (that’s a b, as in bzzzz) and Cal State campuses need another $450m.  If you’ve been in a K-12 school, you know what slums they have become.

The problem is actually much bigger than that: we are not only wasting millions and millions not fixing buildings when they need it, both by ensuring higher costs when damage (for example, from leaks) increases and by lost productivity of the people who are trying to use the buildings, but we are wasting even more by not having enough buildings. (We’re building the wrong kind of buildings as well, but that’s another story).   Disclosure of bias: I’m an architect by training and I believe the built environment matters a lot for many dimensions of the quality of life.  No, a great teacher cannot teach perfectly well on a lawn under a tree (I’ve tried it, maybe I’m just not great enough, but while the experience is charming and romantic, it’s pedagogically terrible.) But draw your own conclusions from these examples from my own industry, education:


Consider an improvement of some sort to a classroom with fifty seats, used for 1200 hours a year – new projector, paint the walls, new chairs, whatever.  If it could increase learning by the students by 5%, what fraction of the cost of the room would it be worth spending?  The answer  is 100%: you should be willing to throw the room away and build a whole new one.  Capital in our business is cheap compared to labor.  A fair amount of learning doesn’t happen at Cal because there’s no room to do it in: if such an additional such room would be used only two hours in each school week, or half time during our reading and review week before exams for review sessions, it would be worth building it.  OK, there’s maintenance and operations and land costs for an additional room; let’s say three hours a week.  Another way to think of it: we should keep building classrooms until the least used is only full for three hours a week, and we’re nowhere near that.  it’s not waste: it’s tough, Republican, businesslike hardheaded efficiency and waste abatement.


A typical senior faculty office is about 10 x 12 feet.  I know, lots of people who make more than we do are in cubicles; that’s Goldman Sachs’ problem and proves nothing.  In that office you can get a desk and a chair, bookshelves all over  one wall,  a couple of file cabinets, and a chair for visitors.  If we’re lucky, there’s a tree outside the window,  and the élite of profs get a squirrel in the tree.  Throw in a printer and a scanner and you need another small table and it starts to get quite tight.

What would increase productivity in my business? I nominate: another real table that seats four, and a couch. Why a couch? For naps; actually everyone would do more, better work with naps, but profs work long hours; the research on this is done and it’s not debatable.  The meeting space is because our work requires a lot of small meetings, often unscheduled, with colleagues and with students alone or in small groups.  This paragraph is guaranteed to stimulate sneers and snickers from the ignorant, for example from managers, gotcha journalists, bureaucrats and legislators who have formed their opinions without the burden of facts:  “taxpayers shouldn’t pay a bunch of lazy professors to sleep on the job!  If you want to have a meeting, sign up for a conference room, or talk in the corridor like ordinary people do!”

How much would this ridiculous luxury cost?  About 12 x 15 will do it; 60 more square feet. The most expensive recent construction at Cal I’m aware of was $1000/ft2, but that’s average for a whole building; making rooms larger instead of making more of them is quite a bit cheaper. Let’s say $800:  that’s $48,000; at 6%, $3000 per year.  Let’s add another $1000/y for maintenance for the extra floor and wall surfaces (generous!): $4000.  The cheapest college professor costs more than $100,000 per year with fringes and benefits; most closer to twice that.  So we only need a productivity increase of two to four percent to justify right-sized offices, and there’s no question that what I’m proposing will pay off at more like 20%; the nap alone is worth 10% for the second half of the day, and the meetings and extra work space much more than that for students and profs both.  Again, another way to look at it: capitalizing faculty efficiently instead of what we do now is equivalent to hiring a bunch of professors at 80% off list price.  Still another: I would pay at least $5000 out of my salary for that office in a New York minute, if there were a way to do it: there’s a grand a year, just sitting on the table waiting to be picked up.

We have had a bunch of consultants from Bain & Co. prowling around the campus for a year now trying to save us some money.  Of course, they have shown precisely no interest in creating net value by added productivity, so you won’t find anything like this discussion in their reports.  Paying $20,000 a year for professing is beneath their notice, I guess; or maybe being forced to work in cubicles has crippled their own productivity.

Cross-posted from The Reality-Based Community. Everyone is entitled to his own opinion, but not his own facts.