About a decade ago, Gina Raimondo, the Governor of Rhode Island, placed a call to Bill Haslam, the Governor of Tennessee. Raimondo, a Democrat, was trying to steward a small state in New England that had struggled for decades with deindustrialization and globalization. Haslam, a Republican, was trying to elevate a border state from middle of the pack performance to higher levels of innovation and relevance.
Governor Raimondo was looking to learn from and emulate Governor Haslam. Haslam had done something ambitious and remarkable that intrigued Raimondo. Building on an initiative he had piloted as mayor of Knoxville, Haslam had championed and pushed through legislation to make community college free in the state of Tennessee. Called the Tennessee Promise, the legislation had made community college free to any high school student that meet certain criteria.
Raimondo, seeking to even the playing field for Rhode Island students, liked what she heard, and within several months of the call the Rhode Island Promise emerged as the Ocean State’s adaptation of the Volunteer State’s signature effort. For both states, this investment has exceeded expectations, with measurable and meaningful impacts in both states on the numbers of residents educated, firms recruited, jobs grown and revenues generated.
This small vignette exemplifies what we call “phone call federalism,” the mechanism by which innovative practices that start in one city, county or state often spread to other communities around the country or even across national borders.
Phone Call Federalism: An effective but insufficient way of scaling good ideas
We all know how this works. A mayor, county executive or governor reads about an innovative local or state practice or policy in the media or, more likely, hears about it from a peer or at a convening held by a national constituency organization and decides to adapt the innovation back to their community. The elected official returns to their respective community, informs their Cabinet and staff of the intriguing innovation and, like Governor Raimondo, places a call to the first mover mayor, governor, or legislator who led the innovation. Information is shared. Lessons are learned. Innovations are adapted. Progress is made.
There is much to admire about this process of spreading innovations from one place to another. It harnesses the motivations of local and state elected leaders to solve problems that are of pressing importance to their constituents. It embraces the propensity of elected leaders to gravitate to solutions that can be easily understood and packaged for political consumption. It is intimate and highly personal, building on the trust that often emerges between individuals who, irrespective of political party or ideology, hold the same job in different parts of the country. It is highly organic, naturally pairing leaders in communities that are facing similar challenges.
But phone call federalism is not a sufficient means of catalyzing innovations and diffusing solutions at a national level. Its allure – city leader to city leader, state leader to state leader – is ultimately constraining and idiosyncratic. It is possible to spread an innovative practice from one “first mover” city to two or three “fast followers.” But 50 cities? 500 cities? That outstrips the ability of individual places to bottle up their new practices and act as customized consultants to another community (after all, these practices were designed first and foremost to respond to a pressing local challenge).
This is to say nothing of the most obvious question: what if someone doesn’t pick up the phone? The fate of millions of constituents, and even whole economic sectors, is left up to a tremendous amount of chance. Problem-solving at the national level requires systems and mechanisms that can both accelerate problem solving within places and then spread them rapidly and effectively to other communities.
How We Got Here: 20th Century Institutions & 21st Century Problem Solving
We have previously written that America is a “perpendicular nation.” With 20th century institutions that are organized in a top-down way and metros that solve problems horizontally. Phone call federalism is a product of this unique tension.
In the twentieth century, national governments (chiefly, but not only, the US) organized problem solving in a top-down way. It was driven vertically by national governments and bureaucratic agencies — a Department of Transportation or a Ministry of Housing — with high levels of technocratic expertise. Solutions, in the form of new programs, reforms and rules, flowed down from technical experts at the top and were applied wholesale across entire countries. Governmental programs often required states and localities to establish special institutions or agencies to carry out the activities and were often paired with tailor-made instruments that could enable easy-to-replicate financing. Starting in the 1920s and 1930s, the dominance of national governments led to efforts to aggregate the political power of cities, counties and states and the growth of national advocacy organizations like the U.S. Conference of Mayors, National League of Cities, National Association of Counties and National Governors Association.
The net result is today’s modern state: a set of specialized national agencies that have clear organizational structures and deep compartmentalized expertise but do not always play well together, have limited local knowledge, are often slow to move at scale and are, in many countries, undermined by partisan combat and populist upheaval.
We are living, to put it mildly, in a different century. For a variety of reasons, states and localities (and private and civic institutions) rather than national or supra-national governments, have become primarily responsible for designing and spreading meaningful solutions to hard challenges. And those challenges and disruptions — the reshoring of industries, the deployment of technological inventions, the demand for skilled workers and affordable housing, the necessity of reliable transportation and energy infrastructure – are happening at breakneck speed and heightened scale. Often, the ways the states, localities, and metros address these problems is through horizontal organizing – using a networked approach that cuts across sectors, disciplines, and institutions (in shorthand, focused more on cross-sector partnerships than legislative committees). This approach to problem solving is very much “of the moment” and 21st century in nature.
The good news is that states, localities, and metros are having great effect in problem solving this way on a whole host of emerging challenges. This is policy innovation in its truest sense.
The bad news is that there is an absence of sound systemic infrastructure to quickly spread these new practices and policies in most countries. Part of this can be explained by incentives: metros innovate to solve metro-wide problems that are in front of them, they are not doing so for the sake of other metros per se. National governments, for their part, are also solving the problems in front of them: managing 20th century institutions and bureaucracies that lack capacity and have mounting costs; in many cases solutions that do not directly have their funding are an afterthought. Neither has a large immediate economic or political reason to focus on spreading good ideas from one place to another (beyond being seen as a “policy leader” – which should not be understated as a motivation!).
The result: the lack of a mechanism to systemically spread good ideas that work at the speed that is needed to respond to today’s challenges. Instead, what we’re left with is a best-practice guide buried on an agency website here, a convening there, and phone-call federalism – ala Governor Raimondo calling Governor Haslam—to make up the difference.
In short, we need a new problem-solving approach and architecture for networks of places rather than nation-states.
Sketching Out What Comes Next: Emerging Principles
1. Be clear about what you’re trying to spread.
At the simplest level moving beyond phone call federalism requires nations to adapt, harness, and formalize the horizontal problem-solving approach that states, cities, and metros have known about for a long time. This is easier said than done, as doing so requires a shift in the modus operandi of nations. This is not just a national government effort, but rather a national governance effort (involving philanthropy, civic institutions, and the private sector as well as government). We plan to follow up with a fuller piece about what it means to put down the phone and pick up a system. In the meantime, we want to sketch out some early principles for what this could mean. In many ways, a phone call is effective because it entails a motivated leader reaching out to someone with a proven solution. This is a hard alchemy to formalize. Doing so begins with being crystal clear about the types of innovation that a nation is trying to scale –as they each scale a little differently.
As a hot political issue, the housing affordability crisis has brought an explosion of best practice manuals and handbooks and in some ways is a great exploration for what works in scaling and where its limitations are. As we see it there are three main types of innovations that spread:
- Policy innovations: these generally entail novel changes to the rules of the road set by governments. Such innovations, in the housing sphere, generally include reforms to zoning regulations, permitting requirements, procurement protocols, etc. These are the easiest to document but hardest to replicate as they require adapting a standard (a rule) to a new and different location. In the end, cities, municipalities and counties are “creatures of state law” and differ in form and structure on multiple dimensions.
- Process & institutional innovations: these are new approaches to governance, for example organizing around “strike teams” or creating new public asset corporations. These are the hardest to document (as much is dependent on local context) and can also be difficult to replicate but often have tremendously high impact.
- Product innovations: these are new types of home types (e.g. modular, shipping containers etc) or financing products (e.g., revolving loan funds) or technological applications. These innovations can channel market logic and be replicated in many places. These may be the easiest to replicate and adapt since product innovations since market players – technology firms, production companies, housing developers, financial institutions, architectural firms and consultancies – can literally capture, carry and apply the same intervention from place to place.
Implicit in what’s above, it is crucial to document clearly not only what an innovation is and how it happened, but to distill into a series of tactical steps how it would be repeated. This is what the National Housing Crisis Task Force has tried to do with the State and Local Housing Action Plan – identifying what it is and how it happened. We are in the process of templatizing the “how to” in the form of playbooks.
2. Solve for the limiting factor: often it is capacity
Best practice handbooks in general, only work –and replicate the alchemy of phone call federalism—when their target audiences have capacity to adapt proven practices (or a willingness to prioritize finding capacity). In many communities, that capacity simply doesn’t exist since it has been degraded over decades.
Diffusing innovations across multiple communities can work, but only if they enhance capacity as an intentional effort. Over the past several decades, extraordinary efforts have been made by Bloomberg Philanthropies, the Rockefeller Foundation and others to build extensive “technical assistance” (“TA”) initiatives.
These TA initiatives, particularly those designed for climate solutions, have a tried-and-true approach that could be easily adapted to the housing challenge. The approach has the following features:
- Backbone Organization: As discussed above, many countries have constituency organizations that “look up” and have the primary purpose of advocating for and informing national policies. What is equally needed are intermediaries that “look across” and aim to accelerate the spreading of innovations from a first-mover city to a few fast followers to multitudes of adopters and adapters. In the climate space, C40 has played this role at the global scale for over 20 years, building a system of research, knowledge and goal-driven accelerators.
- Codify Innovations: Effective TA efforts start with the sharp distillation of the core elements and components of a specific policy, process or product innovation. Repetition requires codification, which is best accomplished using a common template that is flexible enough to accommodate places with very different governance structures, market conditions and institutional capacities.
Effective TA recognizes that routines matter. Routines reduce risk and simplify replication. Common term sheets. Common capital stacks. Common metrics. Common analytics. Common technologies. To replicate this success for housing, cities (and counties and states for that matter) need Housing Affordability in a Box, a packaged suite of promising innovations that can plug into different systems seamlessly and with minimal effort.
- Cohorts of Cities: Successful TA efforts often group cities into cohorts that accelerate adoption via multiple means. The participation of a city in a cohort that focuses on a particular element of the climate (or housing) challenge has a filtering effect; only motivated places tend to join. The creation of a cohort also promotes peer-to-peer learning, which is often the most effective way to transfer knowledge. Accelerator for America (an organization that we have been closely involved with for many years) has demonstrated this to great effect across a whole host of infrastructure and economic mobility issues.
- Enhanced Capacity in Cities: Successful TA efforts often enable cities to embed additional staff in beleaguered and overburdened public entities. This gives governments and institutions breathing room to design new approaches, cross-sectoral collaborations and systems to effect change.
3. Aggregate the market and purchasing power of places.
Beyond the spreading of innovation, there is an urgent need to organize places in the collective to scale innovation. The preponderance of think tank studies and research papers treats places as “every tub on its own bottom.” But special intermediaries can help aggregate market and purchasing power of members and level the playing field with large financial institutions and technology firms.
Examples of such collective power do exist in the US and abroad, in housing and in climate. In 1987, a consortium of public housing agencies aggregated their market power to create a pooled insurance system. The HAI Group is still governed by housing organizations today and offers a range of insurance products and services that are tailor-made for PHAs as well as complimentary risk management resources and training. C40 itself is a model of scaling, since part of its mission is to act as an urban advocate at global convenings and before global institutions.
Conclusion
Broader political dynamics are pushing responsibility for solving hard challenges like housing and climate downwards to cities, counties and states (and their equivalents). While devolution has its limits and drawbacks, it also brings enormous possibilities. Sub-national layers of government (and their private and civic stakeholders) tend to view challenges and their solutions as cross-cutting rather than singular in dimension. In addition, distributing responsibility across many jurisdictions rather than one national or central government offers up the potential for the simultaneous design and testing of multiple innovations.
Now comes the intriguing governance question: how do we move beyond the current state of “phone call federalism” and the often-random spreading of innovations from one place to another? It’s time to think about new intermediaries and mechanisms that fit this moment and both systematize the process by which different kinds of innovations can rapidly become the norm and alter the practices of major financial and technology firms through the collective power of cities and metropolitan areas. We have begun to outline some solutions here and will follow up soon with a fuller exploration of a system that moves beyond the phone call.
Bruce Katz is Founder of New Localism Associates and a Senior Advisor to the National Housing Crisis Task Force. Colin Higgins is the Executive Director of the Task Force. Juha Leppänen is Chair of the Board at Demos Helsinki and Co-Founder of The Institutional Architecture Lab.