Nik's Laws: Don't Arm your Future Enemy

Hey world (and Barack and the useless heap of Congress) are you listening?

What Will Tomorrow Bring: Retro Fashion in Organizations

The organization, whether group, tribe, team, corporation, or government represents the ugly, bloody edge of our evolution as social animals. It's complicated ... and we're not NEARLY done yet. Perhaps a few millennia down the pike we will get it right.

At the moment, I feel safe in saying that we are all collectively burnt and battered into pessimism about our ability to get it right. Look left. Look right. Share your booze with your neighbor. Their loosened lips will start to tell you how anti-government, anti-bank, anti-corporate, or anti-politics they are. 

I can't purport to foresee the best master plan. But I am an organization-man. Based on daily frustrations, I can highlight a few very very VERY simple things which will ever-so-slightly evolve us. These things were once fashionable in organizations, but have gone out of style. It's time to go retro.

• Meeting agendas and minutes
• Documentation of decision taken and justification thereof
• Reading materials prior to meetings
• Discussing and understanding issues prior to meetings
• Taking time to give the context of a discussion beforehand
• Following up on your OWN To Dos
• Speaking in simple sentences which directly respond to the question at hand
• Making decisions based on informed analysis and then EXPLAINING your decision-drivers to anyone who will listen. Rinse and repeat until you have consensus.
• Saying you were wrong. And knowing why.
• Building objective business cases for investments
• Viewing man/hours as a valuable asset you are investing
• Overtly recognizing and funding innovation time at all levels (except at Google, of course)
• Having a secretary to keep the high-priced execs from spending hours formatting documents and finding conference rooms for meetings. (talk about inefficient division of labor)

Yeah! What HE Said: Fareed Z on the 9-9-9 Plan

You have to understand: complexity equals corruption. Americas corruption is institutionalized and legal. The US tax system is not just corrupt. It is corrupt in a deceptive manner that has degraded the entire system of American government. Congress is able to funnel vast sums of money in perpetuity to its favored founders through the tax code without anyone realizing it. The simplest way to get the corruption out of Washington is to remove the prize that members of Congress give away. A flatter tax code with almost no exemptions does that The simplest fix to our tax code would be to lower the income tax dramatically, lower the corporate tax, and instead tie revenues through a national sales tax or value added tax. The US is the only rich country in the world without a national sales tax What is the appeal of a consumption tax? First, it's efficient. Lower fraud. More stable. Reduces consumption and borrowing at the household level.

Goldman needs Privacy

At one point this week, the headline was:

Roiled by op-ed, Goldman loses $2.15 bn m-cap

Goldman didn't get where it was by being a public company. It was a partnership for the first 130 years before going public only 13 years ago. Those have been a pretty awful 13 years for the firm.

The latest round of headline-generators and talking head fodder would have never happened if Goldman were still private. The dude wouldn't have even had the motivation to publish the op-ed. The Times wouldn't have cared to print it. Nobody outside the firm would care to read it.

Instead, over the course of a few hours of stock trading, value was "destroyed" to the tune of ... well, more money than 99.999% of the world's population will see in their lifetimes. Actually, add a few more 9's after the decimal. Billions. With a "B." As in Buffett-sized.

Or was it? If a whiny Dear John to a former employer full of news (which, as Forbes pointed out, everybody already knew) can destroy billions of bucks, then maybe that value didn't really exist to begin with. Stepping back from the greater fool theory, perhaps GS should be valued based on the discounted cash flows it can generate. Novel concept, eh? Maybe I should write a book and teach at Wharton.

Then again, maybe my book should take a different approach. Perhaps Goldman should never have become GS in the first place. Perhaps a financial firm with ridiculous leverage ratios, a wacky capital structure, a penchant for mercenary dealings (AIG collateral call ring a bell?)  needs a small, concentrated, captive based of owners rather than a whole "street" of busybodies to answer to.

The only way Goldman's stock has impressed is in its volatility. It hasn't even doubled over the past 10 years. Hardly a good investment. The management has never been able to find an acceptable balance between staff incentives and shareholder value. Perhaps no such balance can exist for more than a few microseconds. Perhaps GS is an unstable element with a short halflife. Maybe they're in a constant state of containing the meltdown, hoping it wont Fukushima on them tomorrow ... or the next day. Perhaps this is distracting them from their "day jobs" of making deals with and on behalf of clients.

Nice adventure, guys, but it's time to take your marbles and go home. Cash in the chips and go private.

Getting the Most out of Youth

This week, on TED Conversations, (look it up and thank me later) the question was posed:

Roughly 52% of the world's population is under 30. What is best way to harness the energy and ideas of youth?

 To me, step one would be to make sure that energy and creativity are informed. Some background:

I certainly recall formulating incredibly strong opinions in my teens and 20's which later, based on a broader understanding, were dead wrong. I suspect I'm not the only one.

Furthermore, nothing helps me really "gel" or solidify my opinion on something like trying to explain it to someone. Kinda like posting here on Ted Conversations!

Many curricula, especially in the US, rely too heavily on reading- and lecture-based pedagogy. Similarly, our adulthood self-education relies far too heavily on reading- and talking-head-debate based TV and print media. We sit and stare quietly, deciding to agree or disagree with the point being made. Later, over dinner when we try to explain it to our kids, we are disturbed to discover all the holes in our understanding or logic.

Innovation, dynamism, and human caprice are forcing many of us to continually reinvent ourselves professionally. Yet we still instill in our youth in a concept of "profession" tied to a specific set of skills. ("What do you want to be when you grow up?). As TED speaker Sarah Kay challenged: "How many lives can you live?" In prior centuries, the answer was one, but today's youth will be REQUIRED to reinvent themselves over and over again.

Therefore, I would advocate a two-pronged approach:

1/ further a culture of continual education. Make it socially desirable to question your opinions, to seek to further your understanding. Continued lifelong education is the best way to optimize our chances of continually contributing to (or maybe even disruptively improving) our world and thus achieving our life goals.

2/ make that education participatory and practical. University is great, but it so often misses the important applied education. We thus force our young and educated to take a leap of faith into the market across a chasm of lack of experience in applying their knowledge.

Follow Up 2: Less is More

The lead story in the August 6, 2011 Economist minces no words in their opinion of US politicians' "current uselessness" which the paper fears will be responsible for a double-dip recession. They specifically highlight the negative impact of the growing US governmental unpredictability:

Any hard decisionshave been given to a commission--a cop-out that condemns workers and firms to more crippling uncertainty about how the country's fiscal mess will be tackled. Would you build a factory today if you knew that taxes had to rise eventually, but had no idea which ones?

Worse, the poisonous politics of the past few weeks have created new sorts of uncertainty.

This was precisely my message in a January 2010, blog post:

Risk is equivalent to unpredictability. The more able one is to predict the future, the lower the risk and the more confidently one can make moves today which create a nice return tomorrow. Conversely, when the rules of the game may significantly change tomorrow or next year, risk is dramatically increased. This raises the risk-vs-reward bar such that fewer investment options are viable.

Its no wonder that corporations and banks are choosing to sit on "piles of cash" instead of launching big, strategic, long-term investments which would support long-term and largely high-skilled job creation ... and hopefully long-term profitability for the investors.

No, US federal policy currently discourages that type of thing. More precisely, it forces such investment offshore. When US businesses choose to NOT use their cash for investment in their own commercial projects, they must find something else to do with the cash. People say that Apple has umpteen-hundred-billion dollars "in the bank" but more accurately, Apple has this cash invested in non-apple projects in that Apple owns shares, CDs, bonds, and IOUs from other banks and companies who are not subject to the unpredictability and caprice of the US government.

As my blog post continued:

Governments can increase or decrease this risk. Those with the discipline to stick to a stable, sensible, transparent industrial policy over a long period build tremendous "trust equity" with investors ... Ideas become businesses become economic value ...Unfortunately, being based entirely on intangibles (consensus expectations), this trust equity is a very fragile thing. Governments can quickly sabotage themselves, their economies, and thus their citizens by giving off even the whiff of erratic or ill-advised behavior.

 The current lot in Washington reek of it. Like Renaissance French nobility, they slather themselves in ever-increasing amounts of perfume to cover it up, but the flies still swarm. Here's David Brooks:

"If you ask people, 'why aren't you investing? Why aren't you lending?' it all comes down to uncertainty ... If bankers and entrepreneurs don't have any sense of certainty, they're just not going to invest ... We've not only got this economic problem, but its compounded by a psychological problem, magnified by the fact that distrust of institutions is at its highest level in history." - David Brooks, Meet the Press 1/31/2010

The answer? Of course, it's complicated but a good start is in the title of this blog. The Economist is concerned that immediate fiscal austerity would thrust the economy deeper into trouble. They suggest that we wait a bit. They're half right. I'd listen to Greenspan, who has been a long proponent of using the economic power of "signalling." Without changing a single regulation or appropriation today, the government can clearly communicate what changes are coming when. If the message is credible, people will respond as though the change had happened today. Markets will rapidly price in the new information, and the trajectory of the whole economy will shift.

IF the government's message is credible. This is the rub, given the extent to which Washington has squandered that intangible "trust equity." Given this situation, I'd suggest Obama and Congress see a psychologist ... to better understand how to psychologically build trust in a population.

I'd suggest follow-though is key.

The Zeitgeist of the BearDogs

Sometimes Simple IS the best way to communicate. Here's to the simpletons.

Corporate Newspeak 7

Talk Around: (v) 1. Share opinions on tangents related to a topic on which decisions are pending without any expectation that any decisions will be taken, thus taking all pressure off the decision-making leadership at the table. 2. Tongue-in-cheek play on the literal interpretation of the term "talk about."
Also: Waste Time, Chat, Think On, Building a Base, Laying Groundwork
Usage: "Can we make a decision here today, boss?" / "Well, Johnny, of course - we do need to move on this, which is why I think we need to talk around the nuances of the constraints and dependencies to make sure we've covered off all that first."

Draw a Line Around: (v) Avoid talking further about once and for all. Usually used by someone who has argued their side of an issue unsuccessfully.
Also: Ring-fence
Usage: "But, but ... okay folks, clearly we need to think on that niche issue a bit more. I don't want it to keep us from moving forward on the overall strategic vision. Let's draw a line around that and continue the larger discussion."

Friction-Free: (adj) Of a mythical business process which produces economic value without any ongoing cost, often expected to move at the speed of light. Used only in the context of corporate sloganeering or in the context of empty sales promises.
Usage: "Don't worry about what it costs to implement, Donnie. By leveraging technology and enterprise synergies, this friction-free solution pays for itself."

Enterprise: (adj) Of a mythical type of business process which is entirely uniform across all groups, departments, lines of business, divisions, or other factions of a corporation, run under the direction of a single group, yet paid for by all groups. Used when one group starts to implement a new business process, and then realizes they don't have enough money to pay for it.

Follow Up: Baseless Blames and Bangless Bucks ... oh, and Healthcare

Exactly 6 months ago on this blog, I said:

"David Axelrod, himself, said this week there was universal agreement on 80% of their ideas. Sounds like enough for a plan to me. Let's pass it and start to get at least a little relief. Would we delay a heart bypass in the ER until everyone had agreed what to do about the patient's high cholesterol? Of course not. That is not to suggest we should choose Band-Aid surgery over treating the insidious underlying problems. Its just a sensible triage. Nurse?"

Maybe the White House is finally listening:

"Mr Obama has instead hinted that he would like to build support for a bill “around those elements of the package that people agree on.” - Economist.com, 1/26/10

Sadly, the same article continues ...

"It is not clear what other elements the president believes could be agreed on."

This Isn't A Child's Game, Folks, but it Ain't Rocket Science

Surprise surprise a bloated, non-functioning, politically-motivated organization run by a revolving-door president is ineffective.

And I'm talking about the White House.

"The U.S. government had sufficient information to have uncovered this plot and potentially disrupt the Christmas Day attack, but our intelligence community failed to connect those dots,"
Barack Obama criticises CIA failures over Detroit bomb plot

Obama's own report, as paraphrased by Guardian.co.uk, said:

They said that the biggest US crisis in intelligence-gathering since 9/11 had
been brought about mainly because no single agency is in charge, with a dozen agencies fighting for their own turf.

Gee, last time we blew the dots game, I was just sure Washington would fix it:

A key congressional committee opened its investigation Thursday into the November 5 Fort Hood shootings with a pledge to find out if authorities failed to "connect the dots" and could have prevented the attack.
Senate panel seeks to 'connect the dots'

Must have gotten lost somewhere in the bureaucrazy. But that's OK, because the problem should have already been fixed. We realized we sucked at dot connection years ago and did something about it:

It is said that prior to the attacks of September 11th, our government failed to connect the dots of the conspiracy ... So to prevent another attack – based on authority given to me by the Constitution and by statute – I have authorized a terrorist surveillance program.
George Bush, 2006 State of the Union address

Maybe that, too, got drowned in bureaucrazy. Kinda like THIS one way back in 2002:

The Department of Homeland Security consolidates 22 agencies and 180,000
employees, unifying once-fragmented Federal functions in a single agency
dedicated to protecting America from terrorism

But back to the dot-connection game currently at hand. Last I checked, you had to have a visa to get on a plane to the US. Funny, I thought the State Department issued Visas into the US. I agree with Hill on this one:

We are, in the State Department, fully committed to accepting our responsibility for the mistakes that were made
Secretary of State Clinton on plane bomb blame

But, wait, we fixed visa procedures with THIS back in 2008:

The Visa Security Program was established in the Homeland Security Act of 2002 to increase the security of the visa process at U.S. embassies and consulates. The program enhances national security by preventing terrorists, criminals, and other ineligible applicants from receiving visas ... The program assigns experienced special agents to Visa Security Units overseas to review visa applications, initiate investigations, and provide advice and training to consular officers. Agents bring valuable resources to posts and add a layer of security to the visa process

No, wait, that one got lost in bureaucrazy too.

When the cause of failure is bureaucrazy, how can we keep expecting that bureaucrazy to fix it? Maybe more childish games should be part of the Civil Service Exam. Or maybe we'd be better at a different game. Tic-tac-toe, anyone?

"We can't solve problems by using the same kind of thinking we used when we created them."-Albert Einstein

When a Bad Reputation is Just Fine

For a couple of weeks, I've been following a debate on the importance of reputation.

In this entry on his NY Times blog, Paul Krugman argued that insurance companies don't give a rat's rear about their reputation or the satisfaction of their customers. He didn't say, but clearly was saying that he'd found yet another need for a governmental white knight. He explicitly launched snark at a series of Bryan Caplan Econlog posts which placed great importance on reputation in economic decisions. Bryan responded with this post, entertainingly including pirates and VDs in his case. At the end, he asked his audience:

What is your favorite example where reputation doesn't make voluntary
interaction work well? Is the problem demand, supply, or what?

As moths drawn to fire, many responders couldn't help but focus on the pirates and sex. Others have thought up niche examples such as the "fall forward" effect of bad bosses with good employees. They needn't. His question can be answered with common real-world examples. My contribution to the debate is as follows:

When doesn't it work? When there is:
1. A very large, fragmented population of consumers, most making infrequent purchases
2. A largely standardized product (ie: highly regulated or commoditized), leading to high inelasticity of demand to price ... causing price to be the major differentiator
3. And a highly transparent market in terms of price

Airlines, credit card companies, and banks are all great examples. Major players make little investment in customer retention, preferring instead to counter attrition with new customer acquisition, based largely on price, combined with creation of monopoly/oligopoly power (usually only local or short-lived). Any marketer in these industries will tell you that their key metric is the ratio of attrition to acquisition.

Said concretely, an airline can sell confirmed seats to someone else, strand 300 customers in a layover airport overnight, make us stand in line for hours to get re-booked, pack each of us between sumo wrestlers on a tiny aircraft, over-charge us for a bottle of water, and then wreck your luggage. All the while, their demoralized, unionized employees will make scant few attempts to pay attention to, much less accomodate us customers to retain our business. The airline knows it can lure most of us back next time by simply offering the cheapest fare for the route and time of our next trip.

Unsurprisingly, the story is much different in the international market where they have far less ability to secure those temporary monopolies and thus must compete on something other than price alone. Fly the same carrier domestically and internationally. You'll find it hard to believe it's the same company.

Gee, I wonder if therein lie the seeds of a real answer for both Paul and Bryan.

Baseless Blames and Bangless Bucks ... oh, and Healthcare

As Jeremy Clarkson snickers weekly, "Some say ..." this blog started as a diarrhea of personal opinion, but has recently drifted down to the gallows of quote regurgitation, spiced with the occasional snarky fart directed at whatever DC's up to at the moment.

Nope.
'Nuff said. I'm glad we had this talk.
p.s. I love the bumper sticker!

"Some say ..." so many people flock to this blog, there has been a measurable drop in national productivity and employment since it's inception. Piffle. Orszag needs to find someone else to blame his "bangless bucks" predicament on.

And while I'm on the topic: Big ups to Obama on healthcare. By convincing everyone that he's really gonna do something, anything ... maybe even something a little nuts, ya never know ... he has finally scared people into a REAL conversation about what healthcare should be. Brilliant.

I agree with him: something DOES need to be done about health care. I'd even support his plan if it contained no new deficit spending, taxes, fees, surcharges, mandates, wealth redistribution or governmental committees. If he and Congress really want to be non-partisan, deficit-neutral, pro-growth, and generally pro-biotic, they should follow the recent kitch-cuisine trend and deconstruct their plan into its source components. Then, they should whip up a recipe including only those ingredients that meet the tests above.


- Acknowledge that we have problems and that the status quo is unacceptable? Check!
- Improve efficiency? Check!
- Make better use of technology? Check!
- Prevent diseases rather than treating them? Check!
- Use cheaper, generic drugs when they're just as effective as name-brands? Check!
- Allow pharmacies deliver bottles of Advil to hospital bedsides, rather than charging the patient $10 a pill? Check.
- Follow the SEC's lead and require (all but the smallest) healthcare providers to publish uniform, comparable statistics about the customer satisfaction, effectiveness, and cost? Cha-check!
- Give people the option of a low-cost, 24-hour clinic instead of the ER for garden-variety treatments? Check! In fact, authorize ERs to march their dumb untreated butts right out the door and across the street to the clinic.
- Share results of tests among healthcare providers, instead of re-running the same diagnostic multiple times? Double-check!

David Axelrod, himself, said this week there was universal agreement on 80% of their ideas. Sounds like enough for a plan to me. Let's pass it and start to get at least a little relief. Would we delay a heart bypass in the ER until everyone had agreed what to do about the patient's high cholesterol? Of course not.

That is not to suggest we should choose Band-Aid surgery over treating the insidious underlying problems. Its just a sensible triage. Nurse?

Stay tuned for my thoughts on those underlying issues in the next blog entry.

The Good the Bad and the Ugly

This one's short, sweet, and perhaps a little rough around the edges ...

The Good:
Geithner finally says something logical ... executive pay standards can be set by regulators but must be enforced by shareholders and boards.

He even said something smart: the US financial industry regulatory patchwork must be overhauled. The Fed should be put in the lead.

More generally, and as I will cover in detail in an upcoming blog, a sea change is coming in corporate accountability, focused, as I've always said it should, on the board.

Politicians are suddenly less paranoid about discussing healthcare.

The worst recession in 70 years turns out not to be the end of the world for most folks.

The Bad:
Promptly after saying something smart, Geithner proceeded to say something stupid. The holy grail of financial industry regulation most certainly is NOT a "council" of regulators. WTF good is this politicized talk-shop? Put someone in charge for chrissake. Make them independent for the love of God. I'm all for competition, even within government services, but it depends on what they're competing for. What are their incentives? How are they measured? The current incentive framework for these schmucks is: bloat their budget, cozy to the institutions they regulate, and kiss as much ass on the banking and FS committees in Congress as possible. Does he really think that the FDIC and OTS would have been any less of a joke as regulators if they had simply had more touchy-feely time with their fellow bureaucrats? How about getting out into the field and figuring out what's going on in the industry ... and then actually DOING something about the ugliness under the covers.

Worldwide equity and bond markets are turning around. We'll give back at least a third of what we've gained since January.

The Ugly:
This week we saw news of an "inquest" in Canada to figure out why a woman languished, entirely ignored, screaming and pushing the emergency button in a hospital for 4 hours before her husband had to single-handedly midwife her through birth. Duh.

In response, Obama decided that we should adopt the Canadian system. No lawsuits allowed, just like Canada. No guarantee of service levels, just like Canada. No responsible party, just like Canada. Obama's healathcare proposal is dreamware. Instead of injecting some reality, his crew and Congress have launched threats against anyone daring to speak reality (Elmendorf hang in there).

He was so busy thinking up this nugget that he forgot to check on those silly Iranian elections. Or maybe he saw the violations of basic human rights, international law, and his own past blathers ... and just didn't think they were important enough to disturb the lovely peace he's cultivating with his new Muslim BFFs. Maybe he's just being cooooool. Like he has been about the Dear Leader.

MLB players get to buy performance. NFL players get to buy their ay out of murder.

The Post Script:
There's a common thread to many of the "new" solutions that are being trotted out: the idea that more talk is the solution to every problem. I'm a massive fan of communication and information, but neither is an end in itself. These are means. These are methods. A car may need gas to get you from A to B ... but a can of gas is pretty damn pointless without a car ... or a road ... or the ability to drive ... or any of the other co-requisites.

Let's not take our eye off the ball.

The Skyrocketing Cost of Education!

To all ye out-of-work destitute Wall Street bankers: Fear not. Minimal vocational re-education is required for you to join the next big industry .... Education.

Yes, a standard Harvard MBA only costs $175,000, leaving little room for nine-figure professorial salaries. Yes, for some people, a copy of Atlas Shrugged ($8.95) is enough of an eye opener. But the new trend in education caters to those "feeling" style learners who must experience it to learn it ... of course, with copious amounts of hand holding. For them, a few current offerings:

• Hands-on independent studies on pitfalls of Leveraged Buy Outs of failed businesses:

Course.......Price
GM...........$50 billion ($19 billion deposit required)
Chrysler.....$12 billion and 100,000 jobs (best value!)
AIG..........$170 billion plus 10% of the value of shares on NYSE
Act now! Inflation pricing starts soon!

• Popular! New! "Trial-by-fire" Style Finance 101 .... Price: $700 billion
  
• Private! Experiential MBA: .... Price: $1.9 Trillion (and counting)
  
• Investment Basics: .... Price: $ ("socially priced" at 35% of your net worth)
  
• Keynes vs. Friedman vs. Hayek: Fiscal and Monetary Policy: .... Price: $ (1 percent of GDP)
  
• Pass-or-Fail Monetary Policy 301: .... Price: $(price determined one generation after you take the class)


• And the ultimate: On-the-job-training in the White House: .... Price: $ Priceless

Having Vision but Flying Blind

They're misunderstood, if not neglected entirely. They're maligned. They're abused. They each need to be adopted ... by all of us.

I won't be so bold as to say whether Obama or I first sweetened to this set of keys. Clearly, however, we've all been burned by their absence. At least the new administration is trying them out. And I don't mean vision, itself.

You see, having vision is a great thing. Quite rare is the fortitude to choose the right path in spite of the fear mongers, detractors, and wailing interest groups. More rare, however ... in fact, nearly extinct these days ... is successful execution. My recent blog bemoaned and pondered the failings of the US over the past few years. To me, these were seldom from lack of vision, skill, or will. The ideas were sound. The people were smart. But despite having vision coming out of all orifices, they were flying completely blind. Calamity came from complete failures of execution.

Utter failures of execution. On many levels.

It is thus nice to begin to see ghosted hints and hear soft whispering breezes indicating that some people in corporate and political America "get it." It's early days, and this blog will have many follow-ups, but let me describe what's on my radar so far:

A focus on communication.

• Conveying the right message. One side effect of our current info overload is that people have become amazingly good at hearing. People hear more than just the words spoken and can quickly identify the message being conveyed. Too often, Bush administration representatives were speaking about one thing (terrorists in Guantanimo, for example) but projecting a message about something entirely else (caginess from a deep mistrust of the current justice system or the public stomach). It is critical that speakers determine, memorize, and deeply understand the message they're trying to convey. This doesn't mean memorizing a speech and presenting it deer-in-headlights style. It means knowing the message well enough to convey it while sounding like a real person. This builds trust. So does consistency. For an administration, the SAME message needs to be broadcast via multiple channels. It needs to be immutable in its repetition. And the message needs to be right. It needs to be strategic. In the corporate world, for example, the message should convey a specific brand identity and aspiration.
  
• Closely related is Selling the value proposition. Yes, this is Corporate Newspeak. Said in plain English, this means that communicators need to really understand the relative benefits of what they're advocating. This needs to be incorporated into their message every time they communicate. To say it even more simply: sell, sell, sell.
  
• Communication isn't a one-way street. Listening actively to feedback is not optional. It is a diferentiator between failure and success. Actively means listening to and understanding everything they say, literally and in terms of message. It means checking your understanding "So your main goal is X because Y?" It means accepting things that don't sync with your view or message. Once understood and accepted, communicators must be willing to do the unthinkable: incorporate their message into their own, either by responding or by absorbing.
  
• Taking another step back, though, communicators need to make damn sure they've got the right vision as well as message. They can blunder through it; they can be lucky enough to be in the right place at the right time; OR they can do it the right way by investing in information. They must collect, standardize, and analyze data. They must ensure their people AND their audience are properly educated on the issues. They must be brave enough to risk some time and money in skunkworks which may yield nothing, may yield something that doesn't fit with their current vision.

A focus on accountability.

• You cannot have accountability unless you know what your goals are
  
• Then you must identify what the measurements of success should be
  
• Then you must measure what the current state is. Now. With all it's warts.
  
• Finally you need to build the right incentive programs. You need to test your carrots and sticks for perverse incentives.

Surmounting Surmounted Stature

At this very moment, at least a billion people (myself included) must be wondering what the hell happened to the US over the past fear years. Our global preeminence economically, politically, and militarily seems less impressive and less assured today. Of those billion people, sadly, many simply blame one man. The US President is powerful, but he's not all that and a bag of chips. Other people, even more sadly, blame the overall US way of life: our culture, our youth and exuberance, our taste for risk, our ADD, our wealth, our celebsessions, our fast food.

To me, it's adolescent logic to argue that our strengths are our greatest weakness.

The perception that the US has fallen is exaggerated by half, but clearly execution failures, spectacular to mundane, are all too pervasive. Have we just gone pear-shaped? Tits over tea kettle? Lost our mmmmmojo?

One theory is that the rate of failure is unchanged, but in this age of information, they are spectacularized whereas century ago they would have been squelched.

Another theory is that the US has run out of easy wins. Once, oil literally oozed out of the ground in downtown LA. Now, we install rigs in the harshest of locations and must poke miles down into the earth ... or just deal with the Devil. When electricity was first harnessed, options for exploitation were limitless. Gains were huge. Now we must conserve. Innovation used to happen in leaps and bounds as we thought up brand new things. Now it's a slow climb up a steep mountain, figuring out how to do the same old things incrementally cheaper, faster, better.

Or perhaps a social evolution theory applies: Humanity was once, by necessity, survivalistic, decisive, ends-justify-means, hunter-killer, red meat, Western, wanderlust, and masculine. With innovation and social organization, that necessity has abated, being replaced by new imperatives: collaborative, change-averse, risk-averse, non-confrontational, agrarian, vegan, Asian and emasculated. We've evolved (socially) to a point where we believe that our best chance for survival lies not with our individual abilities, but is tied to our capability to integrate within, and enjoy the shared bounty of a larger society. In order to push the whole society to produce and achieve, each member must first endure the necessary overhead of "connecting" with the other members. To "connect" one must spend time communicating, documenting, justifying, persuading, organizing, planning, coordinating, motivating. I'll lump these societal requisites together under the term "connecting."

As the theory goes, people now focus so much on "connecting" that they run out of time to actually produce. This sea change in the way of getting things done (or not) causes a black hole which swallows great people, ideas, laws, and businesses before they can create anything of value.

If you don't like that theory, you could just say that we've just become rich, fat, and lazy. In his case, you must conclude that, just as the Romans, the Akkadians, the Hun, the Mali, the Egyptians, the Ottomans, the Spanish, and the English, so will the American empire fall.

Alternatively, you could decide that we've consolidated power in the hands of a few, and left hoi polloi impotent to look after their own best interests.

Or you could conclude that the human brain has found information overload, that life is just too fast, and that we've thus become irrational and random our their decisions.

It doesn't much matter which justification you prefer. What I would like to figure out is where we go from here!

Yeah, What HE Said: Lee Edition

Even a good Republican will agree that mistakes have been made by the current administration. Mistakes are made by EVERY administration. But this time around, 99.9% of the world is enjoying making a sport of blaming Bush for every evil and ill. We can thank the talking heads on the irritainment-news for spurring this on and on. In response to them, I give you another vilified man, Robert E. Lee.

"It appears we have appointed our worst generals to command forces, and our most gifted and brilliant to edit newspapers. In fact, I discovered by reading newspapers that these editor/geniuses plainly saw all my strategic defects from the start, yet failed to inform me until it was too late. Accordingly, I am readily willing to yield my command to these obviously superior intellects, and I will, in turn, do my best for the Cause by writing editorials - after the fact." - Robert E. Lee, 1863

Apparently, talking heads are not a recent a phenomenon.

Governmental Fiat

As quoted in George Will's recent Washington Post piece:

"By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next. The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s." - Russell Roberts of George Mason University

Those who have had the misfortune of listening to me lately will find striking similarities in what Russell perceived about the '30s and what I've been lamenting about our current predicament.

The US Dollar is fiat money ... backed not by gold, not by collateral, but by everyone's faith in the strength and continuity of the US Government. People expect the US to continue to achieve, deliver, and grow for the foreseeable future. Thus they are happy to hold Dollars. History has proven them right: the Dollar has survived world tumult and domestic shock, inflation and stagnation without ever having a crisis of confidence (=a severe drop in exchange rate).

Underpinning this faith is stability. People trust the dollar, and it's issuer the United States, because both have historically been stable and predictable. The opposite, however, would be equally true: erratic moves by the US would cause suspicion, fear, and trepidation in people. Enough of that tumult, and people would lose faith in the dollar and the US economy. They'd flock out of Dollar-denominated assets in favor of other currencies (predominantly the Euro and Pound, with the Chinese Yuan as an interesting wild card). The US Dollar's exchange rate would tank ... not slide, not drift, but crash. This is a turn of events we cannot allow to occur.

Whereas the Feds thought their bold moves would "jump start" the economy by fiat, their erratic decision-making over the past few months has had the opposite effect, suppressing any recovery precisely because the "boldness" has scared people. Ambiguity on the future of bankruptcy law and assistance is causing households, businesses, and banks to delay bankruptcy filings. Ambiguity on the financial bail-out is keeping would-be bank investors from taking advantage of these bargain-basement stock prices. Ambiguity about interest rates and inflation is making banks sit on their inflated reserves rather than lending. Sounds a lot like the 1930's, no?

Rationally, those people are largely sitting on the sidelines waiting for things to calm down before they'll be willing to re-engage in economic activity. That's the generous view.

The not-so-generous view is that people see a new level of precariousness in the US economy and a new level of unpredictability in the behavior of the US government. Rationally, they are revising their expectations about the US economy to be a little less rosy and are beginning to act based on that new view. In this case, the horse is already out of the barn and it will be far more difficult to re-interest these people in engaging in economic activity ... at least here in the US.

History repeats. Again. Don't act so surprised.




Yin/Yang Graphic credit: transaction.net
Coffee Talk Cartoon Credit: wordsellinc.com
Precarious Cartoon credit: Wide Dynamic Range

Yeah, What He Said: Brandeis Edition

Yes, as in Louis D. Brandeis, Supreme Court Justice from 1916 to 1939. He had some very timeless ... and timely things to say:

Organization can never be a substitute for initiative and for judgment.

America has believed that in differentiation, not in uniformity, lies the path of progress. It acted on this belief; it has advanced human happiness, and it has prospered.

Like the course of the heavenly bodies, harmony in national life is a resultant of the struggle between contending forces. In the frank expression of conflicting opinions lies the greatest promise of wisdom in governmental action.

It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.

There is no such thing as an innocent purchaser of stocks.

In the Words of Willie: "It's Been Rough and Rocky Travlin'..."

... but I'm finally standin' upright on the ground.
And after takin' sev'ral readings,
I'm surprised to find my mind's still fairly sound..."
- Willie Nelson, Me and Paul

Willie doesn't need a U of Chicago economics diploma hanging on the wall in his tour bus. He just knows good sense and how to not take things too seriously. I'm going to borrow his words above to explain what is essentially a very simple economics concept. Stay tuned.

As I bemoaned in a recent blog, talking heads everywhere are proclaiming the death of the free market, but NOT the death of capitalism and NOT a turn toward socialism (that would be politically unwise to say). In saying this crap, they show their lack of understanding of economics. A free market is a necessary prerequisite of the capitalism model because this is how prices are determined ... and prices are the uniform measure which ensures capital is allocated most efficiently ... and efficient capital allocation ensures that the most "value" is wrung from every bit of capital. This is capitalism' single goal.

• It's goal is NOT fairness (Thomas Friedman said it himself on Meet the Press this week: "Fairness is not on the table anymore ... we either have systemic risk or find a way out of this mess.")
• It's goal is NOT equality (actually, perfect equality and perfect capitalism are completely incompatible, as forced equality kills the incentive mechanism)
• It's goal is NOT stability (and that's where Willie's words come in. Free-market capitalism is great at achieving its goal, but it does not guarantee a smooth or direct path. This is not a failing of the model, it is a result of the imperfection of the human mind in making decisions)

Capitalism focuses on what it's good at (the economy) and leaves social topics to social constructs. Advocates of other models such as socialism and communism may be reluctant to admit as much, but the ultimate goal of these models, in pure form, is the same.

The only real difference between the models is simply who makes the decisions.

Socialism presumes that government officials are in the best position to make decisions for the common people, and that their goal must be equality. Our economy is so bogglingly complex that, for this model to work, government must be comprised of a cadre of elite, selflessly compassionate intelligentsia with perfect foresight and super-human decision-making abilities.

Until a doting, grandfatherly HAL 9000 emerges (and it's already 7 years late!), free-market capitalists believe that it takes the entire population of the economy to get decisions right. Leveraging 4 billion years of evolution (or 6 days of creation, which ever you prefer), capitalism makes use of each person's instinctive desire to maximize pleasure while minimizing pain. Each person is empowered to constantly make the decisions that are best for themselves based on the information at hand.

Each owner of capital (including the human capital of our own labor and intelligence) is empowered to constantly make decisions about the best use of that capital in order to maximize the NPV of future profits from it. This NPV is represented by the current price of the capital. If the owner "prices" his capital at $1,000, but a smart entrepreneur thinks of a better use and "prices" it at $1,200, then the owner should be ecstatic to sell it to the entrepreneur at any price above $1,000. Done a trillion times a day, such interaction maximizes the overall output and value of the entire economy. In short, decision-making is decentralized to the lowest possible level, not hoarded in Washington.

Progressive Lefties will immediately smell a rat here. This process does nothing to ensure that all the pie slices are equal. They're right. Capitalism simply grows the entire pie, and in doing so makes EVERY slice bigger. Bill Gates' decisions vastly grew his slice of the pie, both in absolute terms and in relation to everyone else's. He benefited unequally from his own success. That's the incentive mechanism of the economic model.

As a side-effect, the whole pie got bigger, and that has benefited even the poorest among us (see my recent blog on poverty for more on this) but social concepts like equality, fairness, stability, or poverty eradication should be handled via social constructs. Asking an economic model to address social goals creates an unnatural and unstable conflict of interest. To impose these goals on capitalism would require convincing every member of the economy to make decisions which do not maximize their own well-being. On the other hand, the concentration of power required by socialism, creates an much more practical way of imposing these goals on a populace without their consent.

Is that really what we want? If not, we need to put our politicians back in line.