Confessions of An Economic Refugee

Coming off my little expletive saturated rant at the end of my previous entry on Katrina, I hinted at more mismanagement shenanigans from Ms. Katrina.  Well, enough time (and another hurricane) has passed allowing me to calm down enough to fill out the rest of my article.

Truly, I think Katrina represents all things in our North America society coming home to roost.  Consider this:

1. A public administrator appointed on the basis of his political connections instead of his competence.  It truly is ‘who you know’ not ‘what you know’ that ultimately makes the difference here doesn’t it?
2. A bureaucracy (FEMA) so out of the loop that it takes a public humuliation and subsequent outcry from senseless human deaths televised to the entire world to drive home the reality of the situation.
3. An administration more focused on managing the image of the situation as opposed to situation itself.
4. A president eating crow for practicing his HBS leadership best practice of praising in public ("You’re doing a heck of job, Brownie") and what we hope is a severe beat down in private.
5. The Rest of the World puzzling how a prosperous city in the wealthiest and most powerful country in the history of mankind could be reduced to a mini-failed state.

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Well, I don’t think this should elicit too much surprise from any one, but the highly respected The Economist magazine comes right out and doesn’t pull any punches in their characterization of W.’s administration here:

The Economist has always had all sorts of ideological disagreements with Mr Bush, but our main problem with his administration has increasingly become incompetence. [emphasis added here] Katrina now stands besides the shambles overseas in Iraq and Guantánamo Bay as supporting evidence.

I guess the wheels are really started to fly off the W. show on the Beltway now.  Mainstream media, habitually mistreated and resentful of the Administration, are sensing blood in the water and finally getting their long awaited satisfaction.

More to come on this…

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This blog entry has been percolating in my head for a very long time.  Being in the Bay Area, the bluest of blue California, it’s very easy to write some vitrolic rant about W. and not raise an eyebrow.  However, that’s not what I want to do.  To many of my well-to-do colleagues, who have been quite happy with W.’s gift of tax cuts and with whom I have alway struggled to articulate why I think W. has been and is a bad president, this essay is for you.

(Well I guess I shouldn’t feel too bad, neither father of the Internet Al Gore nor war hero John Kerry with their millions of dollars spent on advertising could convince the the majority of Americans to buy/vote into the argument either.)

At risk of sounding like an "I told you so" I think there is now a sufficient body of evidence to strongly support this arguement:

The US army once surveyed its soldiers and asked them what they thought was the single most important quality that an officer should possess.  From the rank and file, one response, stood out overwhelmingly from all others:  competence.

For all his other faults and even some of his admirable qualities simply too much has happened on George W. Bush’s watch.  Managers are loath to make decisions based on single data points and typically act only once there is a discernable trend in the data.  While this often means managers don’t react until it is too late (probably because they based analysis on lagging as opposed to leading indicators), I think even the more ardent "wait and see" manager would find W. track record pretty damning.

Let’s start from the top shall we:

1. Ignoring pre-9-11 warnings: W. ignored the very specific warnings that summer leading up to 9-11 from his counter-terrorism chief advisor Richard Clarke.  The rest, as we know, tragically, is history.
2. Going to war in Iraq: I’m not sure I totally want to lambast W. for this one.  One of the unspoken truths about the leadership is that, more often than managers would like to admit, decisions are made by gut instinct first and then the corroborating facts are gathered to support it.  Often this is simply because there is insufficient data or sufficiently unambivalent data to favouring any one particular side.  I have no doubt this is what happened in the lead up to the Iraq war.  However, even most average clear thinking person would be shocked by the thinness of evidence that coloured Iraq a clear and present danger that had to be unilaterally attacked.  Face it, when pretty much the entire world and most of your own country thinks you are nuts, they might be on to something.
3. The chaotic aftermath of the Iraq war: Simply put, lack of advanced planning. The administration was so wrapped up in building the case for war it forget to plan for what to do after the war.  You can make the case that the current insurgency and political stalemate in Iraq today is largely because of the anarchy following the war which fatally damaged the US’ credibility in the minds of the Iraqi people and ignited a sh$tstorm of resentment.  All the hard work put into winning "the hearts and minds" of the Iraqi’s leading up to the war, only served to paint the US as either an insensitive, dishonest and/or self-serving invading army that wrapped itself in spurious claims of liberation and freedom.  Management lesson: It’s better to keep expectations low than to fail to deliver on your inflated expectations.  That only leads to pissed off customers – or pissed off Iraqi’s in this case.
4. Abu Ghraib 1: (The Iraq War is just a treasure trove of management missteps isn’t it?)  Inability to see the broader ramifications.  I was going to put "lack of ethics" here but in today’s day and age I’m not sure that’s really such a damning indictment.  (Call my cynical.)  Very clearly,
5. Abu Ghraib 2: Lack of accountability. 
6. Hurricane Katrina: see my earlier post on management mistakes on Hurricane Katrina.
7. Ignoring N.Korea, Iran and Global Warming

Summary:  Let’s just quickly review everything that has gone wrong under the George W. Bush Presidency:

• 9-11
• Iraq: No Weapons of Mass Destruction, Abu Ghraib, No Exit Strategy, Al Qaeda breeding ground
• Guantanimo Bay
• Bankrupting America – prosperity and surpluses to deficits as far as the eye can see
• Valarie Plame
• Hurricane Katrina
• Ignoring N. Korea and Iran
• Ignoring Global Warming
• American’s standing in the world has never been lower.  Are you meaning to tell me that 5.85 billion people are all out of their mind when they think something is wrong with the USA?

Characteristics of the George W. Bush Presidency:

• Lack of Accountability: no one fired for 9-11, Abu Ghraib; Valerie Plame, Mike Brown only belated let go for mishandling Katrina
• Lack of Foresight: 9-11, Invasion of Iraq
• Cronyism: choosing close personal friends and political supports for the important posts of  Secretary of State, Attorney General, UN Ambassador, Supreme Court Justice, Director of FEMA
• Fiscal Ineptitude:  W’s prescription for any and all problems seems to be to unimaginatively shove money at it.  What is even more amazing is the sheer lack of creativity in how the money is spent.  Consider the following: 2001 recession = taxes cuts that predominantly benefit the richest 1% of Americans; 9-11 = creating the Dept. of Homeland Security; Iraq = $50B-$200B; Hurricane Katrina = "spend whatever money needs to be spent";  High Oil Prices = subsidies for Oil companies.  The result is entirely expected.  America’s fiscal strength has been severely eroded in the years of the George Bush presidency with enormous twin deficits and an ever weakening dollar.

I think what is even more sad is the American public has decided to reward bad behaviour with another term in office.   I mean, if one were to interpret all the presidential actions of the last 5 years these are the things one would learn:

1) It’s okay to distort the facts and misrepresent your case in order to do convince a nation to partake in an expensive and illogical action (ahem invasion of a soverign nation)

2) You don’t have to be held responsible for your actions nor do you have to ask your subordinates be accountable for theirs.

3) You can spend with complete disregard for how much you can actually afford.  Don’t worry about having to pay it back.

4) It’s okay to use the machinary of government to serve your own selfish political purposes and endanger the lives of forthright citizens trying to serve their country.  While it’s naive to expect politicians not to "play politics" with the machinary of government while they are in power, what is shocking is how blatantly this administration abuses its powers to achieve its political ends.

5) It’s alright to appoint your buddies to positions of responsibility with disregard for their qualifications and/or other candidates who may be more qualified.  Afterall it is about who you know as opposed to how well you can do your job.

6) You can accuse anyone with an opinion that differs from your own of being "UnAmerican" encouraging groupthink.

Is this the type of employer you want to work for?  Is this the type of country you want to live in?

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While we’re on the topic of natural diasters, I recently came across this post on the web about a deadly viral outbreak just a few days ago, already characterized by many as a plague, in an area of the world called Zul’Grub.  This virus originated from people exploring a remote part of the world came into unexpected contact with native animals who are natural carriers to the virus.  Unfortunately, Like SARS and Ebola before it, the virus crossed the species barriers to infect people with deadly effect:

Some animals in Zul’Grub randomly infect [humans] with the Corrupted Blood [virus], which causes … large [blood] loss over a short period of time and [was] transmitted to other [humans] in the [county].

The problem is that a [person] with the [virus] can apparently leave the [county] … and go to a major city, like Ironforge, and spread the disease to hundreds of [people]. Most [children and babies] will die very quickly. [Adults] won’t, however, and will spread the disease. In addition, [aid workers] can also pick up the [virus] and then spread it themselves.

The result is apparently chaos [in] many [counties], with outbreaks wiping out entire cities full of [people] and making travel there very risky.

At last report, authorities were working frantically to try to quarantine the infected cities, effectively condemning the people inside to death, to limited effect. Unfortunately, people being people, with their innate sense of self interest and self preservation – infected people would repeated evade the quarantine, fleeing in the dead of night and going on to infect other cities.  There have also been reports of malicious people committing property crimes and otherwise taking advantage of the unfortunate situation.  In short, it’s become quite serious.

Well, if it’s so serious, how come you haven’t seen it on CNN or read about it in the newspaper you may ask?

The really lucky thing is that this plague, while incredible infectious and lethal is only deadly to player characters in a kind of computer game called World of Warcraft.  You can read the original, unedited version of this Corrupted Blood Virus post here.  Here is another article of the virus on respected video gaming site IGN.

For those of you that may not know – World of Warcraft is what the video game industry call a Massively Multi Player Online Role Playing Game or MMPORPG for short.  Another way to think of it as a perpetual game of Dungeons and Dragons played by millions (yes millions) of people worldwide over the Internet.

Though I’m sure all the Digital Avande Garde magazines and websites will eventually write some piece about this, I think this outbreak will eventually by remembered as a watershed in Digital history.  Here’s why:

1)     The creation of the Corrupted Blood Plague was completely unintentional.  It was purely the result of random coincidence caused by rather interesting interaction of several pieces of unrelated code:

a.     A recent patch, 1.7 introduced the highly lethal, contagious and incurable Blood Plague which was designed to be limited to intentionally incredibly hazardous and remote geographic area.  Similar to the characteristics of real life viruses, because of its remote location and the extreme lethality of the virus, the game’s designers assumed that infected players would have all died (thus leaving no viable hosts for the virus) before reaching the major population centers (i.e. cities) in the game.

b.     An unrelated game feature allowing players (including infected ones) to “teleport” back to the city overcame this design assumption.

c.     Non-player characters, which are effectively immortal, can be infected with the plague and infect other NPC and players.  This  guaranteed that a city, once infected, with its population of immortal virus carriers, the infected NPCs, would be a perpetual bastions of the virus and thus pose lethal danger to all players that entered it.

2)     The initial response of the game’s administrators perfectly exactly copied the tactics used by real world authorities, such as the World Health Organization, to combat real world viral outbreaks.  Talk about an Information Age example of art imitating life.

3)     The response on the part of the individual players to the augured faith of their beloved player characters also realistically followed the reactions of people in similar real life situations.  That is, the people’s survival instinct kicked in and they did what real world people often do – they selfishly ran for their lives with deadly result.

4)     Also as in real life, the dark side of people showed up with some people capitalizing on the misfortune of others either for malicious amusement or personal gain.

For the first time, these persistent digital worlds had become so complex that a simple reboot of the system was not a guaranteed solution to the problem.  It’s very interesting that these virtual worlds have become sophisticated enough disparate bits of code would come together in entirely unintended and unanticipated ways but so entirely mimic real life that that its administrator would apply real world tactics to try to deal with the problem.

The impact of the human element further compounds the uniqueness of this situation.  According to some reports there are some 2 million registered users* in the World of Warcraft making it one of the largest communities (dwarfed only limited few by eBay) in the world.  Unlike other digital communities however, the scope of their freedom of action afforded to users, who can do anything from collaboration in pursuit of treasure and reward, to getting into duals or simply socializing opens up an amazing and hitherto unavailable opportunity to observe and study human nature in conditions on a scale approximately real life as never before. 

I have no doubt that sociologists and economists will be studying this other ‘global’ events in such virtual worlds to better understand human nature.  It’s not hard to imagine MMPORPG spawning entirely new research methods in these fields in the very near future. 

Perhaps some day not to soon from now, historians may be remembering September 17th, 2005 as the day our fanciful simple digital worlds became as real as real world itself.  The birthday of the Matrix indeed?

*BTW, for the financially inclined, those 2 millions registered users approximately translates into some $156 to $180 per year in user fees on top of the opening $49.95 MSRP for the game resulting in initial revenues of some $100M and recurring annual revenues of $312M or $360M**. 

**BTW2, For the finance geeks among us, assuming the game’s owners were simplistically able to keep their user population and pricing constant and run WoW as a cash cow pocketing all the revenue as pure profit, and assuming some appropriate discount rate of say 6%, this annual revenue stream, or essentially perpetuity, would be worth somewhere between $5.2B to $6B.  And your parents said you were wasting your time playing video games!

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I’m going to try something new.  Because my brain has been hardwired for management analysis from reading too many business books and taking too many biz classes at SFU, and because all this wonderful skill is so woefully underutilized at work, I’m going to take up a new hobby – business punditry! 

That’s right, I’m going to be snarky, bitchy color commentator for the wonderful world of business and management.  Other people bitch, complain and otherwise get off on their love lives or sport teams in their blog.  I choose to make my own Harvard Business Review blog on Friendster – go figure.

Seriously, my goal here is to try to bring some  perspective on why business and management people in the news did what they did and ask if it was the right thing to do.

Okay, let’s get started with topic de jour – Hurricane Katrina.

There was a lot of misconceptions and wrongly drawn conclusions from pundits, celebrities and other talking heads in the news in regarding the unfolding 3rd world crsis in the aftermath following Hurricane Katrina at the time.  So let’s get started:

1) "George Bush doesn’t care about black people." – or so rapper Kayne West says.  That’s not true, or more specifically – that’s inaccurate.  George Bush doesn’t care about poor people.  That’s right, we’re drawing the wrong conclusion here.  Think about it Kayne, my Armani sporting rhymster – poor people, black or white, didn’t have the cars or otherwise the cash for bus fares to get out when the evacuation order was given in New Orleans.  Poor people are the ones that are not going to be able to afford hotel rooms or what ever alternative accomodations they can get once they leave the Big Easy.  So what are you going to do if do don’t have the bling bling?  Hunker down in convention center and astro dome like you were told. The color of your skin has no bearing on any of this.  Unfortunately it just so happens that many of the poor people in New Orleans happen to be black. 

Management No-No  #1 – mistaking a symptom for the problem.  That the people suffering in New Orleans are (mostly) black does not mean that these people suffering because they are black.

2) "No one could have predicted this would have happened."  says duly departed Mike Brown of FEMA adminstrator fame. (Boy, I would not want to be him.)  Originally, I kinda agreed with this statement.   I mean if you look at the look at the initial news reports from the French Quarter, they mostly seemed pretty optimistic – "the storm had passed, let’s throw a party because it’s over" kind of stuff.  Mike Brown waited 5 hours before sending in the diaster assessment teams because the news was reporting everything was all right.  Boy were we wrong.  Thinks got a lot lot worse. And then we heard about the Army Corp of Engineers reports that outlined the possibilities on breached levees in New Orleans in the event of the storm.   

Okay, let’s break this one down:

Management No-No #2: Drawing incorrect decisions from too narrow a sample size.  Just because reports from the French Quarter, which is in New Orleans, saying that everthing is alright, does not mean that all of New Orleans is already.  One data point does not indicate a trend

Management No-No #3: Not doing your homework.  Had Mike Brown read up on the Army Corp of Engineers reports, he would have realized, very quickly, the very realpossibility of the levees breaches after a major storm like Katrina and hopefully taken the appropriate measures.

Let’s cut Mikey Brown a little bit of slack here – okay so he was out drinking and whooping it up the night before, maybe taking his beloved black Arabian stallion out for a ride when he should have been reading up and doing his homework.  I mean, I know a lot of college students guilty of this.  Problem is, most college students aren’t responsible for saving the lives of Americans in the wake of catastrophes, natural or otherwise.   Regardless this still leaves him guilty of the next one:

Management No-No #4: Lack of foresight, sometimes known as lack of Scenario Planning.  Dude, I mean, what did you think was going to happen?  Can’t you even remotely imaging the possiblity of flooded New Orleans?  I mean, you’re the diaster guy, isn’t it your job to think about such possibilities and how to handle them?  Also, when you had heard that some of the levees had broken and that water was rising, did you not think that things were going to get worse?  Couldn’t you have predicted that?  Remember, the gov’t did not act in force until the entire city was flooded and anarchy started breaking out.

Management No-No #5: Lack of Risk Management.  Risk management is used in management to determine whether to contingency plan or not. 

Contingency planning is mostly a waste of time and as such you need to think about whether you want to do it or not – your planning for things that may or may not happen.  If they happen, great, you get to deal with it, if not, you’ve wasted your time.  Risk management gives you some guide as to whether your should plan.

Okay, Risk Management works something like this.  Look at how likely something is going to happen compared to the result when it does happen.  It it’s unlikely to happen and the outcome is negligible ignore it.  If it’s likely to happen and the result is significant, you should plan.  If the possibility is unlikely but the result is hugely significant, say like a freakin flood, well you need to freakin plan.

Given the really really bad outcome in the event the levees would break, Mikey B. should have prepped for this possibility, had supplies and teams ready or ready on moment’s notive, even if the possibility was somewhat remote.  (In this case, you could even argue that this was much more than just remotely likely to happen.)  He should have had his people in there the moment it occurred to get a true feel for what had happened.  Where the levees really safe? (see Management No-No #2).

Here’s the thing – it takes time to organize a response.  Yes, there are logistics involved with organizing that much people and resources.  It’s not unreasonable to think 1-2 days are needed from the word go.  However, 5 days is inexcusable and speaks to a lack of a sense of urgency and lack of pre-planning.  What I find truly sad if that not for the most powerful, richest nation with ability to destroy the world several times over, a defense budget greater that the GDP of 75% of the world’s countries and capability to invade and topple 2 countries in 4 years, with all this power, can’t or won’t save its own citizens.

Okay, that’s all for now.  Don’t worry, with Katrina, there’s plenty more management screwiness to go around.

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