Thoughts on the Canadian Political Crisis – Stephen Harper You Need to Resign

Canadians are waking up to the mind boggling possibility that may be going into a worst recession in a generation led by a government comprised of politicians who either want to break-up the country or turn it into a socialist worker’s paradise and led by a prime minster who had not more than weeks ago vowed to resign because his party had gotten trounced in an election no more than 2 months earlier. What the hell is going on at home?

To paraphrase Chris Nolan, I can’t help wondering if Canada is getting the government it deserves as opposed to the one it truly needs. In looking at the possible outcomes, they all seem to be lose-lose.

 

Handicapping the Coalition Government

A coalition government would be inherently unstable and leave the country essentially run by a 3 person committee with a lightweight serving as a figurehead prime minister. I don’t believe it will enact the right economic policies to get through this current economic crisis and leave the country in worst shape.

Worse is the uncertainty of having the separatist Bloc in the government. Despite whatever public commitments to the contrary they may make, it is simply to risky to let the Bloc in a government where they would have every opportunity to undermine the unity and territorial integrity of Canada.

If Stephan Dion were a stronger leader, I might say this ‘team of rivals’ approach could possibly fly by having the separatists in government as a sort of ‘keep your enemies closer’ type of strategy. However as it stands, I don’t have confidence this will work – and the recent debacle of the whole ‘tape incident’ and subsequent back-biting amongst the 3 leaders has done nothing to instill confidence in this government.

 

Assessing Stephen Harper – Good Manager, Bad Politician?

On the other hand, Stephen Harper has not helped his case since breaking his promise and calling an early election in a gamble to secure a majority.  This gamble almost succeeded until an election gaffe related to Quebec funding for the arts.  This cost him votes in Quebec and ultimately the majority in Canada.

And while he has actually been a reasonable manager of the country and its economy he has not been a very good politician – his heavily partisan approach to parliamentary politics has only put off the very people he needs in order to maintain the good standing of his minority government.  Backing the opposition parties into a corner by removing the vote subsidy was final straw.  Rather than dividing his opponents in order support his rule he has rather remarkably united them. That two of the main leaders of this potential liberal-socialist-seperatist coalition (Dion the Federalist and Duceppe the Seperatist) in a previous life were mortal enemies who battled quite literally for the very future of Canada speaks volumes to the degree of animosity Harper has engendered.  They really hate the guy.

From his speech last night, Harper seems intent on fighting to very end, asking for a suspension of Parliament (to avoid a no-confidence vote) and taking his arguments straight to the voters.  Unhelpfully, he has played up the divisive issues of the Separtists in Government and raised the spectre of protests and demonstrations in the street.  Should Harper decide to  go to war on this front, I can only think Canada is going to emerge from this episode with its unity severely frayed.  It would be interesting to see how voters will eventually react to this episode, which parties will be eventually punished at the polls, but in the end the whole country ends up a loser.

 

The Government Canada Needs?

A reasoned approach then would be to have Mr Harper step down for the sake of his country.  This could be positioned to signal to the opposition the end of the Conservative scorched earth partisanship and remove, argueably, the biggest animus for the opposition revolt.  Conservatives could hopefully then get back to the task of fixing the economy.   Economic stimulus, infrastructure building, streamlining regulations which keep the cost of doing business high, diversifying the economy beyond natural resource extraction and not frittering away money in auto bailouts – but instead acting judiciously after seeing what US government does.

This strategy is not without risks and probably a little too far removed from reality.  It assumes that the Conservatives would be able to find a suitable replacement leader which, given the outsized role Harper played in the current Conversative government, may be a cause for concern.  Peter Mackay, the former leader of the PC’s which eventually merged with the Canadian Alliance to form the current Conservative Party might be a viable alternative – but that’s mere speculation on the top of a hypothetical scenario.

Regardless of what happens, here’s hoping the politicians come to their senses and pull back from the brink of this political crisis so they can get to work helping the country pull back from the brink of this current economic one.

 

Thoughts (original and otherwise) on the Banking Crisis

So yet another week passes and we see ourselves in deeper and deeper into this, as yet named, financial crisis (somehow “Sub-Prime” just doesn’t seem adequate anymore, the generic ‘2007-08 Banking Crisis’ will probably be what we settle on.)

And this topic has certainly been on the minds of many of my fellow classmates (primarily because of recruiting) and faculty members (primarily the value of their 401k’s I guess) here at school.  In fact, our school felt it necessary to host no less than separate 2 discussions on the crisis on consecutive days to given everyone a forum to discuss and share their views and opinions.

To you, the inquisitive reader, I thought I would take a couple of minutes to jot down some of the jumble of thoughts on the banking crisis:

“What is the root cause of the banking crisis?”  A broad and vague question posed to me by my social enterprise professor on the 2nd day of class – prolly more to seek out answers he could reuse by polling the collective intelligence of the class for answers – rather than as part of his lesson plan.

• My first response was: “Relaxed borrowing standards for home mortgages to the point that any fool and his dog could take out a loan.”  If you inherently believe in  having free markets that are efficient and will allocate resources to areas that maximize economic return of the participants than this has to be your starting point.  I’m not going to blame the banks for their securitization and structuring activities – this made money and therefore was worth doing, this was the invisible hand at work.  Which brings me a corollary:
• If it’s legal and it makes money (and yes securitizing and repackaging home loans made a boatload of money for them), the investment banks will do it.  The nature and structure of investment banking remuneration (i.e.  focus on big year-end bonuses) rewards bankers for taking risks that pay off in the short-run, long-run risks be damned.  This creates a culture which increases systemic volatility as all the bankers race to get a share of their slice of the pie (in whatever is the latest reward of scene of the day) before the party ends.
• Profit-driven Debt rating agencies which had massive conflict of interests that corrupted their ability to fairly rate debt and that assigned investment grade ratings to the eventually toxic mortgage-backed securities and CDO’s.
• The regulatory environment was all of:
  • too outdated (current structure of financial regulation has not been updated since the 1930’s)
  • too slow or cumbersome (perhaps the US’ rules-based regulatory framework should be sunset in favor of the UK’s principles-first regulatory framework to financial innovation can be automatically matched instead of waiting for lawyers to update the books)
  • too weakened by successive cuts in the funding of the regulatory agencies

to be able to respond.

What about the issues of low historic yields distorting the markets? I heard this sentiment several times and I agree that this definitely contributed to our problems but I don’t agree its the root cause.  As the Fed (re Alan Greenspan) kept rates artificially low for too long (remember Greenspan’s argument that productivity gains from info tech would allow for lower rates of natural unemployment?) this distorted the capital markets.

Related to  Alan Greenspan’s low-rate management policy of the overnight Fed Funds rate were the lessons learned from the Asian Financial Crisis of 1997-98 which instilled a “best practice” of running current account surplus, stockpiling foreign currency reserves and maintaining weaker currency in order to stave off a repeat of ’97-’98.  Of course this had the unintended consequence of flattening out the rest of the US debt market’s yield curve as Asian countries furiously bought treasuries to park their current account surplus and keep their currency relative weaker.

Asset managers, with their trillions of dollars, could no longer rely on a decent real interest rate from the bond markets to earn a reasonable return for their income-seeking fundholders eventually turned to more risky ‘alternative investments’ fueling a boom in hedge funds and private equity.

(These hedge funds with their “2 and 20” payout structure likely contributed additional volatility in the capital markets by fostering a ‘go-big or go-home’ mentality as these fund managers sought outsize risks in order to make outsize gains for their 20% carry.)

Where do we go from here?

I guess this is where things get interesting.  A lot of folks talked about the notion of ‘delevering’ or essentially borrowing less.

For example – now that Goldman and Morgan are commercial banks, they are going to have to run their operations and balance sheets like them.  Whereas they are currently levered 40 and 33 to 1 respectively, they will now have to come in-line with the rest of the commercial banks at 10.   Which means selling off 66% to 75% of their assets (i.e. loans to their customers).  This does imply that GS and MS are now likely to be less profitable and less valuable as they can only lend (and collect interest income) on 1/4 to 1/3 what they could previously have done?

Broader implications to the US economy is that money supply will be tighter, less money flowing around as regulations will (hopefully?) rein in irresponsible lending.

In the medium run, low-yield market distortion could see itself worked out as foreign investors – re Japan and China switch their target instrument of treasuries into alternate and equity investments and out of US dollars into more diversified basket of currencies – this latter treend is already happening and will likely continue.  This will of course have implications on the alternative investments financial management industry.

Longer-term, of course, there is another looming issue which seems to have submerged back from mass consciousness – that of the twin deficits (budget deficit and current account deficit) triggering US-confidence crisis which result in spiking interest rates and falling US dollar (I guess that is already happening) as foreign investors turn their back on US economy.  The potential saving grace here is that given the risk adversity of these investors and the unsettled state of the world and other economies, the US still represents the safest destination for investors…for now.

 

What’s the Matter with Canada? Thinking about the coming Canadian election

Here’s an intriguing outside-in article decrying the decline of “good government” in Canada from Slate.com and got me thinking about the upcoming Canadian election.

Yes, amazingly a US-media outlet deemed it necessary to comment on the rather fractitous state of Canadian politics especially when they have this oxygen draining Presidential poll still going down Nov 4.  Here’s the best (and most sensationalistic line from the article)

Canada is quietly becoming a political basket case, and this latest election may make things even worse.

The essential thesis is that Stephen Harper and his social conservatives are ruining Canada and that the Liberals, NDP, Greens and everyone else on “the left” helping them to it be being too pre-occupied fighting each other.

Well my folks will probably take issue with the whole ‘Harper is ruining Canada’ thesis – they always had a hate-on for the Liberals – but that was always more grounded in the Liberals’ arrogance, abuse of power and lack of fiscal restraint that came from Liberals’s prolonged bouts in power.  Even the Democratic party in the US suffered from this type malaise leading up to Newt Gingrinch’s Republican Revolution in the 90’s but I digress.

From its social liberalism and fiscal conservatism, Canada has traditionally bounced back and forth between the socially and fiscally liberal Liberals and fiscally and socially conservative Conservatives. 

The Conservatives are betting the snap election will yield them at minimum another minority government and majority as being a not-so-improbably possibility if they play their cards right.

Thus far, I think the minority government has done a relatively good job of keeping social-conservatism of the Conservatives in check.  No where did the Conservatives try for a repealing abortion rights or gutting Canadian health care.  And I give points to the Conservatives for:

• not spending Canada’s new wealth from the current commodities boom like drunken sailors
• paying down the national debt
• defending Canada’s sovereignty in the Arctic
• and holding the line in Afghanistan – the real front on the war on terror – while the US went on their adventurist diversion in Iraq.

From afar, though it has been more fractious and turned Canada into a more interesting country, I’m not yet convinced a Conservative majority would be in the best interests of Canada – or for now the Conservatives for that matter. 

The problem is that Canadian’s don’t fully trust the Conservatives to leave them to their own devices.  As evidenced by their website, The Conservatives have sensibly decided to run on tactical issues of sound economic policy, tackling crime and important incremental improvements in better government operation in healthcare (and lip service to global warming.)  I think what is spooking the majority of Canadians is what the Conservatives are not saying and what they would do if granted the unfettered power of a majority government.  Where exactly do they stand on abortion and same-sex rights?  Healthcare funding?  What about the devolution of power to the provinces?  What exactly is the Conservative vision for the future of Canada?  What the Canadians don’t know scares them. 

And here’s the rub – the Conservatives don’t need a majority government to achieve their incremental gains they are proposing to accomplish following this election.   In order to get a mandate of a majority government you have specify what IS the mandate you are looking for.  The Conservatives would be better off doing some soul searching and specifying what a Conservative Canada would and would not look like to give voters some comfort in exactly what they are getting.  This also precludes them of being in the rather interesting position should the ever secure a majority, of leaving them open to the temptation to give into their more base socially conservative instincts.

To sum up, until they can elaborate what exactly they stand for, the Conservatives deserve every minority government they get and are cheating Canadians of any majority government they may eke out.  Here’s to another year of gridlock in Canada?

 

CDN$1 = USD$1: Canada on the Threshold

Today was a great day for the Canadian Loonie.

Today was the day that 1 Loonie was worth 1 greenback. In fact, briefly the Loonie was worth MORE than the greenback.

Let’s put this into perspective: in my lifetime the Loonie has never traded this high before so for me, this is a lifetime event.

Personally, this is going to make my grad school education just a little bit more palatable and I’m certainly glad I held off converting my loonies to greenbacks until now. But other than this small personal benefit, I thought I’d take a moment to assess what exactly all this means for the Great White North.

Canada on the Threshold

Already manufacturers from Ontario to BC are crying out in pain, and I’m sure we’ll be hearing that much more from the CDN news outlets in the future, I really have little sympathy for this nonsense. Instead I would urge them and the country as whole to take this historic opportunity to rethink who they are.

It’s absolutely clear now that Canadians and Canadian companies should no longer see themselves as a low cost outsourcers to the United States.  If Canadians really wanted the better life with the world class social program they have been screaming at their government to deliver, they better start trying to build a world class economy that can support it.

That’s what the Brits did in the 90’s with Blair’s Third Way economics. That’s what Canada needs to do now.

It’s not that we haven’t been trying but the whole 60 cent dollar gave Canadian businesses a crutch they could complacently lean on. Why try to improve the processes and product quality of your company when you this natural low cost advantage working for you?

And the results show. Canada’s productivity growth has perpetually ranked below that of the US since, no surprise, 1980 – just several years after the Loonie started tanking. By PPP, Canadians earn on average $8000 less per person. For a country that is better educated and blessed with more natural resources than its southern neighbour, this is atrocious.

Well back to the future, Loonie companies have a new reality they have to adjust to – a world in which they can’t rely anymore on being cheap. So here’s a quick list of suggestions:

1. Invest in Information Technology. Did you know that the much of the US productivity growth in the 90’s was driven by massive IT investments? And yes I know Canadian companies couldn’t similarly invest at the time since the Loonie was in the crapper.  And yes, I know, IT has for a long time been really expensive and risky to do. But that’s no longer the case. with a $1+ Loonie, IT costs as much to you as well an US company does. Moreover, software manufactures from Microsoft, to Oracle to SAP are falling over themselves to go after smaller companies, companies more like what a typical Canadian company looks like.
2. Labour productivity matters. This might be cultural, but yes, there are better ways of doing things sometimes. Maybe Canadians workers and middle managers are too nice or they aren’t thinking and like to keep their head down and do things the same way they were done 5, 10 even 20 years ago but this has to change. That’s not enough anymore. Execs needs to be pushing harder to work smarter. Your company’s survival depends on it.
3. Invest in mangement talent. Having worked in both Canadian and US companies, I can tell you, Canadian companies could benefit from an upgrade in management talent. I can’t exactly put my finger on it but I can say that US managers seemed to have a more strategic view and make better quality decisions. This was a major motivation for my decision to go back to grad school. In Canada, the % of MBA’s in the workforce is significantly lower than than in the US. Maybe I’m biased but I think this makes a difference. With a $1+ loonie, now is a great time to invest in some human capital – maybe you can re-import some top flight US-educated expats back. (hint hint)
4. Stop getting bought out. For all the PE funds and global companies that bought out Canadian HQ, congrats – you could not have timed your moves better. I guess it helped that there was this niggling loophole in the Canadian tax code to help you fund all these acquisitions. For the remaining Canadian companies out there -stop selling yourself short. You’re better than that and should be looking to be a player in the global economy instead of the wallflower waiting to get picked up by the player. Speak of which…
5. Start looking at Foreign Acquisions. It’s sad to say but I’m not sure the whole $1+ dollar think will be a permanent fixture. As such, you could use this opportunity while costs are relatively low, to snap up promising foreign companies that could diversify your income, give you scale economies or get access to proprietary capabilities or resources to be the next engine of growth for your company. Carpe Diem!
6. Start Innovating again. Hey guess what – one of the biggest IPO’s in the 2007 was Lululemon (NASDAQ: LULU) a little company from Vancouver! How did LULU do it? It created a whole new niche category in atheletic apparel, something totally unique from what was already in the marketplace. Today, LuLu is worth as much as Oakley and it’s offerings are taking the US market by storm. Canada as a whole needs more LULU’s and needs to spend more time innovating, thinking up new products, retail concepts or processes instead of building call centers to take US jobs. Speaking of innovating…
7. Canadian Venture Capitalists – starting funding again! Your job is gamble (in an intelligent, calculated way) with other people’s money – not lock your funds in T-Bills. Go forth and fund the next RIM, Crystal Decisions and ATI’s! Your loonies go further now and setting up that critical SiliValley sales office is now a whole lot cheaper.

All through the 80’s, 90’s and 2000’s Canada has been content to be a economic colony and low cost nearshoring location for the US. Today, marks the opportunity, however fleeting, to step out from that role and become that world-class ‘North American’ tiger economy it has the potential to be.

Canada stands on the threshold. Whether it chooses to cross it or step away depends on how well it responds to the challenges and opportunities presented by $1 loonie.

Go Canucks.

 

In Praise of Michael Moore – ‘Sicko’ does ‘An Inconvenient Truth’ for US Healthcare system

If you had any doubts about the assertion that American healthcare system is broken prior to watching Michael Moore’s latest film, ‘Sicko’, many of them will be dispelled after watching his latest movie, ‘Sicko’.

Rather than focus on the reported 50 millions Americans with un- or under-insured healthcare coverage, Moore instead spends a fair bit of his time examining the issues and delving into some of the horror stories ordinary middle class Americans face with their health care systems.

Stories of how a mother lost her child because the ambulance took her to a hospital that wasn’t a part of the HMO network. Or how a elderly couple are forced to sell their home and move into their adult child’s storage room because they ran out of money paying the co-pays and deductibles. Never mind the segment where Moore takes a group of 9-11 rescue workers to Cuba to be treated for their 9-11-related ailments because their health insurance wouldn’t cover them.

Is this film left wing propaganda? Well, let’s put it this way:

Does Moore present a completely one sided picture of the American healthcare systems? Yes.

Is Moore guilty of generalizing the perils of the US healthcare system to the few people he chooses to focus in on in the film? Yes.

Does Moore present the alternative health care systems in Canada, the UK, France and even Cuba in only their best light? Yep.

Does Moore deliberately try to elicit an strong emotional response through slick editing and narration? Yes – I guess Moore is an adept film maker.

Is Moore doing anything different than what the conservative (re: Republican) media have been doing for years to deposition foreign health care systems? Nope. Turnabout is fair play here.

In the same way that “An Inconvenient Truth” sought to package up existing information on climate change into a salient and compelling message, Moore seeks to do the same with the US healthcare system.

For managers and policy makers in the health care system, Moore does plainly bring to light a number of serious, though already known issues in the US health care system:

1. In the US, the incentives that govern the behavior of the healthcare providers is misaligned to the objectives society is trying to address. Profit-driven insurance companies and HMO’s whose goal is to maximize earnings are driven either by raising insurance premiums to as much as the market can bear (reducing accessibility of healthcare for less well off folks) or reducing its unit costs by reducing payouts to policyholders, reducing quality of care. The result, as Moore’s film shows, is a system where:
   • promotions and raises of insurance company staff responsible for approving treatments are tied to percentage of people they turn down, irregardless of the impact, denial of treatment will have on its policyholders.
   • HMO’s that have special teams responsible for recouping payouts by whatever loophole they can dig up or evne in some cases, manufacture
   • Healthcare providers refusing to pay for costs of necessary tests to properly diagnose ailments for fear having to be saddled with the costs of treating serious conditions. hospitals dropping uninsured patients onto non-profit clinics – essentially free-riding on the non-profit system
   • Insurance companies cherry-picking the most desirable patients, but more importantly refusing coverage to unattractive (re – costly) potential clients. HMO’s who refused to pay for anti-biotics treatment for an infant girl because the mother took her to a hospital that wasn’t ‘in-network’.
2. A “too-cozy” relationship between lawmakers, who are supposed to look out for the interests of its electorate, with the for-profit health providers. Witness Moore’s case in point in the movie – congressman Billy Tauzin, a major proponent of the 2003 prescription drug benefit who, upon the passage of the bill left his seat in Congress for a cushy $2m salary as president of the drug lobbying group – or the 14 other congressional aides who also left to work for the drug industry upon the pass drug benefit. To be fair, the issue of the cozy relationships between lawmakers, lobbyist and giant companies that back them is not limited to the healthcare industry but most all industries in the US.
3. A healthcare system where insurance is tied to employers – where employees are unable to change jobs or retire because the overriding fear of losing healthcare coverage. This reduces the flexibility of the labor market and prevents employees from pursuing the best career opportunities where their skills will be most optimally utilized. Watch has Moore trots out the 79-year old janitor because Medicare doesn’t cover the all the costs of his prescription drugs.

Moore doesn’t offer up any concrete solutions in his movie. He does spend a fair bit of the movie juxtaposing the US system with supposedly superior systems in the Canada, UK, France, and even Cuba. To be fair, I think he does present these countries’ systems in their most flattering light and not at all critically addressing some of the problems each of the countries face.

Already critics of the movie have been quick to point out that:

• The rest of the world essentially free-rides on Americans who bear the brunt of the helping drug makers recoup their enormous R&D costs for developing new drugs. Thus the exorbitant cost of drugs for Americans.
• Non-essential health care treatments are rationed in places like Canada and the UK.
• France suffers from the lowest economic growth rates in the world – an issue that recently came to forefront in the latest French elections.

This is all true but this is besides the point, or rather this is the point – Moore didn’t make his movie to provide a critical comparison of the health care systems in the world but rather to raise awareness for the significant issues he sees in the US system.

That this movie will inevitably generate a shitstorm of rebuttle, spin and argument from the health care industry and raise awareness for the issue in the American society in general, akin to the effect ‘An Inconvenient Truth’ did for global warming is the effect he was trying to accomplish.

In marketing, we have an saying that customer has to be aware and appreciate the problem before they are willing to invest time and money to solve it. Opening the eyes of public to these issues, letting them get greater air time and actually investing the effort to learn about the issues, that’s what ‘Sicko’ movie accomplishes.

In my next post, I’m going to try to take Micheal Moore up on his offer some thoughts on potential ways to address issues in the US healthcare system and perhaps the Canadian system along the way.

 

The War on Terror Comes to Canada

Well it’s finally happened – the War on Terror has come to Canada.

On Friday night, Canadians authorities arrested 17 people alleged to have been plotting to commits act of terrorism in and around southern Ontario – my hometown.  Found in their possession were 3 tonnes of ammonium nitrate fertilizer (easily mixed with gasoline to become a volatile explosive) and the electronics for a remote detonator/IED to set off the explosive material.

Unlike the circumstances in 9/11, Cdn. authorities had been tracking this group for some time now and decided to move on the group before they could advance their plan any further.

Since 9/11, I’ve often thought about how I would respond had a similar attack taken place in my hometown of Toronto or in Vancouver. 

It’s very easy for the rest of the world to be critical of the America’s asymetrical and arguable botched response to the 9/11 – 2 countries invaded in 3 years, human rights violations and atrocities from Guantanamo Bay to Abu Ghraib, to domestic wire-tapping and condonation of torture.

However, how calm and principled could I be at the sight of terrorist attack on the TTC Subway train, the bombing of Skydome during a Blue Jay’s game, jet planes hitting the CN Tower, Scotia Tower or TD Bank towers; or the loss of any of my parents, brother, relatives and/or friends?

Would I try to put these loss into "perspective" or would I be overcome with anger and outrage?  Suddenly these became quite real to me.

 

More Lessons Learned from Hurricane Katrina

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.

 

The Economist calls George W. Bush incompetent

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…

 

The case against George W. Bush

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?

 

Dangerous Viral Outbreak

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!