by Adam Hartung | Sep 30, 2013 | Current Affairs, Defend & Extend, Leadership, Lock-in
Last week we learned that there is no doubt, the world is warming. A U.N. report affirmed by some 1,000 scientists asserted 95% confidence as to the likely outcomes, as well as the cause. We must expect more volatility in weather, and that the oceans will continue rising.
Yet, most people really could have cared less. And a vocal minority still clings to the notion that because the prior decade saw a slower heating, perhaps this will all just go away.
Incredibly, for those of us who don't live and work in Florida, there was CNN news footage of daily flooding in Miami's streets due to current sea levels which have risen over last 50 years. Given that we can now predict the oceans will rise between 1 and 6 feet in the next 50 years, it is possible to map the large areas of Miami streets which are certain to be flooded.
There is just no escaping the fact that the long-term trend of global warming will have a remarkable impact on everyone. It will affect transportation, living locations, working locations, electricity generation and distribution, agriculture production, textile production – everything will be affected. And because it is happening so slowly, we actually can do lots of modeling about what will happen.
Yet, I never hear any business leaders talk about how they are planning for global warning. No comments about how they are making changes to keep their business successful. Nor comments about the new opportunities this will create. Even though the long-term impacts will be substantial, the weather and how it affects us is treated like the status quo.
What does this have in common with the government shutdown?
America has known for decades that its healthcare system was dysfunctional; to be polite. It was incredibly expensive (by all standards) and yet had no better outcomes for citizens than other modern countries. For over 20 years efforts were attempted to restructure health care. Yet as the morass of regulations ballooned, there was no effective overhaul that addressed basic problems built into the system. Costs continued to soar, and more people joined the ranks of those without health care, while other families were bankrupted by illness.
Finally, amidst enormous debate, the Affordable Care Act was passed. Despite wide ranging opinions from medical doctors, nurses, hospital and clinic administrators, patient advocacy groups, pharmaceutical companies, medical device companies and insurance companies (to name just some of those with a vested interest and loud, competing, viewpoints) Congress passed the Affordable Care Act which the President signed.
Like most such things in America, almost nobody was happy. No one got what they wanted. It was one of those enormous, uniquely American, compromises. So, like unhappy people do in America, we sued! And it took a few years before finally the Supreme Court ruled that the legislation was constitutional. The Affordable Care Act would be law.
But, people remain who simply do not want to accept the need for health care change. So, in a last ditch effort to preserve the status quo, they are basically trying to kidnap the government budget process and hold it hostage until they get their way. They have no alternative plan to replace the Affordable Care Act. They simply want to stop it from moving forward.
What global warming and the government shut down have in common are:
- Very long-term problems
- No quick solution for the problem
- No easy solution for the problem
- If you do nothing about the problem today, you have no immediate calamity
- Doing anything about the problem affects almost everyone
- Doing anything causes serious change
So, in both cases, people have emerged as the Status Quo Police. They take on the role of stopping change. They will do pretty much anything to defend & extend the status quo:
- Ignore data that is contradictory to the best analytical views
- Claim that small probability outcomes (that change may not be necessary) justifies doing nothing
- Delay, delay, delay taking any action until a disaster requires action
- Constantly claim that the cost of change is not justified
- Claim that the short-term impact of change is more deleterious than the long-term benefits
- Assume that the status quo will somehow resolve itself favorably – with no supporting evidence or analysis
- Undertake any action that preserves the status quo
- Threaten a "scorched earth policy" (that they will create big, immediate problems if forced to change the status quo)
The earth is going to become warmer. The oceans will rise, and other changes will happen. If you don't incorporate this in your plans, and take action, you can expect this trend will harm you.
U.S. health care is going to be reformed. How it will happen is just starting. How it will evolve is still unclear. Those who create various scenarios in their plans to prepare for this change will benefit. Those who do nothing, hoping it goes away, will find themselves struggling.
The Status Quo Police, trying their best to encourage people to ignore the need for change – the major, important trends – are helping nobody. By trying to preserve the status quo they inhibit effective planning, and action, to prepare for a different (better) future.
Does your organization have Status Quo Police? Are their functions, groups or individuals who are driven to defend and extend the status quo – even in the face of trends that demonstrate change is necessary? Can they stop conversations around substantial change? Are they allowed to stop future planning for scenarios that are very different from the past? Can they enforce cultural norms that stop considering new alternatives? Can they control resources resulting in less innovation and change?
Let's learn from these 2 big issues. Change is inevitable. It is even necessary. Trying to preserve the status quo is costly, and inhibits taking long-term effective action. Status Quo Police are obstructionists who keep us from facing, and solving, difficult problems. They don't help our organizations create a new, more successful future. Only by overcoming them can we reach our full potential, and create opportunities out of change.
by Adam Hartung | May 16, 2013 | Current Affairs, General, Leadership
With the stock market hitting new highs, some people have
already forgotten about the Great Recession. If you recall 2009, things looked pretty bleak
economically. But the outlook has changed dramatically in just 4 years. And it has been a boon for investors, as even the safest indices have yielded a 250% return (>25% annualized compound return:)
Source: Bulls, Bears and the Ballot Box at Facebook.com
Meanwhile, trends have reversed direction with unemployment falling, and consumer confidence rising:
Source: Bulls, Bears and the Ballot Box at Facebook.com
Since this coincides with President Obama’s first term, I asked the authors of “Bulls, Bears and the Ballot Box,” (available on Amazon.com) which I reviewed in my October 11, 2012 column, to capture their opinions on how much Americans should attribute the equity
upturn, and improved economic prospects, to the President as we enter his second term.
Interview with Bob
Deitrick, co-Author "Bulls, Bears and the Ballot Box" (BBBB):
Q– Bob, how much credit should Americans give President
Obama for today’s improved equity values?
BBBB – Our research reviewed American economic performance
since President Roosevelt installed the first Federal Reserve Board
Chairman – Republican Marriner Eccles. We observed that even
though there are multiple impacts on the economy, it was clear that policy
decisions within each administration, from FDR forward, made a clear difference on performance. And
relatively quickly.
Presidents universally take credit when the economy does
well (such as Reagan,) and choose to blame other factors when the economy does
poorly (such as Carter.) But there
was a clear pattern, and link, between policy and financial market performance.
Although we hear almost no one in the Obama administration
taking credit for record index highs, they should. Because the President deserves
significant credit for how well this economy has done during his leadership.
The auto rescue plan has worked. American car manufacturers are still dominant and employing millions directly and in supplier companies. Wall Street reform
has been painful but it has re-instated faith amongst investors.
The markets are far more predictable than they were four years ago, as VIX numbers demonstrate greater faith and less risk.
Even for small investors, such as thoughs limited to their 401(k) or IRA investments, the average annual compound
return on stocks under President Obama has been more than
24% since the lows of March, 2009.
This is a better result than either Clinton, Reagan or FDR who were the
prior winners in our book.
Q– Bob, what policies do you think were most important
toward achieving today’s new highs?
BBBB – Firstly, let’s review just how bad things were in
2009. In 2000 America was completing the longest
bull market in history. But by
the end of President Bush's tenure the country had witnessed 2 stock market crashes, and the DJIA had fallen 58%. This was the second worst market decline in history (exceeded
only by the Great Depression,) and hence the term “Great Recession” was born.
In 2000, at the end of Clinton’s administration, the
Consumer Confidence Index was at a record high 140.
By January, 2009 this index had fallen to an historic low of 25.3. Comparatively, when Reagan took office
at the end of the economically weak Carter years the Confidence Index
was still at 74.4! Today this
measure of how people feel about the country is still nowhere near 2000 levels,
but it is almost 3 times better than 4 years ago.
Significantly, in 2000 America had a budget surplus. By 2009 surpluses were long gone and the
country was racking up historic deficits as taxes were cut while simultaneously
outlays for defense skyrocketed to cover costs of wars in Iraq and
Afghanistan. Additionally, banks
were on the edge of failing due to unregulated real estate speculation and massive derivative losses.
Today the Congressional Budget Office is reporting a $200B decrease in the deficit almost entirely due to increased revenue from a growing economy and higher taxes on the wealthiest Americans. The deficit is now only 4% of the GDP, down from over 10% at the end of Bush's administration – and projections are for it to be only 2% by 2015 (before Obama leaves office.) America's "debt problem" seems largely solved, and almost all due to growth rather than austerity.
We can largely thank a fairer tax code, improved regulation and consistent SEC enforcement. Also, major strides in health care reform – something no other President has accomplished – has given American's more faith in their future, and an increased willingness to invest.
Q– To which President would you compare Obama’s economic
performance?
BBBB– By all measures, President Obama has outperformed
every modern President.
The easiest comparison would be to President Reagan, who’s
economic performance was superb. Even though Obama's performance is better.
Reagan had the enormous benefit of two major factors:
- a significantly better economy than Obama inherited, even if afflicted by inflation
- and his two terms coincided with the highest performing
demographic years of the Baby Boomer generation.
Today's demographics have shifted dramatically. The country is much older, with fewer
young people supporting a much larger near-retirement age group. This inherent demographic fact makes
creating economic growth monumentally harder than it was 30 years ago.
Few people think of Reagan as a stimulus addict. Yet, his administration’s military
build-up added $1trillion of stimulus to the national debt ($2.3trillion adjusted for
inflation) – the opposite of what is happening during the Obama years. Many like to think
that it was tax cutting which grew the economy, but undoubtedly we now know
that this dramatic defense and infrastructure (highways, etc.) stimulus had more to do with igniting economic growth. Reagan's spending looked far more like FDR than Herbert Hoover!
Ronald Reagan tripled the national debt during his tenure, creating what today's Congressional austerity advocates might have called "a legacy of unpayable debt for our grandchildren.” But, as we saw, later growth (during Clinton) resolved that debt and created a budget surplus by 2000.
Q– Bob, President’s Obama detractors liken the Affordable
Care Act (i.e. Obamacare) to an Armageddon on business, sure to kill economic
growth and plunge the country back into recession. Do you agree?
BBBB– To the contrary, ACA levels the playing field and will
be good for economic growth. Where
previously only large corporations could afford employee health care plans, in
the future far more employees will have far more equitable coverage. Further, today employees frequently are unable to leave a
company to start a new business because they would lose health care, which in
the future will not be true.
One leading indicator of the benefits of ACA might be the performance of healthcare and biotech stocks, which are up 20-30% and leaders in the current market rally.
Q– What policies would you recommend the Obama
administration follow in order to promote economic growth, more jobs and
greater returns for investors during the second term?
BBBB- Obama needs to make the cornerstone of his second term creating new job growth. That was the primary platform of his candidacy, and it is a platform long successful for the Democratic party. If President Obama can do this and govern effectively, this could be his real legacy.
by Adam Hartung | Oct 10, 2012 | Books, Current Affairs, Leadership, Lock-in
There was a time, before primaries, when each party's platform was really important. Voters didn't pick a candidate, the party did. Then voters read what policies the party planned to implement should it control the executive branch, and possibly a legislative majority. It was the policies that drew the most attention – not the candidates.
Digging deeper than shortened debate-level headlines, there is a considerable difference in the recommended economic policies of the two dominant parties. The common viewpoint is that Republicans are good for business, which is good for the economy. Republican policies – and the more Adam Smith, invisible hand, limited regulation, lassaiz faire the better – are expected to create a robust, healthy, growing economy. Meanwhile, the common view of Democrat policies is that they too heavily favor regulation and higher taxes which are economy killers.
Right?
Well, for those who feel this way it may be time to review the last 80 years of economic history, as Bob Deitrick and Lew Godlfarb have done in a great, easy to read book titled "Bulls, Bears and the Ballot Box" (available at Amazon.com) Their heavily researched, and footnoted, text brings forth some serious inconsistency between the common viewpoint of America's dominant parties, and the reality of how America has performed since the start of the Great Depression.
Gary Hart recently wrote in The Huffington Post,
"Reason and facts are sacrificed to opinion and myth. Demonstrable
falsehoods are circulated and recycled as fact. Narrow minded opinion
refuses to be subjected to thought and analysis. Too many now subject
events to a prefabricated set of interpretations, usually provided by a
biased media source. The myth is more comfortable than the often
difficult search for truth."
Senator Daniel Patrick Moynihan is attributed with saying "everyone is
entitled to his own opinion, but not his own facts." So even though we
may hold very strong opinions about parties and politics, it is
worthwhile to look at facts. This book's authors are to be commended for spending several years, and many thousands of student research assistant man-days, sorting out economic performance from the common viewpoint – and the broad theories upon which much policy has been based. Their compendium of economic facts is the most illuminating document on economic performance during different administrations, and policies, than anything previously published.
Startling Results
Chart reproduced by permission of authors
The authors looked at a range of economic metrics including inflation, unemployment, growth in corporate profits, performance of the stock market, change in household income, growth in the economy, months in recession and others. To their surprise (I had the opportunity to interview Mr. Goldfarb) they discovered that laissez faire policies had far less benefits than expected, and in fact produced almost universal negative economic outcomes for the nation!
From this book loaded with statistical fact tidbits and comparative charts, here are just a few that caused me to realize that my long-term love affair with Milton Friedman's theories and recommended policies in "Free to Choose" were grounded in a theory I long admired, but that simply have proven to be myths when applied!
- Personal disposable income has grown nearly 6 times more under Democratic presidents
- Gross Domestic Product (GDP) has grown 7 times more under Democratic presidents
- Corporate profits have grown over 16% more per year under Democratic presidents (they actually declined under Republicans by an average of 4.53%/year)
- Average annual compound return on the stock market has been 18 times greater under Democratic presidents (If you invested $100k for 40 years of Republican administrations you had $126k at the end, if you invested $100k for 40 years of Democrat administrations you had $3.9M at the end)
- Republican presidents added 2.5 times more to the national debt than Democratic presidents
- The two times the economy steered into the ditch (Great Depression and Great Recession) were during Republican, laissez faire administrations
The "how and why" of these results is explained in the book. Not the least of which revolves around the velocity of money and how that changes as wealth moves between different economic classes.
The book is great at looking at today's economic myths, and using long forgotten facts to set the record straight. For example, in explaining President Reagan's great economic recovery of the 1980s it is often attributed to the stimulative impact of major tax cuts. But in reality the 1981 tax cuts backfired, leading to massive deficits and a weaker economy with a double dip recession as unemployment soared. So in 1982 Reagan signed (TEFRA) the largest peacetime tax increase in our nation's history. In his tenure Reagan signed 9 tax bills – 7 of which raised taxes!
The authors do not come down on the side of any specific economic policies. Rather, they make a strong case that a prosperous economy occurs when a president is adaptable to the needs of the country at that time. Adjusting to the results, rather than staunchly sticking to economic theory. And that economic policy does not stand alone, but must be integrated into the needs of society. As Dwight Eisenhower said in a New Yorker interview
"I despise people who go to the gutter on either the right or the left and hurl rocks at those in the center."
The book covers only Presidents Hoover through W. Bush. But as we near this election I asked Mr. Goldfarb his view on the incumbent Democrat's first 4 years. His response:
- "Obama at this time would rank on par with Reagan
- Corporate profits have risen under Obama more than any other president
- The stock market has soared 14.72%/year under Obama, second only to Clinton — which should be a big deal since 2/3 of people (not just the upper class) have a 401K or similar investment vehicle dependent upon corporate profits and stock market performance"
As to the challenging Republican party's platform, Mr. Goldfarb commented:
- "The platform is the inverse of what has actually worked to stimulate economic growth
- The recommended platform tax policy is bad for velocity, and will stagnate the economy
- Repealing the Affordable Care Act (Obamacare) will have a negative economic impact because it will force non-wealthy individuals to spend a higher percentage of income on health care rather than expansionary products and services
- Economic disaster happens in America when wealth is concentrated at the top, and we are at an all time high for wealth concentration. There is nothing in the platform which addresses this issue."
There are a lot of reasons to select the party for which you wish to vote. There is more to America than the economy. But, if you think like the Democrats did in 1992 and "it's about the economy" then you owe it to yourself to read this book. It may challenge your conventional wisdom as it presents – like Joe Friday said – "just the facts."
by Adam Hartung | Mar 29, 2012 | Current Affairs, Disruptions, Innovation, Leadership, Lock-in, Openness, Transparency
No businessperson thinks the way to solve a business problem is via the courts. And no issue is larger for American business than health care. Despite all the hoopla over the Supreme Court reviews this week, this is a lousy way for America to address an extremely critical area.
The growth of America's economy, and its global competitiveness, has a lot riding on health care costs. Looking at the table, below, it is clear that the U.S. is doing a lousy job at managing what is the fastest growing cost in business (data summarized from 24/7 Wall Street.)
While America is spending about $8,000 per person, the next 9 countries (in per person cost) all are grouped in roughly the $4,000-$5,000 cost — so America is 67-100% more costly than competitors. This affects everything America sells – from tractors to software services – forcing higher prices, or lower margins. And lower margins means less resources for investing in growth!
American health care is limiting the countries overall economic growth capability by consuming dramatically more resources than our competitors. Where American spends 17.4% of GDP (gross domestic product) on health care, our competitors are generally spending only 11-12% of their resources. This means America is "taxing" itself an extra 50% for the same services as our competitive countries. And without demonstrably superior results. That is money which Americans would gain more benefit if spent on infrastructure, R&D, new product development or even global selling!
Americans seem to be fixated on the past. How they used to obtain health care services 50 years ago, and the role of insurance 50 years ago. Looking forward, health care is nothing like it was in 1960. The days of "Dr. Welby, MD" serving a patient's needs are long gone. Now it takes teams of physicians, technicians, nurses, diagnosticians, laboratory analysts and buildings full of equipment to care for patients. And that means America needs a medical delivery system that allows the best use of these resources efficiently and effectively if its citizens are going to be healthier, and move into the life expectancies of competitive countries.
Unfortunately, America seems unwilling to look at its competitors to learn from what they do in order to be more effective. It would seem obvious that policy makers and those delivering health care could all look at the processes in these other 9 countries and ask "what are they doing, how do they do it, and across all 9 what can we see are the best practices?"
By studying the competition we could easily learn not only what is being done better, but how we could improve on those practices to be a world leader (which, clearly, we now are not.) Yet, for the most part those involved in the debate seem adamant to ignore the competition – as if they don't matter. Even though the cost of such blindness is enormous.
Instead, way too much time is spent asking customers what they want. But customers have no idea what health care costs. Either they have insurance, and don't care what specific delivery costs, or they faint dead away when they see the bill for almost any procedure. People just know that health care can be really good, and they want it. To them, the cost is somebody else's problem. That offers no insight for creating an effective yet simultaneously efficient system.
America needs to quit thinking it can gradually evolve toward something better. As Clayton Christensen points out in his book "The Innovator's Prescription: A Disruptive Solution for Health Care" America could implement health care very differently. And, as each year passes America's competitiveness falls further behind – pushing the country closer and closer to no choice but being disruptive in health care implementation. That, or losing its vaunted position as market leader!
Is the "individual mandate" legal? That seems to be arguable. But, it is disruptive. It seems the debate centers more on whether Americans are willing to be disruptive, to do something different, than whether they want to solve the problem. Across a range of possibilities, anything that disrupts the ways of the past seems to be argued to death. That isn't going to solve this big, and growing, problem. Americans must become willing to accept some radical change.
The simple approach would be to look at programs in Oregon, Massachusetts and all the states to see what has worked, and what hasn't worked as well. Instead of judging them in advance, they could be studied to learn. Then America could take on a series of experiments. In isolated locations. Early adopter types could "opt in" on new alternative approaches to payment, and delivery, and see if it makes them happy. And more stories could be promulgated about how alternatives have worked, and why, helping everyone in the country remove their fear of change by seeing the benefits achieved by early leaders.
Health care delivery, and its cost, in America is a big deal. Just like the oil price shocks in the 1970s roiled cost structures and threatened the economy, unmanagable health care delivery and cost threatens the country's economic future. American's surely don't expect a handful of lawyers in black robes to solve the problem.
America needs to learn from its competition, be willing to disrupt past processes and try new approaches that forge a solution which not only delivers better than anyone else (a place where America does seem to still lead) but costs less. If America could be the first on the moon, first to create the PC and first to connect everyone on smartphones this is a problem which can be solved – but not by attorneys or courts!
by Adam Hartung | Apr 12, 2010 | Current Affairs, Openness
Amidst the brouhaha over health care legislation, Harvard Business Review has produced a report "Megatrends in Global Health Care." One interesting statistic is that medical tourism – that's when someone leaves the USA to have a procedure like surgery performed in a foreign country – has risen from 750,000 in 2007 (more than you would have guessed, I bet) to about 1.2million. Yep, people are going outside the USA for health care.
While everybody in the USA is asking "what do you want" for health care, there is a marketplace. To recognize this you have to overcome myopia and think bigger than the U.S. Anyone can have health procedures performed in Germany, France, Canada, Japan, Thailand, Mexico, Brazil, India – etc. Of course you have to pay for it. But in medical tourism instances, it is cheaper to have the care provided offshore, often with extensive after-event recovery assistance, rather than in the USA. Even if you have insurance (which may have declined to cover the procedure because it is so expensive domestically).
While everyone is arguing about healthcare, some violently, it will be the marketplace that will determine what health care we get and how much it will cost. People want good service at a good price, and they don't like "middle men" such as insurers or regulators, making the trade-offs for them. They want options, and they want to know likely expectations, and they want to know the actual cost as well as the therapy cost, medicine cost and impact on work, income and life. Then they want to make an informed decision.
The beauty of medical tourism is it provides a marketplace mechanism for those things to happen. America has great health care, but it is wildly expensive. Multiples of the cost in other countries. If you are uninsured, either you don't' get complete health care or you want someone to jump in and bail you out (like a government agency). If you are insured, quite simply your healthcare is subsidized, and it is dictated to you by the terms of the insurance company – not really much different than a government program just a "privatized" bureaucratic group making the decision. You aren't the payor, someone else is, so as much as you want to be the "customer" you really aren't. In America the golden rule of health care applies "he who pays the gold gets to make the rules" and that would be your payor (which is either your insurance company – with guidelines from your employer – or medicare with government guidelines).
But with medical tourism, you are the customer. Nobody between you and the doctor, facility or other provider. You get to hear options, and make decisions. Gee, what an interesting approach. This is now competition for the extremely expensive American health care industry. If you don't like your drugs, go buy them in Mexico or Canada – why let a bureaucrat scare you into paying 5x or 15x more? If you want a procedure, go get it Paris or Peking. If you need extended therapy, do it at a spa in Thailand. And all of this done at a price that is a fraction of doing it in the USA. Smart providers will soon have to start paying attention, and find ways to compete!
A lot of people want to affix blame for the cost of American health care. As long as there's no marketplace, then I guess blame fixing is what people like to do. But if we instead focus on the competition we can see how rapidly things will change. When a hospital is losing customers to Hyderabad, or a facility in Florence, how long will it keep tinkering with an approach that costs too much and is losing customers? Real change happens when people realize that they can fail if they don't change their old Success Formula.
The best thing about medical tourism is it creates a very real option, and very real competition. If you aren't thinking about it, you should. You would be surprised what you can have done, and at what quality, and the cost. While you don't want to run to Damascus to see your doctor for a sinus infection, when it's time for a knee replacement Nice might just be the place to go. Give it some thought, because your behavior will speak a lot louder than your words when it comes to creating real change in American health care provision and cost.
