Tag Archives: Alan Greenspan
Sometimes a “C-” is not “Good Enough”
Admiral Rickover asks: "Why not the best?"
Why Not The Best?
“In your life was there ever a time in which you did less than the best?” If the answer was “yes,” the follow up question was: “Why not the best?” – asked by Admiral Hyman George Rickover (Admiral Rickover would ask this of all Naval Cadets, and the story was oft re-told by Jimmy Carter).
Good enough is good enough
“When good enough gets the job done, go for it. It’s way better than wasting resources (And, remember, you can usually turn good enough into great later”).
Fried and Hansson, ReWork
Think “good enough.” By “good enough” we mean absolutely, definitely, not our very best, not perfect. We are actively encouraging you to perform occasionally below standard… Men are better at saying, “OK, this is good enough in my eyes.”
Claire Shipman and Katty Kay, Womenomics
Six Sigma
Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors).
“Zero Defects”
“Zero Defects” is Step 7 of “Philip Crosby’s 14 Step Quality Improvement Process”
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Good enough is good enough – until it is not. Then good enough is a disaster.
I’ve thought about this a lot over the last few days. The thoughts were prompted by a couple of news items, with some numbers buried within the stories that have deeply bothered me, and a whole lot of other folks.
Greenspan argues that a "C-" is "good enough" ("I was right 70 percent of the time.")
Consider these numbers:
Alan Greenspan, the former Federal Reserve chairman, said Wednesday of his two-decade career in government: “I was right 70 percent of the time, but I was wrong 30 percent of the time. And there were an awful lot of mistakes in 21 years.” (read about this here).
“86 percent of mines are safe.” (I heard this stated in an NPR interview by a spokesman defending mine safety – I don’t have a link).
The list is pretty long that describes business decisions, practices, “quality control” issues, where good enough is not good enough. The airplane safety was not good enough when the President of Poland and a plane load of others died in a crash that, at first reports, may have been caused by an unsafe airplane and pilot error.
Alan Greenspan was clearly not practicing the right levels of “good” when he was only right 70 percent of the time. In fact, when Greenspan said it, here was the response by the committee chair:
That prompted Phil Angelides, the commission’s chairman, to say Thursday that he would consider himself a success if he was right just 51 percent of the time. “I don’t aspire to reach what Mr. Greenspan thinks he has reached,” he said, in a sardonic tone.
And a mine safety figure of 86 percent mines deemed safe is clearly not good enough – just ask the families of the twenty-nine dead miners, as they labored for a company with an abysmal safety record and an attitude that clearly placed profits over human safety and even human life.
One of the true business and society and life challenges is this one: when is “good enough good enough” vs. when is “my best” critical?
I agree with the “good enough” movement – except when I don’t. I don’t mind a “good enough” free pen in a conference center. I don’t mind receiving a text message with a spelling error. But I would like the very best airline safety, if you don’t mind. And when Alan Greenspan argues that his 70 percent right was good enough (that is a “C-” in most grading systems), I think it is time to dust off Admiral Rickover’s question.
It’s Not My Fault – I’m Not Responsible
In a 2006 internal memo to underground mine managers, Blankenship’s exasperation with what he saw as excessive caution was evident: As the New York Times reported, in the memo, Mr. Don Blankenship (CEO of Massey Energy Corporation) instructed the company’s underground mine superintendents to place coal production first.
“This memo is necessary only because we seem not to understand that the coal pays the bills,” he said.
(read about this here).
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Here’s a business book that needs to be written. How to Handle a Real Mistake – I Mean, a Real Whopper.
There is a long list of people who should not write this book: The CEO of Massey Energy Corporation, the CEO of Toyota, Alan Greenspan. And the list is really much longer. They all seem to have the same message, that in one way or another, is this message:
“It’s Not My Fault – I’m Not Responsible.”
Now, of course, I do not believe that the CEO of Massey Mining personally caused the death of those miners (though his company is certainly negligent; possibly criminally negligent), nor did Greenspan personally cause the crash, nor did the CEO of Toyota personally design the flawed vehicles. But in each case, and many more, the warning signs were clear, and no leaders stepped up and yelled fire loudly enough to clear the theater.
And if you listen to interviews with such people, especially Don Blankenship of Massey Energy, they come across as evasive (and, though this is quite subjective, there seems to be a genuine compassion shortage).
Whatever else business leadership is, it is this: the leader assumes and takes and acknowledges responsibility.
And I assume we have now learned this truth (although, many do not seem to have fully grasped it): there will be big time mistakes made in companies.
Some of these mistakes or deficiencies can be life threatening. And it is the job of a leader to say, “if we find a mistake, a deficiency, in our company that is life threatening, then we stop what we are doing, now, and solve this problem. Now!” Any failure to do this is a clear statement of priorities, and reveals the true priority — of profit over human life.
And I will state my bias – any leader that places profits over human life is not worthy of leadership at all.
The Wall Street meltdown may not have endangered human life like Massey Energy and Toyota, but the tendency to say, in one way or another, “It’s not my fault – I’m not responsible” is not the kind of leadership we need in this very difficult era.
Someone needs to actually lead!
A Growing Consensus on the Financial Crisis – Somebody’s Got to Regulate!
The books keep coming about the great financial crisis. The questions they are trying to answer are these:
what went wrong?
why didn’t we see it coming?and most importantly
how do we fix it?
and
how do we keep it from happening again?
I’ve read and presented The Black Swan and This Time is Different (I blogged about that one recently, here). Business Week reviews another new one with Slapped by the Invisible Hand: Richard Posner has steadfastly fought the regulation of markets—until now, a review of The Crisis of Capitalist Democracy by Richard A. Posner.
There is a theme developing. The theme is this: a number of people (Alan Greenspan was one key player in this) believed that the market was self-correcting. The call for fewer regulations — for deregulation — was a call to free up the markets, confident that financial institutions would do well by all of us.
That confidence has been shattered.
From the review:
In Posner’s latest book, The Crisis of Capitalist Democracy, the prolific federal judge and University of Chicago economist argues that competitive forces inspire financiers to take irrational gambles—especially when they’re betting other people’s money. We cannot trust them to put the common good ahead of profits, says Posner. As a result, government must step in to limit the risks bankers take and, occasionally, repair the damage they inflict.
Laws inspired by the Great Depression helped achieve a half-century without catastrophic meltdowns. The dismantling of those laws and emasculating of the agencies established to enforce them—without the enactment of new regulation suited to today’s Wall Street—go a long way toward explaining our recent brush with disaster.
Though Posner was himself a champion of deregulation, he now sees the error of his ways. And he joins the chorus of voices saying that we’d best do a much better job at paying attention, overseeing, regulating. Again, from the Business Week review:
As an influential free-market thinker, he helped shape the antiregulatory ideology that inspired so much public policy since 1980. Belatedly he admits error. The Chicago School and all its powerful acolytes blundered, Posner writes, “by persuading themselves that markets were perfect, which is to say self-regulating, and that government intervention in them almost always made things worse.”
I had a professor in college years ago who said (from my rusty memory), “if one person/author says something, pay a little attention. If nearly every author says the same thing, pay a whole lot of attention.”
Well, a whole lot of authors and observers are saying the same thing: somebody (the government, in some fashion) has to regulate. To quote Ronald Reagan, though he was speaking of the Soviet Union: “trust, but verify.”
What if there are no real Black Swans at all? — (And the “Dynamite Prize in Economics” goes to… Alan Greenspan)
Alan Greenspan, "prize winner"
News item: Alan Greenspan is the recipient of this year’s Dynamite Prize in Economics as “the economist most responsible for causing the Global Financial Crisis.” The once-lauded Federal Reserve chairman has been awarded the “Dynamite Prize In Economics” by his fellow economists, according to the blog Real-World Economics Review. The Real World Economics Review Blog has over 11,000 subscribers, and they have named Alan Greenspan its recipient for this prize. Finishing second and third were Milton Freidman and Lawrence Summers. (No, receiving this prize is not a good thing). Here is a line from the article:
This blog established the prize in response to attempts by economists to evade responsibility for the crisis by calling it an unpredictable, “Black Swan” event. In reality, the public perception that economic theories and policies helped cause the crisis is correct.
(I first read about this here on the Huffington Post).
Their next prize will go the Revere Award winner:
The economics establishment has attempted to evade responsibility for the Global Financial Collapse by calling it an unpredictable, “Black Swan” event. But in fact some non-neoclassical economists foresaw the crisis and warned the public of its approach. The Revere Award aims to give these economists the professional and public recognition that they deserve, to encourage others to utilize their methods, and to increase the likelihood that, for the benefit of humankind, empirically responsible economists will be listened to in the future.
maybe not all "black swans" are actually black swans
And I got to thinking. I have presented a synopsis of The Black Swan by Nassim Nicholas Taleb. I like the book, and I have bought into the philosophy of the book pretty enthusiastically. The book says that “nobody knows anything.” Here are the characteristics of a black swan:
• A Black Swan is an event which follows three attributes:
• First, it is an outlier. (rarity)
• Second, it carries an extreme impact.
• Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. (retrospective, though not prospective, predictability).
But these economists definitely call into question the explanation of the current crisis as an actual example of a “black swan.” And, I have been quite intrigued by Gawande’s simple formulation: the two great problems are ignorance and ineptitude. (see my earlier post here).
Maybe some of the events that we label as “black swans” are in fact knowable. The trick is to overcome enough ignorance, and find the right experts with the right knowledge, to be better prepared and make better decisions and take better steps… In other words, the crisis may not have been the result of ignorance, but ineptitude.
This much is clear. Some economists missed it – and others (fewer) got it right. It looks like we may have listened to the wrong economists.
Anyway, I’m intrigued by all this.
What went Wrong? How do We Fix It? — The Two Questions of our era
What got us into this mess?
First, an admission. I, like all of you, have too many books on my “I should read this” list that I simply will never get to. In my case, I prepare a minimum of two new book synopsis presentations a month, and that means that there are other books that I simply do not have time to delve into. At this moment, the books that I am not getting to are books that try to answer these two questions, both related to our current economic meltdown and ongoing crisis:
Question number 1: What went wrong?
Question number 2: How do we fix it?
There are a lot, a mean a whole lot, of answers to the first question being thrown out for our consideration. (Not quite as many for the second question).
Business Week has a review up of one of the many new books tackling these questions. (One of the many I do not know when I will find time to read). The book is How Markets Fail:
The Logic of Economic Calamities by John Cassidy
. (Read the review here).
Here’s a quote from the book (taken from the review):
Between the collapse of communism and the outbreak of the subprime crisis, an understandable and justified respect for market forces mutated into a rigid and unquestioning devotion to a particular, and blatantly unrealistic, adaptation of Adam Smith’s invisible hand.” And it was this faith, he goes on to say, that led Alan Greenspan, among others, to turn a blind eye to what was happening in the real world of money and business.
This book calls for greater government regulation as one part of a solution. Chris Farrell ends his review with this:
More important, the reader comes away persuaded that reality-based economics can play a critical role in what the 18th century British conservative Edmund Burke called “one of the finest problems in legislation, namely, to determine what the state ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion.”
Let’s hope the legislators in Washington share this principled view of their role. Cassidy makes a compelling case that a return to hands-off economics would be a disaster.
As I stated earlier in this post, there is much being written about what went wrong. A provocative piece in The Atlantic points to an unexpected but specific contributing cause: the role of pastors in fundamentalist/prosperity gospel churches on the sub-prime mortgage crisis. The article, Did Christianity Cause the Crash? by Hanna Rosin, argues this:
America’s mainstream religious denominations used to teach the faithful that they would be rewarded in the afterlife. But over the past generation, a different strain of Christian faith has proliferated—one that promises to make believers rich in the here and now. Known as the prosperity gospel, and claiming tens of millions of adherents, it fosters risk-taking and intense material optimism. It pumped air into the housing bubble. And one year into the worst downturn since the Depression, it’s still going strong.
The article chronicles how some banks partnered with some churches, especially some pastors, to help people get into houses. Houses they could not afford, and ultimately could not keep. Here’s the conclusion of the article, referencing Pastor Fernando Garay from Virginia:
And there is Garay’s kind of hope, which perhaps for many people better reflects the reality of their lives. Garay’s is a faith that, for all its seeming confidence, hints at desperation, at circumstances gone so far wrong that they can only be made right by a sudden, unexpected jackpot.
Once, I asked Garay how you would know for certain if God had told you to buy a house, and he answered like a roulette dealer. “Ten Christians will say that God told them to buy a house. In nine of the cases, it will go bad. The 10th one is the real Christian.” And the other nine? “For them, there’s always another house.”
I don’t know that there is one cause. As Scott Peck stated, it is “overdetermined.” The cause of most problems is overdetermined – that is, there is no one cause, there is a constellation of causes. And, thus, there is no one solution.
But finding the causes, so that we can avoid them in the future, and then finding the solutions, so that we can dig out of this mess, seems to be the necessary agenda at this time in our history.
From Alan Greenspan to the Texas Lottery Debacle
I was recently asked, “what business book would you write?” Tough question – and one that I may never answer. I am a book reader, but will I ever write a business book? I don’t know about that, yet.
But here is an area that gets my attention, and I think needs a really good book or two. It was most recently prompted by the Texas Lottery debacle. A man named Willis Willis bought a winning lottery ticket – worth a one million dollar prize. The clerk told him he had won only $2.00, and then the clerk himself cashed in on the one million. That Willis actually bought the winning ticket is no longer in dispute. But he will not be getting the money. Here’s the key paragraph from the story Lottery: Grand Prairie man won’t get $1 million prize:
During a meeting on Monday, the Texas Lottery Commission told the 67-year-old Grand Prairie man that he is not the rightful winner of a $1 million prize – even though its own investigators have told police he bought the winning ticket. (bold added).
So – the Texas Lottery Commisision’s own investigators know that the man had his money stolen, from an agent of the Commission. (I assume any one who sells such tickets, and grants prizes, at retail outlets, is acting as an agent of the Lottery Commission). And yet, he won’t be getting the prize money. This-is-simply-not-right.
There is a flaw in the regulation of this industry.
I try to avoid political discussions on this blog. But there is a long on-ongoing debate about whether or not there needs to be more or less government regulation. In financial institutions. In companies in every industry. And business likes to argue that the less government regulation, the better. And it would be – if we could trust people to do the right thing.
But we can’t. And so we need laws, and regulation.
Of course, there is a difference between out and out criminals (Bernie Madoff), and people who just make mistakes, regardless of how big the mistakes and how dire the consequences. But—if we should have learned anything in the last few months, it is this – big mistakes can have devastating consequences.
When Alan Greenspan was being questioned by congress about a year ago, he gave this response (read the story here):
Representative Henry A. Waxman of California, chairman of the committee: “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”
Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”
And that flaw was in trusting that people and institutions, out of their own self-interest, would protect all of those around them.
Here is Greenspan in his own words:
If you read business books, you know that business success is helped by good observers/coaches, who help us with deliberate practice. They watch, they critique, they correct, they encourage. Because we simply do not know enough, and cannot observe ourselves in action well enough, to produce the needed results.
There is a lesson here regarding regulation. Too few were watching – and the economy has paid a very, very steep price.
If the Texas Lottery Commission encourages us to buy tickets (and, for the record, it has been years since I bought a ticket – and I have never bought many), and then cannot guarantee the rightful purchaser the winnings, let’s shut the whole thing down until we get workable regulation in place.
And if we cannot protect the investments of hard-working people with the good intentions of people looking out for their own self interest, then we need to get some regulation that works in place.
