The Relativity of Time in Business – Conversion Formula

The problem in US businesses today is that they are too focused on meeting quarterly profit targets, often at the neglect at the long-term welfare of the company. This whole short-term focus is partially to blame for our current economic crisis. Richard Waggoner, the former CEO of GM, admitted before Congress that instead of investing in new technologies and new car models, they milked the profits from the SUV trend. Anyone with a long-term perspective would have realized that the housing bubble was bound to burst at some time; all bubbles do. Yet, corporate America is fixated on delivering quarterly profits and not providing long-term growth. With little or no investment, eventually all the value in a company gets used up or stripped away, just like any asset that is not maintained (including people!).

One curious aspect of human behavior is that when someone monitors performance, that performance changes (kind of like in reality TV.) When companies decide to measure progress, they often believe that it is just a way of ensuring that people are on their way meeting their goals. However, these measurements end up becoming the goals. When revenues fall short, maintenance, investment, and personal development are all put on hold to meet the short-term profit objective.  If the period of performance monitoring were longer, there would be a better chance that these investment activities would have enough time to prove their benefit.

What’s really interesting is that this is really only the perspective of corporate America (and corporate UK/Australia.) Having worked in Asia and Europe, I discovered that different cultures treat the passage of time very differently. In fact, in Geert Hofstede’s famous book, Cultures and Organizations, time is one of the dimensions of culture. For instance, both China and Japan take a very long-term perspective on time, easily sacrificing immediate gratification for a long-term benefit. It is common for parents to invest everything they have in their children. Getting something done ASAP in the US means within weeks or days, but in Japan it usually means months.

You can see this difference in perspective on smaller scales as well, like across industries. High tech companies work in a different time scale than pharmaceutical companies. Even within companies, you can notice a difference. Marketing folks are always rushing around, wanting everything immediately while your R&D department probably takes about a week to answer their emails. Plus, the higher up you go in the hierarchy, the more urgent everything is.  For anyone with a C and O in his title, end-of-day means three o’clock.

To be successful in business, it is absolutely essential to understand other people’s time frames.  To help you, I have formulated a time conversion equation that takes into account factors of position, nationality, function, etc.

TIME CONVERSION FORMULA

CONVERTING YOUR TIME TO THEIR TIME

Here’s the equation:

τ_r = τ_y *C*A*I*F*L

where
τ_r= relative Time
τ_y= your Time
C=Culture factor
A=Age factor
I=Industry factor
F=Function factor
L= Level factor

The following tables show the appropriate factor to use depending on situation. 

Culture	Factor		Age	Factor		Industry	Factor
German	1		Teens	15		High Tech	0.25
American	2		Twenties	0.75		Financial	0.5
British	3		Thirties	1		Consulting	0.75
French	4		Forties	1.25		Manufacturing	1
Italian	5		Fifties	1.75		Construction	3
Spanish	6		Sixties	4		Healthcare	5
Brazilian	7		Seventies	6
Indian	8
Chinese	9
Japanese	10

Function	Factor		Level	Factor
Marketing	0.5		Staff	1
Finance	0.75		Manager	0.75
Manufacturing	1		Director	0.5
IT	1.5		VP	0.25
HR	1.75		CxO	2.5E-05
R&D	2

Let’s try some examples.
 
Suppose your boss is Indian, in his forties, a manager, and he has promised to get back to you tomorrow regarding your request for promotion. You are American, in your thirties, and staff level.
 
Using τr = τy *C*A*I*F*L 
τr =1 day * 25 * 1/.75 or 
You will hear back in 33 and 1/3 days and the answer is “no.”
 
Notice how you need to invert factors depending on how they relate to you.  Given the same two people but in reverse, your boss has asked you to deliver a project plan by the end of the week (3 days time), here is how the calculation works:
 
τr =36 hours *1/25*.75  or
He expects you to have it ready in one hour eight minutes and your delivery dates are too long.
 
Now, here’s a more complicated example:
Suppose you are a manager level consultant working for the CFO of a high tech company who asks you to put together a business case for an acquisition. He says he wants in next Monday, 1 week’s time. You are both about the same age, and he is French.
 
τr =7 days*4*.2/. 5*.75*2.50E-05
or you better drop everything and pull all-nighters until you are done because you are already late, and he is going ahead with the acquisition anyway even if the business case doesn’t justify it.

Read whole article: http://whomovedmyholyhandgrenade.com/Pages/2%20Bring%20out%20your%20dead.html

Can My Mind Move Mountains?

I’ve recently taken up yoga with a vengeance in an effort to get back in shape and something struck me, figuratively that is, in my class yesterday. The instructor had us visualize our goals, mentally encase them in a bubble, and then send them out to the universe where the universe would fulfill it.  Similarly, many people have taken the book, The Secret, to heart and will often advise me to wish hardfor  and visualize what I want. Then, like magic, my wish will become true. 

I really wonder why all this magical thinking is so popular right now? Is it because of the recessions? Is it because many of us feel powerless in our lives?  Even so, as children didn’t we all learn that wishing hard for something did not make it come true?  Now, I fully believe in the value of a positive attitude. Our thoughts shape our actions and our interactions with others. If we believe that we will fail, subconsciously we will communicate that belief with others through our non-verbals, causing them to believe that we will fail and then set in motion a self-fulfilling prophecy.  If we believe we will succeed, we will make others believe that as well and so on.

What I am talking about is not positive attitude or positive self-talk, but wishful thinking.  Send your wish out to the universe or visualize yourself succeeding at your goal, and it will somehow become true. Don’t we actually have to do something in between the visualization and the actualization?  I really can’t buy that all I have to do is wish it so to make it so.

Let me know if someone has wished really hard and the wish came true without any action in between. I’d really love to save myself the effort.

Badlibs – Business as Usual or the Dark Ages?

Choose the word to make your own badlib essay!

 

 

The (Medieval Ages, last few decades) are also known as the Dark Ages due to the lack of advancement in (the arts, literature, and science; finance, economy, and government) during this period. Many people blame the stranglehold (the Church, economical dogma) had on society, and hence this period is also known as the (Age of Faith, Age of Wishful Thinking). The governing structure was a rigid hierarchy, known as the (feudal system, organizational structure) whereby the (nobility, executives) were able to maintain control of the (peasants, employees.) The (Kings, CEOs) were in possession of a huge amount of (lands, assets) and could not govern them effectively from a central position. Therefore, the (King, CEO) granted (manors, departments) to his (lords, vice-presidents) in return for their homage and fealty.  Likewise, the (lords, vice-presidents) granted (property, responsibility) to their (knights, managers) in return for their loyalty. The last people in this chain were the (serfs, staff) who usually ended up with only small (plots, cubicles).  In return, the (serfs, employees) agreed to obey their (lords, managers), work hard, and follow the rules laid down by (the lord’s court, corporate policies). 

There were various types of (serfs, employees), each with different degrees of (rights, respect.) A lucky few were (free serfs, entrepreneurs) who ran their own businesses while paying a large commission to the (lord, venture capitalists.) Most of the (serfs, employees) were not free and led miserable lives.  Forced to do the will of their (lord, employer), they looked to the wisdom of (the Church, management consultants) for relief.  Due to this, the (serfs, employees) mostly believed that if they worked hard, followed the word of the (clergy, latest management guru), gave their money to (the Church, their 401k) and did the (king’s bidding, latest corporate initiative), they would go to (heaven, Boca Rotan) in their (afterlife, retirement.)  Unfortunately, giving all their money to the (Church, 401K) did nothing to ensure a better life afterwards, but only served to make the (bishops, fund managers) very wealthy.

 Kind of scary, isn’t it? 

 

 

 

 

 

 

 

 

 

 

Bail Me Out!

The current joke in my neighborhood is how do we, as ordinary citizens, apply for a federal bailout? Although it’s a joke, the undertone is of resentment as we see the same people, who made obscene amounts of money during the past few years while we struggled, get rewarded for their profligate ways with a bailout. The scenario is much like the parable of the prodigal son.  

As I joked along with everyone else, I started to think, what if every US citizen got a bailout? How would that help the financial crisis?  It’s a little crazy, I know, but it has some real benefits.  The current estimations of the US deficit with the planned bailout and economic stimulus spending are over $7 trillion dollars. Experts are concerned that this is not enough money to turn our economy around. Personally, I’m annoyed that the first $350 billion went to recapitalize the banks and not to buying the bad assets as initially promised.

Spending the last two decades of my career on improving processes and fixing business problems, one of my tenets is to always address the root of the problem, not the symptoms. The corollary to this tenet is to dig as deep as you can to find the root.  Some of the big problems companies face have their roots in small problems that become compounded and amplified as they spread, not unlike the butterfly effect.  One example of what I mean is the bull whip effect where small changes in demand for a product get amplified along the supply chain and eventually become huge changes in demand for the supplier on the other end of the chain. Similarly, in a non-business example,   combating large crimes by prosecuting small infractions like graffiti, pan-handling, and subway fare jumping has lowered the crime rates in many cities.  Prosecuting these types of crimes, considered standard of living crimes, sets the tone that crime in general will not be tolerated with the result that total crime rates have decreased.

With that said, we need to address the root cause of our biggest financial mess, bad mortgages, not the securities based on these mortgages.  The trading of securities has involved a great deal of leverage, which has lead to the dire straits of many banks, and the last thing anyone should want to do is pay for all that leverage.  This means buying the bad mortgages is a lot cheaper than buying the bad securities.  If the mortgages are no longer bad, neither will the securities be.  Herein lies the problem with buying these bad assets – no one knows how much they are worth.  This brings me back to our US citizen bailout. 

There are about 100 million households in the US. If we gave $100,000 to each household, that would be $10 trillion in government spending.  Everyone with an unaffordable mortgage should be able to pay it off or refinance on better terms. Even better, those that weren’t foolish enough to spend more than they could afford would be rewarded with the extra cash. The government buying bad mortgages rewards the wrong behavior.  Banks would be recapitalized because where else would you put the money?  I realize that the risk of inflation could make that amount of money worthless, but the government is already risking inflation by the level of spending it is proposing.  This alternative could actually be cheaper and more effective because it could solve a lot of our problems, at least temporarily, in one fell swoop.  Seriously.   Don’t bailout any more banks or the auto industry or anyone else – just give us the money, and we will fix our economic problems.

The way to fix our problems would to ask the American people to spend and invest responsibly in ways that would help the economy.  I realize that that sounds naïve, but I believe that the majority of people would be willing to do the right thing.  Plus, Barack Obama talked about redistributing wealth, and this would go a long way.

Here is what we would ask people to do with the money:

1.       Buy down your debt. Use the money to refinance your mortgage or get rid of your other personal debt.

2.       Buy personal health insurance plans.  This would allow everyone to get covered and get employers off the hook for providing health insurance, a huge drag on our current business’s balance sheets.

3.       Invest in college funds and retirement funds, again easing the burden of pensions from the coffers of businesses and governments.  Let’s face it. The days of a company taking care of its employees for life are long over.  We shouldn’t be dependent on a company for our retirement funds or our healthcare.  Allow GM and other companies and municipalities to renegotiate their pension obligations.  This investing should also bring the stock market up.

4.       Invest in your employer.  Do you want to keep your job? How about everyone buying a piece of your employer?  No one knows better than the employees if a company is worth investing in. If none of the employees want to put money in their own business, than it is not worth saving. 

5.       Invest in yourself.  Get educated. Get healthy. Start a business. Start many businesses. Help others start businesses. Start a community business. Start a green business.

6.       Buy American, if possible.  With the global supply chain, there are few purely “American” companies or purely “foreign” companies. Toyota, Honda, Nissan all have plants here as well as the big three. Spend some of the money frivolously, but spend it with a company you would like to see stay in business, especially ones in your town.

Of course, there would be a few catches. Along with the handout would be a hefty national sales tax to help keep spending in check.  This would be implemented after a year or two, depending on the recovery, and would replace all or part of the income tax. After all, we do want to encourage saving over consumption but our current tax code taxes income from savings while giving breaks for spending.  The only way to encourage saving is to reverse this incentive by instituting an-across-the-board retail tax somewhere around 15% on all spending, except may be food.  Imports, houses, (yes houses), clothing, cars, jewelry, computers , everything would be included. (A computer simulation would be helpful to determine what percent would provide the right disincentive to keep spending in check.)  We’d have to ensure that foreign retailers would face stiff penalties if they did not collect this tax abroad. Hopefully, this kind of tax would eventually replace the income tax which is cumbersome, ineffective, unfair, and discourages people from creating more income.  

The other thing I would ask is that we put up a website where people could flag abuses and scams and note if anyone is blatantly raising prices, like insurance policies or cars priced at  $99,999. Part of it could be an investapedia where people could report investment opportunities in small businesses and everyone could be a venture capitalist.  During WWII, Americans pitched in to do what was needed in the war effort. This may not be a physical war, but let’s call it a fight for the American way of life.    I think we can rise to the occasion.

Healthcare Reforms Require Surgery, not Bandaids Part 1

I really like the change.gov website being used for the Obama transition and am excited that our government is finally using technology.  I checked out the healthcare proposals because that is an area of keen interest for me and must say that I am disappointed. I realize that these proposals are what Obama had been proclaiming throughout his campaign, but let’s face it, these are rallying cries, not real reform. Perhaps it’s my engineering and management consulting background, but real reform requires eliminating middlemen and  non-value adding activities, and getting at roots of the problems. I’m afraid that lawyers are too accustomed to adding small pieces of legislation onto existing legislation to eventually form a body of changes. This is not the way to streamline processes or create a system that works efficiently.  The following posts are my thinking on what we need to fix our healthcare system.

Part I

Although I think universal health care is a worthwhile goal,  I fear that implementing such a system using the many broken pieces that exist today will result in both bankruptcy and a deterioration of care.  Unlike some people who think the government screws everything up, I had dealt with Medicare after my mother was terminally ill and found them much easier to deal with than my own private insurance company.  However, I find the Obama-Biden proposals on this transition website quite distressing.  These are political proposals meant to get the audience yelling, “Yeah, hang those evil corporations out to dry and make them pay!” They are not the innovative, big thinking, collaborative solutions we need to make real changes. They are knee-jerk reactions to a few of the most painful symptoms of a broken system. We must determine the root causes of the problems and fix those rather than looking for scapegoats.  Our health care system is rife with game-playing, dishonesty, inflated pricing schemes, and complexity because everyone is trying to survive in a difficult situation. All too often, we design legislation and policies that address symptoms, leaving the original problems in place and creating new ones.  Here’s a non-healthcare example of what I mean:

The Endangered Species Act (E.S.A.) of 1973, designed to protect species that are threatened with extinction, also protects their physical habitats. Once a species is declared endangered by ESA, it takes months or years before the habitats of that species are designated as protected areas. In the meantime, property owners and developers who suspect that their properties may be a risk for protection, rush to destroy the natural habitat in order to make their lands inhospitable to the endangered species and available for development, essentially further endangering the species.[1]

I believe that the Waxman Hatch Act had a similar harmful consequence. It was intended to break the monopoly big pharmaceutical companies had on their patented drugs by making it easier for generics to get approval and get to the marketplace. This would usher in cheaper alternatives once the patents expired. It worked in that respect, but meanwhile the price of patented medicines has skyrocketed in the US. Because of this legislation, the pharmaceutical companies have only a limited amount of time in which to reap profits on their patents, and so they substantially increased the margins on their drugs while the patents were still in effect. Unable to compete with generics, they need to recoup all their investments in a short time period, hence the unreasonably high prices of non-generic, prescription drugs.

It may be shocking to hear someone actually defend pharmaceutical companies, especially when they engage in some ethically ambiguous activities like paying doctors to recommend their medicines,  but the point is, pharma companies, like other links in the healthcare system, are working under impossible conditions and thus are resorting to acts of desperation to stay profitable.  I’ll expound more on the problems in big pharma a little later.

For any organization or any system to be successful, all the players must be aligned with the same objectives. This is true for baseball teams, businesses, trading partners, and political campaigns – in short, any system with more than one component trying to achieve something.  The Obama/Biden campaign organized its supporters around the Change We Need. The McCain/Palin organized its campaign around revitalizing the traditional base and yet being Republican mavericks, supporting the current policies while recognizing the need to change the policies, inciting hate-mongering and then peace-making.  See what I mean? Our health care system is littered with inefficiency because many of the components are working against each other. The proposals on the transition website only offer punishments to address certain ills, but not ways of fixing the underlying problems and aligning objectives. I’d like to just briefly look at the different players involved in our health system, the conditions they work under, and what their objectives are in order to get at the root causes of our healthcare problems. I especially want to highlight that many of these players are working at cross-purposes to each other, kind of like the mavericky change agents who support the current Bush policies.
 
1)      Doctors.  Being a doctor is no longer as prestigious as it used to be and doesn’t bring the large salaries that it used to unless you specialize in services that are usually paid out-of-pocket, like plastic surgery. Doctors leave medical schools with huge debts and can either work at a hospital, in research, private practice, or some combination of all of these. It used to be that a private practice was lucrative, but now that insurance companies are determining the costs of doctors’ visits, these practices are struggling. First, they must overbook patients in order increase volumes, with the doctor rushing around to visit as many patients as possible in a short amount of time.  One of my doctor’s is paid only $15 per patient for an office visit.  Second, the amount of administration needed to deal with insurance forms and authorizations has increased, resulting in more overhead costs. On top of these, the cost of malpractice insurance continues to rise. How is a doctor supposed to make the good living to which they are entitled?

 Some doctors have turned to investing in diagnostic and  imaging centers and refer their patients to these centers more often that they should.  Some specialize in procedures that are fully reimbursed by insurance. Many inflate the fees they charge insurance companies when they can. Others take money from pharma companies to endorse their products. Of course, many of these actions are a conflict of interest , but doctors do need to make money and they can’t make enough money by just  caring for their patients.  Worse yet, doctors need to get approvals for their treatments from insurance companies.  So not only have their salaries decreased, costs increased, they no longer have the autonomy to care for their patients in the manner they deem best.

Add into this mess  the fear of lawsuits and now doctors have the incentive to over-prescribe diagnostic tests and procedures  in order to cover their asses. This fear also discourages doctors from being completely candid with their patients about their care.  For example, a doctor botched my brother-in-law’s knee operation, but never revealed exactly what went wrong in order to avoid being sued.  This meant that he had to visit several other doctors and undergo multiple diagnostics to figure out what the problem was and how to fix it.  All of these factors  result in poorer care for the patient  and increased medical  costs.   
Objectives:
·   Find ways to make money within this screwed-up system
·   Avoid lawsuits
·   Care for patients within the confines of authorized treatments
 
[1] Stephen J. Dubner and Steven D. Levitt  NY Times Magazine January 20, 2008

 The next post will discuss hospitals, patients, and the evil pharma and insurance companies

A subconscious black box?

In Malcolm Gladwell’s bestselling book, Blink, he often refers to our intuition as “the black box subconscious,” as if we have a secret compartment in our minds where mysterious things take place. Similarly, many people believe in a magical sixth sense that enables us to know things without involving our rational mind. Although I like to believe that this universe is often-times a mysterious and magical place (dark matter anyone?), I don’t think our subconscious mind is all that mysterious. I think language lies behind the mystery.

As a mother of two, I loved to observe my children when they were infants and toddlers. Children at this age are amazingly intelligent if you let them be. Even though they haven’t mastered language, they have complicated thought processes going on in their little heads. I’ve watched toddlers master complex skills playing software games meant for much older children, copying action-figure drawings, and building complicated cog and wheel systems. When my own kids started to walk around age one, I taught them not to go in the street and not to touch the furnace, radiators, and electrical outlets by showing them the dangers involved. I experimented with teaching them things and realized that showing them what would happen was tremendously more effective than telling them. Partly this is due the fact that we parents regularly lie to our kids as a matter of convenience, but I found that they learned readily from seeing the situation. For instance, before he could crawl, my son liked to roll around the floor and would grab electrical cords in order to pull things down to play. In a controlled situation, I let him pull a heavy lamp to the floor that crashed right near him. He got the message. 

My conclusion from observing kids, not scientifically sound mind you, is that young children must possess a sophisticated way of thinking that does not rely on language. As we age, we grow more and more dependent on words to shape our thoughts. Using words, we codify and categorize our memories, our perceptions, and our thinking. How did we think before we mastered language? Surely, our cave-man ancestors mastered survival skills before they mastered language. Our black box and our intuition are really our non-verbal thinking skills, a method of thinking that evolved for a much longer period of time than our verbal-based thought processing. We have trouble accessing these because they are not language-based, and we have learned to use language to access most things mental.

People who meditate regularly report an increase in perception, better concentration, and a “clarity of mind”. Meditation allows one to access the non-verbal parts of brain and dusts off those neural cobwebs. There is nothing magical or mysterious about this. In fact, improving your perception of others enables you to better notice their body language and facial expressions that can give you the “gut feeling” about whether they are trustworthy. Skills like interpreting facial expressions are learned when we are very young (try it with a baby; they know what a smile and frown mean) and occur in that black box. Sometimes, though, our verbal thoughts overrule what we learn from body language.

I’d like to devote this section of my blog to exploring how our intuition works and to how rational thinking can be very irrational sometimes.

Adult Competency Certification

I’ve been thinking about the concept of elitists that has been bandied about so much during this election.  How does one qualify to be an elitist? A top-tier school?  No doubt, graduates of Harvard and other Ivy Leagues would likely qualify, but is it a guarantee? What about geography? Are New Yorkers elitists while Iowans are not? Hardly. I know plenty of city-folk you would never mistake for an elitist while I am sure some faculty at the University of Iowa would proudly call themselves elitists. Do you have to be a liberal? The person I conjure when I hear the term “elitist” is William F Buckley. He is certainly not a liberal. What about occupation? Are lawyers and doctors automatically elitists while small business owners are not. I wouldn’t brand the personal injury lawyer I see on TV ads as an elitist and what about those who own small art galleries or antique shops?

Anyway,  as I thought about the two Americas – the one full of elitists and the other one with regular folk – I began to like the idea. Only, I think we need to expand elitists to include all “competent adults.” Our two Americas would be the one for competent adults and the one for those who are not. For instance, there are those who research the issues and where each candidate stands and base their votes on that information. Then there are those who vote based on a candidate’s smile, skin color or middle name.  There are those who like to stay informed on current events like the latest legislation or economic events. Then there are those who want to know if Britney Spears will get her kids back. There are those who like to read magazines like the New Yorker or the Economist. Then there are those who read the National Inquirer.  I’d like to propose that those of us who take the time to stay informed should get some benefit for our efforts. I’d like to propose a competent adult certification.

Just think of it. As a certified competent adult, when you call a computer help desk, you immediately get passed through to Level 2 Help, bypassing the inane “Is your caps lock on?” checklist of questions.   When you go to the doctor, once you show him/her your certification, he’ll know that your ailment is real and not a ploy for attention. You’ll also be exempt from having to sign all those waivers saying you won’t sue because you did something stupid.  Certified competent adults  could also ask for the abbreviated instruction manuals that don’t include sections on the dangers of putting a plastic bag over your head or changing out electrical components while the item is still plugged in.  Competent adults could also get a version of Windows Vista that lets you make modifications.

I think the easiest way to show everyone that you’ve obtained your certification is by wearing a bracelet similar to Lance Armstrong’s Live Strong or Stephen Colbert’s Wrist Strong. This bracelet would be grey and say “Grey Matters.”  When you are lost and in need of some directions, you would wait until you find someone wearing the Grey Matters bracelet.  If you needed help picking a wine in a liquor store, again, you would ask the person with the grey bracelet.  When looking for qualified professionals to renovate your house or fix your PC, you would make sure they were wearing the bracelet when they came to call.  

I’m still working out how one would obtain certification. I think it should be some combination of an exam and life experience credits.  The exam would have to include some basic knowledge like world history and geography and literature. Although I think basic math and science are also a must, I realize that these subjects are not well-taught and could eliminate too many qualified adults.  However, a demonstrated understanding of evolution and survival of the fittest is definitely a requisite. Among the required  life experiences would be travel outside of the USA and sampling a variety of cuisines.  Certified competent adults would also need to prove they know the difference between  propaganda, opinions, and  facts.

Of course, the certification would have to be maintained. Just because you were once competent doesn’t mean you still are. Being a certified competent adult would be a lifestyle choice. You could maintain your certification by attending classes, advancing in your career, traveling, or just by reading regularly. Plus, the certification could be revoked. I think the “three strikes and you’re out” rule works so if you do three really stupid things, you lose your status as a competent adult. Reinstatement could only be achieved by winning the Nobel or similar prize. Harsh, perhaps, but you have to have standards.

Please tell me what you think by taking this quick poll:

How the Relativity of Time Applies to Corporate Settings

Many of the miscommunications and misperceptions of time in the work place occur due to relativity of time, as determined by Einstein. Unfortunately, the physics of relativity is not taught well in our school system and many people don’t understand how these laws work, especially in the workplace. Here’s a very brief explanation of how relativity applies to time and what you should keep in mind in order to be successful in your career.

Let’s start with the classic example of the identical twins, Betty and Ann. The same in every way, Betty gets an opportunity to fly in a space ship at close to the speed of light and explore the galaxy. Ann does not get this opportunity and stays confined to earth. Finally, Betty returns home and is surprised to find that Ann has aged quite a bit more than she has. In Betty’s time, she has been on her adventure for twelve years, but Ann’s time on earth has been twenty years. You should realize how this applies in business. Let’s suppose that the CEO takes a shine to Betty, and she gets put on a career fast track. Traveling not nearly close to the speed of light, Betty’s world is a whirlwind of activity and new challenges and her time expands to fit many activities. Betty remains engaged and invigorated and does not age much.  Meanwhile, Ann, stuck in the same dead-end job, ages more rapidly, becoming old and embittered. Her time passes her by.

Continued

How Business is Like Monty Python posts

 Everything I needed to learn in business I learned in Monty Python and the Holy Grail
Or The Complete Idiot’s Guide to Corporate Lunacy

 A few years back, a co-worker and I were reviewing project proposals for a new corporate efficiency initiative. We worked in IT, so many IT projects fall under the cost cutting/efficiency improvement justification. As we reviewed the list that had been approved by the governing committee, we saw many old friends – projects that had been rejected during the normal course of business because they didn’t meet the cost/benefit hurdle rate. As part of the new initiative, however, these projects somehow now looked attractive to the leadership team. As we shook our heads in dismay over the bad proposals, my co-worker made the comment that he was reminded of “bring out your dead” from Monty Python’s Holy Grail. “Let’s take all our dead or sickly projects and pile them into this cart and see if they look attractive now.” That comment set my neurons buzzing, and soon I was finding business analogies everywhere in the movie.  It’s true. Everything you need to know about business you can find in the movie.

No Value for the Money

A few weeks ago, I watched Bill Clinton on the Daily Show discuss the current economic meltdown.  His insight into this whole mess was that the demand for the mortgage-backed securities was so high that the sellers of these began underwriting more and more risky mortgages in order to fill the demand.  Because no one really understood how these worked, and because the risks of these bad mortgages were now borne by many investors instead of just a few, these securities continued to be created and sold to meet the demand.  This insight got me thinking about the current state of investing these days, and I’ve concluded that there are no good places to put your money.
 
First, let’s look at bonds. US Treasuries used to be a good investment, but these days due to our big deficit , bonds no longer have much value. Both the value of bonds themselves is declining due to the amount of government spending and the interest they get is pretty paltry.  When I last looked, the interest rate was less than most certificates of deposit.  Bonds for municipalities may be returning higher rates, but some of these are considered to be junk due to looming fiscal crises. Who really wants to invest retirement or college savings in junk bonds?  

Then there are stocks. Looking at the Dow Jones Industrial Average, stocks had steady growth in the 80’s and 90’s. If you invested after the .com bubble burst in 2000 or 2001, your money didn’t do much until 2007. Now with the latest crash, stocks are trading at about the same price as 1996. Much of my bonus and options were in Pfizer stock, granted at prices between 32 and 47, which is now trading at 15. I also thought buying Fannie Mae preferred stock was a relatively conservative investment.  A friend of mine had her retirement portfolio from Amex in Lehman Brothers stock.  Even GE, once the epitome of a ‘solid’ investment is struggling to reward shareholders.

This leads us to real estate, the last bastion of investing. Not getting solid returns from either bonds or stocks,  people turned to the “safest” of assets – real estate. Investing in real estate these days, though, is more than buying property. You can buy all sorts of securitized mortgages and REITs. The only problem is that there just wasn’t enough of the mortgage assets to satisfy the needs of the market. This led to more risky lending practices and more people buying real estate. With the risks spread to multitudes in the form of securities, it seemed as if no one would actually have to pay for bad debt, so why stop?  As housing prices rose, more people entered the market, feeding the frenzy and the bubble. Many of these people were pure speculators who thought they could get rich by flipping houses without having enough money down for a traditional mortgage. The whole real estate market turned out to be a giant pyramid scheme, not unlike the .com bubble of a decade ago. You think we would have learned from that, but obviously we didn’t. 

Now, John McCain was mercilessly raked over the coals by saying our economic fundamentals were good. However, there is something very amiss with our fundamentals.  Actually, there is one fundamental that most worries me – the American economy no longer creates value.  There is one basic exception – the high tech industry – but mostly, our government, our large corporations, and our real estate investors engage in schemes. It’s all about timing the market these days, not about creating value.  The most important criterion for a good investment is to ensure you have someone else to sell it to.

Let’s look at our government.  For the past eight years, government spending has increased and the government has become bigger. But where is the money going? Obviously, to the two wars we are waging and increased security.  What’s suffered in those years are basic services and infrastructure. Literally, our bridges and roads are falling apart and welfare, unemployment, and social services have been cut. As an investor, I like to put my money where it can do some good and get returns.  I have a fund for my kids’ education, because I think that it will ultimately result in better job opportunities for them. I think investing in people in the form of education, health care, poverty relief have a better chance of generating positive returns than security and war fare.  Hopefully, this way more people could contribute to our society through taxes, jobs, and even volunteering.  I recognize that protection from terrorism is a fundamental  need for a society to function, but we should be careful that we still have a society worth protecting.  Wary of excessive defense spending, Eisenhower once said, “We will bankrupt ourselves in the vain search for absolute security.”

Secondly, our businesses are not creating much value.  Although I applaud the slate of entrepreneurs and high-tech startups for their innovations, much of main stream corporations just engage in number crunching. The mandate of business management is to meet the quarterly profit projections no matter what. Having books that look good has taken the place of creating value for consumers.  Whenever revenues don’t meet projections, the easiest lever to pull to meet earnings is to cut costs. The easiest costs to cut are long-term investments, especially in R&D.  Yet, companies can’t cost-cut themselves to growth, so unable to grow organically, they seek new revenue streams through mergers and acquisitions. Although intended as a growth mechanism, M&As are notorious value-destroyers. Fully two-thirds of M&As turn out to be unsuccessful.  Typically, the financial justification for a merger or acquisition consists of synergy targets that can be achieved by combining operations and getting rid of redundant assets, especially people assets. Ironically, usually the most highly paid and most experienced employees are targeted for lay-offs, hence ensuring that years of knowledge and wisdom are effectively purged. Oddly enough, my experience with layoffs is that the Finance and Legal departments usually escape unscathed because they are needed to further justify the success of the effort and to structure future deals.   Thus, most corporations are in the business of structuring deals and justifying them through cost-cutting – not an environment conducive to developing innovations and creating value.

Lastly, look at the real estate bubble. Typically, when a family buys a home and lives in it for a while, they add value to it, either by upgrading the interior, putting up an addition, or improving the exterior. They may also improve the neighborhood in which they live by contributing to the police or fire dept or joining the  PTA.  Many people who have a limited budget buy “fixer-uppers” and pour sweat equity into home improvements.  In all these ways, people add value to their homes or to their communities, making the investment actually worth more. However, during  bubbles, people flip houses, just waiting for the prices to go up in order to sell, adding no value to the home or neighborhood. Worse yet, convinced to purchase homes they can’t readily afford,  owners have no cash to spend on improvements or anything else. Everything goes toward paying the mortgage.

My argument is that there just can’t be any good investments in assets that don’t create value. An economy cannot exist on market timing; yet this is what we have been doing for the past decade, if not longer. Our government barely supplies basic needs when compared to governments elsewhere that subsidize healthcare, education, and even child care. Our companies are obsessed with meeting short-term projections and making the books look good. Our real estate markets depend on the availability of people  willing to pay too much for homes.  Nowhere is that old-fashioned philosophy of investing to  make life better for everyone. 

As a final point, I’d like to point out who our most highly paid professionals are.  During this financial crisis, many people have been railing against the high compensation of Wall Street executives.  Although these are some of the highest paid people in the country, we should also look at other classes of excessive compensation – movie stars and professional athletic stars.  What do these stars and the Wall Streeters have in common? None of these professions contribute real value to our society. Wall Street execs try to make money for themselves and sometimes for others, while movie stars and athletes keep us entertained. What about the people who teach our children, protect our streets, create new medicines, build our infrastructure, keep us healthy or tend to us when we are ill? Salaries for teachers, cops, scientists, engineers, nurses are pitiful in comparison. Even doctors don’t make much anymore, except for plastic surgeons.  How can a society justify investing hundreds of millions of dollars in a comic-book action movie while it skimps on orphan drug research and space exploration?

This is the fundamental problem of our economy. We no longer create enduring value.  We no longer value value.

My Holiday Update – Christmas with Teenagers

Yes, once again, it is  that time of year

When the Hennigans wish you all some good cheer

And recount the latest news to report

Like how the kids are doing in school and in sports.

Aidan is 15 and growing like weeds. 

He snowboards and fences and constantly feeds.

Alex is 13 and also quite tall,

Two lunches, three dinners, he eats it all.

Karen and Tom are doing just fine,

 Except we shop and we shop and we shop all the time.

(To eat that much food must be a crime!)

Sorry for complaining, I don’t mean to grouse

But we just can’t keep any food in the house!

Sorry again, this is the time for good wishes

Not the time to bemoan the piles of soiled dishes.

But, oh, how I dream when I wake Christmas morn

To find that the fridge is fully adorned

With bread, milk and eggs and some Jarlsburg cheese

Perhaps crackers and snack food – oh, what a tease.

To imagine a kitchen that’s all fully stocked

Is the white Christmas dream I wistfully concoct.

With that,  I wish you all well and hope you’re all in good form

Alas, being hungry is now Tom’s and my norm!

Health Reforms Require Surgery, not Bandaids Part 2

Please read part 1 first.

2)      Hospitals.  Hospitals have many of the same problems as doctors, and some of the items fit in both categories. Hospitals, for the most part a generation ago, were non-profit organizations reliant on endowments, religious charities, or government funding. Now many hospitals are for-profit and have new demands to generate revenues and keep costs low. Whereas indigent people in the past could be treated out of charity, now hospital admissions demand to see a valid insurance card before you can get any care.  This is the tough reality of a for-profit hospital. Overworked and understaffed, care providers in hospitals have demanding and contradictory jobs.  While doctors and nurses are committed to saving and prolonging lives, administrators are committed to controlling costs, burnishing reputations, and avoiding lawsuits.  I don’t have the numbers to support this, but from my own observations, I’ve seen the number of nurses per patient decrease and the number of administrators increase. (Please challenge this as I don’t have the statistics.) Of course, there is a greater demand for these administrators and accountants. They have to deal with the complexity of insurance requirements and payments, legal obligations, and financial reporting that didn’t exist two decades ago.

 

Another thing I’ve noticed about hospitals is that they often provide heroic efforts to prolong the lives of hopeless cases.  I realize that this sounds heartless, but some of my relatives have received extraordinary treatments to prolong their lives when they were terminally ill and no longer sentient.  With the growth of living wills, many people and families are choosing not to artificially extend life, but the default is to resuscitate and respirate in the absence of such instructions.  Often the quality of this life is not high and just prolongs the suffering of the family.  Are those few days really worth it or are they just trying to run up the hospital bill? 

However, my biggest complaint with hospitals is their billing practices. It seems blatantly unethical to me that one’s insurance policy or lack of insurance policy determines the cost of a room or a procedure. Different people get charged different prices for the same thing.  I realize that the origin of discriminate pricing was to charge poor people less, but pricing and billing is all over the place today. Ironically, now it is the patient without insurance who is charged the ‘full price.”  This has led to a lot of fraud  and incompetence in medical billing. Hospitals and doctors often send patients bills that have already been sent to insurance companies and also bill for additional payments when the insurance has clearly negotiated one particular fee.  On the flip side, some of my medical providers neglect to properly fill out the insurance claims and never get paid at all.  From my experiences, only about 10% of my medical bills are correct. This whole system of insurance claims, negotiated rates, co-insurance payments, deductibles, etc. is hopelessly and needlessly complicated and costly.

Objectives:

·         Ensure revenues exceed costs

·         Avoid lawsuits

·         Establish good reputation

·         Care for patient

 

3)      Insured Patients –It became the practice for employers to provide health plans to employees when during WWII, there was a cap on wages, and companies looked for other forms of compensation to attract scarce workers. Because a large company’s workers provided a relatively low-risk pool (you don’t work when you are old and ill), insurance companies encouraged employers to offer health insurance benefits. Coupled with legislation that designated health benefits exempt from income tax, employer-sponsored health insurance took off and has become the norm.  This set-up worked fine at first, but now this system is also showing its flaws. Now these plans cover the population of retired employees as well as active ones, creating a more risky pool. Industry consolidation and population demographics have resulted in less young and healthy employees to offset those that have retired. More importantly, the cost of medical care has skyrocketed since that time , these plans have become quite expensive (but still cheaper than trying to buy an individual plan.)  Now that employees pay a big portion of the cost, they have an incentive to get their money’s worth and consume more health care services.  These employees have no incentive to limit the number of diagnostics or treatments they undergo, driving up costs.  Also, they become savvy buyers of optional insurance and will buy more insurance when they know they have a need and drop insurance when they are most healthy. This practice also drives up the costs for the insurance company, who must then pass those costs along.

Employers  don’t benefit either, especially those required through legislation to provide insurance for their employees. Instead, they no longer hire full-time workers and rely on part-timers and contractors whom they don’t have to insure. Even large corporations monitor the number of full-time hires because the tax and benefits package for every employee rivals the actual salary. This makes our companies less competitive in the global market.  Some other adverse consequences are that many employees stay in jobs they hate because they have medical conditions, employers must hire or contract people to manage their health benefits, and in the hunt for lower cost plans,  frequent plan changes cause frequent changes in care providers and poorer doctor/patient relationships,.

Objectives:

·         Consume healthcare to get money’s worth  a la moral hazard

·         Buy and drop insurance as needed to save money a la adverse selection

·         Remain in current job to ensure continuation of benefits

 

4)      The uninsured – These are those who can’t afford insurance even though they are healthy or can’t be insured because they have medical conditions.  The uninsured often will not seek preventive or maintenance care and wait until they are ill before they consume healthcare.  Not having a regular doctor or being familiar with providers, they are also those most likely to show up at a hospital ER for non-critical illnesses, using the most expensive resources needlessly. Ironically, these are the only people who do not have bargaining power with healthcare providers and are often billed the full price of their care.  Given that their bills are usually ridiculous, some are inclined not to pay anything at all and the hospitals and doctors are left to pick up the tab. Others will spend a lifetime paying off bills.

Objectives:

·         Save money by ignoring preventive procedures and treatments

·         Seek help when ill

 

5)      Insurance companies – I’m not sure which are hated more, insurance companies or pharmaceutical companies, but anyway, insurance companies are detested for denying coverage on legitimate, but unauthorized treatments,  denying coverage for people with “pre-existing conditions,” and for intruding into to the doctor/patient relationship.   Unfortunately, insurance companies are between a rock and a hard place and driven to acts of desperation, like our evil pharmaceutical companies.  This is because they no longer provide insurance; they are required to provide health plans –  a totally different animal.  The definition of insurance is:

the act, system, or business of insuring property, life, one’s person, etc., against loss or harm arising in specified contingencies, as fire, accident, death, disablement, or the like, in consideration of a payment proportionate to the risk involved.

 

Life insurance, home insurance, car insurance all work by pooling together a large number of people to insure against some unlikely condition with higher risk participants paying more to be included in the pool.  Based on statistics, the insurance companies can figure out how probable the unlikely conditions are and charge accordingly. This model has been working well for centuries.  Unfortunately, health insurance is not insurance any more.  It pays for normal medical use and does not charge its riskier customers more.  By law in some states, insurance companies are constrained to offer specific comprehensive health plans to everyone (major medical insurance is prohibited in NY and NJ).  This is like car insurance companies having to cover everyone at the same rate and include car maintenance costs as part of the coverage.  It’s not a profitable business model.

 If health insurance companies can’t make money in the way insurance is supposed to work, how can these companies stay in business?  Every company needs to be profitable.  What insurance companies do now is charge a large fee from participants and then squeeze the cost of what they pay to providers.  They bet that each participant will pay more for insurance than they will actually consume in healthcare costs.  If a PPO plan for a family of four costs about $11,000 per year and  everyone remains healthy, that family will likely use no more than $5000 worth of preventive care. The insurance company nets a whopping $6000. Seeing this, that family will be motivated to  consume more than they really need, usually in prescriptions, diagnostics, and unnecessary office visits bringing the actual consumption closer to the cost of the plan. However, the insurance company is banking on this profit to pay for unhealthy families. Therefore, the insurance companies have no other recourse but increase their fees and continue to negotiate bargain basement prices for the providers.  Unfortunately, the insurance industry has become so consolidated that they have tremendous bargaining power and have squeezed prices to the bare bones in many cases.  Next they turn to denying claims and limiting treatments. Given that both the providers and the patients feel helpless compared to these large companies,  fraud and deceptive billing practices are deemed acceptable.  Providers regularly inflate their fees for services that have not been negotiated. If the insurance requires a co-pay percentage, many providers will raise their rates by that percent and not charge the patients. Patients rarely inform insurance companies of any misdeeds because frankly, we’re paying through the nose for coverage and not getting much for it. It seems fair.   Unfortunately, this only adds to the costs of our healthcare system.  

Objectives:

·         Keep costs low

·         Motivate patients to maintain health

·         Eliminate high risk/high cost consumers

Next post discusses pharmaceutical companies and personal injury lawyers.  

Healthcare Reform Require Surgery, not Bandaids Part 3

Part 3 is a continuation of the two previous blogs.  

6)      Pharmaceutical companies – It’s very easy to cast pharma companies as evil villains along with insurance companies. They, too, are between a rock and a hard place and are resorting to some questionable practices to remain profitable, mainly price gouging.  New drug compounds are covered by patent protection for 20 years. However, much of that time is eaten up during the discovery process and clinical trials before the drug is approved. Although drug companies can file for patent extensions, the maximum number of years a drug can be marketed under patent protection is  14 years.  This would seem reasonable, but the only place where pharma companies are not under price controls for their drugs is the US.  To sell in most of the world, drug companies must have their drugs listed in government-approved formularies at mandated prices.  Considering that most of the drugs researched never make it to the marketplace, the few that do must bear the costs of all ongoing R&D.  The overhead at pharma companies is larger than other manufacturers because of the stringent regulations governing their manufacturing and R&D practices.  Worse yet, our current FDA is under-staffed and under more scrutiny due to recent drug dangers, resulting in fewer new drug approvals. This means that drug companies must make all their profits on just a few drugs in just a few years in just the US, hence the exorbitant pricing. 

Fortunately for pharma companies, but not fortunate for everyone else, patients and doctors rely very heavily on prescriptions as the cure for everything . It is the norm to walk out of a doctor’s office fluttering a paper trail of white prescriptions that in many cases are not necessary. Yet patients and doctors don’t feel like the doctor has done her job unless a prescription was written.  Doctors also feel like they are better doctors if they prescribe the newest (and also costliest) drug.  Many drugs are being overprescribed (Viagra,etal, sleeping medicines, anti-depressants) and for some,  prescriptions are taking the place of healthy living habits like eliminating stress, eating right, and exercising.  On the flip side, those without insurance with risks of heart disease and diabetes are not consuming the medicines that can keep them healthy.  All-in-all, the cost of prescriptions as treatment is lower than the cost of hospitalizations. Although the profit margins on some of these drugs are obscene, the reality of drug research is that it is rarely federally-funded and drug innovation has fallen mainly to biotech and pharma companies. Restricting profits will result in less drug innovation in the future.

Objectives:

·         Encourage consumption of the costliest proprietary drugs

·         Bring new patent-protected medicines to the market

 

7)      Lawyers – We are in dire need of tort reform.  I realize that there have been some improvements in the last few years, but there are still too many lawsuits.  I’m not sure why Americans have to keep suing each other all the time.  Basically, sometimes stuff happens, and we really need to discern the difference between malevolence, negligence, and accidents.  I’m surprised someone born with birth defects hasn’t tried to sue his parents for having defective DNA.  Isn’t that where we are heading? There is a difference between a doctor with a history of incompetence and someone who happens to screw up once or twice. There is also a difference between compensating for lost income and awarding millions in pain and suffering. There is a small, but significant population of unscrupulous personal injury lawyers and “victims” who try to rip off insurance companies for their personal gain. The punishment for this behavior should include jail time. I feel rather strongly about this because twice my family has been sued by con artists for personal injuries in car accidents that were no more than fender benders. Fortunately, our insurance company takes these cases to court, and we won both times as they were obvious frauds. Although they had to pay for court fees, they should have gone to jail or paid a huge fine. The costs of all types of liability insurance, malpractice insurance included, have become prohibitively high due to lawsuits and are creating a drag on our economy.  I realize that most of Congress are lawyers who do not like restrain their own kind, but without reform in this area, we will never have improved care at better costs. As long as the threat of a lawsuit hangs over every provider, we will never have the type of transparency and candor we need to make real changes.

Objectives:

·         Profit from medical mistakes

·         Seek compensation for malpractice 

That was a very brief situation analysis of some the key parties in our health care system (I’ve excluded our government who plays a big role in Medicare, Medicaid, FDA, and other regulations.)  There are many, many problems in this whole system and creating universal healthcare using this mess as a foundation would bankrupt our country.

As a management consultant specializing in process reengineering, I recommend some fundamental principles that need to be followed when redesigning any process or system:

1.       Align objectives across all parties as mentioned earlier.  There are many disincentives in place that worsen care and increase its costs.

2.       Eliminate non-value adding activities and, with it, minimize the number of transactions and middlemen wherever possible.  Employers and insurance companies should not be in the decision-making process of what care should be provided and paid for.  All the effort that goes into negotiating rates, verifying claims, verifying treatments, figuring out how much to bill should be eliminated. These only add costs and no value.  

3.       Establish trust amongst the parties.  Only through cooperation will any reform succeed. There is very little trust now that is caused by the misaligned incentives.

4.       Don’t bastardize things that work well.  It’s like the “too many cooks spoil the broth” syndrome. Insurance as insurance works well. Insurance as a comprehensive health plan does not.

5.       Eliminate game playing.  Everyone is working around a system that doesn’t work.  The doctors, patients, hospitals, lawyers, insurance companies, and pharma companies are all trying to see what they can get away with at the expense of the others.  Work-arounds never work well.

6.       Put a computer model together and simulate how the proposal will work before it gets implemented.  There are a number of economics professors who use models regularly, and there are two professors at the Sloan School who put together systems dynamics models. Play around with various scenarios before they get enacted into law.

The next and last post of this series will have some of my ideas and recommendations.

 

Healthcare Reforms Require Surgery, not Stitches Part 4

This is a continuation of previous posts.

Let’s look at the objectives of each of the parties. If I were to start from scratch, I would want to design a system around these objectives:

• Provide high quality, effective care
• Make care as cost-efficient as possible
• Maintain best possible health
• (Be profitable doing the above)

In our current situation, doctors and hospitals are somewhat motivated to provide high-quality care because they don’t want lawsuits, and they want more patients. Pharma companies also need to provide quality drugs in order to get approval and to gain customers. However, all of these parties have other objectives that work contrary to this incentive, namely making money by means other than providing quality care. The only group working to make care cost-efficient is the insurance companies, and in some cases, those consumers who are uninsured. Providing high quality care is not really an incentive for the insurance programs unless it forestalls having to pay for more treatments due to poor quality. Only the insured patients and the insurance programs have the objective of maintaining best possible health, except they often work against each other. The insured are getting as many diagnostic procedures as allowed while insurance companies are hoping that the healthy will require less procedures. “Being profitable doing the above” is in parentheses because if we have government-provided healthcare, this will not be an objective. It is also not an objective for those programs run by charities. If we are going to continue to have privatized insurance and privatized drug research, we must allow these companies to be profitable, not excessively so, but still profitable. We also need to let doctors earn a comfortable living by being doctors and not savvy investors or corporate shills. So whatever our new system turns out to be, all the parties need to be aligned with maintaining the best possible health and providing cost-efficient, effective care when not healthy.

What follows are some of my ideas for how a new system could work that follow most of the principles above. I don’t have access to a computer model, and I don’t claim to have this all perfectly worked out, because I am only one person with limited resources and knowledge. Changes of this sort require teams of experts and professionals working together, brainstorming, critiquing, and piloting. My ideas are based on the assumption that we will still be using privatized insurance and drug research and not creating a nationalized system like in the UK or France. Although I like the idea of a nationalized system, I think we need to fix our problems before we move that way. I would also like to mention that I do not work for either a pharmaceutical or an insurance company, though I have worked for pharma companies in the past.

I’d like to see a personal, life-long insurance plans that work like insurance to cover medical catastrophes. Insurance is not a health plan, and a health plan should not be insurance. Nor should your insurance coverage depend on your employer. (Isn’t it a form of indentured servitude if you have to remain at an employer to be covered?) At a national level, we have a pool of over 300 million people in which to dilute risks. I envision a mandatory health insurance product you purchase when you turn 21. We already have mandatory car insurance and home insurance, why not health insurance? This should work at a national level, not state level, so that anyone could buy from any company in the US and risks could be pooled better. Buying it a young age would encourage low premiums. The premiums would increase if you don’t keep yourself healthy by maintaining a healthy lifestyle and using preventive medicine. High risk people could be pooled the way car insurance works today. People could buy different levels of coverage based on dollar amounts. Someone wanting low premiums might buy a policy that covers expenses over $25,000. Others might pay substantially more to cover $10,000 and over. A waiting period would be required for those wishing to substantially increase or decrease their insurance amounts so they can’t bump up or down based on planned usage.

Insurance companies would not be able to negotiate rates with providers but would base the reimbursements on statistical averages for particular disease states. Different cancers, heart disease, etc. would be reimbursed within a range of rates. Like good drivers, healthy people and those who consume under the national average for a disease state would be offered discounts off their premiums. Information on how much treatments cost for different disease states would be widely shared by insurance companies, and providers who are outliers would be examined. People would be responsible for their maintenance medical care and would shop and consume more wisely. Too frugally and they would be punished with higher premiums for not maintaining their health. This system would drastically cut down on the administration and paperwork required for submitting health claims, remove the insurance company from determining the course of treatment and the price of treatments, and give people an incentive to keep costs low and maintain their health. Doctors and hospitals could focus their attention on providing care with less need to find other sources of income.

Of course, paying for your own maintenance health care is only reasonable if the costs are reasonable, which they aren’t right now. This is why the following are absolutely critical:

1) We need to make proprietary drugs affordable because these are often the best treatments available. Trying to do away with proprietary drugs by encouraging generics is only ensuring that we will have fewer and fewer new drugs in the future. We don’t want this. Drugs are a cheaper alternative than surgery and radiation and hospitalization. Importing them makes no sense either as it is the foreign price controls that makes them cheaper. We could just implement price controls here and save the shipping and handling. If we do that we should expect that fewer new drugs will be available in the future. Contrary to populist opinion, extending patent life or limiting generic competition will allow these drugs to be profitable over a longer time period and remove the need for obscene margins. Perhaps we could provide incentives like longer patent protection for the most effective and cost-efficient drugs. Right now, we have lots of me-too’s clogging up the FDA. We also need to staff up the FDA so more NDAs can be approved. These changes should be contingent on drug companies changing their practices and lowering their prices.

2) We need tort reform to protect medical practitioners from lawsuits and lower cost of malpractice and eliminate all the “cya” and mistrust. Quality medical care requires quality relationships, and you can’t have quality relationships if no one trusts anybody. Maybe we could use those lawyers to root out fraud and find truly incompetent practitioners instead.

3) Education –

a) Train doctors and patients that prescription drugs are not the answer to everything and can often have some debilitating side effects. Many health problems should be solved by lifestyle changes, but people expect a magic pill from their doctors. Doctors have been conditioned that their job is to provide a medicine or a procedure. Alternative medicines, hypnosis, and counseling should be recommended as often as prescriptions.

b) Medical providers should be required to take courses in communication skills and project management skills. Miscommunication is a large source of errors in most professions, and I have found that doctors don’t communicate effectively with patients nor with their peers. General practitioners should be responsible for coordinating care amongst specialists. I’ve found that they usually know nothing about basic project management, like coordinating teleconferences or planning out dependent activities. Much of this is left to the patient who usually has no clue about what is needed and has to decipher medical jargon.

c) Make sure everyone knows about powers of attorney for health care, living wills and “do not resuscitate” orders, and that these documents are readily available. I also question the practice of always resuscitating when the patient wishes are not specified. This is less about saving money and more about dying comfortably and cognizantly with grace.

4) Encourage more ways to get cheaper care. Emergency medical clinics are a cheaper and often more convenient way to care for urgent, but non-critical injuries like cuts, sprains, and nosebleeds. Walgreens is offering care for typical ailments like colds and flus. Nurses, nurse-practitioners, and doctor’s assistants are all capable of handling some very basic procedures and well-care diagnostics. How about innovative ways of bringing care, especially well care, to the indigent or disabled, like mobile units, travelling clinics or home visits? Pharmacists in Europe prescribe medicines, both prescription and OTC, for colds, aches, rashes, etc. Wouldn’t this be an easier and cheaper way for people to get medicines?

5) Information technology – There are so many ways that IT can improve medical care and reduce costs – improved (and legible) patient records, shared medical information, visibility into doctors’ and hospitals’ performance are just a few. Incentives to implement these initiatives would go a long way.

6) This is my pet peeve. Reduce errors by requiring medical providers to have a full night of sleep each night. Although several years ago the AMA changed its guidelines to limit residents’ working hours, I don’t think it was enough. I realize that the practice of being on-call for 24 hours is to provide continuous care from one doctor, but sleep deprivation is dangerous for all involved. Studies show time and again that people can’t perform well when they are tired, and medical errors increase with lack of sleep. Personally, I become delirious when I miss a night of sleep. Staggered shifts, technology, and better communication skills can help the hand-off from one practitioner to another. Also, fully informing the patients and their families would help as well.

This is my first pass at diagnosing and treating the ills of our healthcare system. I’m sure there are lots of holes in my ideas, but hopefully you will find it useful. My most important message is that we need fundamental changes to our current system, not knee-jerk, reactionary legislation. It’s a beautiful thing when all the components of system or organization are aligned around clear and complimentary goals and incentivized to behave in a mutually beneficial, win/win way. Hey, it even works in elections.

What Makes Us Wise?

To me, wisdom is the ability to discern the world as it is and not as how we want it to be. What do I mean by that? Religious people see the divine hand of God in everything around them while atheists see proof of the lack of divine intervention in the ways of the world. The same world, but two interpretations.
The only way to become wise is to become a skeptic and strip away the myriad belief systems that comprise our world. Belief systems like conservativism or liberalism, being green or even healthy eating inform all of our actions and thoughts or rather misinform them. Oddly, obtaining knowledge of many belief systems is the way to become a skeptic. If you are knowledgeable about many religions, it becomes harder to believe just one, for there is beauty in each.
Seeking to understand all points of view and all ways of life is the best way to discern that there really is not one right way to believe or perceive or be, and then one can become wise.
btw – I have put up a website with how beliefs can wreak havoc in corporate America at http://whomovedmyholyhandgrenade.com Still a work in progress, though.
Read the Article at HuffingtonPost

School’s Out, Kids Can Feel Smart Again

I’m so glad to read that others feel that our school system is not educating our children. As a parent of two teenage boys, I saw my own kids’ love of learning be extinguished by the school system. Why on earth do we think learning comes solely from reading, writing, and lectures? What about creating experiences or building things (math skills required!) or having kids lead discussions? Yes, you need books to learn to read, but for science and math? My kids are bored with the curriculum and actually learn more from their games and TV. (OMG – Kids can learn from TV and games? Aren’t they evil? ) My kids know more about world history from Empire Total War than from school and more about physics from Mythbusters than their classes.

I spent over a decade of my career in corporate training and always laugh when I hear about how different adult learning is from childhood learning because adults learn experientially and need to know how the knowledge can be applied in the real world. Why do we believe that kids aren’t the same? Why do we subject them to an environment that we wouldn’t tolerate as adults?
Read the Article at HuffingtonPost

Eight Tips for Working More Happily With Your Colleagues

I strongly agree that having good relationships with your co-workers makes your work life so much more enjoyable. It really is the simple things in life. Part of the problem now in large companies is that we forget that vendors, customers, and employees are people, not human resources or high value (or low value!) customers. And all people like to be treated and appreciated as the unique individuals we are, not as things to be manipulated, managed or optimized.
More on Careers
Read the Article at HuffingtonPost

The Knights that say “Ni” – Medieval Management Consultants

Here’s more on how business is like Monty Python and the Holy Grail. Again taken from
 http://www.intriguing.com/mp/_scripts/grail.asp

HEAD KNIGHT OF NI:  Ni!
KNIGHTS OF NI:  Ni!  Ni!  Ni!  Ni!  Ni!
ARTHUR:  Who are you?
HEAD KNIGHT:  We are the Knights Who Say… ‘Ni’!
RANDOM:  Ni!
ARTHUR:  No!  Not the Knights Who Say ‘Ni’!
HEAD KNIGHT:  The same!
BEDEVERE:  Who are they?
HEAD KNIGHT:  We are the keepers of the sacred words: Ni, Peng, and Neee-wom!
RANDOM:  Neee-wom!
ARTHUR:  Those who hear them seldom live to tell the tale!
HEAD KNIGHT:  The Knights Who Say ‘Ni’ demand a sacrifice!
ARTHUR:  Knights of Ni, we are but simple travelers who seek the enchanter who
    lives beyond these woods.
HEAD KNIGHT:  Ni!
KNIGHTS OF NI:  Ni!  Ni!  Ni!  Ni!  Ni!…
ARTHUR:  Ow!  Ow!  Ow!  Agh!
HEAD KNIGHT:  We shall say ‘ni’ again to you if you do not appease us.
ARTHUR:  Well, what is it you want?
HEAD KNIGHT:  We want… a shrubbery!
    [dramatic chord]
ARTHUR:  A what?
KNIGHTS OF NI:  Ni!  Ni!  Ni!  Ni!
ARTHUR and PARTY:  Ow!  Oh!
ARTHUR:  Please, please!  No more!  We will find you a shrubbery.
HEAD KNIGHT:  You must return here with a shrubbery or else you will never pass
    through this wood alive!
ARTHUR:  O Knights of Ni, you are just and fair, and we will return with a
    shrubbery.
HEAD KNIGHT:  One that looks nice.
ARTHUR:  Of course.
HEAD KNIGHT:  And not too expensive.
ARTHUR:  Yes.
HEAD KNIGHT:  Now… go!
 
ARTHUR:  O Knights of Ni, we have brought you your shrubbery.  May we go now?
HEAD KNIGHT:  It is a good shrubbery.  I like the laurels particularly.  But
    there is one small problem.
ARTHUR:  What is that?
HEAD KNIGHT:  We are now… no longer the Knights Who Say ‘Ni’.
KNIGHTS OF NI:  Ni!  Shh!
HEAD KNIGHT:  Shh!  We are now the Knights Who Say ‘Ecky-ecky-ecky-ecky-pikang-
    zoop-boing-goodem-zoo-owli-zhiv’.
RANDOM:  Ni!
HEAD KNIGHT:  Therefore, we must give you a test.
ARTHUR:  What is this test, O Knights of– Knights Who ‘Til Recently Said ‘Ni’?
HEAD KNIGHT:  Firstly, you must find… another shrubbery!
    [dramatic chord]
ARTHUR:  Not another shrubbery!
RANDOM:  Ni!
HEAD KNIGHT:  Then, when you have found the shrubbery, you must place it here
    beside this shrubbery, only slightly higher so you get the two-level effect
    with a little path running down the middle.
KNIGHTS OF NI:  A path!  A path!  A path!  Ni!  Shh!  Ni!  Ni!  Ni!  Shh!
    Shh!…
HEAD KNIGHT:  Then, when you have found the shrubbery, you must cut down the
    mightiest tree in the forest… with… a herring!
    [dramatic chord]
ARTHUR:  We shall do no such thing!
HEAD KNIGHT:  Oh, please!
ARTHUR:  Cut down a tree with a herring?  It can’t be done.
KNIGHTS OF NI:  Aaaaugh!  Aaaugh!
HEAD KNIGHT: Augh!  Ohh!  Don’t say that word.
ARTHUR:  What word?
HEAD KNIGHT:  I cannot tell, suffice to say is one of the words the Knights of
    Ni cannot hear.
ARTHUR:  How can we not say the word if you don’t tell us what it is?
KNIGHTS OF NI:  Aaaaugh!
HEAD KNIGHT:  You said it again!
ARTHUR:  What, ‘is’?
KNIGHTS OF NI:  Agh!  No, not ‘is’.
HEAD KNIGHT:  No, not ‘is’.  You wouldn’t get vary far in life not saying ‘is’.
KNIGHTS OF NI:  No, not ‘is’.  Not ‘is’.

 
We are the management consultants who say “Rightsizing.”  Bring us lots of money and your best resources and you will be able to pass through the forest of inefficiency. 
 
Now we are the management consultants who say “Outsourcing.”  Bring us even more money and we will let you let pass.
 
No wait, we are the management consultants who say:
 
Balanced Scorecard, Management by Objectives, Pay for Performance, Learning Organization, Continuous Improvement, Innovation, Business Process Re-engineering, Six Sigma , Statistical Process Control , Zero percent defects, High Performance technology, Intellectual capital management, Business Intelligence…

……..and then when you have finished phase 1 of the project, you must embark on phase 2 which requires even more money and resources and ……….
 
…Enough, enough, you say, stop, be quiet.
 
Change management, Disruptive Innovations, Total Quality,  Demand driven supply network, Global supply chain, Innovation, customer relationship management, Strategic Intent core competencies, vision engineering, ISO x000, Creativity and Innovation, Blue Ocean Strategy, Strategic Selling, Cascading KPIs, human capital management, MRP, ERP,  BRP, Business process monitoring, Web 2.0, e-business, e-commerce, e-learning, Design for Engineering, Design for Manufacturing, Product Lifecycle Management……
 
Stop, stop, stop. Don’t say anymore. I can’t bear it.
 
Outsourcing, Insourcing, Rightsizing, Downsizing, Accordian management, Decentralization, Delayering, Shared Services, Centralization, Lean Organization,  Lean Manufacturing, Just-in-Time, Kaizen, Systems Dynamics, Empowerment, Participative Management, Time-based competition, Community 2.0. the Wisdom of Teams, The Wisdom of Crowds, Virtual corporations, virtual collaboration, virtual teams…….
 
Enough ? Enough? And just when you get versed in one of these management theories, another one has taken its place that is suddenly the answer to your organization’s woes. After you become learned in enough of these concepts, a great gestalt moment arises when you realize that all you have been doing all along is buying shrubberies. In other words, people manage to get their work done despite all the management fads, especially when the fads become the work.

We’re the Executives at the Boardroom Table – Song and Dance

Here’s the scene where Arthur and his knights arrive at Camelot to be greeted by the following song and dance routine. Again, I took the script from http://www.intriguing.com/mp/_scripts/grail.asp  

ARTHUR:  Shh!  Knights, I bid you welcome to your new home.  Let us ride…
    to… Camelot!
   
KNIGHTS:  [singing]
    We’re knights of the round table.
    We dance when e’er we’re able.
    We do routines and chorus scenes
    With footwork impeccable.
    We dine well here in Camelot.
    We eat ham and jam and spam a lot.

    We’re knights of the Round Table.
    Our shows are formidable,
    But many times we’re given rhymes
    That are quite unsingable.
    We’re opera mad in Camelot.
    We sing from the diaphragm a lot.
KNIGHTS: 
    In war we’re tough and able,
    Quite indefatigable.
    Between our quests we sequin vests and impersonate Clark Gable.
    It’s a busy life in Camelot.
MAN:  I have to push the pram a lot.

Now, my version –

The Executive Committee Song

We preside at the boardroom table
Deciding programs to enable
But oftentimes we commit white crimes
By embezzling what we’re able
We love our life in the corporation
It’s like having our own little nation
 
Our lives are like a fable
We own way more  than what’s comfortable
Like private jets and costly (female) pets
Hey, some of us even have a stable
A top executive in a corporation
Deserves lots and lots of adoration
 
Yes, we preside at the boardroom table
Determining which jobs to disable
We love the big pay-offs of big lay-offs
As our stock price becomes more stable
(and our options more valuable)
An executive in a corporation
Is quite a desirable occupation