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November 26, 2006

Honest Problem Solving

Problem definition is among the most critical -- essential -- elements of effective problem solving. Taking the time, putting in the effort and gathering as many views as possible about the nature of the problem at hand dramatically increases the odds that effective solutions will be found. As a quick illustration, consider the family who, month after month, see themselves falling deeper in debt. Does this family have a credit problem to solve or a spending problem to solve? The airwaves are filled with commercials offering to help such families solve their credit problem -- an indirect, anecdotal piece of evidence that a whole lot of families in this situation are choosing to define their problem as access to credit instead of finding different approaches to spending. Until the families change the way they define their problem, the odds are against them finding solutions that work.

That's plain common sense.

So, what are we to make of these sentiments from Senator Chuck Hagel on the problem we call Iraq:

"The time for more U.S. troops in Iraq has passed. We do not have more troops to send and, even if we did, they would not bring a resolution to Iraq. Militaries are built to fight and win wars, not bind together failing nations. We are once again learning a very hard lesson in foreign affairs: America cannot impose a democracy on any nation -- regardless of our noble purpose.

We have misunderstood, misread, misplanned and mismanaged our honorable intentions in Iraq with an arrogant self-delusion reminiscent of Vietnam. Honorable intentions are not policies and plans. Iraq belongs to the 25 million Iraqis who live there. They will decide their fate and form of government."

Problem definition: We've got to move beyond noble purpose and honorable intentions if we are to find a solution to this problem.

That, of course, is dishonest. Senator Hagel knows very well that the government of George W. Bush did not enter Iraq with a noble purpose or honorable intentions. The record shows that less than two weeks after taking office, the Bush Administration began plans for "taking out Sadaam". It used 9/11 to push those plans forward. They lied about WMD. They lied about Sadaam's connections to 9/11. They lied about Sadaam's connection to al-qaeda. They lied about the cost of the war. They lied about their preparedness for the post-war occupation. They lied about how things were going. They lied about their questionable methods, such as those used at Abu Ghraib. They continued to change the definition of the problem they were seeking to solve (e.g. what constitutes 'victory') and misrepresented and lied about how they described the situation in order to fit the message of the day. Throughout the affair (and as recently as a month ago in the run up to the mid-term elections), they demonized as traitors anyone who did not agree with their lies.

There were no honorable intentions. There never was a noble purpose. Quite the opposite. Yes, there was ideology. But, ideology and noble purpose are not synonyms. Did Hitler have a noble purpose? Did Stalin? Would you call the events triggered by the madness of Rev. Jim Jones linked to a noble purpose? How about Osama bin Laden? Noble purpose? Honorable intentions?

The Bush Administration defined the problem to be solved in at least three ways: First, to win and retain political power in the United States. Second, to "take out Sadaam" as part of Rumsfeld's 21st century military vision. And, third, to strike anywhere and everywhere that, famously, there was even a 1 percent chance that anti-Americanism and/or terrorism could be found.

There is nothing either noble or honorable about any of this.

And until folks like Senator Hagel rid their problem definitions of perpetuating these lies, the big lie of honorable intentions and noble purpose will continue to cloud our capacity for clear problem definitions and clear problem solutions.

We will make much faster progress when people like Senator Hagel find the stomach to acknowledge the full picture. The Senator correctly describes the actions of the US government when he writes: "misunderstood, misread, misplanned and mismanaged."

Now, the Senator -- and others -- must also speak as clearly about the fact that the Government of The United States acted dishonorably and did so with purposes linked to power, greed and arrogance. If our government is now to move forward, it must do so with a renewed fidelity to the rule of law and our historic aspirations toward decency, fairness, tolerance and liberty and justice for all. And the first and truest step toward doing this is: stop lying.

Our government has acted wrongly. And like a family who continues to seek easy credit instead of taking responsibility for spending, we will not find workable solutions to the mess we've created if we perpertuate the dishonarable lies that produced this mess in the first place.

When one reads Senator Hagel -- especially when he concludes on the note of supporting the Baker-led Iraq Study Group - one sees that the real problem being defined is still the first plank of the problem as defined by George W. Bush's crowd from the beginning: how to win elections and retain political power in the United States? How to spin the messages through our media and political markets about Iraq in a way that will let political leaders who compete in those markets -- as well as the media companies and their celebrities who have replaced news with promotion -- get the troops home without acknowledging that those same troops were sent off to fight, get injured and die for a lie.

Senator Hagel -- and James Baker -- are seeking access to more credit. And they most definitely are not prepared to take full responsibility for our spending problem -- i.e. what's been and will continue to be spent in blood, treasure, values, the rule of law and our national honor and decency.

Posted by Doug Smith at 12:45 PM | Permalink

November 25, 2006

Day Of Reckoning

The United States remains one of the rare -- and certainly the largest -- pharmacuetical markets where government has refused to step in to curb pricing and other practices. Defenders of these practices point to the ideological instruction of shareholder value extremism: we must have free markets in which companies use profits and capital to innovate through research and development that, in turn, bring us ever new and more effective pharmaceuticals. The problem, of course, is when any single answer -- in this case profits and shareholder value -- is repeatedly used like a catechism without reference to it's actual, fact based effects, even the constructive aspects become emptied of all reason, all possibility.

Should we construct our affairs so that pharmaceutical companies make profits and offer an attractive return to those who provide them capital?




Should we construct our affairs so that pharmaceutical companies drive profitability through kick-back like rewards to doctors who promote their high priced drugs, research and development trials conducted without oversight by independent agencies with sufficient resources to maintain objectivity, campaign funding provided to politicians (who declare themselves anti-science) in exchange for extending legalized monopolies needed to support high prices, product development processes that favor marginal advances on existing drugs over fundamentally new drugs (including life-style drugs instead of life-saving drugs), marketing and advertising campaigns that draw attention toward life-style and away from real need, and, finally, legislation that sets up complexly regulated distribution of drugs to older folks who neither themselves (nor their adult children) can even ever hope to understand -- and all because each and every one of these practices and more help pharmaceutical companies do in the United States what they cannot do elsewhere: make unsustainable profits?

Should we continue to allow all of these usurious and unethical practices?


The free market crowd of zealots have become so detached from the facts on the ground about how markets actually operate that it comes as no surprise that Big Pharma is gearing up to fight against allowing for the free market importation of lower priced drugs from Canada.

Here's the problem. If you're an executive in a Big Pharma company, you know that the United States market is your last, best hope for sustaining unethcially high prices and shareholder value. Why? Because other markets are now 'off limits' to such practices because the governments in those marekts have chosen to blend their concern for Big Pharma profitability with their concern for the health and well being of all of their citizens (not just the top 10%).

For the red meat eating ideologues out there, please re-read: these governments blend their concern for profits and people. Blend. They do not prevent or advocate or wish that Big Pharma become indigent groups operating at unsustainable losses.

No. They wish for and hope and listen to reason to help Big Pharma and all private sector companies make profits -- reasonable and sustainable profits. Because that's how markets work.

But, these other governments -- unlike the government of the United States -- have said "No" to single answer, shareholder value extremisim. They know that this form of extortion is no more sustainable than continual, persistent losses.

So, if you're a Big Pharma exec and you look at the markets around the world and you see that, for the most part, your profits will be hemmed in except for one -- the US -- then what do you do?

You put the peddle to the metal in the US and do whatever it takes to drive as much profitablity as possible out of this last 'frontier'. Do the math! If you have 10 markets and 9 of them -- at best -- would produce, say, 10% return on investment while your financial markets are 'demanding' you maintain 25% in total -- then you better get a heckuva lot higher profitability out of that 10th market if you hope to make the total performance meet these expectations.

So, when a mid-term election shifts Congress from R to D, and the D group knows there's not much reality left to what we used to refer to as 'middle class' -- quick fact: the top 1% in this nation have 40% of the assets and they can definitely afford the high prices of Big Pharma's US market drugs while the lowest 60% of families have 1% of the assets and cannot -- and this D group identifies the free market idea of importing lower priced drugs -- well then the 'free market' Rs and their Big Pharma paymasters are going to go to work quickly to ensure that free market thinking like the D's offer do not imperil the 'free market' profits of the status quo.

Posted by Doug Smith at 12:19 PM | Permalink

November 19, 2006

Invest Today In A Free Press

How would you like to invest in the growth of an independent press? Well, go to the Media Development Loan Fund today and you can do just that by putting your money in a safe, low yield bond.

Over the past decade, MDLF has provided low-cost financing and technical assistance (learning related to financing, distribution, business planning, etc) to more than 50 independent media companies -- radio, TV, newspaper, internet and more -- in nearly a score of nations in Asia, Latin America, Africa, Central Europe, Russia and elsewhere that are transitioning toward the possibilities of democracy.

MDLF provide both low cost loans as well as takes equity stakes. They, in turn, use innovative instruments to gather the capital needed for their important work. In particular, with the participation of major financial institutions, MDLF offer investors low interest returns (e.g. up to 3%) in safe bonds -- what they call 'social bonds'. In effect, you can invest in press freedom around the world.

Posted by Doug Smith at 01:33 PM | Permalink

November 14, 2006

Market Magic

See my article in Slate about how we can use the idea of "dynamic deductibility" to create a new kind of security around the right to trade the timing and size of a charitable deduction -- and, thereby, foster a real capital market for non-profits.

Posted by Doug Smith at 01:40 PM | Permalink

November 12, 2006

Six Sigma Upside Down

Six Sigma programs have been a common aspect of the quality movement that swept industry over that past twenty years. Among the key principles of these programs are (1) all work can be described in terms of step-by-step processes; (2) there are always 'customers' of these processes (that is, people, whether inside a company or, more traditionally, beyond it like real customers) who receive the benefits of the work at hand; (3) defects or errors matter to these customers; (4) data can be kept about such defects; (5) a variety of problem solving and improvement efforts can be made to continuously root out the causes and eliminate such defects; and, (6) those involved will do better if continuously challenged to reduce the number of defects.

Six Sigma itself is a statistical notion conveying that there will be less than 3.4 errors or defects for every milllion opportunities. This is a steep mountain to climb. Still, as an aspiration, it has vastly improved the quality of work over many years now -- especially when combined or driven through an expectation of continuing reducing the number or incidence of errors at some rate (e.g. every year cut defects by 70% or 90% or some other goal).

The six sigma statistic crossed my mind while reading about the track record of the federal and state Road Home program designed to help Katrina victims with the money needed to repair or replace damaged homes. Whether organizations are governmental or private sector, one doesn't expect six sigma performance in an effort only 14 months old. 3.4 four errors out of a million opportunities would be too high a bar.

Still, it came as a bit of surprise that, in a process essentially aimed at providing money to needy homeowners, the pace at getting it wrong would be so wildly at odds with six sigma. Indeed, the numbers turn six sigma on its head. Instead of getting it wrong 3.4 times out of million, this program has gotten it right only 22 times out of 79,000.

Only 22 home owners have actually received cash -- out of nearly 79,000 who have applied.

In six sigma upside down terms, this translates as "of every million opportunities to get it right, those doing the work in the Road Home program succeeded 278 times."

So, here's a suggestion to the Road Home program:

Invite all who have applied to the program to a football stadium. Ask them to use their application as their ticket to get in. Take the $7.5 billion allocated to the program, divide it up by the projected number of those in attendance, put that amount in a cashier's check on the stadium seats, provide some entertainment and call it a day.

Will there be defects?

Will there, for example, be folks who spend the money on something other than home repair or rebuilding? Will there be folks who shouldn't get the money? Will people get the wrong amount of money?


But, here's my guess: The number of defects will be far lower than the current rate of getting it wrong at a pace of 999,732 times out of a million.

Posted by Doug Smith at 12:26 PM | Permalink

November 11, 2006

Note To Joe Nocera: Almost There

Joe Nocera of the The NY Times visited the annual Corporate Social Responsibility conference this past week and came away dazzled by the paradoxes. The contradictions would have been hard to miss. For example, what must Joe have wondered as he spoke to Exxon Mobil's and Chevron's corporate social responsibility representative the week following the Stern Report catalogue of the catastrophic risks of continuing to treat environmental damage as an externality. Ditto for Pfizer's 'do-gooder' who, as a person undoubtedly seeks to better human kind and cannot be held individually accountable for his company's maniacal focus on bottom line practices such as kick-back like rewards for doctors who push Pfizer products, research and development trials conducted without objective oversight, campaign funding to politicians who support extending legalized monopoly, product development efforts aimed at minor improvements over fundamental innovation, and marketing campaigns that draw attention away from health risks while misleading consumers about the actual costs of new drugs.

Ditto for Ford Motor Company -- whose advertising mantras for years and years (e.g. "No Boundaries") use the imagery of pristine environmental experiences to push gas guzzling SUVs. Or, how about General Electric? Having fouled the Hudson River for decades, GE poured tens millions of dollars into delaying court-ordered cleanup and miselading the public about it's actions because, from a shareholder point of view, the costs incurred in delay outweighed the costs of the clean up. McDonalds? The same week it's representative chatted about the company's sense of social responsibilty at the NY City confab, McDonalds was also funding the effort to fight a NY City ordinance banning transfats.

The list could go on. Joe could not avoid the paradoxes. When, for example, the McDonald's rep claimed corporate social responsibility is "core to the way we do business", Joe noted: "You could wonder about that."

Nocera picked up this theme again in his conclusion. Having ceaselessly breathed in paradox and contradiction, Joe opined that for companies to become substantively responsible -- as opposed to PR-oriented "responsible" -- would demand all responsible values become core to those companies' business models.

Hurrah for Joe! He is dead on correct. Now, Joe, go back, re-read and re-think this declarative statement you make earlier in the article:

"Do shareholders come first -- above other stakeholders (another favorite buzzword at the conference... encompassing customers, employees, activists and so on)? Of course."

Joe, Joe, Joe. There can never -- never -- be fundamental change to the core business models if shareholders come first and their concerns are the trump card of any discussion. Never.

But, Joe, listen up carefully. This last comment does not reflect today's either/or orthodoxy. The orthodoxy embedded in your all-too-facile "of course". The orthodoxy that insists that either the shareholder comes first. Or the shareholder comes last.

No. The shareholder cannot come last. We saw a long run of the poor consequences from the 1950s through the 1980s of what happens when the shareholder came last. We must pursue shareholder value. We must celebrate shareholder value.

But we must not make shareholder value the trump card of all human affairs conducted by business -- especially if we, as I think we should, choose capitalism as an essential philosophy for the well being of the planet.

Joe, if you are to help us change the core business models then you've got to erase your robocall "Of course" about the primacy of shareholder value. You've got to think again and somehow, some way discover the more profound declaration that the shareholder, like other core constituencies, must abide in equivalency of importance. The shareholder does not come first. Nor does the customer come first. Nor does the employee come first.

The shareholder does not come last. Nor does the customer come last. Nor does the employee come last.

Sustainable and ethical corporations must shift their core business models to this formulation: "Shareholders provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who..... and on and on."

That is an ethical and sustainable scorecard. And it reflects this unprecedented and undeniable fact of the 21st century human condition: we live in a world of markets, networks, organizations, friends and families in which our organizations are the new communities that determine the fate of our planet. Our primary ethical challenge can only be met when organizations reintegrate our legitimate concern for value with our equally legitimate concern for other values. Failing this, our most dominant organizations -- for-profit enterprises -- will continue putting value first and, thereby, continue propelling our global society toward social, environmental, political and economic disasters.

Joe, consider only this illogical aspect of your all-too-easy-and-orthodox "of course": Who are these shareholders who come first? I'm imagining you are a shareholder. But, let me ask this, are you a customer? Are you an employee?

Put differently, does Joe Nocera the human being come first? Or, do your concerns only matter to the extent that you happen to own stock in one more enterprises?

Should we put one of our dominant shared roles (investor) above the other dominant shared roles of our new age of human kind (employee, customer, family member, friend)? And where does that leave the extraordinary number of folks on this planet who are not investors?

Joe, if we wish to take your constructive insight about changing core business models as an essential condition to the fate of this planet, then we must move beyond either/or-ism to both/and. We must not elevate any role to trump card status while also avoiding subordinating any role as a last concern.

We must learn to practice the new golden rule: "As employees do unto others as customers, investors, family members and friends what we would have them do as employees to us as customers, investors, family members and friends."

When the employees and executives of Chevron, Exxon Mobil, Pfizer, Ford, General Electric and McDonalds begin practicing this golden rule in earnest, we'll all witness social responsibility (as well as environmental, medical, legal, political, technical, family, spiritual and economic responsibility) blended into the daily lives of those who make, sell, distribute and service the many good things we depend on for leading our lives.

We will experience and have good things to have that are truly 'good'.

Posted by Doug Smith at 12:44 PM | Permalink

November 09, 2006

Grounded and Clear

Effective communication demands being both grounded and clear. Communicators who are grounded convey -- and are in fact -- deeply rooted in their conviction about what they are saying. Listeners get a sense those roots go deep -- very deep into the ground on which the speaker stands. There's a strong message in this: unshakeability. (Notice, though, that unshakeability does not have to equate with stubborness or obstinancy. I can be unshakeable in what I'm conveying AND also be unshakeable in my openness to considering alternatives).

Effective speakers are also clear. By clarity, I mean the words used spell out in straight forward, understandable and logical fashion what it is the speaker is saying.

Being both grounded and clear does not insure those listening will agree. But it does insure they will believe that you as the speaker know what you are about and are committed to your point of view. When Rush Limbaugh recently disparaged Michael Fox for Fox's pro-stem cell research commercial, Limbaugh was both grounded and clear in his disparagement. He was deeply rooted in his own conviction that Fox was using his disease as a ploy and Limbaugh was also clear about how and why Fox was doing this.

As a listener, I found Rush Limbaugh's grounded and clear sentiments in this case to be yet one more piece of evidence that Rush Limbaugh is a repugnant, despicable man. Still, he got his message across because he was grounded and clear.

Speakers who are grounded yet unclear, or who are clear yet ungrounded, or who are neither grounded nor clear can never hope to to elicit an effective response -- whether that response is agreement, disagreement or a blend.

Instead, such speakers betray their own lack of conviction and/or understanding in what it is they are saying. When, for example, President Bush chose to read a prepared statement about dumping Rumsfeld at yesterday's press briefing, Bush immediately showed he was neither grounded nor clear about his action. In contrast, his defense of Rumsfeld for the past few years was a much more grounded and clear communication. He didn't need notes. The message was grounded and clear: Rumsfeld is doing a great job and he's staying.

Yesterday's use of notes dumped all that. And, if you had the chance to see Bush, you also saw that he could barely keep his feet planted behind the lectern -- let alone firmly rooted there. His body language was as muddied as his verbal language.

Like the example of Limbaugh's contemptible words about Michael Fox, Bush's years-upon-years choice to stick with Rumsfeld was, to many, a tragic case of poor leadership. But he was grounded about it. He was clear. We knew where he stood.

All we know now is that he's extraordinarily uncomfortable about dumping Rumsfeld. He doesn't really believe in it. And he isn't totally sure why. He may be doing what others have advised (or, less kindly, told him to do).

But we'll have to watch the coming days, weeks, months and two years to find out if George W. Bush can regain his footing and his clarity about what he and his Presidency are all about. That tens of millions of Americans may well disagree with any formulation he re-discovers is a separate issue from whether the man himself can ever communicate effectively about what, why and whether he has any purpose to his life.

Posted by Doug Smith at 03:28 PM | Permalink

November 08, 2006

Moving The Foul Lines

This past Sunday, the local newspaper endorsed the incumbent Congressman John Sweeney against his challenger Kirsten Gillibrand. Throughout his career in politics, Sweeney has repeatedly behaved in ways that raise questions about his character -- incidents suggestive of problems with alcohol, a variety of questionable fundraising and lobbying practices, and violent behavior -- including a report of domestic violence in December 2005. He has never, however, been charged with any specific crime.

He did, though, rise within the Republican-controlled Congress. As the endorsing editorial noted, he held a position of power that could benefit bringing home the bacon to his district. And, with regard to Iraq, the endorsing editors noted that, while Sweeney has voted with Bush, he had recently questioned the wisdom of some of the choices made by the Bush Administration.

On the other hand, the endorsing editors went on to point out Ms. Gillibrand had lived much of her adult life outside the Congressional district and had failed to run for a more local office.

The day after the endorsement, a group of leaders met with the endorsing editors to criticize their choice -- mostly because of Sweeney's domestic violence incident -- an incident that Sweeney first denied, then acknowledged, then denied, then acknowledged, then refused to cooperate with.

The endorsing editors told their visitors that, while they appreciated their concern, they believed they had made the correct endorsement because Sweeney has not been charged with any crime.

So, there we have it. The foul lines on what is permissable to consider about questions of character -- at least for sitting members of Congress who have power to bring home the bacon -- has moved. If you are a challenger, you can be judged not ready for office because you've lived most of your adult life outside the district and you haven't earned higher office by holding more local office. If, however, you are a powerful, sitting member of Congress, you deserve re-election so long as you haven't been charged with any crime.

Posted by Doug Smith at 01:35 PM | Permalink