We All Want To Live The American Dream

Just when I thought I had read up enough to understand what caused of the financial crisis that led to the actual or near collapse of some the major financial institutions, the Foreclosure Flap reared its ugly head, telling me that the underlying problems could be deeper than we’d realized.  We may have put out the fire caused by all the mortgage backed securities (a.k.a. toxic assets) but hot ambers are still smoldering and could break out anytime and burn us again.

What has been most shocking is that the problems are occurring in the United States of America which pride itself as being a nation of laws.  A look at the train wreck of the mortgage mess reveals a chain of dishonesty and a disregard of the laws that send shivers up and down the spine. The image of reliability, trustworthiness and enforceability of deals and investments in the US has been severely damaged as a result. 

Having laws but not the desire or the means to enforce them renders the laws simply useless.  As the former Chairman of the Fed has discovered, expecting the financial industry to self-regulate was a mistake.  It is akin to asking a drug addict to take charge of a warehouse filled with drugs.  Sadly, the people elected to positions of power AND responsibility took the first and forgot the latter.  They eliminated regulations that were designed to protect the average man on the street and they denied funding to those agencies that were set up to ensure adherence to the laws and regulations.  By demonizing “government” they chipped away at the rules that had been been carefully crafted to protect the innocent.  Corporate profits became their sole obsession and expanding that their only mantra.  In essence, they sold out the very people that had elected them into positions of power and opted for corporate welfare instead of helping the average American get closer to achieving their American dream. 

For most Americans, the “Pursuit of Happiness” entrenched in the Declaration of Independence translates to ‘living the American Dream’.  In the majority of instances, it simply means a decent job, a house, a spouse, two kids (and maybe a dog) and a car.  That simple dream is now more remote than ever before.  The so called ‘middle class’ is fast shrinking as decent paying jobs and industries have migrated overseas.  Graduates with higher degrees (and big student loans to go with them) often find themselves fighting for jobs that barely pay their living costs.  Their employers have higher productivity expectations and the longer hours at work often translates into less quality time with family and friends.  The wealth gap in America is rapidly increasing and the pendulum must start swinging the other way or something will break very soon. 

To turn the tide, our elected and appointed officials cannot continue doling out cash (remember the bailouts?), concessions and tax breaks to the big corporations and banks unconditionally.  Yes, we want them here and we want to help them succeed but we want them to be good citizens as well, providing decent jobs and paying their fair share of taxes.  Their focus cannot be on the short term profits alone – the longer term well being of the US consumers must be part of their priority too.  The US consumers cannot consume unless they have the ability to do so and fundamentally that means a steady job with a decent pay.  Flipping burgers and temporary jobs don’t make the cut.

We need to figure out what the appropriate criteria of a good Corporate Citizen should be and start enacting rules to bring that about.  Corporations that do not meet those expectations should be taxed at a higher rate or not be allowed access to the same incentives that Corporations that do. 

As a start, Companies that do not pass an American Content test (US employment and product component percentages) should be made to pay a penalty in the form of a surtax.  All companies closely monitor their employment numbers and their product content makeup so introducing a requirement that they disclose those numbers in their quarterly and annual reports should not result in any additional cost to the corporations.  Such a rule should not impact the small and medium sized businesses that have all or the bulk of their production and employment in the US.

Those who are in bed with the big corporations would decry this proposal as being protectionist.  We must peel away the rhetoric about protectionism and see that not all such rules are necessarily bad – lawyers, doctors and accountants from other countries can’t legally practice their profession in the US unless they have the necessary US training and certification.  Take away those protections and their jobs would quickly be outsourced to lower cost countries as well.

We’ve tried the carrot without the stick approach and we know that it does not work.  Corporations took full advantage of the system and did all they could to make their profits private and their losses public. 

However the winners or the losers of the mid-term elections choose to frame it, the exit polls point out that the real anger at Washington is about bailing out the big corporations at the expense of the American people.  We’ve saved the mega banks, the insurance companies, and the auto-manufacturers and we’ve pumped cheap cash at them but where are the jobs?  US Corporations are reporting higher sales and bigger profits but where are US based jobs?  Retirees who depend on income from their savings have seen interest rates plummet to near zero and they have had to rethink their retirement but where are the jobs for their grandchildren who are entering the workforce?

The late Ted Sorensen, who helped compose JFK’s inaugural address and the exhortation “Ask not what your country can do for you”, once wrote: “Government must give priority to the needs of ordinary citizens, workers, consumers, students, children, the elderly, and the ill, the vulnerable and the underdog, and not to the needs of those already sufficiently powerful and affluent to afford their own lobbyists.”

We all want to live the American Dream.  It should not be an impossible dream or one that is reserved for only the elite and the rich.  Take away the American Dream and you take away the hope of a nation. 

Dear World – a letter from America

Dear World,

Despite what you’ve seen or heard on the news lately, America is not what some fanatics would make it out to be.  Yes, there are the few loose nuts who made the headlines lately with their rants and the rather frightening and unreasoned blabbering.  Please just ignore them. 

Unfortunately, our media (notably our TV media) is constantly and desperately seeking to outdo each other in being the first to air the latest exciting news.  In doing so, some networks have opted for sensationalism and have forgotten what journalism is all about – informing the public of worthwhile news and analyzing, printing or airing topics that are important for the welfare of the nation and the general public.  Topics get old very quickly on a 24-hour TV news cycle and there are insufficient breakthroughs in medical research, weather and climate changes, development of new technologies, etc., to fill up the air time.  In their desperation to stay exciting in order to grab a bigger viewership and more advertising dollars, they have resorted to giving voice to attention seekers of all sorts.  Consequently, more and more TV “news” programs have taken on a tabloid characteristic.  If you are not one to fall for the “exposés” in supermarket tabloids, you shouldn’t fall for all the sensational news items on TV channels either.

Please, look beyond the obvious.  I am a hundred percent sure that if you take a closer look, you will find that there are, in reality, many times more sane people than the insane ones.  It is just that the sane ones aren’t as vocal or they find it harder to get the media’s attention.  On TV, sane and normal are not as audience captivating as the wild and unbelievable.  TV show producers love the “exotic” acts - those who would do anything to get their five minutes of fame in front of a camera.  What’s better for the networks’ bottom line than if they don’t have to pay for those acts?

The early settlers in America had left their homeland for the new world so that they could practice their faith free from the oppressive powers that controlled Europe back then and, when America became an independent nation, the founding fathers of the nation followed that same instinct and spirit of freedom and the authors of the US Constitution entrenched in it certain fundamental rights for all Americans, including the freedom of religion, freedom of speech, freedom of the press, freedom of assembly and the freedom to petition.  As a result of such freedoms, we can express our dissent without fear of arrest and incarceration.  Those freedoms, as you may have noted, are essentially freedoms of expression and do not extend to include acts of violence.

We can’t really silence the few individuals who are vocal and whose incantations are welcomed by the media.  We can only seek to expose their falsehood and lies by speaking out (or writing) against them, arguing our case with facts and good logic.  Exercising those same freedoms, some Americans voice their opposition to the offensive speeches through counter demonstrations and marches.  Sadly, there are also those who are in positions of influence and responsibility who choose to remain silent instead of bringing a reasoned voice to the debate. 

Freedom has a price and democracies are messy but the alternatives are oftentimes worse. 

America has shown and continues to show its true heart and compassion when disasters strike in other countries.  With little hesitation, Americans jump in to help rescue and treat victims of earthquakes, Tsunamis, floods, AIDS, and other disasters.  Because we’re essentially a mixed bag of immigrants from all over the world, anytime a disaster happens in some corner of the world, we feel it and we feel engaged and involved.  Although we are American citizens, we treasure the heritage and culture of the countries that we or our parents or their parents came from.

We are a nation of workers and our lives are not very different from yours.  We love our children like you do yours: we clothe and feed them, we send them off to school and we hug them and kiss them goodnight when bedtime comes.  We make mistakes (hopefully not too often) and we try to remedy them.  We do our best to learn from our mistakes and we try not to repeat them.  Sometimes we succeed and other times we fail but we don’t give up on trying.  When we fail, we laugh at ourselves and we try not to take ourselves too seriously.  We cry over the loss of a loved one and we sympathize with others who have experienced a personal loss.  We are excited at the success of someone we know and we root for the ‘underdog’ who is trying to beat the odds and come out on top. 

Our hope is that you will not listen to the few fanatics and false prophets who would exploit the sensitivities of others for their own glorification.  Don’t give credence to them or use the mindless words of the few crazies against all Americans.  Our appeal to you is to tune them out, just as you would tune out those among you who seek only to provoke and to incite others to no good.

Remember: not everything you see on TV or read on the Internet is real. Be sure that there is a hidden plot or lots of clever editing to keep the viewers or readers enthralled.  Just as you have learned to discern what’s real and what’s not on “Reality TV” shows, you must apply the same thought logic to what you see or hear on the news.

“Finally, whatever is true, whatever is honorable, whatever is fair, whatever is pure, whatever is acceptable, whatever is commendable, if there is anything of excellence and if there is anything praiseworthy-keep thinking about these things.”

Your friend,

America

[Quote taken from the letter of Paul to the Philippians]

The Power of Perception

A friend recently forwarded me a short story that has probably made its way around the Internet a few times but is nevertheless refreshingly poignant each time I get to read it. 

It goes like this:

A young couple moves into a new neighborhood. The next morning while they are eating breakfast, the young woman sees her neighbor hanging the wash outside.

"That laundry is not very clean", she said. "She doesn't know how to wash correctly. Perhaps she needs better laundry soap."

Her husband looked on, but remained silent.

Every time her neighbor would hang her wash to dry, the young woman would make the same comments.

About one month later, the woman was surprised to see a nice clean wash on the line and said to her husband:

"Look, she has learned how to wash correctly. I wonder who taught her this."

The husband said, "I got up early this morning and cleaned our windows."

The moral of the story was summed up as follows:

And so it is with life... What we see when watching others depends on the purity of the window through which we look ...

(In the interest of fairness, the roles in the story can be switched.)

What fascinates me about the story is that it is so appropriate in this “Information Age” which, unfortunately, is filled with an equal or greater amount of Misinformation – distortion of the truth that is designed to mislead.  The Internet has enabled the explosive spread of all types of misinformation, of distorted half-truths and, worst of all, hate speeches – cleverly disguised so that they are not perceived as such, but rather as ‘shocking revelations’, some cross-referenced to external sources to make them appear authentic. 

It is easy for anyone with an agenda to put his or her thoughts up on a Blog and it is even easier to forward an email on a topic that is crafted in a way that pushes across a viewpoint that we favor.  Very easy and, sadly, too dangerous.

We don’t see or hear the word “propaganda” being used much these days.  The specialists prefer the more updated and less derogative term “spin”.  Either word means the same thing: publication and dissemination of distorted information with the objective of misleading.  In Propaganda and Persuasion, the authors Garth Jowett and Victoria O'Donnell defined it as “the deliberate, systematic attempt to shape perceptions, manipulate cognitions, and direct behavior to achieve a response that furthers the desired intent of the propagandist”.

Paul Joseph Goebbels, the Minister of Propaganda in Nazi Germany, once said, “If you repeat a lie often enough, people will believe it”.  A similar quote “A lie told often enough becomes the truth” is attributed to Lenin, the Father of the Soviet Union.

The intent of spin or propaganda is not simply to change your perception.  The ultimate goal is to get you to act based on those perceptions.  Therein lies the danger of blind faith – believing everything that we read or hear is true WITHOUT taking the time to do some fact finding and weighing the plausibility of the information before us.

Not all of us are born skeptics and we have a natural inclination to believe that other people are, in general, truthful.  That perception of honesty is what scammers and con artists base their schemes on.  They take an element of truth or fact, embellish it with touches of exaggeration and arrive at a story that is believable to the naive and those who, for one reason or another, need those fabrications to be reality.  Look at the supposedly sophisticated individual and institutional investors that put millions of their savings with Bernard Madoff.  Look at the billions lost in the supposedly Triple A rated (investment grade) securities based on sub-prime mortgages and over-inflated asset values.

A decade of economic growth tilted our perception on real-estate values and we ignored the probability that an explosive growth in values is unsustainable and is indicative of a bubble.  Those who came out against the cuts in interest rates as real estate values became over inflated were decried as doomsayers who are anti-American and anti-business.  More spin and lobbying led to loosening of bank regulations and Investment banks were able to take their leverage ratios to uncharted areas, and when that was not enough, moved the risky assets off their balance sheet so that they could go for broke.  Unfortunately, they did and had to be bailed out with taxpayers money.  What about those bonuses that were paid out of the banks’ so called “profits” before they went bust?  The spin they want you to believe is that they earned it and there is no way to for the taxpayers to recover those bonuses – not even if they were based on fraud…?!?!

Beware of the Power of Perception.  The only tool against being misled (yet again) is to spend time evaluating the spin and to research the facts. 

Bring out that power-washer and clean your window….!!

The S.S. USA

While searching for a new topic for my blog, one thought that struck me over the Independence Day weekend is that this historic event that we celebrate each year is all about Choices.  The founding fathers of this great nation chose to be free from the oppression of the colonial masters and to be able to set off on the pursuit of equality, life, liberty and happiness.  Generations later, those pursuits continue and the ideals have not faded. 

As we try to find our way through the present period of economic uncertainty, high unemployment, soaring budget deficits, two drawn out wars, and a whole financial mess brought about by the housing bubble and unbridled greed, we are faced with choices that we must make.  Some of the choices will be hotly debated by people on both sides of the political and economic spectrum.  A healthy debate is always good but we must not let it turn into a mud-slinging match or allow ugly words and unfounded accusations tear us apart.  None of the choices will be easy and some will, with certainty, be painful but inevitable.  What is key to the success in our march forward is for everyone to grasp that we’re all in it together – we can either sink or swim.  As in generations past, we will need calm hearts and cool minds to make the balanced set of choices that will bring us safely back into harbor. 

To understand the dilemma we’re in, we need only to imagine that all of us are passengers aboard an ocean liner, the "S.S. USA".  There is a big gash on the side of the ocean liner and the ship's crew is fighting to keep the ship afloat.  We can opt to vent and scream at what the crew members are doing about the situation but that would clearly be not helpful.  Neither would throwing all of them overboard. Running a ship, let alone saving one, is not a simple task.  Blocking others from acting or doing nothing or simply hoping for a passing ship to come to the rescue are not the smartest moves either.  What we need are calm heads, constructive ideas (not rhetoric), and healthy debates that lead to smart choices.

Justifiable anger has been and continues to be vented against those who had helped create the financial mess and at the corporate executives at those ‘too-big-to-fail’ entities that had to be bailed out with taxpayers’ money.  To be clear, I don’t like government bailouts of private enterprises any more than the person next to me and I can’t agree more that none of the bail out moneys should have been used to pay bonuses to the same people whose callous actions helped bring about the crash.  That being said, the financial crisis called for quick thinking and difficult ‘on-the-spot’ choices had to be made.  Failure to act fast as the events were unfolding would have resulted in dire consequences and collateral damages too frightful to even ponder.  Imperfect as they were, TARP and the bailouts helped steady the S.S. USA so that it can be navigated back to shore.

I recently finished reading the book “Too Big To Fail” and it was an eye-opener on the behind the scenes dealings and decisions once the sequence of events that led to the collapse of Bear Stearns and subsequently Lehman Brothers started.  The heavy and momentous choices that the (then as well as the present) Treasury Secretary, the Chairman of the Federal Reserve, Congress, and the CEOs of the many financial institutions had to make at short notice, were mind numbing.  With hindsight, some might criticize those decisions but the reality was that time was a luxury they did not have. Events with potentially disastrous outcomes were happening at a rapid clip on a twenty-four hour clock cycle.  If nothing was done immediately, the destructive forces could have accelerated and spread across the globe in a more catastrophic manner.

What brought about the near financial crisis was a series of poor choices.  Homebuyers chose to borrow more than what they could reasonably repay even when they had jobs.  Mortgage brokers chose to falsify records or ignore sound financial requirements in order to close the deal and get their commission.  Investment banks chose to buy up those mortgages, repackage them as mortgage based securities - masking the high risk of default behind those mortgages - and sold them off to investors, earning a hefty fee in the process.  We could go on but I think the point has been made – poor choices can only lead to ruinous ends.

The frightening thing is that most of us will continue to make poor choices for selfish reasons and short term rewards.  Recent examples: We chose to punish those who are unemployed in this current economic downturn by cutting off their unemployment benefits.  We chose to rail against regulations and controls that are meant to better ensure we won’t have a repeat performance of the recent financial meltdown.  We chose to demonize healthcare realities and the inevitable end-of-life decisions we must all make.  We continue to choose to close a blind eye to the cost of unfunded programs and wars.

We can change the direction of the ship and steer it into a safe harbor by making choices that will shift the balance back towards a greater focus on the American people.  Our elected officials must make choices that will ensure that small and medium sized enterprises that form the backbone of the US economy have every incentive necessary to hire, train and retain staff.  Our appointed official must negotiate more balance trade agreements with other nations and ensure adherence.  As consumers, we must leverage our consumption power and choices to help keep good paying jobs in the US. 

Choice, after all, is what “Government BY the people and FOR the people” is all about. 

Remember, we are all aboard the S.S. USA. 

Putting People First

One of the most inspirational moments in my career happened when I was just a young accountant, starting off on a professional journey that lasted many years and eventually landed me in the United States. 

I was thrilled to have been invited to the company’s global seminar, held that year in Vittel, France, and I was totally wowed by the events and speeches but the special moment happened rather unexpectedly one afternoon when the founder and chairman and I were passing each other in a busy hallway.  He stopped to smile at me, reached out to put an arm on my shoulder and spoke with me for a few short minutes, asking me with an utmost sincerity how I was doing and assuring me that he appreciated my work and how important it was to the success of the group.

Imagine, the chairman of a global corporation stopping to give a moment’s attention to a little known employee from somewhere across the world !!  I did not get a pay raise but I was absolutely motivated to do more as a result of that encounter.  Maybe I didn’t or couldn’t work any harder after that but I have no doubt that the experience taught me how to be a more caring, approachable and effective leader. 

As we enter a new era of challenges as the economy slowly recovers from its dramatic downturn, corporations, executives and political leaders will have to learn new motivational skills.  If, as some economists have predicted, the rate of unemployment will remain stubbornly high for some years to come, wages will fall and that will in turn demoralized the workforce.  As their pocketbooks shrink, it will feed into the negative spiral downwards - corporations will attempt to boost profit margins by cutting costs, one of which may be through a greater exodus of jobs to countries with cheaper labor.  To break that vicious cycle, political and corporate leaders (the people with the means and the ability to influence the outcomes) will have to value the workforce in ways that they have not done in a long time.  Budgets will be tight (if they aren’t already so) and higher paychecks or benefits are harder to justify.  Absent those financial incentives, they will have to win their constituents’ trust, loyalty and hard work by demonstrating more of their humanity and show greater empathy and appreciation of their contribution to the company profits and to the country’s economy.  In short, they must learn to put their people first. 

I recently stumbled across an ancient Chinese philosopher as I was doing some personal research work.  Mozi (墨子) lived sometime between 470 and 391 B.C. and his teachings were quite startling and refreshing.  I was never much of a student of Chinese history when I was growing up so the discovery of other Chinese philosophers besides Confucius was a revelation of sorts.  If, like me, you’ve not heard of Mozi or his teachings before, it is quite fascinating to read.  The Stanford Encyclopedia of Philosophy has a write up about Mozi’s teachings.  [For a Cliffs Notes style summary of his teachings look up Mohism on Wikipedia.]

While imperfect, Mozi put forward certain thoughts that are worthy of further examination.  Among other things, Mozi taught that a leader’s role is to live up to a set of high moral standards that are inclusive and indiscriminate – and his followers would then emulate his example.  Failure to follow that principle would result in chaos and the loss of the leader’s mandate. 

In a section titled “Critical Assessment”, the author of the Stanford Encyclopedia’s entry wrote: “Model emulation is indeed a powerful educational process, as any parent knows, and many of our values and judgments are in fact learned by following the example of admired role models. Social coherence, peer pressure, and the approval of superiors are important motivational factors even for critical, reflective adults.”

If business leaders want to overcome the general perception that they are solely focused on profits and personal enrichment; and political leaders want to inspire their constituents to do greater good; they would do well to get down from their ivory towers and walk among the people and occasionally put an arm on a shoulder and offer that someone words of appreciation and encouragement.  As they see more of what the everyday man or woman has to go through to put a meal on their family’s dinner table, to put clothes on their kids and to send them off to school, they might regain their humanity and find it harder to justify the increasingly huge gap between their own paychecks, bonuses, stock options, etc., and the wages of the average workers. They will find it difficult to explain, to the people they have touched and connected with, why their jobs have been or will be sent overseas and they might even reverse the tide by bringing those jobs back to the US.  They will recognize that with a concerted effort by all, unemployment will ebb and consumer confidence and spending recovers, sales and profits will quickly grow again.

Half a century after Mozi’s teaching on inclusive care, Jesus taught his followers that there is no credit for loving only those who love them (Luke 6:32) and he gave us the “do as you would be done by” rule.  Our job on earth is to leave it a better place and we can only do that by putting people first.  Nothing is as important as how our actions (or a lack thereof) impact and affect other peoples lives.

Laws and Moral Obligations

Just because there are no laws about certain acts, it should not be interpreted to be a free-for-all, do as you please, wild-wild-west playground where the strong and the quick are allowed to prey on the less nimble and the weak.

Laws, rules and regulations cannot be (and we should not expect it to be) so comprehensive that it fully protects against every possible scam or scheme concocted by some clever guy who knows the rules and the loopholes.  Clearly, any rule that is comprehensive and complete would be so voluminous that it would be too costly for individuals and businesses to keep tab of and to adhere to.  It would be equally costly for the government to ensure compliance.

Even the Ten Commandments are merely broad, basic tenets to live by. “Thou shalt not kill” does not prescribe the ways that one can commit murder.  It wasn’t and it shouldn’t be necessary.  The intent is clear and we are expected guided by our conscience, our inner moral selves.

Where the law is silent, the unwritten moral code must come into play.  The question that we must always ask of ourselves is: “Is it morally correct to do this?”  It is hard to codify morals.  Even so, it is our duty to ask that question and apply the standard of moral that is appropriate, acceptable and expected of us.  The more power we exercise over others and the more our actions impact the lives of others, the higher that moral standard becomes.

The image of America and Americans in the eyes of the world suffers when, as a result of our actions (or inactions), a global crisis ensues.  Our struggle against terrorism will fail if the world perceives us to be worshippers of greed and gold, ready to sacrifice the well being of others for personal gains.  Capitalism without morals erodes the very foundation of our country, our unity, our strength. 

The founding fathers of the United States of America, in crafting the Constitution, began it with a short preamble that is just as important, if not more so than all the articles of the constitution that follows it. 

“We the People of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United Sates of America”. 

It is an emphatic summary of the overarching goals of the Constitution, the law of the land.  It underscores the moral objectives behind each article of the Constitution.  It brings out the need to apply the ‘spirit of the law’ – captured in the preamble itself - where the ‘word of the law’ is absent or silent on a particular issue. 

The success of America on the world’s stage stems from its willingness and ability to think and act for the common good of everyone; its generosity when calamities befall others; and its willingness to stand up and fight for freedom and the basic rights of ALL people, as if we are ONE people. 

When we look back at history, the defining moments of greatness and success are always associated with what one has done to establish justice… promote the general welfare of all people… and secure the blessings of liberty to ourselves and our posterity.  It is not “all about ME” and it certainly is not all about the millions in profits and bonuses that some would brag about. 

The success of an individual is measured not by his/her wealth but by his/her legacy of deeds that has benefitted others.  We can inherit wealth but we cannot inherit greatness. 

The goodness of our actions is not defined by whether it is legal but by whether it is moral.

Worst Case Scenarios

The best CEOs in the world – whether they run multinational corporations or small, growing businesses – are those who possess, among other traits, the ability to understand what the ‘worst case scenarios’ could be for their businesses and they keep a keen eye over those risks and exposures.  Like a hawk watching over its prey, they’ll swoop in with lightning speed and remove the threat preemptively. 

Sounds like paranoia?  Sure, but that is what it takes to successfully run a company and prevent the business from being overtaken by the competition and the ever-changing business landscape.  In almost every analysis of failed or failing businesses, the result will inevitably show that the managers and executives had taken their eyes off the risks. 

Everyday, businesses (and investors) take risk and they expect to be rewarded for doing so.  Risks are a normal part of business – whether it is in the form of new investments (assets, manufacturing plants and equipment) or inventory (stocking up ahead of the holiday season) or in granting credit (facilitating customer purchases), there are risks.  However, service and product pricing can only assume that there will be certain reasonable risks – otherwise, few people will be able to afford to buy the service or product.   The impact of a ‘worst case scenario’ (and varying degrees of that) must therefore be evaluated and avoided (where possible) or hedged against where the likelihood of it occurring is more probable than not.

Consider the car-manufacturing business.  For decades, fuel costs were low (some might even remember when a gallon of gas cost less than a bottle of Coke) and manufacturers had no worries about what could happen to their business model if the cost of gas doubled or tripled.  Despite the Clean Air Act of 1963 and the public’s support of the electric car, manufacturers that had leased fully working production models to the public removed them from the market.  They could not and would not imagine that the ‘worst case scenario’ would happen – that gas prices could go so high so quickly. 

When gas prices in the US started its fast track upwards and broke the $4 per gallon mark in the summer of 2008, gas guzzling SUVs and fancy big cars weren’t selling anymore and a paradigm shift occurred.  Hybrids cars went from being a fashion item to being a necessity and the return of the electric car became inevitable, sending those same auto-manufacturers scrambling back to their drawing board to come up with a product. 

Just as suddenly, automakers were faced with a credit crunch (thanks to the near collapse of the financial markets due to property speculation, sub-prime mortgages and collateralized debt obligations) at a time where declining sales resulted in a burgeoning inventory of unsold units on the dealers lots all around the country.  To make the whole thing worse, an increasing burden of pension obligations began to appear on their books (thanks to new financial reporting regulations) and forced those that were ill prepared or undercapitalized to file for bankruptcy protection.  The ‘worst case scenarios’ that they did not or would not permit themselves to worry about became a reality.  Lesson learned: one can only put off dealing with problems for so long - they will not go away and the consequences can and will likely become increasingly severe the longer we hold out.

The age-old adage “don’t put all your eggs in one basked” pretty much sums up what business need to be doing to stay ahead of the ‘worst case scenario’.   If and when the ‘worst case scenario’ happens, the business must not be found wanting.

Even in our personal lives, we need to always have an ‘exit strategy’ – just so that if ever the ‘worst case scenario’ happens, we know where we’ll end up and we have a ‘Plan-B’ that we can put into action. 

In learning how to ski, what stuck with me the most was the instruction I received on how to fall without incurring avoidable injuries and how to slow the fall or the slide down a slope and to get up and get going again. 

Parents have a tendency to be overly protective of their children.  Instead of teaching them how to anticipate problems and to cope in the event that bad and undesirable events took place, many parents do everything they can to put their child into ‘safe’ spaces so that their young would never have to deal with the disappointments in life.  In reality, they are only trying to spare themselves of the heartache and pain of ever seeing their own flesh and blood in a bad spot. 

My parents did not have the means or luxury of weaving protective cocoons around their children so they taught us the best way to cope, to fill our bellies when the rice jar was running low, to spice up the curry when there’s little to go with the rice on the table.  Although illiterate themselves, they taught us to study hard so we could have a better life than they did.  We learned what the ‘worst case scenarios’ could be and we learned enough to steer clear from them. 

When you have only one egg in the basket, you’ll quickly learn never to let the basket fall.  And if it should fall, you have done everything you could to keep the floor clean so you can still make a meal out of the broken egg.

Healthcare Matters

A week ago, I was going through my files to find a form I needed in order to fax a prescription over to an online pharmacy when I stumbled upon a stack of monthly health insurance bills starting in May 2001 when I first obtained an Individual HMO plan with Empire Blue Cross Blue Shield.  I became self-employed at about that time. 

Before I go further, it is important for me to state that I am a healthy individual.  I don’t smoke and I don’t drink, except for maybe a glass of wine about once a week.  I live a healthy lifestyle, I am physically active and I don’t consume sweetened beverages and I avoid foods that are loaded with sugar.  Apart from the seasonal allergies I get in Spring, I am hardly ever sick (my health records will attest to that) and the only times I have ever been hospitalized was once when I broke an arm back when I was a young 7 year old and a second time when I had my appendix taken out when I was still in my teens.  I probably see my Primary Care physician once a year when I have an annual physical check-up to be sure I’m doing OK and nothing is out of the ordinary.

That first month back in May 2001, my premium was $337.65 which worked out to be $4,051.80 per year.  I flipped over the stack of bills to August 2006 – the last month for which I remained on that plan - and the premium for that same coverage had gone up to $616.82 or an annualized $7,401.84, a whopping 183% of what I was paying back in May 2001.

Out of curiosity, I went online to get a quote for the same plan today and the premium has shot up to $1,549.30 a month or $18,591.60 annualized.  That works out to 251% of what I paid back in 2006 (less than 4 years ago) or 459% of what I paid back in 2001.

If the premiums keep increasing at that pace, the monthly premium for an Individual HMO plan would cost about $7,800 in another 10 years time when I will qualify Medicare.  I know I can’t afford that in-between period – I don’t think any self-employed or unemployed individual can.

As unemployment soared and as the duration of people staying unemployed increased with the latest recession, it has become abundantly clear that an employment-linked health insurance is not the solution.  COBRA has its limitations and is more costly for the individual as the former employer no longer picks up any part of the premium.

Even if one is fortunate enough to remain employed or is able to get a new job thanks to the job stimulus bill that was recently passed, rising health insurance premiums would force employers to shift more of the burden of healthcare plans over to their employees. 

The claim that “we have the best healthcare system in the world” is misleading – it confuses availability with affordability.

We need healthcare reform AND MORE. We need a “medical tort reform”, defining what is the standard of care that should be expected so that doctors are not over-prescribing tests and treatments that serve only to enrich the pharmaceutical companies and medical equipment companies.  We need a “prescription drug reform”, making medications more affordable – there should be no reason why Americans pay more for the same drugs than in other countries.  We need reforms that encourage healthy lifestyles and more physical activity for both the young and the old.

We need to continue the debate about what healthcare should or should not be but not let it hold us back from enacting what should be the first of all the necessary reforms.  As we gain experience from the present reforms, we need to refine those provisions that prove to be less than satisfactory.  Nothing will be perfect from the get-go and we need to be mature enough to keep working at it and make it better.