Tasting the Pudding Before It's Made

Dr. Michael Watkins was my professor of advanced diplomacy at Harvard Business School, and no professor had more of an influence over improving and shaping my diplomatic skills than he did. For that, I owe him a tremendous debt. He is also a fantastic teacher, author, and human being.

But in his recent blog post on the website of his company, I think his attempt to relate the presidential transition to business transition falls very short of the mark, and is thin in its analysis. But that happens when one tries to view the world from the perspective of any single discipline, and it happens to the best of academics and accomplished elite consultants.

From Dr. Watkins' blog:

President Obama clearly understands that the moment demands heroism. He issued a ringing call-to-arms in his inaugural address: “Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted - for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things - some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.”

But does our new President have the heroism within him to force (yes force) the nation to swallow some very bitter medicine? Because he strikes me more as a steward than a hero. This is potentially a big problem because consensus-building-on-steroids simply isn’t going to cut it.

Dr. Watkins is definitely spot-on when he says "consensus-building-on-steroids simply isn't going to cut it." But where is the evidence that the actions of this administration will demand "consensus on steroids"? As an internationally accomplished diplomat, Dr. Watkins surely understands the tactical value of framing a strategy in public versus the actual strategy deployed, which can only be discerned in hindsight. It strikes me as imminently appropriate to call for unprecedented consensus in these times, but the call for consensus and the refusal to act in its absence are two very very different beasts. And while the call has now been made, the actual strategy deployed is far from clear.

Dr. Watkins' next comment, however, is a universal but not obvious truth that will surely come to bear, and that we can witness in our own lives and organizations with ease:

He and his administration can listen until the cows come home and what they will hear is a cacophony of conflicting agendas and parochial views.

Yes. Just yes. A thousand times yes. And this is precisely the nature of the beast this administration faces, just as the last administration faced it. But the ability and determination of this administration to confront this timeless beast cannot yet be discerned.

Hence the closing line of the post I offered on this blog for which I hope Dr. Watkins will cut an old student some slack(!):

"I’m not sure I find Dr. Watkins' post convincing in its analysis. By that I mean that I could chew more on the claims if they were backed by specific examples in modern turnarounds or in history - there are plenty from which to draw.

I am also struck that it is way too early even to attempt a judgment about President Obama’s abilities in this context and at this time. Certainly we have strong indications of the quality of his judgment and management skills from his career and especially his two year campaign for the presidency, which was no small feat.

But as with all managers, the proof is in the pudding, and not in the rhetoric. And we simply don’t have enough of it (the pudding) to make any consequential conclusions. But as the post implies, that does not mean we can’t know what to watch for.

Right now I am struck by his strong and effective grasp of both the necessary rhetoric and imagery needed in this moment of time to communicate the great American turnaround (a “rebirth” seems more compelling, as it is a time to remake the nation, not just change course). And that is encouraging - this is not a man with a tin ear for political dynamics as his predecessor had.

And if we’re going to consider the promise of his judgment or future actions based on the inaugural speech, I don’t think any particular lines are quite as instructive (though there are many profound ones) as his obvious choice to deliver a sober, nuts-and-bolts, clear speech. We all know this is a man who knows how to deliver a barn-burner, or inspirational, or soaring speech without parallel. But nothing at this point can be said about the inaugural speech more profound than his particular choice of tone and subject, which was not at all an obvious choice to make.

With the inaugural speech, we begin to see the early makings of the pudding. His choice of tone and subject, his clarity and specificity about this moment we face, and his very telling lines that promise a clear break from both the style and substance of the preceding administration were more telling than any of the words.

That was not the “broad stroke” thin-on-substance-but-a-great-speech-maker caricature of him that was made (always without reason) during the campaign. In the inaugural, we saw a man capable of embracing this moment, a man clearly capable not only of inspiring hope as was his trademark during the campaign, but a man capable of providing clarity, and clearly capable of the arduous and grand task of map-making.

For the rest of it, we have no choice but to keep watching - and participating - with open minds and cautious optimism."

The wonderful thing about really smart, confident, accomplished professionals and good human beings is that they can take criticism with grace and relish. I have the utmost confidence in Dr. Watkins. But at any rate, the grading has long been done, so that confidence could be a little disingenuous I guess.

When Elevators Attack

If I told you that someone was injured when their elevator fell from the 27th to the 25th floor before the emergency brake kicked in, you might ask, "What happened?"

But if I told you someone jumped off a 2-story building, you'd probably ask, "Did they survive?"

It's essentially the same thing though.

Granted, elevator travel really is the safest form of travel in the world. The best elevators in the world will only fall 6 feet, even if the suspension cables hypothetically snapped. There are redundancies upon redundancies, and aside from accidentally falling in an open door into the shaft, the danger couldn't be less given that the car travels along a fixed path cleared of all obstructions in only 2 directions.

But still, like anything, systems fail. When I first read of the failure in the linked article, I thought it would be a clear example of how our nation's aging skyscrapers are falling into extraordinary disrepair in an ever spiraling need for greater maintenance to fight against the ravages of physical aging. Skyscrapers weren't built to last 100 years on their own.

But the building in question, in downtown Houston, was only finished in 2003. Instead of being of comfort, it only alarms me more.

I am convinced that the era for central business districts consisting of dense roads and tall skyscrapers is fated for an end. Whereas prior to the telecom revolution, businesses required physical proximity for efficiencies of day-to-day business, this is just no longer the case. The falling costs of telecom technology, its rising efficiencies and capabilities, and the inevitably rapid rise of transit costs - auto or mass - point clearly to the future trend, which doesn't favor the downtown skylines of 20th century American triumphalism.

I expect that one day American history books will have a chapter with awesome skyline photos of American cities in the same way they now have photos of the 19th century American West full of buffalo herds roaming on open plains.

Whether it's an isolated instance of failure or not, this recent elevator failure foretells I think the kinds of infrastructure problems we are certain to see more as the next few decades unfold amidst ever-expanding telecom technology, rising transport costs, and declining urban and municipal tax bases.

Beyond that, how many horror stories like the following will the public tolerate?

From The Houston Chronicle:

On Dec. 9, DeRouen, who has been working as a contract consultant for Rosetta Resources on the 27th floor, said she finished work about 5:30 p.m.

“I pressed one, and it started free-falling really fast,” DeRouen said.

Sent airborne during the descent, she slammed hard into the floor when the elevator suddenly halted at the 23rd floor.

Her tibia bone tore through her leg between her knee and ankle, creating a long wound. Her ankle and toes on her left leg were fractured.

The elevator door wouldn’t open, so employees on the 23rd floor could not come to her aid as she pierced the air with screams, Boutros said. They kept her talking, though, worried that she might lose consciousness otherwise, she said.

It took a half-hour for help to arrive, Boutros said.

She has undergone several surgeries on her leg and will undergo at least two surgeries to repair the fractured lower vertebra and ruptured discs, Boutros said.

Oh, and there wasn't just one instance -- there was another one shortly after in the same building.

Both incidents are still under investigation by the landlord and its elevator contractors (and where are the police?), while the other elevators are still in operation. Naturally, many employees are taking 25 flights of stairs now instead of using the remaining elevators.

Just this week, roughly one month after the first incident still under investigation:

On Monday, Carleen Naumann, a sales representative for Besco Tubular, and Allan Keel, president of Crimson Exploration, were injured when an elevator dropped precipitously from the 27th floor to the 25th floor.

They were trapped in the elevator for a short time. Keel said he suffered a minor back injury and declined to be taken to a hospital.

Later, called ambulance
Naumann, of Katy, also declined treatment Monday. But she said she called for an ambulance after she got up Tuesday morning and her nose was bleeding. Her ankle also was hurting, she said.

Staff at Memorial Hermann Hospital in Katy determined she had fractured a vertebra in her lower back, she said.

“The elevator was flying. I thought we went down 15 stories. I was shocked to hear it was only two,” she said. “I was airborne and then it was as if we hit bottom.”

The nation's urban infrastructure problems are piling up so quickly from accelerating deterioration and a long history of deferred maintenance -- one day the costs of renewing the systems of the buildings, water systems, roads, fuel, and air will exceed the capacity of the nation to pay them. This is one of the biggest secrets in American municipal government and civil engineering. Few yet appreciate the full scope of the problem.

And if anybody else gets killed in their car from an exploding old gas main, or falls to their death in an open road hole from a water main break, or simply plunges into a river from a failed Interstate bridge, or especially if other cities see executives with bones sticking out of their legs or crushed vertebrae after an elevator falls two or three stories -- well, let's just say the suburbs and exurbs and rural areas will suddenly find new federal resources to support low-rise commercial development, and brand new sewer, water, electrical, and gas lines.

One day telecommuting won't be an HR incentive - it will be our way of life. It is destined to become the only affordable option for the nation's economy.

Suburban Blight

This article is terribly, horribly interesting. It is about certain community leaders' efforts to revitalize a corridor of north Houston that used to be the de facto suburbs just 30 years ago. The area is the FM 1960 highway corridor (really it's a 5-lane cement thoroughfare) from I-45 westward to about Steubner Airline. It used to feature a primary medical district for the north Houston region, family-oriented retail strips, major retail outlets, entertainment, restaurants, and mid-rise office buildings.

But in the past 30 years as the northern boundary of the city of Houston reached FM 1960, and as the suburbs sprawled ever northward into the next county and past one of the nation's earliest and most successful master-planned communities, The Woodlands, the FM 1960 corridor - along its many large adjacent subdivisions, many once affluent - fell into total disrepair.

Now, driving from I-45 westward on FM 1960 to Spring Steubner at night reminds me of driving through Times Square in its worst years. The once neighborly strip centers have bars on the windows, the nice restaurants now long gone, obscenely bright flashing LED lights untolerated in any dignified residential area, pawn shops every other block along with other "low rent" small businesses, and the office buildings that once spared nearby residents from long commutes have fallen into office-slum status.

So now a group wants to create a special taxing entity to tax commercial businesses in the corridor to make "improvements." And here is where suburban politics intersects with traditionally "urban" concerns: the Republican state representatives are sitting on their hands, reluctant to create "additional layers of government", "new taxes", or to do anything local businesses -- even low rent ones -- might find objectionable.

Call it suburban blight. And we'll be seeing a whole lot more of this.

From the article:

That management district would provide a method to raise money, through an assessment on commercial property, to carry out improvement projects in the 1960 area. The annual assessment charged to commercial property owners would range between 9-15-cents-per-$100-property valuation.

In the past two years, Renaissance 1960 has been working on projects aimed at spurring revitalization, including the creation of an Urban Design plan for the community, group “bandit sign” removal efforts and community clean-up days, but work on larger projects would require a larger, steady source of income, management district supporters say. ...Many see signs of deterioration in vacant and abandoned buildings, graffiti, signage, heavy traffic and the perception that crime is on the increase.

Well this is certainly new territory for suburban Republican representatives, such as state Reps. Patricia Harless and Debbie Riddle.

Harless said Renaissance 1960 and Houston Northwest Chamber of Commerce members worked the past two years to communicate the management district’s mission to property and business owners, and they sought letters of support from those constituents.

In the end, 39 businesses representing about 10 percent of the property value in the proposed district’s boundaries wrote letters of support. That is a substantial number, Harless said, but the questions remain about the overall level of support, and the district’s ability to raise enough money to make an impact on the area even if the bill is passed.

“So that leaves us at how do you create a new tax and new layer of government when several major property owners do not support it?” Harless said.

Personally, I think all the smart "major property owners" bailed on this area years ago. Can anything be done now to lure those quality owners and developers back?

Hmmm... this is sounding more and more like a particularly well-known phenomenon... called urban blight.

Riddle said the management district option is not generating a positive response among commercial property owners who would pay the annual assessment. She said there is a misconception in the community that a management district would have the powers granted to a homeowners’ association, but that is not the case.

Because of those limited powers, she said the vast majority of problems on FM 1960 could not be addressed by management district, and there are other ways the community could address those issues with that without creating a “taxing authority.”

“We are all in agreement that doing nothing is not an option,” Riddle said.

Well now that's an understatement, Debbie. Welcome to urban, or post-suburban, politics.

Peter Schiff is a Fool or a Traitor

See the following video of a Russian TV English interview with Peter Schiff, an investment manager in Connecticut. When someone starts talking like this, run don't walk away. Or change the subject. There is no hope of talking any sense on the subject.



If you can't see the embedded video: Click Here

This is an egomaniacal idiot who's dead wrong and severely misguided in his judgment. Many many people could see the current housing crisis coming; Schiff is no sage. Nobody wanted to hear a party-pooper though, as Krugman said. And too many people were getting rich playing the game to stop. It was a gambling addiction, pure and simple.

So it wasn't the housing bubble that needed foretelling. Who couldn't see it? Nobody knew when it was going to end exactly, and that was the problem. So what exactly really needed foresight that was nowhere to be found?

It was the $50 TRILLION DERIVATIVES MARKET.

We could solve the housing problem in no time if that's all it was.

The real economic threat was the shadow side-bets-with-no-bookie market of derivatives enabled by former Sen. Phil Gramm, a Republican congress with Democratic enablers, and a Democratic and then Republican administration. See the Commodities Futures Modernization Act of 2000, earlier discussed on this site.

Moreover Schiff thinks the U.S. is in isolated economic dynamics and pays no heed to the fact that the rest of the world is DEPENDENT on a U.S. RECOVERY, and so yes, the world will lend us whatever we ask for... for now.

You can bet this guy's firm is shorting the dollar and so he benefits by talking it down. In other words, if America loses, he wins.

He is only stating the obvious about the nature of the crisis without making any progress into what legitimate options we have to work our way through it.

That's always a fool's position. What we can't tell is whether he's really a fool or simply a traitor.

Stultifying

I'm trying to get over a rhinovirus or allergies or something. Almost a week now. Yikes. But brandy I have found is helpful with the sinuses. As is a combination of nasal decongestant (they're all the same), Benadryl, Flonase, and Pseudoephedrine.

I find the cold/allergy aisle to be absolutely stultifying. Not only are there hundreds of brands for the same basic problems, but there are dozens of variations on each brand, each as indecipherable as the next. All of this for cold/sinus/allergy problems that even doctors can't reliably differentiate in person. Then, what's even worse, if you read the ingredients in every single brand, it's the same 3 or 4 basic ingredients just in different combinations or amounts: Phenylephrine (nasal decongestant), Diphendhydramine (antihistamine), and Ibuprofen. That's it really, in all of them. ALL.

The secret behind Nyquil for knocking you out? Benadryl. 25mg.

Benadryl (Diphenhydramine) is actually what most "non-habit forming" sleeping pills are. That's it. Read the label.

Cepacol lozenges are fun because it contains 2 ingredients: Benzocaine (sounds good right?), and Menthol. The Menthol is listed as an "oral analgesic" but the Benzocaine is listed as an "oral anaesthetic," like it puts your mouth to sleep. Like tasting cocaine. Whatever, it works.

I am starting to feel better this evening, so hopefully I will have the clarity of mind to return to real estate and economics blogging very soon.