How the mighty fall

Jim Collin's most recent book "How the mighty fall" reads like a playbook of Bermuda's past, present and future.  It's a scarily accurate account of where we are now and where we may well be headed based upon this highly respected author's well researched investigation of the stages great organizations progress through as the go from success to failure.  Should we be heeding his warnings or ignoring them at our own peril?

Businessweek gives a good summary of How the mighty fall including the core "5 stages of decline":


STAGE 1: HUBRIS BORN OF SUCCESS

Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place.

Only a few years ago people were talking like Bermudians could do anything.  If international business left we wouldn't need to worry because we're innovative and destined for success and would create replacement industries with ease.  We've always succeeded regardless of the struggle and we will again because we're a brilliant and resilient people.  While Bermudians are resilient and brilliant, did we become too entitled in thinking that we could do anything, including pushing international business around, blaming them for our problems and putting onerous requirements upon them to the point that we're seeing jobs leave?  

STAGE 2: UNDISCIPLINED PURSUIT OF MORE

Stage 2, the Undisciplined Pursuit of More—more scale, more growth, more acclaim, more of whatever those in power see as "success."

We've witnessed incredible growth.   More international business, more companies, more people, more revenues, more, more, more.  The problem is that we were so focused on our success we lost track of the implications of growth.  Where do we house these people?  How can our infrastructure handle it?  Can our people handle it? Can we ensure we're providing great service to our customers?  What happens to construction when all the office buildings come online and demand plummets?  We were too busy with the boom to realize we could be overheating towards bust.

STAGE 3: DENIAL OF RISK AND PERIL

In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility.

Sound familiar?  Of late we're seeing more and more negative data being spun like it's no big deal.  For the longest time we heard there was no recession, then we heard that Bermuda wouldn't be impacted.  What are we hearing now?  The data is never really that bad is it?  Our budget is just fine.  Job numbers have taken a slight decline, nothing to worry about.  Tourism is on the cusp of reaching that perennial 'platinum period' and international business has nothing bad to say in person, just ignore what they're saying behind the scenes.  The hard numbers tell a different story, but who pays attention to those?

STAGE 4: GRASPING FOR SALVATION

The cumulative peril and/or risks gone bad of Stage 3 assert themselves, throwing the enterprise into a sharp decline visible to all. The critical question is: How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place? Those who grasp for salvation have fallen into Stage 4.  Common "saviors" include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a "game-changing" acquisition, or any number of other silver-bullet solutions.'

Trips to India?  A massive new pier?  Renovate Port Royal?  Music Festival?  Love Festival?  New Hotels? Gambling?  The list goes on.  We've pursued a great many radical "game-changing" solutions at the hand of our charismatic visionary leader but how many have produced fruit?  How much have we spent vs. seen in visible returns?  Are we really saving ourselves or are we grasping for anything we can hold onto?  Are we throwing our money away on ventures that seem really great on the surface but in reality don't keep us afloat?

STAGE 5: CAPITULATION TO IRRELEVANCE OR DEATH

The longer a company remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spira
l downward. In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future. In some cases the company's leader just sells out; in other cases the institution atrophies into utter insignificance; and in the most extreme cases the enterprise simply dies outright.

Our decline is intensifying as we're showing signs of being in stage 4 and prolonging it.  We're grasping for more and more silver bullets as we try to find the next big idea that will fix everything.  We're seeing how our small setbacks, expensive false starts and heavily overspent projects truly are eroding our financial strength.  Our great charismatic and visionary leader has announced many things and yet we still aren't seeing traction from most anything that yields real income vs. money spent.  We're drowning ourselves in debt and are not showing signs that we're taking the steps to save ourselves from destruction.  Will we continue to ignore the signs and fail to make the right moves until the eventual moment where Bermuda as it once was, never is again?

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Jumping off a cliff?

To add to the chorus of dismay with regards to Auditor General Heather Jacobs Matthews 2008/09 Consolidated Fund report, the initial results are downright shocking and do not signal prudence at the managing of our budget over recent years.   Ms. Matthews report outlines some of our greatest fears for Bermuda as we show increasing evidence that we’ve left ourselves with little buffer if things get worse.  Even more concerning are our finance minister’s nonchalance that everything is ok and her rather meek attempts at deflecting responsibility for our runaway budget.

Undoubtedly you’ve already seen it but the Bermuda Sun’s graphic is incredibly telling.  In the last 5 years we’ve witnessed expenditures vastly outrun our revenues, deficits and debt skyrocketing with no signs of it abating.  This at a time when we’re facing the fallout of a significant local recession on top of a global one along with threats of tax changes in the US.  We simply haven’t left ourselves much in the way of a means to stay afloat if we go off the deep end.

Credit: Bermuda Sun

Finance Minister Paula Cox seems to continuously rely on the “well, everyone else is doing it” argument for jumping off a cliff.  Defending her actions in a recent opinion piece Ms. Cox suggests that the comparative US and UK fiscal deficits are an adequate reason for why we can let our own deficit grow.  Ms. Cox argues:

Debt is a necessary tool in public finance. Around the world in 2009, government debt and fiscal deficits rose sharply in response to an extraordinary financial crisis and the widespread global recession.
In the U.S., the Congressional Budget Office projected the U.S. fiscal deficit to be 13 per cent of GDP in 2009. In the U.K., their fiscal deficit in 2009 was estimated at 12.4 per cent of GDP.
Indeed, the U.K. Chancellor of the Exchequer stated: "Allowing borrowing to rise – protecting services, helping people and businesses – is the right thing to do."
The fiscal deficit in Bermuda was in the range of 2.5-3.5 per cent of GDP in 2009.

The core problem with this argument is that our deficit began to grow out of control in a boom period when times were good and Ms. Cox was raving about 5 consecutive budgets where revenue outstretched expectations.  The US primarily grew its deficit over the last years due to a number of large wars, not vast overspend on capital projects.  Besides, we are a tiny island governed by completely different economics than those of superpowers.  The US and the UK have at their disposal mechanisms to adjust their debt and currency levels that we simply don’t have.  As an example, the US has taken to printing over a trillion dollars to deflate their currency thus adjusting their debt levels.  Whether or not this is a prudent move to take is debatable but ultimately they have a diverse economy that allows them to take to these forms of quantitative easing in hopes of stimulating the economy.   We don’t.

We’ve already expressed concerns at the ratio of local Bermudian $ borrowing versus savings and since we did so, the ratio has continued to climb.  We can note the latest regulatory update from the Bermuda Monetary Authority shows that we’ve become even more reliant on foreign borrowing to sustain ourselves and this is without even considering the borrowing our government is doing. 

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We are increasingly reliant on borrowing foreign money to sustain ourselves and despite arguments that we’ve invested in infrastructure with our debt, the reality is that in a great many cases we vastly overpaid for that investment.  Would you readily pay me $2 for a regular $1 coin?  Likely not as you’d end up with something worth half as much as you paid for it.  So why do we think overpaying for Berkeley, the new cruise ship pier and the Port Royal renovations are good value for the added debt we’ve undertaken?  The worst part is that not only does the list of overspend go on but here is how our Finance Minister justifies it:

The Minister of Finance operates as a cog in the wheel. My role is to add value and to provide input on fiscal positions taken in various ministries. I can indicate support or objection. However the sponsoring minister(s) knows that I cannot overrule their request unless I have others who join with me to support and uphold my position.

Individual Ministers are 'finance directors' in their own right and have a responsibility to keep a keen eye on how their senior officials manage their budgets and projects.

In addition, there is an accountability framework that includes the office of the Accountant-General's Department, the Office of the Auditor-General, the Office of Internal Audit, and the Ministry of Finance HQ.

There we have it, the ‘Finance’ Minister has no power in actually managing finances and admits to no accountability for overspend.  The Minister of Public Safety is willing to take such a stance that he’ll resign to uphold his position while the Minister of Finance is “Politically neutered”.  But hey, we shouldn’t worry as the Office of Auditor General, you know likely the only department to actually have its budget restricted, office space contained and it’s head arrested twice, is part of the ‘accountability framework’.  

In the end, Ms. Cox is probably right that we should simply go along with it because everyone else is doing it, who knows, perhaps in 3 years we’ll be looking back at the musings of this “irresponsible and biased writer” to realize that everything said above was nonsense and completely wrong.  In the meantime it’d likely be wise to heed the wisdom of Gary Larson and always be sure you have a way out before following the herd of lemmings jumping off a cliff.

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Encouraging alternatives to marijuana

So again we return to the whole marijuana crackdown debate.  We’ve already
covered facts,
fiction and a bit of history
behind the drug and it’s prohibition along with
a discussion
on its implications on crime and gang activities
, so there’s no need to
rehash those arguments here.  What we can cover is a bit on the psychological
addiction of marijuana, the implications that our policy and stance against it have on our society and ultimately the reasons why we should be focusing on encouraging alternatives rather than removing them.

Marijuana has not been proven to be physically addictive but has been shown
to be psychologically addictive.  To understand the implications of
psychological addiction one only needs to look around in our society.  Fatty
food and fine sugars are not considered physically addictive and yet the effects
of psychological addiction are readily apparent when one simply looks at our
society’s extreme prevalence of obesity, heart disease and diabetes.  Quitting a
long time habit of overindulgence is about as easy as quitting smoking
cigarettes.  It isn’t something that happens overnight but instead is a grueling
and arduous process of commitment to an ideal, self restraint and will power. 
Usually it can’t be done without help and fighting relapse is a lifelong
struggle if you don’t maintain a healthy active lifestyle.  In moderation fatty
food and fine sugars can be a nice treat but in excess they can be one of our
worst enemies.  Similar moderation is essential in all facets in life.

Fatty food and fine sugars are damaging to and represent a considerable tax
on our society and yet we leave people to their own devices, free to abuse
them.  Why?  How would society react if we were to enact laws against sugar and
fatty food consumption?  If tasty meals and deserts were restricted?  If we were to enact regular testing denying jobs and access to activities on the basis of blood sugar and cholesterol levels?  Certainly it would be better for our health but
ultimately it would rope in so many victims of psychological addiction that we’d
simply further balloon our prison population with people barely capable of
helping themselves stay away from it.  These individuals wouldn’t simply wake up
one day, realize it’s illegal and never touch another powered donut.  The
temptation is simply too great if you use food as a crutch to help yourself
manage through life.  Marijuana is little different.  In moderation it can be as
unhealthy as those fatty foods and fine sugars and yet in excess it can be just like those foods in that it can be a debilitating crutch that keeps people from living a healthy and productive
life.  You can’t simply say today we’re cracking down and expect every user to
readily stop using, it just doesn’t work like that.

Despite the well known wide prevalence of marijuana use in our society we
seem to think that our approach can be different, that use can be turned off like a light switch.  We seem to believe that keeping it illegal and cracking down heavily is the answer and that people will kick their habit just like that.  Nothing in
life is that easy and yet we keep acting like it is.  There is a great crusade
of anti-marijuana campaigners out there who aim to ensure that you can’t have a
steady job, you can’t get involved in sports, you can’t have a life if you
partake in marijuana smoking.  It is a sure fire lose-lose approach.  Imagine if
tomorrow we made fine sugars and fatty foods illegal and embarked on a similar
campaign.  Guaranteed a large segment of our society would not only avoid
giving up their habit, they would fall deeper into it for lack of alternatives
to using.  Why do we think marijuana is any different than these unhealthy
foods?

Saying that because someone uses marijuana they can’t partake in local sports
robs them of legitimate alternatives to lighting up.  We need to be focusing
on encouraging abusers to seek healthy alternatives rather
than advocating that there is no alternative.  Similarly with the crackdown on
job opportunities.  By unnecessarily enforcing drug testing and ensuring that marijuana smokers cannot obtain steady
jobs we guarantee that a large segment are pushed further and further into a
life of crime.  Again, imagine if we did this for fatty foods and sugars.  What
do you honestly believe would happen if tomorrow people were banned from
sports and holding steady jobs if their blood sugar and cholesterol counts were
too high?   Do you honestly believe the now jobless and alternative restricted
over indulgers are going to suddenly drop their crutch and stop eating the wrong
foods?  Is it more likely they’d only end up more likely to lean on their crutch
to get through these rougher times?

Our approach to combating over indulgence of unhealthy foods is to test
regularly as a guideline rather than a rule, advise of the risks, educate and work together to encourage people to
choose a more healthy and active lifestyle.  Perhaps it is not successful in all
cases but gradually through various community programs, education initiatives
and genuine commitment by our society to improve our health we’re seeing better
results as we understand the implications of an unhealthy lifestyle and addiction to unhealthy eating.  Is this
approach a better alternative to criminalizing all sweets and fatty foods to save people from themselves?  If so, why do we feel it is necessary to take two different approaches with similar forms of substance abuse?    Perhaps it’s
time we rethink our approach and devise more ways to encourage people to choose a healthier and more active lifestyle rather than ensure that they don't have a choice.

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