My Page

Random posting of book recommendations, general thoughts about life, vacations and travels, philosophy and business experiences-

My Photo
Location: Old Hickory, Tennessee, United States

Saturday, January 01, 2011

America: A nation addicted to spending

Our government is sinking deeper into debt with every day that passes..interest on our national debt now accounts for approx. 11% of our entire annual budget and within two years, given the current budget deficits, our national debt will equal the total GDP output of the entire nation. For the most part, our elected Representatives are cowards, not willing to forgo money and power in exchange for what is best for our country. They are all addicted to spending.

This Fall, republicans won back a majority in the House of Representatives primarily because the average person understands that we cannot continue to spend 72% more than we take in,(and yes that is what happened in fiscal 2010!) sooner or later we will have to discipline ourselves and rein in excessive government spending and stop making future financial promises that are not sustainable over time- either that or the market will force us to make some very painful adjustments to our way of life- think Greece and Ireland!

Our President and congress need to start telling the American people the truth with perspicuity, but without term limitations that prospect seems rather is easy to appeal to the have-nots promising to re-distribute the nation's wealth and narrow the gap between the rich and the poor but this promise is a deceptive canard that cannot be accomplished without undercutting America's economic growth engine.

According to the OMB, in fiscal 2010 the budget deficit was $1.56T and the 2011 budget now before congress projects another $1.15T in deficit spending. So with all the noise about the budget deficit and the national debt, I decided to go see for myself. It is easy to do, just to to

Fixing the budget deficit is really rather simple to do, and probably to your surprise requires no spending cuts and no tax increases. It may not be easy but it is simple. How so, you say? Well, I did a little math to demonstrate how simple spending contraints would impact the budget deficit and our national debt. Politicians (both democratic and republican) all spin everything to their advantage, counting on people not to think for themselves.

From the US budget I simply took the projections for tax revenues for 2011 thru 2015 and held all government spending at current 2010 levels (you may be amazed to learn that total spending in 2010 was up over 2008 by 25%!). Simply freezing spending for the next five years will close the budget deficit almost entirely without cutting any one's expenses are increasing any one's taxes.
Years 2006 thru 2010 are actuals in table above.

All you need to do is freeze all spending, NOT CUT spending, just make the government live with its current spending levels. Congress and the President could move spending from one place to another but they could not exceed the overall spending cap. With this simple spending constraint in place, we can put the nation back on a path to economic health. Besides closing the budget deficit, a spending freeze also would remove the inevitable pressure to increase or create new taxes (like a national VAT tax).

Now some of you will say, well that's not fair because if you freeze spending, inflation is a just a spending cut in disguise. Okay fair enough, I will accept that argument and to the chagrin of my conservative friends I would propose to increase income taxes at the same rate of inflation, that way both those receiving entitlement benefits and those paying taxes would both be equally yoked. I added a column showing the impact of such additional taxes increases on the deficit. If we balanced the burden with inflation based tax increases, not only would we close the budget deficit in five years but we could also pay down our national debt by approx. $500b. I personally would be willing to pay more taxes if total government spending were to be frozen for the next five years!

We can do this, it is simple but it is not easy because as a nation, we are addicted to spending. Our politicians tell people they have a right to best health care available, a right to ever extended unemployment benefits whether they are looking for a job or not, a right to ever increasing social security benefits and the right's list go on....we are addicted to spending and this will not change substantially until we first enact term limitations on Congress and the Presidency.
The government could cut out enought waste to continue to fund new programs without exceeding the total spending cap. An excellent example of waste and downright stupidity is paying 100,000 teachers in NYC to stay home and do nothing because they have tenure and a union contract that says that don't have to take any new assignment or job offer in another location if they don't want to and they still get paid. Can our society really be that stupid?

And yes, I have heard the experience and leadership continuity argument but with a one term of eight years for the Presidency, staggered eight year terms for the Senate and staggered four year terms for the House, this arguments dissipates into "why I want to stay in power" not "why I should to stay in power". In my opinion, our nation's spending addiction will continue without term limitations.

ps. If you click on the table above, you will be able to read it clearly

Friday, August 07, 2009

Heathcare Reform And Why You Should Care

Any meaningful debate about healthcare must start with an honest and candid dialogue and address the hard issues such as (1) one's right to healthcare and the level of thereof, (2) rationing of healthcare services and prescription drugs, (3) litigation and tort reform,(4) waste in the healthcare system, (5) health care delivery options and last but not least (6) how to pay for healthcare reform?

Liberals are pushing for a public option which seems suspiciously like a trojan horse for nationalization, a one-payer system. President Obama denies this is the objective but some influential members of congress have a decidedly different point of view. Watch the video of Barney Frank; both his intent and desired outcome are clear.

Significantly expanding coverage without reforming health-care delivery is "a recipe for failure," said Alwyn Cassil, a spokeswoman for the Center for Studying Health System Change in Washington, D.C. "You won't be able to sustain the expanded coverage because it will just bankrupt us."

Spending on health care this year is projected to reach $2.5 trillion, or 17.6 percent of the U.S. gross domestic product, according to a Kaiser Family Foundation analysis of Medicare and Medicaid data. That's up from 7.2 percent in 1970, and by 2018 it could swell to one-fifth of the GDP, which is a measure of all goods and services produced in the United States.

Meanwhile, a worsening shortage of primary-care providers and rising demand for certain specialists will continue to strain the system, perhaps creating long waits for appointments. The following video shows the breakdown in overall healthcare costs.

Should American citizens and illegals have a right to health care?
Neither the US Constitution nor the Bill of Rights assert any such right. Healthcare coverage for those who can not pay is another entitlement program and we need to call it that. Now many conservatives are under the impression that entitlement programs benefit only the poor but that concept is dead wrong- the middle class and the rich get their entitlements just like the poor, it's just that their entitlements come with better labels. Welfare, food stamps, Medicaid and similar state programs are seen as entitlements to the poor (which they are) but Medicare and Social Security are viewed as rights by the middle and upper classes - a return of what they paid into the system- this is only partly true and a small part at that. Unfortunately the math and facts do not support this argument. Agriculture and other specific sector subsidies and investment tax deductions and loopholes are not viewed by the middle and upper classes as entitlements but in reality they are no different from welfare transfer payments made to the poor.

My own view is that taxpayer funded health care should be provided at basic levels but not full health care. It is disingenuous and dishonest to pretend that everyone should have a right to the best health care that money can buy whether or not they can afford it. And the lowest level should be for illegals, such as emergency care. As a nation, we need to find a political stasis for benefits and coverage being offered under healtcare reform.

Rationing of healthcare services and prescription drugs:
Let's face it, healthcare is rationed today; it is just largely adjudicated by the free market. A profound conundrum and one of the immutable laws of economics is that you can control prices and supply of commodities and services but you cannot control both at the same time in a free market economy. To think that the system can suddenly provide health care services to 47 million additional people (who knows what the real number is) that are currently not insured and not have longer wait times, does not make common sense - can anyone say rationing? And notice I said those who are not insured- everyone of those 47 million have access to emergency health care today which is paid for by health care providers, by tax payers and those of us who pay for health insurance and/or pay directly for health care. So when and if healthcare reform is enacted and regardless of whether there is a public option or some sort of non-profit co-ops, healthcare rationing will continue and you can bet it will get worse.

Litigation and tort reform:
At one of his town hall meetings, President Obama said he was "not comfortable with artificial caps on litigation". In addition to the cost of defensive medicine, medical malpractice insurance which is driven largely by punitive damages, runs in many cases as much as the doctors' salaries.

Below are excerpts from an article published by UMHS.

The high cost of malpractice insurance for some medical specialties affects not only how many doctors are entering the field of obstetrics and gynecology, but also where they offer their widely needed obstetric, prenatal and gynecological care, according to new University of Michigan Health System research.

Their study, published in the June issue of the journal Obstetrics & Gynecology, gives a foreboding prognosis for the supply of doctors specializing in the field because of the rising costs of malpractice premiums.

“The high cost of malpractice premiums is beginning to lead providers to drop or reduce obstetrical services. Our study presented evidence that high malpractice premiums affect where new obstetricians are locating and it may affect the supply in the future,” says Scott B. Ransom, D.O., M.B.A., M.P.H., associate professor of obstetrics and gynecology at the U-M Medical School and of health management and policy at the U-M School of Public Health, and the senior author of the paper.
“Something has to be done about the skyrocketing cost of malpractice premiums in our field,” says Ransom, also the director of women's health and gynecology at the Ann Arbor VA Healthcare Center and director of the U-M Program for Healthcare Improvement and Leadership Development. “We are going to lose some of the best and brightest young doctors who otherwise might enter this field, and we are going to face shortages in many areas of the country if something isn't done.”

Malpractice insurance premiums vary widely from state to state. Florida is the highest-premium state, with an average 2004 premium of more than $195,000, followed by Nevada, Michigan, the District of Columbia, Ohio, Massachusetts, West Virginia, Connecticut, Illinois and New York. Many areas of the country, especially around major metropolitan areas, are experiencing large increases in the average costs of premiums. Between 2003 and 2004, Dade County in Florida, which includes the city of Miami, went from $249,000 to $277,000, an increase of about 11 percent.

In that same period, Cook County in Illinois, which includes Chicago , jumped about 67 percent from $138,000 to more than $230,000. Wayne County in Michigan , which includes Detroit, went up 18 percent, from almost $164,000 to nearly $194,000.

As you can imagine the underlying reasons for the high cost of medical malpractice insurance premiums are varied and complicated but there is little doubt that outrageous jury awards (punitive damages) are the major factor. In other words, if punitive awards were capped at some reasonable amount, the cost of every one's healthcare would be significantly reduced. Naturally most attorneys are opposed to any attempt to reform tort laws since this is how they get rich. I personally believe you could take at least 20% of cost out of the entire healthcare system and still pay 100% of compensatory damages and punitive damages with reasonable caps. Changes to the legal system would also be required to eliminate the wasteful spending on defensive medicine. Case in point- several years ago when I went to the emerency room at a local hospital and the attending physician admitted me to a room for a couple of days for tests and examinations. I gave my vital medical information to the nurse in the emergency room, in the private room and later on at two different occassions for tests/procedures. When later I suggested to the doctor that the hosptial could benefit from my services to improve it's efficiency, he said the problem was not a lack of systems understanding on part of the hospital but lawyers- you mean his/her life was at stake on you only asked one time?

Waste in the healthcare system:
Records automation and more efficient healthcare delivery systems can significantly reduce waste in the system. However, here is an important point to remember in a macro-economic environment- one person's waste is another person's income. Automation of records and tests/procedures eliminates some one's job. However, it is possible to gain more efficiency than actual cost reductions, in other words cost avoidance.

Healthcare Delivery Options:

Models of Healthcare Delivery
A NextGen Tutorials in Medicine Article published in association with the New England Journal of Medicine.

There is no perfect healthcare delivery system for a country. Some models seem to work better than others but each has its own advantages and drawbacks. Broadly, healthcare delivery models could be classified under tiered system or diffuse system.

The tiered system is made up of regionalized systems of healthcare delivery divided into Primary care, Secondary care and Tertiary care. Such a pyramidal system is more common in UK and in HMOs (Health Maintenance Organizations) in US.

Primary care
Refers to the activities concerned with prevention and treatment of common medical problems in outpatient setting. Care is delivered by primary care practitioners (PCPs) in the US or general practitioners (GPs) in the UK. A PCP could be responsible for 2000-3000 patients and is responsible for managing patient's overall care.
Secondary care
Concerns with treatment of disorders requiring specialist opinion or hospitalization. The patients are usually referred from Primary care and the physicians are affiliated to a hospital or a group practice.
Tertiary care
Provides medical and/or surgical management of complex disorders in an inpatient setting and usually requiring collaboration between multiple specialties. These are super-specialized standalone hospitals or specialty departments in a multi-specialty hospital.
In the diffuse system there is no such division. In this system patients can directly approach specialists without consulting GPs or PCPs first. The boundaries between GPs, internists, family practitioners and pediatricians are blurred. Many internal medicine specialists provide primary care, many family practitioners provide secondary care. However, some centers have designated "hospitalists" for inpatient care.

The diffuse system is the relatively more common in United States. It is a diamond type of system with most hospitals providing a mix of multi-specialty secondary and tertiary services. The stress is on getting the latest technology and advanced clinical care closer to home.

Models of healthcare delivery
In the late 19th and early 20th centuries, contract doctors existed in many parts of United States. Large organizations and philanthropic societies employed physicians under salaries or capitated (fixed pre-payment) contracts. In a capitated system, providers are paid a fixed amount per patient per month regardless of the quantum of services utilized. This slowly lost popularity due to increasing competition for contracts and price wars.

In the later half of 20th century, fee-for-service was the dominant model of healthcare delivery. The physicians were affiliated with a hospital as staff members and had admitting privileges. They wielded considerable power since they could chose to admit to the hospital of their choice. They were not employed by the hospital and the specialists were dependant on a referral network of physicians affiliated with the same hospital or a different group.

In a group practice, a number of physicians, usually from multiple specialties, come together to setup a group practice. Some of the senior physicians have ownership stake in the practice. Most of other physicians are compensated through a mix of salary and bonuses. The practice bills the insurance plans or the patients on a fee-for-service basis. The group practices try to coordinate care amongst physicians in the practice.

Community health centers were the earliest alternative to fee-for-service setups. They managed health of entire community rather focusing just on walk in patients. These took the form of neighborhood health centers, homeless clinics or clinics for immigrants providing a mix of clinical and public health services.

HMOs originated when large cooperatives or public sector employers started taking onus of delivering care for their members for a nominal fee. They evolved Health Insurance Plans where the employers paid a fixed amount per employee to the healthcare provider bringing together financing and delivery of care into one entity. This prepaid model of care was renamed HMOs which subsequently evolved into network HMOs.

An HMO which provides full services from primary to tertiary care is known as a Vertically Integrated HMO. It owns a health plan and either owns or has contracts with group practices or hospitals.

Some physicians may form groups or associations just for the purpose of negotiating and administering contracts. Independent Practice Associations (IPA) were formed when insurance companies, hospitals or local governments started contracting with individual fee-for-service physicians, office based physician group practices. The IPA is responsible for the network of physicians which is not linked to the HMOs plan. In some arrangements, physicians can contract with different HMOs or IPAs. A variance to this structure is Integrated Medical Group (IMG) in which physicians are employees rather than owners of their practices. IPAs and IMGs could also provide care under capitated system, assuming the financial risk of providing care.

IPAs, IMGs and HMOs operate in a largely similar structure; however, the "Virtual Integrated" groups enter into contracts for provision of all services putting them in contrast with the Vertically intergrated HMOs.

A POS (Point of Service) plan gives the HMO plan members to get healthcare services from physicians who are not on the HMO's provider panel. Usually they are required to pay higher co-pay for such services unlike in HMO where they would have paid the whole amount.

PPO (Preferred Provider Organization) plans differ from HMOs in the way they compensate their panel providers. The contracts are based on fee for service payments unlike HMOs limiting the financial risk to physicians and hospitals. The PPOs are able to negotiate reduced rates with providers in return of the increased availability of patient pool.

With the introduction of HMO model, the HMOs controlled the patient base through contracts removing physician's admitting discretion to their choice of hospital. This has given hospital administrator better position in the power equation. According to recent data, PPOs are becoming popular over HMO plans.

The other important systems are Medicare, Medicaid and governmental health programs. The Employers and Medicare beneficiaries pay into the federal Medicare program fund during their employment for subsequent coverage. The healthcare service provider they visit bills the insurer which gets its payment from Medicare. Under the Medicaid program, the Medicaid enrollee gets coverage from the program and the provider bills the payor, which gets payment from Medicaid program.

The Veterans Affairs, Department of Defense and Indian health service directly provide service to covered individuals since they act both as a payor and provider.

Integrated systems
Group practices: They may or may not contract with HMOs. Management Services Organizations (MSOs) are specialized agencies for the management of physician practices. Sometimes they also act as the source of capital. MSO services could include billing, claim processing, administration, contract management, utilization management, quality control. MSOs could also own the assets related to practice such as office space, equipment, support staff. Sometimes MSOs buy out physician practices using outside funding and becomes a Physician Practice Management company.

Physician Hospital organization: A PHO is formed to exert greater negotiation power against MCOs. They are a type of arrangement between physicians and hospitals and are usually affiliated with one hospital. They can directly contract with employers too.

Integrated Delivery Systems (IDS): IDS are the strategic arrangements between hospitals, physicians and insurers to provide full spectrum of healthcare services to a given population. Managed care organizations contract with IDS instead of each of different players. Larger size of IDS can facilitate investment in capital expenditure.

Employer driven payment systems
Employer provides health insurance to individuals who seek care from provider which bills a payor or insurer. In the case of large employer which is self insured, the bills would come back to the employer and payor combination. In such cases the insurance companies usually act as ASOs (Administrative Service Organization) for the employers providing administrative support.

For individuals who are ineligible for group insurance, individual policies are available. In this system, the individuals who are self employed or on individual policies seek coverage from an insurer which reimburses the providers providing service to the individuals.

In United States, the healthcare administration is largely outside the governmental control. This leaves hospital capacity regulation, residency seat allocation and coordination of care amongst primary, secondary and tertiary centers in the hands of private entities. The physician groups control the policy, occupational standards and entry requirements for licensing. So their professional interests and favor for technology and inpatient capacity also led to expansion of hospital facilities. Over the last few decades, the healthcare has increasingly been delivered at hospitals rather than physician offices. With emerging consumer driven healthcare models and advanced surgical techniques, there is a gradual shift towards Ambulatory Clinics. This will introduce newer models of healthcare delivery

How to pay for the healthcare reform:
President Obama seems to suggest that much of the estimated $1 trillion cost of healthcare reform will come from drug manufacturers and health insurance companies and from cutting waste out of the system. The top 13 health insurance companies last year made about 5% profits on their revenues and if you took all the profits from the health insurance and drug companies it would total only about 3% of the total cost of healthcare today, not to mention the $1 trillion of additional estimated cost of healthcare reform. And you have heard much about the drug companies offering a few hundred million but this is pennies compared to the $1 trillion price tag of healthcare reform. Cutting waste from the system will be like "the millions of jobs that are supposed to be saved", no one will be able to measure it. In my opinion any efficiency savings actually acheived will be more than offset by the increased cost of government bureauarcy in overseeing healthcare reform. Take a look at the healthcare reform organization chart on the home page of congressman Kevin Brady, R, Texas and you will get the picture.

Unless we borrow or print the money, the $1 trillion dollar cost of healthcare reform will be passed to the consumer through higher taxes, insurance premiums or to businesses who in turn will pass the costs back to consumers in the form of increased prices of goods and services - either that or we get reduced healthcare services. There is no other way. My guess is that it will be some of all of the above.

Wednesday, April 08, 2009

My Rwanda Trip

I was anxious to go on this trip but also quite concerned about contracting some contagious disease. In preparation for the trip I got all the required shots including Yellow Fever and started taking my malaria medicine two days before departure as instructed by the Travel and Contagious Diseases Center at Summit Hospital.

On February 27, 2009 I traveled to Dallas, met up with Lara Dulaney, one of my two best female friends, and together we departed on KLM from Dallas to Amsterdam, Netherlands ~ then to Nairobi, Kenya ~ and then to Kigali, Rwanda. All together the trip was about 23 hours of actual flying time. It is much further to Africa than I realized.

While in Rwanda I was cognizant and very careful about what I ate, and every night I called Lara Dulaney to remind her to take her malaria medicine. I am sure she thought old Tigger was way to anal about taking my medicine and putting on the mosquito repellent every day and using the hand sanitizer quite often but I was taking no chances. In preparing for the trip, I purchased some cheap pants and long sleeve shirts and soaked them good in mosquito repellent.

We did not get in until nearly midnight on Saturday. We stayed at the Serena in Kigali which is billed as a five star hotel- actually it is quite nice. On Sunday all of the WOF and World Vision travelers on this trip went to visit the Kigali Memorial Centre pictured above. The genocide that occurred in 1994 is difficult to imagine and disturbing to contemplate on many levels. Below is a timeline of the Rwandan genocide.

Some 800,000 Rwandans, mainly Tutsis, were murdered in a 100-day period following the killing of the Hutu president of Rwanda, Juvenal Habyarimana. The presidential guard quickly murdered the political opposition and enacted a pre-planned campaign of slaughter that spread across the country. Soldiers, government officials and business leaders organised the killings and were joined by a Hutu militia, the Interahamwe.

The international community did little to stop the killings and the slaughter was brought to end by the military defeat of the government by the Rwandan Patriotic Front, a Tutsi-led rebel group.

6 April 1994: President Habyarimana and Burundian President Cyprien Ntaryamira are killed when the Rwandan leader's plane is shot down as it is about to land at Kigali Airport. Hutu extremists opposed to the Arusha Peace Accords are believed to be behind the attack.

7 April: The Rwandan armed forces and Interahamwe militia begin the systematic killing of Tutsis and moderate Hutus. UN forces, unwilling to breach their mandate, fail to intervene. 10 Belgian UN peacekeepers are killed.

8 April: The Tutsi Rwandan Patriotic Front (RPF) launches a major offensive to end the killings and rescue 600 of its troops based in Kigali under the Arusha Accords.

9-10 April: French, Belgian and American civilians are rescued by their governments.

11 April: The International Red Cross (IRC) estimates that tens of thousands have been slaughtered. UN soldiers protecting 2,000 Tutsis at a school are ordered to withdraw to Kigali airport. Most are killed after their departure.

14 April: Belgium withdraws its troops from the UN peacekeeping force in Rwanda.

15 April: Slaughter of thousands of Tutsis gathered at Nyarubuye Church seeking protection.

21 April: The UN cuts the level of its forces in Rwanda by 90% to just 270 troops. The IRC estimates the dead could now number over 100,000.

30 April: The UN agrees a resolution condemning the killing but omits the word 'genocide'. Tens of thousands of refugees flee into neighbouring Burundi, Tanzania and Zaire.
Mid-May: The IRC estimates that 500,000 Rwandans have been killed.

17 May: The UN Security Council issues a fresh resolution saying that 'acts of genocide may have been committed'. It also agrees to send 5,500 troops with new powers to defend civilians, however deployment is delayed by disagreements between the US and UN over the financing of the operation.

22 May: RPF forces gain control of Kigali airport and Kanombe barracks, and extend their control over the northern and eastern parts of Rwanda.

22 June: With arguments over the deployment still continuing, the UN authorises an emergency force of 2,500 French troops under Operation Turquoise to create a 'safe' area in the government-controlled part of Rwanda. The killing of Tutsis continues in the 'safe' area despite the presence of the French.

4 July: The RPF takes control of Kigali and the southern town of Butare. Its leadership claims it will form a government on the basis of the Arusha Accords.

13-14 July: Refugees fleeing the RPF advance in north-western Rwanda flood into Zaire. Approximately 10,000-12,000 refugees per hour cross the border into the town of Goma. The massive influx creates a severe humanitarian crisis, as there is an acute lack of shelter, food and water.

18 July: The RPF announces that the war is over, declares a cease-fire and names Pastor Bizimungu as president with Faustin Twagiramungu as prime minister.

On Monday, we traveled with the WV film crew out in the countryside~ mountianous and very beautiful ~ elevation about 7,000 ft and tropical, lush with green everywhere and lots of banana trees - not that far from the equator.

The purpose of the trip was to bear witness to the tangible results of World Vision's work in Rwanda- this included demonstration of bread making skills, a house built by WV and sustained by entrepreneurual work, aids care giver and an elementary school with about 700 children in attendance. The school visit was really the highlight of the trip for me, seeing the hope and excitement of so many young people with so much promise. And this one very bright young kid (he looked to be 8 to 10 years old and spoke perfect English) asked me how old I was- in answering his question, I realized that very day was my 66 birthday!

These people are really poor but this is not an issue of intelligence or lack of effort but rather lack of capitalist tools which we take for granted in America and which it seems that many of the liberal bent want to tear down. If you give a farmer in Kansas a $500,000 tractor he can cultivate a 1,000 acres of wheat but take away the tractor and give him a hoe, which is what most of the Rwandan farmers have, and the Kansas farmer won't do any better than they do regardless of his education! The left is so blinded by the negative aspects of capitalism that they fail to see the good resulting from capitalism, the most productive and efficient economic system ever devised by man.

After dinner one night, Chantal Kagaba, told her very personal story of surviving the genocide. Her husband was killed the first night of the attacks and she gave birth to her second child in the bush by herself within a few days after the killings began. It is difficult to imagine the physical stamina required to survive not to mention the psychological torment. But the most compelling aspect of her life experience is that she came to forgive the man who murdered her husband and now they are best friends. After wanting and plotting revenge on his family, she came to believe that forgiveness was the better solution and found peace of heart and mind.

I took a lot of pictures of the people I met and the landscape including some pictures of the Serengeti , a portion of which is situated between Kigali and Nairobi.

The Serengeti ecosystem is a geographical region located in north-western Tanzania and extends to south-western Kenya between latitudes 1 and 3 S and longitudes 34 and 36 E. It spans some 30,000 km2.
The Serengeti hosts the largest and longest overland migration in the world, a semi-annual occurrence. This migration is one of the ten natural travel wonders of the world.
The region contains several national parks and game reserves. Serengeti is derived from the Maasai language, Maa; specifically, "Serengit" meaning "Endless Plains".
Approximately 70 larger mammal and some 500 avifauna species are found there. This high diversity in terms of species is a function of diverse habitats ranging from riverine forests, swamps, kopjes, grasslands and woodlands. Blue Wildebeests, gazelles, zebras and buffalos are some of the commonly found large mammals in the region.
Around October, nearly 2 million herbivores travel from the northern hills toward the southern plains, crossing the Mara River, in pursuit of the rains. In April, they then return to the north through the west, once again crossing the Mara River. This phenomenon is sometimes called the Circular Migration. Over 250,000 wildebeest alone will die along the journey from Tanzania to Masai Mara Reserve in upper Kenya, a total of 500 miles. Death is often caused by injury, exhaustion, or predation. The migration is chronicled in the 1994 documentary film, Africa: The Serengeti.

I bought some small gifts for friends at the Kigali airport when we left. On our return trip, Lara and I arrived in Amsterdam at 5:30 in the morning. We got something to eat at McDonalds and two hours later on the plane trip home I got sick- what a bummer. I sat next to 16 year old German exchange student who was also sick. This was her first trip to the America so I helped her with the immigration and custom declaration forms and waited for her to clear passport verification upon arrival in Dallas. At the international terminal in Dallas, I retrieved my bags, cleared customs and rechecked my bags on American Airlines for the flight back to Nashville. And to my horror, American lost my bags which contained not only my clothes and personal stuff, but my CPAP and medicine. So there I was in Nashville, sick filling out lost baggage forms- not a fun time. Three days later, American found and delivered my bags.

So that was the end of a very long, interesting and inspiring trip. I am glad I went to Rwanda.
My thanks to Lara Dulaney, Mary Graham, Stuart Bitting and Mike Hyatt for this once in a lifetime opportunity.

Saturday, October 18, 2008

Tax and other Public Policy Issues-

Our citizenry needs to engage in serious dialogue regarding fair and appropriate distribution of wealth-

Market-oriented capitalists like myself recoil at the thought of wealth distribution but we already have a progressive income tax code and promised entitlement payments approaching forty trillion- that is five times the current federal deficit of 11 trillion so let us at least face reality!

While America is a republic and not a true democracy, the basic economic/political forces are the same- the "have-nots" have the power to take from the "haves" - this is the grand conundrum of an economic democracy.

We don't live in a totally free economy and no reasonable person would advocate that the government has zero responsibility to help those less fortunate and unable to provide for themselves. The problem centers around (1) personal responsibility, the (2) amount of assistance and (3) entitlement.

Personal Responsibility
Should I be required to help someone who is lazy and makes little effort to help themselves? Should those who are more ingenious and industrious not be rewarded for their labors? Should welfare recipients be required to do public service work? Should I have to pay for abortions by individuals who are not responsible for their own actions? Even worse should I have to do all the above for illegal aliens?

Amount of Assistance
Can we afford to continue mortgaging future generations to pay for our government's massive entitlement programs which by the way, go largely to the middle class in case anyone asks.
Can we afford to provide the "same quality" of health insurance to everyone whether or not they can afford such insurance? What will be the criteria for "means testing"?
Can we afford to bail out big banks and insurance companies whose management took millions and sometimes billions in bonus and severance compensation while grossly mismanaging the companies they headed?

I am personally happy to pay taxes in return for basic infrastructure (roads, bridges, airports, etc.) and government/institutional services such as clean water, sewerage system, police protection, public libraries, courts, national defense, postal service and such like. But I am not happy to pay taxes to support those who are too lazy to work and help themselves.

As a solution to the sub-prime housing debacle and the staggering amount of bank loans being foreclosed, some politicians are now proposing that the government (through the banks via the bailout money) write down the principal amount of these loans to market valve. This amounts to a gross inequity to those homeowners whose real equity has declined and a windfall to those who purchased homes they could not afford.

As a nation we seem to be accelerating down the path to socialism.
The government is now partial owners in the major banking institutions of America and there is a growing chorus for nationaliation of banks. It seems every time our government leaders come to us with a crisis we give up a little more of our freedom and get very little of the help we were promised. Remember the $700 billion dollar bank bailout was supposed to help "main street" as well as "wall street". I have yet to see much help to main street. Of course the other side argues that we would have faced enconomic catastrophe if we had done nothing- a negative can never be proved.

Sub-prime mortgages and the Perfect Storm-
No one person or factor is to blame but rather a convergence of several factors which together brought about an unprecedented destruction of wealth and left us in uncharted financial territory.
1) development of global financial systems which provided efficient methods of capital deployment coupled with historical low interest rates in the United States and world wide.
2) shortage of housing unevenly allocated in a number of large cities coupled with speculation drove housing demand and prices at a dizzying pace.
3) increased government and political pressure on banks to make loans to individuals and families who could not afford the houses they were buying which arose out of an entitlement philosophy
4) securitization of mortgages "Collateralized Debt Obligations" coupled with Credit Default Swaps created a false sense of security. The complexity of mortgage securitzation tied to collateralized debt obligations and credit default swaps is baffling even to the experts. Check out the the CDO and CDS links and you will see the complication involved in these credit derivatives which are estimated by some to be upwards of 60 trillion worldwide. Collateralized Debt Obligations and Credit Default Swaps and the related risk models employed by the underwriting financial institutions were unregulated and like an unchecked epidemic they quickly engulfed the global economy.

Collateralized Debt Obligations created an asymmetric-risk environment for orginators versus investors which encourgaged unchecked deregulation in credit standards and credit rating agencies. Most states, cities and municipalities issue variable rate revenue bonds which are attached to liquidity banks. Public revenue bonds are rated by specialized bond rating agencies who in turn have been impacted by the sub-prime housing defaults.

When bond holders sell their bonds back to the liquidity banks, a sort of buyer of last resort, the municipalities have effectively defaulted which means their interest and principal payments are accelerated. The municipalities must in turn raise taxes and/or charges for its services. Now you can begin to see the circular nature of this problem. That is a key reason why the congress is looking to allocate a significant portion of the next stimulus package to cities and states.

Here are some broad tax and public policy changes I think should be seriously considered.

1) Abolish our existing tax code and enact the Fair Tax Plan
2) Revise existing tort laws and cap litigation awards for errors and malpractice for all health care providers- in other words allow compensatory damages but no punitive damages. This change alone will provide sufficient savings to pay for minimum health insurance for everyone.
3) End short selling on all security exchanges- this is nothing more than speculation and provides hedge funds, pension and endowment funds and private equity funds with the ability to unfairly manipulate stock prices and effectively transfer wealth from long buyers.
4) Regulate Hedge funds like investment firms
5) Ban Collateralized Debt Obligations and Credit Default Swaps
6) Invest in America's infrastructure; roads, bridges, electrical grids, etc.
7) Invest in higher education for our young people
8) Attach Iraq's oil revenues as compensation for our infrastructure investment and find an honorable way of this war.
9) Put all illegal immigrants on a path to citizenship and find an effective way to enforce immigration laws going forward.
10)Permit offshore drilling beyond 20 miles off the Continental shelf of the entire United States, permit exploration in Alaska's ANWR, build more refineries in the US, build more nuclear power plants, encourage and mandate energy conservation through taxation, and develop all commercially potential sources of alternative energy such as wind, solar and geothermal.

Monday, December 24, 2007

Zero to Twenty

Happy Birthday, Betsy
November 3, 1990

When I first saw your little face shine,
You were to young to know mine
Years went by as a little girl you grew,
Passing out Christmas presents at Grandmother's to those you knew
Then the world grew bigger for you with all things sensibly,
In school you excelled while others not ostensibly
Saw you like them no cognizance of how unique,
Betsy from little girl to womanhood to mysterious to speak
Now in college you can contemplate and learn,
of God's grand universe and romantic love to burn
With a smile effervescent and barretted hair,
and beauty undeniable cause all the boys to stare,
Amble through life and care not to be loquacious,
Sieze all things wonderful and not those mendacious
Like a learned lexicographer, love that which is pellucid,
And write your story on life's vellum, becasue that's you kid
You, a lover of words like me,
Dare to dream bigger than all but HE
Cling to your innocence and Godly virture,
Learn all you can and forget not your soul to nurture
So here's hoping that #20 is your greatest birthday yet, BETSY
For you deserve the best the world has to offer and that is no hyperbole!

Sunday, September 02, 2007

The Halo Effect by Phil Rosenzweig

The thesis of this book is to challenge the reader to think critically about business and more specifically about how to define high performance and why this is so difficult to do given the tendency for pomposity the authors of many business books exhibit in the distillation and identification of deep and profound secrets of a company's success. Editors of major business magazines and newspapers add hype and rationalization of performance without much understanding of the real underlying factors.

Take the story of Cisco Systems. During the internet bubble, Cisco made 73 acquisitions and grew it's revenues, profits and market capitalization to record levels- for a brief moment in 2000, Cisco was the number one company in the world in market capitalization at over $550 billion. Cisco and in particular its' CEO, John Chambers was lauded as being just about perfect in every way.

"It could close it's books in a day and made perfect financial forecasts. It was an acquisition machine, ingesting companies and their technologies with aplomb. Cisco had flattened the corporate pyramid, outsourced capital-intensive manufacturing, and forged strategic alliances with suppliers that were supposed to eliminate inventory almost entirely. Sophisticated information systems gave its managers real-time data, allowing them to detect the slightest change in current market conditions and to forecast with precision. If anyone had the vision thing nailed for the digital era, it was supposed to be Cisco's CEO, John Chambers".

Oops, just one year after the apex of its glory, Cisco had written off $2.2 billion in inventory and lost more than $400 billion in market capitalization proving it was just as vulnerable as any other company to an economic slowdown.

Now the same business writers who were over accentuating Cisco's high performance now claimed that just about every strength that was previously lauded was now a weakness.
Cisco was not good at forecasting, had lost its customer focus and had made a mess of the scores of acquisitions made over the past ten years.

So where is the reality? Why is it so hard to define high performance?
Because it is easier to succumb to "delusions" than to do the hard work of determining what causes high performance and to admit that there many times there is no simply answer or secret formula to success.

Consider the following delusions:
1) The Halo effect delusion- so many of the things that we- managers, journalists, professors, and consultants- commonly think contribute to company performance are often attributions based on performance.

2) The Delusion of correlation and causality- take the classical assertion that satisfied employees drive superior financial performance; you can make just as strong a case, if not stronger, that superior financial performance drives employees satisfaction.

3) The delusion of single explanations- So many things contribute to company performance that it's awfully hard to know exactly how much is due to one particular factor versus another. Even if we try to control for many things outside the company, like environmental turbulence and competitive intensity and industry and firm size, we can't control for all the many different things that go on inside the company.

4) The delusion of connecting the winning dots- Only five out of thirty five companies profiled In Search of Excellence improved their performance five years after the book was published! Same result for Built To Last- only eight out of seventeen companies profiled outperformed the S&P 500 five years later. The authors simply looked for commonality among successful companies and connected the dots.

5) The delusion of rigorous research- notwithstanding the quantity of data gathered, beware of research corrupted by the Halo Effect!

6) The delusion of lasting success- We can tell ourselves that our handful of companies, selected by a rigorous and objective process, are a breed apart, somehow better than the rest (and the more rigorous the selection process appears to be, the more we can persuade ourselves these companies are somehow really better than the rest). But it's a delusion. We are kidding ourselves. If we start with the full data set and look objectively at many years of company performance, we find the dominant pattern is not one of enduring performance at all, but one of rise and fall, of growth and decline. Managing for survival, even among the best and most revered corporations, does not guarantee strong long-term performance for shareholders. In fact the opposite is true. In the long run, the markets always win. The basic force at work in capitalism is that of competition through innovation-whether of new products or new services or new ways of doing business -(attributed to Austrian economist Joseph Schumpeter.

7) The delusion of absolute performance- diverts our attention from the fact that success and failure take place in a competitive environment- you can improve in absolute terms and still fall further behind your competitors in relative terms.

8) The delusion of the wrong end of the stick- a look at the Fox-Hedgehog parable.

9) The delusion of organizational physics- The most important questions in the business world do not lend themselves to the predictability or replicability of physics.

Business performance may actually be simpler than it is often made out to be but may also be less certain and less amenable to engineering with predictable outcomes.
Michael Porter of Harvard Business School said that company performance is driven by two things- strategy and execution. Strategy is about performing different activities from those of rival companies or performing similar activities in different ways. Execution involves critical thinking about our priorities. For our company, at this time, competing against our rivals, which of the many dimensions of execution are most important? Which are the most vital for us at this time? It is always easier to bang the drums about execution than to address fundamental questions of strategy. Both are equally important.


Wednesday, August 01, 2007

Fortnight In France

A Time to Remember
with Dana Hanson,

Pushing deep into the night sky, the big jet engines strained and whined,
Bound for Paris at last - New York skyline faded behind.

Pavement rushing up to meet us on the long runway at Orly,
Secure in our Hilton room, we took repose, reflecting on the journey.

The huge elevator creaked and moaned crawling to stupendous height,
There atop the Eiffel Tower; behold the City of Lights, we were awed and inspired by the sight!

Standing there in the Great Hall of Mirrors and many chandeliers leaves one but to sigh,
As around the grandiose grounds we went, this place they call Versailles!

America's Embassy around and through we visited too,
Moreover than the sights, we just talked- me and you.

Floodlit Cathedrals and seawalls of old, even a statue of Liberty, what a magnificent sight,
All this we saw on a boat ride down the Seine, light rain falling through the night.

Standing on the Champs E'lyse'es before the Arc de Triomphe, the history is sure your spirit to move,
While at the other end, masterpieces of art, Mona Lisa and all hang in the great halls of the museum Luv.

Legion the steps of the winding stairway - as ahead you ran and at last I came,
There together we stood on the balcony of centuries old Notre Dame!

Many a place there was to eat but not every menu item did we try,
Hard to say between Brassiere and small outdoor cafe' - or did Jules Vern and the Russian Tea Room vie?

Me trying to use the telephone with no french spoken,
You laughing because I didn't know the 'thing' wanted a token.

Paris we left on the TJV - down to Lyon, Marseille and in Nice we stayed,
Beaches on the Riviera are mostly rock and topless which leaves some dismayed.

From Nice on we went 'round the winding road, the seaside view washed away all cares and woes,
There in Monte Carlo we stayed at the beautiful breathtaking Loews!

The name I can't recall of the Play in Monte Carlo or the one in Paris too,
Alas, my daughter, I remember being there with you!

Breakfast on the veranda then at poolside soaking up the sunshine,
And at night in the Casino, with you luck seemed to be mine.

This fortnight in Paris I will always treasure,
And my love for you to great to measure.

Love, Daddy