Wall Street, Main Street and Resilience

July 7th, 2010 - John Plodinec

Last evening I read a fascinating essay by Michael Lewitt called “The Death of Capital” (based on a recently published book of the same title). Lewitt shows how our financial system (including the federal government) has become an instrument that does not encourage growth of our economy but rather rewards speculation. The Wall Street bailouts, and their use to aggrandize a few at the expense of all of the American taxpayers, are an example of how we have privatized gain while socializing loss. The credibility of the security rating services has been dealt a severe blow as we have seen how they failed in their primary mission – to accurately inform investors about the risk of investments. As a result, there is widespread mistrust throughout the financial system.

When disaster strikes, businesses can’t rebuild without financial resources; for most that means credit. The mistrust that has become endemic in our financial system has upped the ante for businesses seeking credit. More information is needed; more security is needed; but less credit is available. The burden of proof of creditworthiness has almost gone beyond the reach of many small businesses.

Earlier in the day I had a phone call from a friend in Nashville. He told me about a vet there who had nearly been swept away twice while trying to save the animals in her care. As the owner of a small business, she is desperately trying to recover and rebuild after the flooding that occurred (see the photograph below). She is discovering what too many have found before – there is little help for Main Street when disaster occurs. There is a smattering of private credit available for recovery. The federal Small Business Administration offers low interest rate, long-term loans, but the already high burden of proof of creditworthiness becomes almost unreachable for disaster-crippled businesses. And then there is … nothing else for our small businesses.

In propping up those “Too Big to Fail,” we seem to have forgotten the real engines of our economic growth and vitality – the tens of thousands of small businesses across the country. As we strive to make our communities and our country more resilient, we need to recognize that our small businesses are a crucial part of our communities and that they deserve special attention. I don’t have an answer but I do know that without one, our efforts to make our communities more resilient will fail.

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The Art of War on Leadership

June 22nd, 2010 - John Plodinec

“Leadership is a matter of intelligence, trustworthiness, humaneness, courage, and sternness.” – Sun Tzu

As I discussed in a previous posting, The Art of War – the two millenium old classic Chinese treatise on war – has great relevance to community resilience. In this post, I’d like to discuss how SunTzu’s observations about leadership can be applied to communities.

According to Sun Tzu, a successful leader must have the five traits listed above. In the context of a community and its resilience, these traits might be better described as follows.

Intelligence. Intelligence in leadership means that the leader knows how to clearly identify an objective, communicate it, and then plan to achieve it. This implies that an intelligent community leader recognizes when the community must adapt to changing circumstances. The intelligent leader is able to articulate that need and initiate the planning effort needed to affect change.

Trustworthiness. A trustworthy leader is recognized by the community as a person of integrity. Thus, the community believes that a trustworthy leader will carry out promised actions, and will provide support to the rest of the community to implement action plans. Such a leader is thus able to communicate more effectively to the larger community, because even unpopular messages are more likely to be heard.

Humaneness. An effective leader cares about the community, and that caring is manifested in actions. The community feels that a humane leader “feels their pain,” and therefore are more likely to follow where the leader is going. This recognized innate humanity of the leader is especially important when trying to reconcile different factions within the community.

Courage. A leader must have the courage to persevere even when obstacles are encountered. In essence, the courage needed by an effective leader is born of a certain innate confidence in one’s own integrity – the leader believes the community is on the right course.

Sternness. By “sternness,” Sun Tzu means a sort of rigorous fairness. Rewards and punishments are strictly based on actions, and not the person acting. Ultimately, this sternness is the result of a sort of self-discipline in which the leader may have favorites but does not favor them.

The transformation of Charlotte, NC, from a textiles to a financial center illustrates the importance of several of these leadership traits. Up until the 1970’s, Charlotte had been one of the leading centers for the textile industry in the country. The heads of two of the largest banks in North Carolina and the head of Duke Power recognized that the demise of that industry threatened Charlotte’s vitality. All three were a part of the community, and passionately cared about Charlotte’s future. Acting largely independently of city and county governments, these three formed an organization aimed at helping Charlotte to adapt to these changing conditions. As plans were developed, these three spearheaded the transformational effort. They helped rebuild some of the poorest sections of the city (encountering opposition because many of these were predominately black), making what had been almost slums into desirable neighborhoods. In spite of criticism and carping, these three eventually transformed Charlotte into what has become the second largest financial center in the country.

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People with challenges and community resilience

June 3rd, 2010 - John Plodinec

As many of you know, CARRI has embarked on a massive undertaking focused on developing – and then testing – a community resilience system. Recently, during a meeting of the Community Leaders Working Group, I was asked why we had included “The community works to maximize the value of those with special challenges” as one of our important community functions. In fact, two of the most in-my-face questioners (both former mayors of sizable cities) actually accused me of being politically correct (If this were true, it would come as a huge shock to the rest of the CARRI team, not to mention my wife!). By the way, these are my thoughts I share today and not necessarily the voice of CARRI.

I thought it would be worthwhile to talk about who are the challenged, and why it makes practical sense for communities to treat them as potential assets, not liabilities.

If we look at our communities today, 5-10 % of the population has some debilitating mental or physical condition. Last year, one in eight Americans received at least part of their food through food stamps – and one in four of our children. Officially, about 10% of our population is unemployed; but if we include new college grads, those who’ve stopped looking for work, and those who are underutilized, the rate increases to almost 18% nationwide. It should also be noted that unemployment among the college-educated is at an all-time high – almost 5%. In the Rust Belt and parts of the South, the official unemployment rate is over 20%, meaning that the actual unemployment rate approaches 30%. Thus, in many communities, a large fraction of the population – and sometimes a majority – is facing significant challenges.

After a community is hit by a disaster, recovery makes huge demands on the permanent personnel who actually keep the community running. More people are needed to remove debris. More people are needed to handle the flood of permits for rebuilding. People are needed to reconnect families and to help get services to those who need them. Many communities meet these needs by hiring “outsiders” to provide these services, but if they do so, they lose in at least two ways:

These communities send the resources to pay for these services outside the community. Since the federal government will pay for many kinds of temporary workers after a disaster, it makes good sense to hire these workers from within the community – to keep as many precious dollars within the community as possible. The challenged – particularly the employable unemployed – should be the first resource tapped by a community (To their credit, BP has agreed to do just that in southern Louisiana communities affected by the oil spill.).
These communities have to spend more of their resources helping the challenged recover from the disaster than they otherwise would. That means much less accomplished with limited resources and possibly a longer recovery period.

In other words, communities who don’t use the challenged to aid in the extraordinary challenges of recovery are turning potential assets into real liabilities.

Thus, by making use of its members who face significant challenges to meet the extraordinary demands of recovery from a disaster, a community can keep dollars in the community while maintaining a more productive and motivated permanent staff. This isn’t political correctness but enlightened self-interest.

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Three things I think I think – about resilience

April 19th, 2010 - John Plodinec

With apologies to Peter King of Sports Illustrated …

I think I think I’m starting to hate resilience. Not the concept, but the word. Like sustainability, it has been adopted as a fad by so many, that it is losing its meaning. In CARRI, we are focused on the concept of being able to bounce back better, but that injects a tincture of resistance into our definition that sometimes confuses people.

I think I think that our ballooning federal deficit is the single greatest threat to the resilience of our communities. From 2005 to today, the federal government has lost one “Katrina” – the federal government’s payments to service our national debt have increased by slightly more than it cost to recover from Katrina. Simply put, communities will have to develop creative ways to find and use the resources they will need to recover from a disaster. This is one area where I hope that CARRI’s Community Resilience System Initiative will have a great impact.

I think I think that we as a nation need to put a spotlight on rural America. In a very real sense, our rural communities are under siege. Their ability to respond to disasters is at its lowest ebb since the Depression. Many are struggling to reinvent themselves because they have lost their original reason for being; others are just holding on trying to stave off their inevitable death. But if some of the predicted impacts of global warming are real, it is likely to eradicate a large number of rural communities across the country. Rural citizens most likely will go to coastal areas that will already be coping with their own impacts from climate change. Ideally, we’d like to see the migration go the other way – away from coastal communities. We need to figure out how to help rural communities become more resilient – in this case, able to recover quickly from acute disasters and respond to the chronic problem of reinventing themselves in a changing world.

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The Art of Resilience

March 23rd, 2010 - John Plodinec

Whenever I start a new endeavor, I try to assess it in terms of the factors set down over two millenia ago by Sun Tzu in his great work, The Art of War. According to Sun Tzu, successful generals assess their strategic situation in terms of the weather, the terrain, the leadership, the discipline and the Way. Communities can become more resilient if they assess themselves using the same five factors.

When a community assesses itself in terms of the weather, it shouldn’t literally think only of natural disasters, but rather consider all of the storms that swirl around it, including pandemics, economic disasters, and even civil chaos (think of the riots in the ‘60s). Each of these brings its own challenges. The resilient community anticipates crises, and objectively determines what the consequences might be.

A community’s terrain is not only its geography but also its internal terrain – its networks that actually perform the actions needed by the community. A resilient community understands that just as different neighborhoods may be affected and respond to crises in different ways because of their geography, so, too, different parts of its networks may respond in very different manners to a crisis. Thus, in assessing its terrain, the resilient community recognizes its strengths and weaknesses, and realizes that disasters are likely to magnify its weaknesses, while reducing its strengths.

A resilient community recognizes that its leadership goes beyond government, and is most often a complex network of public and private partners. Time compounds this complexity: the attributes of successful leadership during the response to a disaster (e.g., heroism) have to evolve to the patient perseverance of a saint as the community recovers and redevelops itself. Indeed, the community’s “decisions” made during recovery often will be the sum of hundreds or even thousands of individual decisions made by those in the community.

Resilient communities will exert discipline by planning for disasters, and by practicing those plans. Those plans will identify the human, physical and fiscal resources needed, and where they will come from. Through practice, these plans are refined and revised. Communities seeking to become more resilient will also invest to reduce their vulnerabilities.

The Way is at once the most difficult of these factors to grasp, but likely the most important. The Way is a complex compounding of vision, communication, and trust that provides a signpost to any member of the community in reaching decisions. The resilient community strives to achieve a coherence – a moral accord – an agreement – a shared vision across the entire community about what the community should be. If a community has a recovery plan or – better yet – a strategic plan, it can inform those hundreds or thousands of individual decisions made during recovery so that the overall outcome is positive. Thus, it is useful for communities to develop recovery plans before disasters, to lay out the general principles by which all in the community will act.

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Unrealistic Expectations

March 5th, 2010 - John Plodinec

In a previous posting, I pointed out that the new reality of constrained resources created by the Great Recession makes the need for a community resilience framework more pressing than ever before. In this post, I’ll discuss another major reason a community resilience framework is needed now: the unrealistic expectations that have resulted from recent disasters.

In the aftermath of 9/11, and especially after Hurricane Katrina, a large portion of the populace seems to believe that the federal government should and can be the “White Knight” that charges in after a disaster and returns the community to normalcy. This belief has been reinforced by recent federal bailouts to financial institutions and automakers, and mirrors some of the rhetoric surrounding the health care debate.

Many current plans for emergency response and recovery reflect other facets of the same problem. For example, too many plans expect that the community’s behavior will conform to directives from the community’s leaders. And yet opinion polls in several locales have shown that large portions of the populace in hurricane-prone areas say they won’t leave no matter what they are told. read the entire article >

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Impacts of the Great Recession on Communities

February 5th, 2010 - John Plodinec

In previous postings, I’ve tried to present trends that pointed to the need for a community resilience framework. These trends (growing complexity of communities, the new spectrum of hazards facing communities, and the accelerating rate of change) by themselves make the case for the need for a community resilience framework. In this posting and the next, I’ll examine reasons why we need such a framework NOW – first the impacts of the Great Recession, and then the unrealistic expectations of so many of our citizens.

The Great Recession of the last two+ years has created a new reality for communities. The resources that communities, states, and the federal government have available for disaster recovery may not be there for the next disaster. Across the country, tax revenues are falling. At least 35 states expect to have budget shortfalls this year; last year, 49 out of the 50 actually did. According to the Bureau of Labor Statistics, that translated to almost 300,000 less workers in government in December, 2009, than a year before – and at least 17 states already have announced they will reduce staff again this year. This year, the National Debt is expected to approach 90% of our national GDP. We just don’t have the money – or the human resources – to repeat the recovery from Katrina (cost $230B and counting), at least not the way we’ve done it before.

And it does not look like the economic picture will significantly improve any time soon. Only the most glowing – and unrealistic – projections of our economy lead to reductions of more than a percent a year in unemployment over the next decade. These rosy assumptions fly in the face of the projections of many economists that we will see another economic dip within the next two years. read the entire article >

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The Accelerating Rate of Change

February 2nd, 2010 - John Plodinec

In my previous post on the need for a national framework for community resilience, I focused on the new spectrum of hazards facing American communities. In this post, I’d like to look at another reason why a national framework is needed – the accelerating rate of change.

As I’ve noted earlier, in early American communities the pace of change was relatively slow – communities usually could adapt to emerging trends and new hazards at their own pace. A person in his prime in 1700 would not be all that uncomfortable in the America of 1800 (unless, of course, he was a violent royalist!). A city dweller in her prime in 1800 might be overwhelmed with all of the new technologies (street lights, streetcars, horseless carriages!) in the world of 1900, but her country cousin would still be able to recognize her world of 1800 in that of 1900. In today’s techno centric world, the accelerating rate of technological change means that those in their prime in 1900 would face a completely unfamiliar – and perhaps terrifying – world.

As noted in an excellent report by Susi Moser and Shanna Ratner (“Community Resilience and Wealth….”), available at the US Endowment for Forestry and Communities, http://www.usendowment.org/communityresilience.html, rural communities are now faced with the need to adapt, or re-invent, themselves every fifteen years. Why is that? read the entire article >

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Old and New Threats to Communities

January 27th, 2010 - John Plodinec

In the first post of this series, I summarized the reasons that a community resilience framework is needed – now. In my last post, I expanded on one of them: the growing complexity of communities. In this post, I want to expand on another of them: the new spectrum of threats facing communities.

American communities have always been at risk from natural hazards and pandemics. However, the evolving and ever more complex nature of communities, and the rise of global terrorism have brought new vulnerabilities. A community resilience framework can help communities identify these vulnerabilities, and take steps to mitigate them.

With the growing affluence after World War II, Americans were able to live wherever they wanted, rather than where they were born and raised. As a result, more and more people have migrated to what they deem to be more attractive locations. In 1900, less than half of our population lived near either the Atlantic or Pacific Oceans. Now, over three fourths of Americans live within 50 miles of one of the coasts, and the proportion is increasing. Smaller communities that were formed as a hub for agricultural activity are disappearing, or are being transformed into bedroom communities for a nearby urban center. Where once almost all communities were self-sufficient, now most communities have complex ties to others in their region or the nation (and, more and more, to the rest of the world), and must depend on others for critical capabilities. read the entire article >

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Community Complexity and Need for a Framework

January 19th, 2010 - John Plodinec

Generally, communities in early America were formed based on the perceived self-interest of their members – at convenient points for land or water transportation, or near valuable natural resources, or for mutual defense or for religious reasons. These early communities quickly became hubs of activity for the common good – for defense against hostile intruders, for trade, for education.

In the earliest days, most communities were self-sufficient – the community provided its citizens with the essentials from local farmers, artisans and craftsmen. The community had to be relatively self-sufficient; most communities were rather isolated (for example, it would take two hours to go from Harlem to central Manhattan, even by ferry) and travel farther than a few tens of miles was both difficult and expensive. These early communities were also relatively stable; their reasons for being – whether economic, defensive or religious – changed very slowly. For most communities, this meant that in times of crisis, people almost instinctively knew who they could rely on for support in times of crisis. Timely assistance could only come from their friends and neighbors – people they had known their entire lives – to recover.

With the growth of cities like Philadelphia, Charleston, Boston and New York, the nature of communities began to become more complex. Instead of looking to the entire community in a crisis, people relied on their neighborhood for support. The neighborhood was largely a place where you lived, and citizens had to look to other neighborhoods – and eventually other communities – for some of their needs. Thus, while early American communities were self-sufficient, cities – and especially neighborhoods – became less so. read the entire article >

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