John Plodinec

Adversity: the primer for resilience

January 30th, 2012 - John Plodinec  

Walt Disney said:

All the adversity I’ve had in my life, all my troubles and obstacles, have strengthened me… You may not realize it when it happens, but a kick in the teeth may be the best thing in the world for you.

Nietzsche wrote (and Jethro Gibbs repeated), Whatever doesn’t kill you makes you stronger.

One of my favorites among the many definitions of resilience is – Positive adaptation to perceived adversity (slightly altered from Adger). But what Disney and Nietzsche (and Gibbs) are pointing out is that resilience is learned behavior whether at the individual, the community or the national level. We learn to cope by coping; we learn to adapt by adapting to those things we cannot change. But that begs the questions: How much adversity is enough? How much is too much?

I recently read a summary of some interesting work by Dr. Mark Seery at the University of Buffalo which sheds an interesting light on this. He looked at those who had faced much adversity throughout their lives, those who had faced some adversity, and those who had faced little to no adversity. He found that those who had experienced a great deal of adversity and those who had faced little adversity were both much worse at coping than those who had experienced only some adversity. And it didn’t appear to matter what the adversity was.

There are a few interesting parallels at the community level. The strengths Charleston developed during and after Hurricane Hugo undoubtedly helped it to successfully cope with the subsequent naval base closure. Without the adversity of Katrina and the levee breaks, would New Orleans have been able to withstand the Great Recession and the BP Oil Spill as well as it has (Next week, I’ll be writing a blog about some surprising – at least to me – lessons from New Orleans recovery.)?

Too often, we (especially our politicians!) seem to act as if we can’t allow anything bad to happen to anyone. But does trying to prevent bad things from happening to people, communities, or our nation actually mean that we are actually preventing people, communities and our nation from becoming more resilient? And, ultimately, such efforts are doomed to failure, anyway. Bad things will happen. The more little “bads” we’re able to prevent, the more severe the big “bads” will be, because we will have been deprived of the opportunity to learn to cope – to become more resilient.

As Helen Keller wrote:

Security is mostly a superstition.
It does not exist in nature
Nor do the children of men
As a whole experience it.
Avoiding danger is no safer
In the long run than outright exposure.
Life is either a daring adventure
Or it is nothing.
To keep our faces toward change and
Behave like free spirits
In the presence of fate is strength undefeatable.

John Plodinec

Notes on the International Disaster Conference and Expo

January 27th, 2012 - John Plodinec  

Last week, I attended the first International Disaster Conference and Expo in New Orleans. Rather than give a blow by blow rundown, it’s probably more useful to lay out major themes that kept popping up, as well as a few interesting (at least to me!) insights I gleaned.

Public-private partnerships, and the emerging importance of the private sector. Virtually every speaker spoke to the value of private sector involvement in disaster preparation and recovery. Craig Fugate talked on his “Waffle House indicator,” and the CEO of Waffle House described his company’s approach (He probably had to handle some of the toughest questions – for example: “Would Waffle House be as proactive if it was a publicly held company?” He did a superb job of laying out the importance of WH’s corporate culture for the corporation’s actions, something that receives too little attention.)

The presentations on the humanitarian response to the earthquake in Haiti provided an interesting twist on this theme. Several speakers pointed out that one of the unintended consequences of the outpouring of humanitarian assistance was the harm it did to local companies. By providing goods for free, aid organizations essentially shut out local companies that could have provided goods and services to strengthen the local economy.

Whole community. Craig Fugate did his usual good job of explaining this but the theme was reinforced and amplified by several speakers. I appreciated his point about the tax base being an indicator of recovery. In CARRI’s work, we have encountered those in local government who felt that they had no business worrying about business. As Fugate implied, they had better worry about business – if they lose businesses, their ability to provide the services expected by their citizens is diminished. Several of the international speakers echoed the importance of involving the entire community both before and after an event.

Information. This became the most important theme of the conference for me. If the Whole Community is to be effectively engaged, then each member of the community must have accurate, relevant and timely information. Dave Kauffman of FEMA pointed out that there is three times more information available now than in the 1980’s, and it’s volume is growing at 30%/year. Dave and one or two others talked about the need for tools to pan the river of data to find those golden nuggets of needed information. Social media can play a crucial role, as sentinels signaling a changing situation, as validators of data, and – increasingly – as platforms for action. This led me to wonder if we might see more mini-“Boatlifts” (the almost spontaneous organization of the evacuation of Manhattan Island after 9/11) facilitated by Twitter and its siblings.

Community resilience. I was very pleased to see more and more people looking at community resilience as a “virtue with big shoulders,” something vital and active rather than a pallid and passive shadow that is only seen after a disaster happens. Meir Elran from Israel pointed out that active communities were resilient communities, and that resilience could be built and enhanced. He described several steps being taken in Israel ranging from training elected leaders to providing age-appropriate programs for students from kindergarten to college. If we want to build a culture of resilience, what better way than starting with youth. Dave Kaufman pointed out that one of the key drivers FEMA sees in our future is the greater involvement of the entire community in preparation and recovery. We need to actively build trust between the governing and the governed to do this effectively.

Education. While this wasn’t an explicit theme in the presentations, I was struck by the number of educational institutions who were part of the Expo and what they offered. Noteworthy were:
• The Stephenson Disaster Management Institute at LSU. Probably their most visible accomplishment was conceiving and helping to foster the foundation of the Business EOC in Louisiana. An excellent example of government making a commitment to work with the private sector.
• The Center for Hazards Assessment, Response and Technology at the University of New Orleans. UNO also touted the usefulness of some of their urban planning programs.
• Tulane’s Disaster Resilience Leadership Academy. Dr. Ky Luu and his colleagues have pulled together an excellent interdisciplinary program. I have to admit somewhat ruefully, though, that the curriculum seems too daunting for any current leader to take it (which is too bad). Let’s hope their graduates are among the next generation of leaders.
• Anna Maria College, near Worcester, MA. They have some interesting “nuts and bolts” programs (e.g., a degree in fire science, as well as an MS in Emergency Management).

Ian Moore

Risk, Utility and Probability

January 18th, 2012 - Ian Moore  

UTILITY

For the completely rational human being the concept of the ‘utility’ of a thing (that is its ‘usefulness’) should be directly related to the amount of the thing that they receive. For example £10 should be twice as useful as £5. Two cabbages should be worth twice as much as one cabbage.

Actually the relationship between most items and utility is more like the following diagram which depicts the relationship between utility and money for a typical person:

To demonstrate this, how would you answer the following question:

Which would you prefer?

100% chance of winning £1,500
50% chance of winning £3,000

Most people will choose the $1,500 even though logically they both have the same value.

This is because, as you can see from the graph, twice the amount of money corresponds to less than twice the amount of utility.

This utility/money curve of course varies from person to person and how risk averse they are but similar curves exist for the majority of people.

The curve also implies some other things. The further the amount of the resource increases (in this case money) the less the relative difference. For instance your response to the question above will probably be even less logical (and more risk averse) if the amounts were £10 million and £20 million. The other side of the curve implies that £20 probably has more than 10 times the utility of £2. The exception being if you needed the £2 for a bus home, in which case you would be highly risk averse to any gamble.

RISK AND PROBABILITY

This behaviour is also similar to our risk versus probability curve:

If we have a very low probability of something happening (the left hand side of the curve) then there is little perceived risk because it is very unlikely that we would make that choice. For instance if we could bet £1 at 1 in ten thousand odds of wining £10 we are highly unlikely to take the bet.

The right hand side of the curve also is perceived as low risk. It there is a very high probability of something happening we perceive it correctly as low risk.

The highest risk is at the 50/50 probability where it is totally uncertain if an event will happen or not.

From a purely logical perspective this curve does not make sense, it really should be a triangle with straight lines. It differs from this because humans do not easily perceive very low probabilities as being as low risk as they are (and vice versa for high probabilities.) For a probability of 99.9% that some event will happen there is a small doubt in our minds and this increases the perceived risk. consider the following scenario: your house insurance is normally £500 per year but your insurance company has a strange offer on, for £100 per year you can insure your house for all days starting with a T or an S (that is 4 out of 7 days), would you take out the insurance?

We do not react linearly to utility and resource, logically we should.

We do not estimate risk against probability well.

If we can incorporate an understanding of these behaviours into our decision making we will be able to improve it.

John Plodinec

Demographic Trends and Community Resilience

January 10th, 2012 - John Plodinec  

Two weeks ago, the Brookings Institution released an interesting report on Five Things the Census Revealed about America in 2011. The authors were focused on America as a whole, but in the following, I’d like to look to look a little deeper at what their findings may mean for American communities.

Minorities are driving growth, and replenishing America’s youth. In the 1950’s, about one-fourth of our population growth was due to minorities (non-whites). On the 2000’s, almost all (92%) of our population growth was due to minorities, mainly Hispanics and Asians.

While non-whites in particular are driving population growth, the overall rate of growth is slowing. The nation’s population increased by about 10% from 2000 to 2010, the lowest rate of increase since the 1930’s. This reflected less immigration because of a poorer economy, and a lower birth rate because of an aging population. It’s as if everyone in Quebec, Ontario and the rest of the eastern half of Canada (about three-fourths of their population) moved to the US in just ten years. We clearly are continuing the process of becoming a “majority minority” country, just a bit more slowly than we have been.

The rate of growth of the population 45 and over is eighteen times that of those 45 and under. As one important result, only one in five households consist of a married couple with a child under 18.

The rate of migration continues its slow decrease. About 20% of us moved our homes in the ’50s and ’60s; in the last five years that dropped to just over 10%. Simply put, more and more Americans are staying home – with one major exception. We are seeing a “Reverse Migration” of the Black population to the South, as well.

The median household income declined the past decade for the first time on record, by about 9%. There was a concomitant increase in the poverty rate, to 15%. As we’ve seen so pointedly for New Orleans after Katrina, poverty is spreading from inner cities to the suburbs as is ethnic diversity.

Clearly, each of these trends will impact our communities, and each in a different way, depending on the community. However, there are a few generalizations worth noting.

• Communities’ responses to the diversification process will be telling indicators of their resilience. Some communities will not cope well; others will find strength in their increased diversity. Fortunately, there are models that are working (e.g., Anaheim) that others can emulate.

• Perhaps the greatest danger inherent in this diversification is that the community’s sense of itself may be dampened or destroyed. Without positive action, there is a real danger that a community may splinter based on race, language, age, or economic condition. If these become barriers to communication in a community, groups will tend to isolate themselves, and their members may have greater allegiance to their group than to the community as a whole. As a result, community resilience will suffer. It will be important for communities to develop inclusive “community mythologies” to prevent these barriers from forming. The reduced rate of migration may be a trend that counters this in many communities.

• Concentrated poverty is an extreme example of this isolation and an important one because poverty has a tremendous impact beyond just the poor. We’ve seen what happens in many big cities (e.g., Detroit) when poverty is concentrated in a neighborhood like plaque on a blood vessel. Crime and other anti-community activity increases. Those who can, leave – creating a potential death spiral for the neighborhood and a resource-sucking “Black Hole” for the larger community.

• While there will be greater diversity (based on ethnicity, age…) within communities, at the same time we are likely to see greater diversity among our communities in terms of their makeup, the specific challenges they face, and the resources they have available to deal with them. This implies that one-size-fits-all solutions from the federal government will be even less likely to work. Given the inertia in the federal system, this also means that communities are going to have to cope with their demographic changes largely on their own.

• As communities aim toward the future, they will have to consider whether the present mix of community services matches future needs. If the immigrant population in the community is growing, that may imply a need for more youth services, and for provision for those with little or no English. If the community is “graying,” this likely will mean the need for more services aimed toward the elderly. In areas of high unemployment, homelessness will impact not only those agencies that serve the poor, but education, and others as well. More resilient communities will meet these changing needs with solutions that include private business, non-profits and other essential service providers, as well as local governments.

• At the same time, local governments and other service providers will have to look at their services in a regional context. As we’ve seen so pointedly in metropolitan New Orleans, poverty has spread to the suburbs. For many communities, this means that they will have to look at themselves in a regional context more than ever before. Through effective coordination of service delivery among different organizations and jurisdictions, there is the potential for greater efficiency and greater resilience as well.

Many of our communities are already being impacted by these trends. These trends indicate many more will be. A community’s anticipation of what these trends portend for it, and its actions to positively respond, will perhaps be the best indicator of that community’s resilience.

Warren Edwards

Searching for Project Impact

January 9th, 2012 - Warren Edwards  

In the FEMA “Think Tank” (www.ideascale.com) I recently noticed another recommendation to bring back Project Impact. That suggestion almost always surfaces in discussions of communities, community resilience and community disaster risk reduction. With such frequent mention the idea is clearly worth thinking about.

For the few who are not familiar, Project Impact was a program created by FEMA Administrator James Lee Witt that began in 1997 with seven cities and grew to several hundred cities. It was cancelled in the early days of the Bush administration in an effort to save $25M. The program’s purpose according a FEMA spokesman was to “protect families, businesses and communities by reducing the impact of natural disasters.” It accomplished that goal by bringing together different levels of government and the private and non-profit sectors to work in close partnership to identify specific actions and programs for reducing risks and enhancing response and recovery. By almost every account, it was a very successful federal program.

Its flaw may have been just that – it was a successful federal program. FEMA provided the funding for each city. Cities received federal grants to implement Project Impact and grants to implement the projects it produced. There doesn’t seem to be an instance of a city adopting a Project Impact program that was not subsidized by FEMA. It was a great idea that was widely embraced and achieved substantive results but because it was wholly sustained by federal funding it was not resilient. It was subject to the vagaries of shifting politics and it could never be funded robustly enough to reach all US communities.

Does that mean that we should abandon the idea of bringing back Project Impact? No. But we need to acknowledge the flaw in the original model and find a way to meet the original goal in other ways. Federal resources to assist communities in becoming more disaster resilient are declining and will continue to decline for the foreseeable future. There is simply neither the political will nor the available funding to begin a new federally funded, community risk reduction program.

Much more importantly, a fully federally funded program is the wrong way to approach the problem. The Project Impact vision of bringing the full community together to collaborative solve challenges was exactly right. But by tying it to federal funding the program never become the community’s program. Cities acknowledged the power of the process but never internalized ownership. In almost all cases, when the funding went away, the program ended.

Like it or not, communities own the challenges. Communities must own the solutions. Federal encouragement, facilitation and indirect support of Project Impact-like programs in America’s communities are desperately needed. A new federally funded program is not.

John Plodinec

Resilience — One Movement, Many Voices

December 19th, 2011 - John Plodinec  

Earlier this fall, I attended the annual meeting of the Federal Alliance for Safe Homes (FLASH). For those of you who aren’t familiar with FLASH (see www.flash.org), they are doing an amazing job in raising consciousness about strengthening homes to severe weather conditions. I was struck by the applicability of their motto – quoted above – to resilience.

For resilience has become a movement; and like all movements it has developed branches as diverse as the roots from whence it came. Transition Towns and Resilience Circles, Asset-Based Community Development communities and many others are all fluorishing branches of a movement aimed at strengthening communities so that they can withstand adversity.

The Transition Towns approach to community resilience is ultimately based on a philosophy of despair (as is that of its close cousin – Resilience Circles). The British founders of this approach see Peak Oil, Global Warming, and the Great Recession as working together to fundamentally change the nature of society. They foresee a rapidly approaching end to the Age of the Automobile, and a concomitant possibility of severely disrupted supplies of food and other necessities. Some of their writings seem almost apocalyptic in their forecasts, including the collapse of civilization. Their answer is to make communities as self-sufficient as possible. Hence, an emphasis on growing food locally, and a more communal lifestyle in general. While there is an anti-technology Luddite element to this, one cannot deny that participants have found much satisfaction – and even joy – in the renewed sense of community in Transition Towns.

The Asset-Based Community Development (ABCD) approach has a very different philosophical basis. Developed by John McKnight and co-workers at Northwestern, the ABCD approach seeks to discover and develop community competence by helping neighborhoods, for example, to recognize the assets and capabilities they contain within themselves. While ABCD shares with Transition Towns a general distrust of the ability of external bureaucracies to address local problems, it ultimately celebrates the capacity of the commons working together to solve local problems. David Gershon’s work in Philadelphia and New York, while not explicitly based on ABCD, shares much in common with it.

There are many other branches that deserve recognition – FLASH’s work to make homes more robust, TISP’s efforts to develop a more resilient infrastructure, the Department of Health and Human Services’ inclusion of resilience as a core element of their strategic and operational planning, the Army’s work to enhance the resilience of soldiers and their families, and especially FEMA’s Whole Community approach to emergency management spring to mind. Where then does CARRI’s approach fit in?

Back in July, I wrote a blog about resilience and the problem of scale (Community Resilience and the Problem of Scale or There are Horses for Courses). CARRI’s approach focuses on the community, and particularly on the challenges that communities face. While some of these challenges are universal (economic distress), most of them reflect the specific conditions and setting of the community itself. Applying Brian Walker’s insight from ecology, this means that CARRI must help communities consider these challenges from both the individual-family-neighborhood and regional perspectives, if the community is to successfully meet them. As William James said, “The community stagnates without the impulse of the individual. The impulse dies away without the sympathy of the community.” And sometimes the community must call on resources beyond its own, if the impulse is to lead to positive action. CARRI is thus centered on the community, and its role is thus to energize and empower the individual to influence the community to take action to meet the challenges it faces.

Warren Edwards

Resilience and the Social Contract

December 1st, 2011 - Warren Edwards  

Democracies, the functional ones at least, are always in a discussion about the social contract between the government and its people. In the United States, the times and conditions may change and the conversation may wax and wane but it is never entirely absent. Usually it centers on whatever topic is perceived to be the most relevant of the day but in general the themes do not change significantly – more taxes or fewer; more regulation or less; federal or state control or no control at all; individual liberty or sacrifices for the common good. What sometimes changes is the intensity of the debate. This change in intensity has led occasionally to seminal changes in the way citizens view our American social contract. The American Revolution began that process for the new nation although the conversation and debate was already an old one in the colonies. Other significant and sometimes dramatic changes occurred during the American Civil War, the Great Depression, and perhaps the aftermath of World War II.

The United States may be in or approaching one of those significant periods of change today. While the themes remain consistent with our past the debate seems now concentrated at the more extreme ends of the spectrum of positions. Beyond ideological advocacy, there appears to be very little interest in or movement toward finding a positive premise around which to organize the debate and give it coherence beyond platitudes and fixed dogma. Resilience, however, provides a powerful concept for organizing thought. It allows the nation to collectively discover practical solutions that avoid the extremes of ideological driven thought. Resilience pursues what works not what someone thinks ought to work.

Resilience when applied to civil society has great appeal. We are in a time when change seems almost overwhelming and disasters, natural and human induced, are evident in each day’s news. Life for many everyday people seems out of control. Resilience requires regaining a measure of authority over our lives, our families and our future. It requires everyday people and leaders at all levels to assess the present and plan for the future. Resilience breeds confidence that we can take action now, withstand adversity when it comes, and rebound quickly and completely.

Resilience has legitimate and practical appeal across a wide range of political philosophies. It requires more self-reliance, more realistic expectations of government, and more personal responsibility at the individual, family and community level. It also acknowledges a leadership place for governments at all levels, a need to address chronic stresses at the local, state and national levels and an equitable opportunity for every American to prosper. Resilience is a way to empower citizens making them the core of the solution rather than simply part of the problem. Empowering citizens, neighborhoods, communities and regions is a way of managing expectations and creating positive action in a time of limited resources. Resilience can be a powerful consensus builder; there are few who will come forward and declare themselves to be anti-resilient.

Just a few years ago, the word resilience was a term of art in the material, medical and ecological sciences. Now it has become so prevalent across a wide spectrum of disciplines that it may be in danger of losing all meaning. Rather than let such a powerful concept go to waste, it is time to make it the thought around which we organize the nation’s conversation about many things but certainly about the relationship between citizens and government.

John Plodinec

Resilience and Jobs

November 16th, 2011 - John Plodinec  

I am an inveterate, voracious and omnivorous reader. No cereal box near me goes unread. Books, blogs, and newsletters are fed straight into my bloodstream. This weekend I read two very good pieces that together got me thinking about jobs, recovery from the Great Recession, and community resilience.

The first was by John Mauldin, one of the best writers on financial matters I’ve found (www.johnmauldin.com). The second was by Ashwin Parameswaran in his series “towards a more resilient macroeconomy.” Both tackled the question of jobs and unemployment and provided a useful point/counterpoint to me.

Quoting first from John Mauldin, looking at where the new jobs came from in the last 15 years:

“…Big business is a net drag on job creation, and small businesses are a wash. Governments have seen job growth, but where does the money come to pay government employees?

Net new jobs come from new businesses (defined as those started within the last ten years). Yes, some of those businesses become Google and others are the local dry cleaner or donut shop. But those start-ups (if they survive) are the source of new jobs.”

Ashwin’s piece (warning – desert-dry academic writing!) focused on the role of innovation and competition in employment. He considers technological unemployment (where a company or industry’s market is destroyed by a new way of doing what has been done before – think buggy whips at the dawn of the automotive age), and truly innovative products that create brand new markets. He asserts that we are seeing a dearth of innovations across our economy, primarily due to a lack of investment.

What binds these two together is that each points to investment in startups as the best way to create jobs. You can’t have startups if there isn’t money to make the initial investment to create the business. You can’t have innovative new products without investing in their creation. This implies that the best way out of the economic morass we’re in is to encourage investment in new businesses in every way we can, and to remove barriers and disincentives to their formation.

This is where communities need to look inward and begin asking some tough questions. What are we doing to encourage startups? Do we have an able workforce? Do we have unnecessary permitting or licensing requirements? Are our transportation systems blocking access to areas that need new businesses?

Do we have sources of capital in our community? Rural agricultural communities might say no, but they’d be wrong. Some very innovative Canadian farming communities are forming micro-investment funds that are creating new businesses. Are we taxing startups at the same rate as large companies? Most importantly, do we understand and appreciate the important role that businesses play in our community, providing jobs, taxes, and, often, crucial support to the things that pull us together – the arts, sports teams, and community events? That means, are we working with businesses to make them – and the community – stronger?

Mauldin points to an article in last week’s Wall Street Journal by Daniel Henninger. He interviewed many businesses that had moved to Texas. The overwhelming sentiment was that it wasn’t just lower taxes or no unions, but a willingness to get things done – a can-do attitude. Communities that care about jobs can learn a great deal from Fluor’s experience in leaving California and coming to Texas. According to Alan Boeckmann, former CEO:

[When the 2006 move became known] “California made no attempt to keep us… things started to happen quickly [in Texas], without us initiating them. The Irving Chamber of Commerce did orientation sessions for employees and spouses, even helping with new-house searches. Or ‘little things’: Irving on its own renamed a street Fluor Drive, which in California or the Northeast would be laughable.”

Resilient communities recognize that businesses are vital parts of the community, and central to the community’s survival. These communities seek to encourage new businesses so that the communities can remain relevant in a changing world. If resilience is adaptation, these communities are discovering that fostering new businesses in the community is a way that they can actively be a part of the future, and thus more resilient.

Ian Moore

Decision Making: Handling Information

November 14th, 2011 - Ian Moore  

When planning for resilience the way we interpret information is critical to our planning and decision making. This article looks at some of the ways in which our processing of information is flawed and suggests some ways of countering this.

Our brains have evolved over hundreds of thousands of years to help us survive and to that end they are highly effective decision making instruments. However in modern day situations, and especially in business, these mechanisms for decision making may not be the best. So rather than spending time on developing sophisticated decision making strategies it is bound to be useful to understand some of the mechanisms that our brains have developed to make decisions. By understanding these mechanisms we can become sensitised to their shortcomings and so develop approaches to counteract these shortcomings and thus make better decisions.

The way we process information is critical to our decision making. Unfortunately we do not always process this information correctly. We do not always see what is actually there. If we are basing our decisions on correct information which we have processed incorrectly this will obviously lead to faulty decisions.

We tend to see what we expect to see. Have a look at the following diagram. Which square looks darker, A or B?

The vast majority of people think that square B is lighter than square A. However if we draw some uniform grey bars on the diagram we can see that A and B are exactly the same shade.

In the first diagram without the bars we make the assumption that the cylinder is casting a shadow and our brains automatically make the B square appear lighter than it actually is. Now look back to the diagram without the bars on. Even though you know that squares A and B are exactly the same shade B still appears to be lighter.

Here is another example of how we see what we expect to see rather than what is actually there. Try reading the following:

I cnduo’t bvleiee taht I culod aulaclty uesdtannrd waht I was rdnaieg. Unisg the icndeblire pweor of the hmuan mnid, aocdcrnig to rseecrah at Cmabrigde Uinervtisy, it dseno’t mttaer in waht oderr the lterets in a wrod are, the olny irpoamtnt tihng is taht the frsit and lsat ltteer be in the rhgit pclae. The rset can be a taotl mses and you can sitll raed it whoutit a pboerlm. Tihs is bucseae the huamn mnid deos not raed ervey ltteer by istlef, but the wrod as a wlohe. Aaznmig, huh? Yaeh and I awlyas tghhuot slelinpg was ipmorantt! See if yuor fdreins can raed tihs too.

Even though all the words are seriously misspelt we still impose meaning on them. We are not seeing what is actually there but what we would like to see and what we expect to see.

So that is just a couple of examples of how we see what we expect to see rather than what is actually there. In order to make effective decisions we need to see what is actually there not what we expect to see.

If you would like to improve your decision making by seeing what is actually there, try making a list of the ways that you see what you expect in information rather than the actual information. When you have done this you could go through the list and see if you can develop any techniques that would help you see information as it actually is.

There is another way in which information affects our decision making. That is when we have to much information. The next diagram is a simple picture. It is not animated in any way. However when you look at it, it will appear to be moving.

This is a nice example of how too much data causes confusion. Even though the diagram is not moving it still appears to move because of the way our eyes view the picture. If you don’t believe that it is not moving try focusing on one individual spot. You will see that it is not moving but other areas appear to move. Then try to focus on one of the areas that still seems to be moving. It will now appear to be stationery and other areas will appear to move. Or if you focus on the two small red markers on the two top, middle circles, you will see that these circles are stationery.

If you would like to improve your decision making try making a list of the ways that too much data causes problems for your decision making. When you have done this try going through the list and see if you can devise techniques that would help.

John Plodinec

A Path to Economic Recovery and Resilience

November 10th, 2011 - John Plodinec  

Just over a year ago, I wrote about what a more resilient economy might look like (see Recovering from the Great Recession – What Might a More Resilient Economy Look Like?). I talked about a value-driven rather than a consumer driven economy. That post begged the question, though – how do we get there from here? In the next few paragraphs, I’ll try to outline an answer to that.

Before I do, however, my disclaimer. I am clearly not an economist (I’m not sure that’s a disqualification, since the economists are all over the map on how to recover!). Further, politicians will be making the most crucial economic decisions over the next few months, and they are clearly not economists (not to mention their roles in getting us into this mess in the first place).

Our national economy is in what economists call a liquidity trap. In a liquidity trap, there is relatively little investment because those with money are very risk averse. Consumers don’t spend, businesses don’t hire, and everyone looks at the economic glass as half empty. And that’s what we’re seeing right now – individuals and businesses are paying off their debts, individual debt is at levels not seen since the early 1990’s; those who can are saving at rates not seen since the 1970’s; and businesses are sitting on their cash (and not borrowing) rather than investing in new products and jobs.

The two antipodes of the debate over how to fix our economy – escape the trap – are characterized by the “Spend, Baby, Spend” school and the Tea Party’s call for government austerity. The Spend, Baby, Spend school is epitomized by economists such as Paul Krugman, who vehemently believe that our federal government should be spending more, much more, to spur demand for goods and services. This group points to our nation’s crumbling infrastructure as a place where investment would create jobs, creating demand, and facilitating economic recovery. At its core, this view sees lack of demand for goods and services as the problem that needs to be addressed.

The Tea Party-ers, on the other hand, see the size of our government as the core problem. In this view, a smaller government, with fewer regulations and lower taxes, would put money back into people’s hands to spend on goods and services, thus jump starting the economy.

You’ll notice, however, that neither view really addresses the core problem – how we get out of the liquidity trap. Or, said a little differently, how do we help businesses, in particular, become less risk averse so that they will invest the cash they are now sitting on in new equipment or new jobs. Framed this way, it seems that government spending per se is somewhat irrelevant to getting out of the trap. Recovery will come only when people have confidence once again that there is a secure future. That’s not to say that government spending is unimportant, just that stimulus spending doesn’t really seem to be the right answer.

If this is true, then what should government do to put us on the road to a resilient economy? Simply put, governments should do those things that will remove uncertainty from people’s minds and those things that will make people more confident in their futures. In this light, it seems that we need to take some of the medicines prescribed by both schools of thought to help bring us out of our national malaise.

We need to recognize that the current pace of regulation creation is creating great uncertainties for businesses and individuals. In the first two years of the present administration in Washington, we created more regulations than we did in eight years of the previous administration. Further, whether we like it or not, small businesses are already telling us they won’t be hiring in the near term because of the possible impacts of health insurance reform (and those impacts won’t be fully known until 2014 at the earliest!).

We also need to recognize that our national debt is unsustainable – if we continue on our present path, we as individuals eventually will end up paying exorbitant amounts in taxes to support intolerably high interest rates to service both our national and personal debt. We as individuals or investors or business owners recognize this and are saving at almost unprecedented rates to provide our own safety nets for ourselves.

However, we also have to recognize that the government must continue to make investments that will help us to have a more certain future. We must invest in our infrastructure – not to stimulate spending but to ensure that we can continue to move goods, people, and information where they are needed. If we don’t, we will spend far more to respond to and recover from the disasters that will expose our infrastructure’s fragility.

We also need to heed the lessons we have already learned about what went wrong and put regulations in place that address the root causes of those problems. The current regulatory framework for the financial industry has much that is wrong with it; recently passed legislation is likely to drive smaller community banks – who in the main were not at fault in getting us into this trap – out of business. This will make it more difficult for entrepreneurs and small businesses to get the capital they need to start up or expand their businesses, i.e., will make our economy even less resilient. Meanwhile, many of the more speculative financial sectors remain unregulated even though they were prime actors in our economic tragedy (and are doing nothing to help us recover).

We must provide a safety net to those of our citizens with special needs. Not because of their vulnerability but as an investment in their future and in ours. The safety net should be focused on outcomes – for example, living healthier and more productive lives – rather than means, for example insurance. Just as with our physical infrastructure, if we don’t make these kinds of investments we will spend far more to respond to and recover from the human tragedies that will result.

I don’t think it requires a rocket scientist (or a Ph.D. economist!) to see a path to recovery. It only requires a clear recognition of where we are as a nation, and then some common sense actions to move to where we need to be. We have to cut government spending and the pace of regulation, but we also need to invest in ourselves and take actions to prevent us from falling in the same trap again. At its core, we have to restore our confidence in ourselves if we are to recover. Neither school of thought, neither political party, can or will be successful unless they grasp this simple truth – this is the only path to economic recovery and greater national resilience.

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