August 28, 2003
Industrial-Strength Stupidity In America
Now that the speculation on the cause of the blackouts seems to be abating in the mainstream media, I wanted to bring up a topic of concern regarding what has become an epidemic of short-term thinking in America. The cause of this lies with ignorant stockholders who seek quick profits, and the CEOs and boards that are willing to sacrifice the long-term viability of a company to them.
The cause of the blackouts is clear, there was inadequate investing in infrastructure and monitoring. The effect of the blackout was a loss of billions of dollars and trust in a matter of days. Months of cumulative overtime had to be paid, PR campaigns that will undoubtedly be run, and possible lawsuits. The shock waves of red ink is already leaving many in the energy industry reeling. So why didn’t anyone foresee this?
Obviously, no one is clairvoyant and can see the future, but such a lapse in infrastructure planning and spending is unforgivable. All of America wants to know who should get pointed at and scowled at with anger. The answer is first most CEOs, then boards of directors, and lastly... the common stockholder. The CEOs because their mantra of profit has perverted the ideology of capitalism, and morphed into profit right now. Of course now we have to look to the why of that, and the blame lays squarely with the board of directors, who appoint CEOs ever few years and give them short-term incentives such as stock options (which are convertible almost immediately), grants of unrestricted stock, and cash bonuses. They want to maximize profits as soon as possible and they want the CEO to work extra hard in order to reach that goal.
For a publicly traded company (and many private as well), the ultimate blame lies with those who invest in the company, those who are willing to trade a solid long-term investment (e.g. 15 years at 10% per annum), for a short term bubble investment (e.g. 2 years at 30% per annum). It's feasible for a company to make 30% and still be quite viable in the long term, but it's a rare industry with little overhead, very little reinvestment, or incredibly large profit margins. The short-term ideology sees no reason for spending money on capital improvements or new hirelings, especially if it means that his return on investment is going to go down. This is the painful epidemic that is sweeping America and is causing our demise.
There is no longer much thought about the long-term, everything must be instant gratification. Even if a company falters and approaches bankruptcy, this mind set causes CEOs and investors to demand at the very least that stock prices go up or reverse in quick order rather than allowing a company to reorganize and discover a new line of profitability. Instead, as in the case of the Airline industry after 9/11, executives will lay off thousands of employees, boost their profitability, and get a pat on the back and a bonus. This happened across many industries, and now the result is a 6% (reported) unemployment rate and millions of Americans jaded about their employment prospects.
Americans have been told that the answer is to work harder, to tighten their belts, and in a few years things will get better. At the same time we have been consoled in word by these industry and government voices, in deed they have been contemptuously working behind our backs in order to fill their own pockets as quickly as possible. The government has cut taxes that mostly effect those who are less likely to need it or spend more, at the same time, voting for their own pay raises, and cutting benefits to social programs, and active and retired military. CEOs have laid off hundreds of thousands of workers and urged those remaining to work even harder and be more productive.
Yet, companies are no more viable than three years ago, they delay capital expenditures in an effort to add to profits and keep stock prices up. With the 9/11 bailouts of the airline industry, this mentality swung into high gear, as bail-out money flowed into company coffers, yet short sighted security fixes caused travelers to flee. There was no viable long-term plan to fix security, merely a shift from privatization to government control and regulation. This mentality is about to play itself out in the energy industry as well. Everyone was working hard at passing responsibility to someone else instead of directly fixing and addressing the problems.
The government will pass laws requiring energy companies to invest in infrastructure, and will probably be forced to bail out companies that cannot cope with such an atmosphere. The estimate is in the tens of billions of dollars, and that's just for the energy infrastructure. Other vital areas of civilization are crumbling as well: water, sewage, and police protection. Each is focused on short-term goals, and not on expansion of services or population. In the case with police protection, recent years have shown a marked shift towards revenue generation through traffic enforcement, with many departments pulling away from responding to burglar alarms, and increasing wait times for critical aid, to ignoring public safety completely. During the recent blackout, one traffic enforcement bureaucrat has the presence of mind to keep writing tickets rather than heed a plea from citizens who had to direct traffic through a darkened intersection.
Is the problem getting any better? Are there any officials who will pay attention to the outcomes of such imprudent behavior? Recent years have shown, that unless we change our behavior, it is only going to get worse, and the short sighted, instant gratification culture that America is wallowing in will only progress. Until it is too late to fix the problems, and things really begin falling apart. Things are already nearing the edge, and many are hidden from public view by ignorance and apathy: Two overloaded water arteries leading to NY (built in the early 1900s) cannot be repaired until a third one is finished (sometime in 2020); Electrical grids that were largely built in the 1970s are overloaded and new ones cannot be built at all due to the BANANA (Build Absolutely Nothing Anywhere Near Anything) mind set; Vehicular gridlock is expected to continue to pose problems as mass transit proposals across the country are stalled by costs. These are all real problems that are on the table, and the answer from the industry has been to point finger and lay blame instead of planning and fixing and building.
No, things are not getting better, and the current ignorance pervading America will lead to it's downfall. It's something terrorism could never have dreamt of accomplishing: a crumbling faith in the future.
Posted by Stephen VanDyke at August 28, 2003 03:26 PMThere is an article in this week’s New Yorker called “City of Water” that says New York City is in danger of losing it’s water supply if one of the two main underground acqueduct tunnels (which are near 100 years old) collapses. Work on a third tunnel was begun in 1970 but is not slated to be finished until 2020. They say if Tunnel One collapses unexpectedly, all of lower Manhattan and most of downtown Brooklyn would be without water until the damage can be repaired: an estimate of several months to several years of repair work.
Posted by: Cam at August 28, 2003 06:02 PMCam, I didn’t know you read the New Yorker. The article was very well written and I would have loved to link to it, but it’s one of those magazine only articles, so everyone will have to go buy a copy. Anyways, I’m glad you picked up on my nod to it.
Posted by: Stephen VanDyke at August 28, 2003 06:07 PMStephen—
Excellent article, I could not have said it any better. I have long felt that our (Americas) current obsession with short term profit, deregulation of everything irregardless of the consequences, and lack of political and social vision, would lead to our ruination, and eventual downfall as a Superpower, and indeed a nation. Glad to know that I am not alone!
But you left out one critical problem: the growing water problem in the west, mainly in California and Arizona. I say tap into the vast, vast Pacific Ocean via desalinization plants along the California coast, but not one politician has had the vision to propose it as a solution. No doubt your BANANA (I love the acronym, it describes the mindset so completely) mind-set would kick in immediately and years, upon years of wrangling would commence preventing anything substantive from being done.
There is no sense of shared sacrifice in this society anymore, no vision for our future, and no leadership. It is so sad to watch, so sad…
V. Edward Martin
You have touched upon the conclusions of some very bright philosophers like Nikhil Bhattacharya and historians. Looking back through history there are two prominent social events which correlate very significantly with the beginning of the fall of every great civilization. Those two social events are the rise of the middle class and the openly observed rise in homosexuality.
Careful, now, no one is saying that either homosexuality or the middle class cause the downfall of great civilizations. Rather, they are coincident with the causes which bring down great civilizations. The causes are pervasive individuality which can only be found in societies with a large middle class, and dependence. The rise of individuality results in personal values being placed above those of society. And dependence breeds ignorance.
America reached its zenith of individuality during the 70’s and 80’s with the ‘ME’ generation and the society has been becoming more divisive and factionalized ever since. One need only look at the number of registered third parties for evidence of this. Also, during the 80’s and 90’s, we saw technological advancement occur at such a rate that it all but eliminated generalists in the population. It is now very hard to find anyone who repairs their own vehicle or changes their own oil, or builds their own home with their own two hands. These activities were far more commonplace in the 50’s through 70’s.
With all this specialization taking place, none of us has the time, energy or for that matter, the learning capability to become knowledgeable about all the various events in our society. And such generalized knowledge, is precisely what is needed to sustain a cohesive and well knitted cultural population.
How can one expect the 49 percent of eligible voters who don’t vote, to do otherwise? Few of us today are knowledgeable enough about law, medicine, business, international affairs, military affairs, political affairs, in addition to what education and knowledge is required to obtain and maintain a job or career. I often wonder if those who don’t vote, are simply more honest than the rest of us. They don’t know enough, aren’t informed enough to cast an intelligent vote at the polls, and so they don’t. The rest of us proclaiming to make intelligent votes are either geniuses, believe we know more than we do, or are just downright dishonest.
One hundred years ago, people of this nation knew how to grow food, can food, raise kids; they knew who was who in their communities, and found it difficult to escape the news of what was going on next door through the gossip network, or what was going on in Washington. These were generalists, they knew a little bit about everything, and those who got a degree, know quite a bit about everything. They had a kind of collective knowledge and wisdom that filled in for the gaps in personal ignorance.
If history’s tale of the fall of great civilizations, like Ancient Greece, the Roman Empire, Babylon, 20th Century Russia, or the British Empire is prescient, politics as practiced today in America holds little hope of salvation as time marches to the future. President Bush is just an example of ignorance marching to history’s drum beat, and of the hubris of the individual who declares he and his kind, and no others, know the way.
Posted by: DRRemer at September 3, 2003 02:26 AMDRRemer—
Very well put, and I agree with almost everything you’ve said except I think we all have the capacity to be generalist, but most of the population lacks the will to try. Technology, the law, medicine, animal husbandry, carpentry, philosophy are all subject that can be learned if one applies his, or her mind to the task. But it is far easier for the average human (I say human because unwillingness to think for oneself is in no way inherent to the U.S.) to let others think for them. To think for themselves is way to hard an enterprise to master.
I pity our children who have to inherit from us a society, a country in decline.
