The search for good decisions continues

Always nice to see when one of the champions of the little guy turns into the lead cheerleader for scamming the little guy.  You go Glenn.  Quoting from one of my favorite guys, Barry Ritholtz and his excellent Big Picture blog . . .

Goldline International is under investigation by the Santa Monica City Attorney’s office, jointly with the Los Angeles County District Attorney’s office, as well as being the subject of a separate investigation by Congress into the possible criminal practices. The firm has been the subject of an ABC Nightline News Exposé, as well as an investigation by NY Congressman Weiner).

Jess Bachman, who did several of the fantastic illustrations for Bailout Nation, turns his graphic expertise to the Glenn Beck/Goldline endorsement scheme:

Infographic by The Big Picture

I went walking with a friend last night and we got to talking about Obama’s polling numbers and the general uselessness of trying to project forward to 2012 and his political fortunes. So I went looking.

John Woolley and Gerhard Peters have an excellent site where they publish their work on The American Presidency Project. It’s an absolute treasure trove.  To the subject of approval ratings, we find that Obama’s numbers have moved from a high of 69 points early in his administration to the mid 40s 19 months in (currently 44%).

And what of W?  He entered office with much lower approval numbers, due in large part to the legal fracas surrounding his losing the popular vote but winning the Supreme Court vote: 9/11 handed him a popularity coup sending his approval ratings soaring to 89%.  19 months in his approval ratings had settled back to 68% and by the mid-term elections were closer to Obama’s current numbers at 48%.  At the end, only 34% approved of Bush’s performance.

Clinton, despite his manifest personal troubles entered office with a 58% approval rating and left with a 66% rating, astonishing given the rise of the conservative attack machine during his administration. Only Reagan and Bush the Elder managed the same trick. 19 months in his approval rating had also dropped, oddly to 42%, essentially the same as Obama’s.  At the time of his re-election, his approval ratings stood at 58%.

Bush Senior’s popularity curve looks like a roller coaster.  He entered office at 51% and left at 56%.  As was true with his son, his ratings soared to 82% during Desert Storm, seemingly proving that America loves a tough guy, at least for awhile.

And what of the Lion of the Right?  Reagan took over from a President suffering 34% approval ratings, due to many things not the least of which was the Iranian Hostage Debacle.  Despite the fact that Reagan won the electoral vote going away, he entered office with an approval rating of 51%.  At the 19 month mark his approval ratings stood EXACTLY where Obama’s do, 44%.  At his re-election, his popularity stood at 61%, roughly the same as Clinton’s.

Conclusions?  The first is what investment prospectuses always tell you: Past performance is not indication of future performance.  This has to be one of the most common, most insidious decision-faults going: looking at data about the past (data, by definition is always about the past) and using it to project the future.  Project is actually an apt descriptor, as it is an exercise in projecting our hopes, dreams, fears, fobias, and preconceptions on the future based on what we see in the past.

A second possible conclusion is the lesson of Bill Clinton: It’s the economy stupid.

At the risk of beating a dead horse . . . Yesterday I blogged on what I regard as the craziness of spending billions of dollars on Afghanistan.  My lens on the problem was primarily the math but mostly it was about the impossibility of success given the frame on the problem.

Low and behold the always entertaining GOP Chairman Michael Steele was thinking the same thing.  Sort of.

The story everyone is focusing on his yet another Steele-gaffe.

Michael Steele, chairman of the Republican National Committee, drew fierce criticism on Friday after declaring at a party fund-raiser that the United States was on the wrong side of history with its conflict in Afghanistan, a military fight he called “a war of Obama’s choosing.”

“This is not something the United States had actively prosecuted or wanted to engage in,” Mr. Steele said in a speech on Thursday evening in Connecticut in which he offered a strong critique of President Obama’s military strategy.

“It was the president who was trying to be cute by half by flipping a script demonizing Iraq, while saying the battle really should be Afghanistan,” Mr. Steele said, according to a video of his remarks that was circulated by Democrats on Friday. “”Well, if he’s such a student of history, has he not understood that you know that’s the one thing you don’t do, is engage in a land war in Afghanistan?”

Wow.  Really? More than enough people have piled on this one so I won’t bother to comment beyond wondering when the spaceship is scheduled to return to the planet Mr. Steele comes from. No, the part that gets me spouting is what comes next.

Mr. Steele, seeking to clarify his remarks, issued a statement on Friday afternoon, saying, “There is no question that America must win the war on terror.”

And this . . .

“For the sake of the security of the free world, our country must give our troops the support necessary to win this war,” Mr. Steele said. “As we have learned throughout history, winning a war in Afghanistan is a difficult task. We must also remember that after the tragedy of Sept. 11, 2001, it is also a necessary one.”

He added: “That is why I supported the decision to increase our troop force and, like the entire United States Senate, I support General Petraeus’s confirmation. The stakes are too high for us to accept anything but success in Afghanistan.”

I have a good friend named John who always kindly reminds me that politicians aren’t to be listened to, especially when they’re talking to the true believers as was the case with Mr. Steele. Notions like telling the truth (in all its forms) are really only suggestions in these instances. My issue is more pedantic: You can’t solve a problem when you define it like . . .

“There is no question that America must win the war on terror.”

“The stakes are too high for us to accept anything but success in Afghanistan.”

“As we have learned throughout history, winning a war in Afghanistan is a difficult task. We must also remember that after the tragedy of Sept. 11, 2001, it is also a necessary one.”

Can someone please tell me what “winning the war on terror” would look like?  I mean really, how would we know?  Who would keep score? How would we verify? How would we enforce it? For how long would the win have to be won for it to be regarded as a real win? This isn’t meant to be an exercise in rhetoric, but really, words do matter.

The same line of inquiry applies to the concept of “success.”  For example, we have successfully burned through nearly $300 billion dollars and 1,000 American war dead.  If that was the objective, and clearly it was not, we succeeded.  Can we go home now?

And “necessary?”  Really?  How necessary?  Necessary enough to consider genocide?  That would do the trick.  There would be no more Afghans and by definition, none could engage in terrorist-like activities.

I get it, I get it.  This is political-talk, not decision-talk.  Mr. Steele is in the business of raising money from the faithful and scoring political points, not actually governing or solving real problems. Given the low standards of the job description he can be forgiven for his less that helpful words and thoughts about the trillion dollar black hole that is our foray into Central Asia. As a matter of public policy it would be nice if someone could offer we the people a problem definition that was useful, understandable, and achievable.  Not that I think anyone in Washington is in danger of doing that.

On a smaller scale, think about how you frame the decisions you make on a daily basis. Pay particular attention to the big ones.  Make sure you’re not declaring the equivalent of war on [fill in the blank].  You’ll never get there.

For the past decade I have made a living helping people and corporations make smarter decisions.  I say that by way of disclosing my bias when I think about nearly everything.  Yesterday I blogged about General Petraeus’ testimony before the Armed Services Committee in advance of his taking over as the overlord of the “not war” in Afghanistan.  You should read it.  It is a marvel of circumlocution.

Good decision making begins with an exam question: The entire rationale for making a decision in the first place; a statement of the problem we’re trying to solve. Use your favorite search engine and see if you can figure out the answer to the question of why we’re in Afghanistan. I figure the President’s own words from his State of the Union are as good as any . . .

As we take the fight to al Qaeda, we are responsibly leaving Iraq to its people. As a candidate, I promised that I would end this war, and that is what I am doing as President. We will have all of our combat troops out of Iraq by the end of this August. We will support the Iraqi government as they hold elections, and continue to partner with the Iraqi people to promote regional peace and prosperity. But make no mistake: this war is ending, and all of our troops are coming home.

So basically the point is to “take the fight to al Qaeda” or more broadly to “fight terror over there so we don’t have to fight it here” or something like that.  I’m sure that there are more precise thoughts than that but basically that’s the mission the American people have been sold for the past eight years by two different administrations.

There are lots of ways to think about this, so let’s pick one: The Math

From the State Department, here’s what we know about Afghanistan:

Area: 652,230 sq. km. (251,827 sq. mi.); slightly smaller than Texas.

Population (July 2009 est.): 28.396 million; slightly smaller than Texas.

GDP (2009 est., purchasing power parity): $23.35 billion.

GDP growth (2009 est.): 3.4%. GDP growth average between 2004-2009: 11.25% (est.).

GDP per capita (2009 est.): $800.

Keep in mind that GDP has been inflated by the US presence since we tossed the Taliban.

So how much have we spent to date on the “not war” in Afghanistan.  That’s a moving target, but here are some numbers that might help you understand. According to the site, Cost of War, the number to date (depending on when you read this) is $280 billion dollars. Add in the cost of the Iraq “not war” and we the people have spent about $1 trillion dollars “taking the fight to al Qaeda.”  To get a sense of some alternative uses of $1 trillion dollars, spend some time on the Cost of War site.

Keep in mind that these numbers don’t include the costs associated with the Obama surge of an additional 30,000 troops.  So what do those cost? One source I found put the figure in 2008 at $500,000 per year.  A more recent source puts the figure much higher.

The cost of sending one U.S. soldier in Afghanistan for one year is $1 million versus an estimated $12,000 for an Afghani soldier, according to Steve Daggett, a specialist with the Congressional Research Service. Those numbers fall within the calculations that the Obama administration has been using. The Obama administration is calculating $1 billion per 1,000 troops deployed to Afghanistan.

To put the cost of the surge in a different light, US tax payers will spend the entire GDP of Afghanistan to send 30,000 troops there to achieve what?

And how much does it cost the Taliban / Al Queda to fight back? It’s hard to put a number on that but a simple metric might be the cost of an AK-47.  It turns out that fighting Americans is a growth business.  A few years ago you could get a locally made knock-off for the equivalent of a few hundred dollars . . . so half a year’s pay.  Today, the price in Pakistan has bloomed to nearly $1,500. Throw in some ammunition and a year’s pay and call it $3,000 per annum, half that if you assume the person holding the gun is a variable cost.

This is the time when you need to stop and think about the mission and the math: $1 million vs. $3,000.  One bullet kills either one.

We have been in Afghanistan eight years.  Every year, on average, we spend the entire GDP of Afghanistan chasing after a couple of thousand bad guys that can be equipped and paid for less than one of our soldiers.

The war is unwinable for three reasons, all math related.

1. It only takes one bad guy to do the thing we have spent $1 trillion dollars to prevent: commit a terrorist act on the homeland.  Call it 100.
2. The other side can replace them faster and cheaper than we can kill them.
3. We’re going broke.  The other side can wait.

The problem here is the problem statement. It’s like the war on drugs.  ”Taking the fight” to the bad guys never ends.  There is no end zone. There is no way of knowing that you’re winning.  More importantly, the cost of the other side to stay in the game is orders of magnitude lower than what we spend. The other side ALWAYS WINS for the simple reason that all they have to do is stay in the game.  Eventually the high cost player is bled dry. The only way out is to change the question.

Finally, a reminder.  The people voting to keep us in this mess work for us.  You voted for them (or failed to). It’s time to speak up.  It’s time to stop the madness.

Opening Statement
General David H. Petraeus
Confirmation Hearing: Commander, ISAF/US Forces–Afghanistan
29 June 2010

Mr. Chairman, Senator McCain, Members of the Committee, thank you for the opportunity to appear before you today. And thank you for the rapid scheduling of this hearing.

I am, needless to say, humbled and honored to have been nominated by the President to command the International Security Assistance Force and US Forces in Afghanistan, and to have the opportunity, if confirmed, to continue to serve our nation, the NATO Alliance, our non-NATO Coalition partners, and Afghanistan in these new capacities.

[Yesterday I had a completely different job and I'm still stunned that we're even having this conversation, but that's the way these things go.]

At the outset, I want to echo your salute to the extraordinary service of Senator Robert Byrd. With his death, America clearly has lost a great patriot.

[I can already hear people sharpening their knives.]

[Read more →]

So my wife and I were driving from point A to point B last Saturday.  Just a regular day running errands and spending time with each other.

Honest to God, no kidding, I have not been thinking at all about getting a new car . . . though I have to confess that I never loved the Camry Hybrid we have been driving and always felt like I made a mistake selling the Acura TL. Anyway, I say to my wife, “Do you ever think about getting a new car?” Gloriosity, she has!

There is an Audi dealer about five blocks from where we are so we go and poke around and drive an A5 coupe. Stunning to look at and very nice but pricey given the performance level. The one with all the goodies costs as much as a small town. There aren’t any used ones.

Very much out of character, we leave without buying one (as it turns out, this is the third time in the past ten years that we went to look at an Audi and bought something else which is weird and too bad because I really like Audis and would very much like to be like Jason Stratham).  Instead, we wind up home looking at everything we can think of on the web.

It turns out we actually have some decision criteria . . .

• Coupe: We think that means two doors and an emphatic statement that we are now a) Empty nesters for sure, and b) Too cool for school.
• All wheel drive: Well you never know, it might rain in Seattle, and it is always possible that after a 30 year hiatus, we might just decide to head to the snow and do some skiing. It could happen.
• High fun factor: Antithesis of the Camry Hybrid.
• Good economics: We don’t need to do this so there needs to be something compelling (like free money).
• Good story value: If there isn’t a good story in here, what’s the point?

Basically something more fun that a four door hybrid (a very low bar to step over I might add).

There aren’t that many coupes out there at all if you think about it.

Audi A5
Infinity G37
Hyundai Genesis
Jaguar XK
Aston Martin
BMW 3 or 6 series
Mercedes CL
Ford Mustang
Chevrolet Camaro
Dodge Challenger
Cadillac CTS (coming soon)

There are probably some others (Bently comes to mind) and there are some four door coupes as well (we’ll get to that in a minute), but that’s what we looked at on our dueling iPads.

A bunch of those you can just cross right off the list for cost reasons. This is a car, after all, not a vacation home. The Ford, Dodge, and Chevrolet never made the list.  Too retro, too boy racer, too much. I didn’t want another Corvette or anything in that category either.  Cars like that are a hoot to drive three or four times a month for several miles without a break.  We also looked at other AWD cars not in two doors, kind of. Never for a second did we think about a SUV.

Basically it was looking like a two horse race between the A5 and the G37x.

There are almost as many Infinity dealers in the US as there are BMW motorbike dealers and they are slightly less convenient. We motored up to the one in Kirkland and low and behold they had a nice collection of G37x’s right out front. Very nice car it is.

For those not in the know it is a two door coupe with a stupidly powerful V6 engine, all wheel drive, and enough computing power and navigational gear to launch a first strike. I think there is a Predator Drone option as well. Various buff books have called it the best this and the most that.  It’s a fine, fine ride. In a pinch you can put your pet gerbils in the back assuming your luggage needs don’t exceed a laptop, credit card, and toothbrush.

We drove one.  We looked at all of them in detail. I really wanted to love it but I didn’t. Not really sure why. Just like I really wanted to love the A5 (a beautiful car with abusively priced options).  In the end, the dream of the racy coupe with two gigantic hard-to-egress doors and go-fast ergonomics got trumped by my creaking bones and sybaritic tendencies.

Meanwhile, I kept looking over at the G37 sedans . . . essentially the same car with two more doors, lots more headroom, and the possibility of transporting two more bipeds in relative comfort.  By this time my wife was talking with the sales guy about a Coupe with a particular interior color she fancied and I finally suggested that we go over to the sedans because they had a couple just like that.

For about the fifth time, one in the lineup kept whispering to me: A G37x in Lakeshore Slate with Stone interior, all wheel drive, Navigation package, and upgraded wheels and tires that come up to my waist. Our sainted car salesman (Ken, who just this week sold his 1000 Infiniti working at this dealer which is something indeed) tossed us yet another set of keys and off we went. We barely made it out of the lot and kind of looked at each other and it was done. The car had us at 2500 rpm.

Being a well known expert at decision-making I would give this about a six on a scale of one – 10. We had a decently clear idea about our preferences. We had a solid frame on the problem. We gave ourselves interesting choices. We did some research. The fact that we changed one of the major preferences at the last minute (expanding coupe to include the four door variety) brought other cars into play that we didn’t then go test drive, but what the hell. Ken made us an offer that was not insulting (remember we’re trading in a Camry Hybrid, the 2010 Torts Award Silver Medalist, tossed from the top step by British Petroleum).  Robert, the F&I guy made us a smoking deal on stuff to keep the paint and interior spiffy and then papered the whole thing in about twelve minutes. Bye-bye Camry, and hello rocket ship.

One day of ownership later, I can say with complete confidence the following:

The people at Kirkland Infinity were just superb, led by Ken.  It’s all part of the brand, but the difference in customer experience shopping for a luxury car and anything else is stunning.  Ken has been at this same dealer for eight years which is even more remarkable than the thought of Sarah Palin shooting a moose.  This sort of thing just doesn’t happen.

Ken, and people not named Ken, continually make an effort to a) communicate that “you’re family now” (in a really good way), and b) are constantly trying to figure out how to do something helpful. I was only sorry I hadn’t brought our laundry to be done.  I know I’m going to get a survey but let me cut to the chase and say that the folks at Kirkland Infinity get a 10.

Infiniti has ridiculously cheap money these days (there was a free option actually).  It’s like I couldn’t afford not to.

The car is all kinds of fun to look at, sit in, and drive.  I. Must. Drive. Slow.

It’s been an interesting ten days for Obama (and the rest of us) . . .

Oil rig blows up, sinks, and unleashes a torrent of oil. It is Obama’s fault because he authorized offshore drilling and / or he didn’t respond quickly enough or in the right way.

A couple of FBI guys blow the tail on the Times Square bomber and Emirates doesn’t read their email. Still, in 54 hours we grab prime suspect number one before he leaves the country, manage not to read him his Miranda rights (that will never happen again) and more arrests have begun in Pakistan and elsewhere. It is Obama’s fault for not being in Time Square to personally apprehend the guy and/or direct the bomb squad, because the FBI lost site of the guy, and because Democrats are soft on terrorists.

“Ahmand in the dinner jacket” comes to town in the middle of the once every five year nuclear non-proliferation summit and makes a spectacle. It’s Obama’s fault for letting him in the country, for suggesting that talking to the guy made sense, for not allowing the Israelis to bomb Iran, for not being tough enough, and for not figuring out a way to isolate Iran even though Russia and China, and we know they do what we want, won’t go along.

Arizona detonates the national debate on Immigration (among other things). It’s Obama’s fault for not being born here, for being a socialist, for not having an answer, for not being able to tell Congress what to do and get them to do it, and for being a racist.

Lindsey Graham throws a shoe, first on Climate / Energy and then on Immigration. It’s Obama’s fault for being partisan, for not being able to work with the GOP, for not letting the GOP run everything even though he was the one that got elected by a landslide, for not being born here, and for having an agenda.

American Idol turns in another dumb week, ratings suffer, and Simon Cowell is even harder to fathom and stomach. It is Obama’s fault because Idol is on Fox and everything is Obama’s fault on Fox.

The only thing Obama and the Administration knew they were going to have to deal with going into last week was the UN. They could guess on Arizona. And I didn’t mention all the other inconsequential things like running two wars, trying to figure out if Europe and the Euro are going to incinerate and launch a full scale sovereign debt crisis, hosting the Navy football team, and the hundred other things that show up on his daily briefing that none of us know about.

Point one: To all the people who think Obama isn’t acting fast enough or up to your liking, get a clue. It’s been a bit of a week. In retrospect, the same could possibly have been said about W at Katrina but I still say he handled that one poorly (and there was advanced notice and a lot of it). Yeah, he signed up for the job but if you have to admit there have been a few things vying for his attention.

Point two: Everything is not Obama’s fault. Increase the budget and resources 100 times and a couple of flat foots can still blow a tail (just to pick one item). They got the bad guy. Yeah, not on the first trip wire but the backup systems worked. The same cannot be said for BP. Not to be too tart here, but in response to the conservative meme that government can do nothing well, and certainly nothing as well as private enterprise: I would score this one Government 1, private enterprise 0 in the overall competence category, at least in the HOLY %&^! category for this week.

I get emails every week at www.decision-quality.com asking for permission to reprint, quote, and distribute one or more papers I wrote on decision-making.  It’s been forever since I actually looked at what I wrote so I went back and looked.  Here’s a snip from a paper on innovation I wrote.  The words seem useful even today . . .

Having participated in the tail end of it as a go-to-market consultant to a number of incubator companies, I had a ringside seat to both the good and the really ugly of the dot.com excitement. At literally the height of the boom, days before the wall started coming down, I wrote a kind of innovator’s credo that I called the disruptor’s dilemma, which had the following dimensions.

Nothing is Known. If it really hasn’t been done before, there are few if any known market requirements, and therefore your planning and projections are pretty much guesswork.

What Used To Work, Won’t.  The strategies and tactics that worked so well in the value system you just left probably won’t work in the market space you’re about to enter.

Half of What You Decide Is Wrong.  As a result of the first two points, you have to make the assumption that at least half of the decisions you make are probably wrong.

Half Of What You Learn Is Right.  You’ll spend every waking minute on a massive learning curve, and the feedback you’ll receive will usually be completely contradictory.  You should worry if that’s not the case.  The question is: where is the truth?

All Of What’s Right Is Only Useful For Half As Long As It Used To Be.  Just because something is true, doesn’t mean it will continue to be true.

Success Is Out There, It’s Just Somewhere Else.  If you keep learning, adapting, and innovating you might just succeed.  It’s just that success probably won’t lie where you thought it would.

Depending on your point of view, this is either a recitation of the worst of the dot.com hyperbole, or it is a reasonable set of guidelines for nurturing innovation. This led me to articulate what I then saw, and still see, as the “Six Laws of Successful Innovation,” which are as follows:

Your plans won’t hold up so compress your planning.  Bring the right people to the problem; stress test your thinking, make clear decisions, keep your documentation simple, and launch decisively.

Keep it simple. Complexity shows up all by itself.

Once you launch, go fast and hard.  Compress your learning into small segments of time and space. Think in 100-day increments.

Embrace your mistakes.  Mistakes are good because they tell you what not to do, so don’t cover them up. You’re probably going to make a bunch, so plan how you’re going to learn from your mistakes.

Expect the unexpected. You’re going to whack some beehives in the process (particularly if you’re really innovating), and the bees are going to swarm.  Don’t expect the market to sit around and watch as you try to redefine reality. Expect pushback.  Expect to be counterattacked from unexpected directions. Expect partners to make silly decisions.  It should all tell you that you’re doing something right.

You’re going to win in unexpected ways so build your organization, rewards structure, and partnership agreements accordingly.