Kaulapi World

Recently Came across a few nuggets of wisdom from wikipedia:

The Peter Principle states that “in a hierarchy every employee tends to rise to his level of incompetence”, meaning that employees tend to be promoted until they reach a position at which they cannot work competently. It was formulated by Dr. Laurence J. Peter and Raymond Hull in their 1969 book The Peter Principle, a humorous ^[1] treatise which also introduced the “salutary science of hierarchiology.”

The principle holds that in a hierarchy, members are promoted so long as they work competently. Eventually they are promoted to a position at which they are no longer competent (their “level of incompetence”), and there they remain, being unable to earn further promotions. Peter’s Corollary states that “in time, every post tends to be occupied by an employee who is incompetent to carry out their duties” and adds that “work is accomplished by those employees who have not yet reached their level of incompetence”. “Managing upward” is the concept of a subordinate finding ways to subtly “manage” superiors in order to limit the damage that they end up doing.

The employee’s incompetence is not necessarily a result of the higher-ranking position being more difficult — simply, that job may be crucially different from the job in which the employee previously excelled, and thus requires different work skills, which the employee may not possess. For example, an engineer with great technical skill might get promoted to project manager, only to discover he lacks the interpersonal skills required to lead a team.

Thus, “work is accomplished by those employees who have not yet reached their level of incompetence”.

Peter also suggested that ‘super-competence’ in an employee is more likely to result in dismissal than promotion, which again is a feature of poor organizations, which cannot handle the disruption. A super-competent employee “…violates the first commandment of hierarchical life: [namely that] the hierarchy must be preserved…”.

–Which eventually lead me to read this entry:

The Dilbert principle refers to a 1990s satirical observation by Dilbert cartoonist Scott Adams stating that companies tend to systematically promote their least-competent employees to management (generally middle management), in order to limit the amount of damage they are capable of doing. In the Dilbert strip of February 5, 1995Dogbert says that “leadership is nature’s way of removing morons from the productive flow”. Adams himself explained,^[1]

“I wrote The Dilbert Principle around the concept that in many cases the least competent, least smart people are promoted, simply because they’re the ones you don’t want doing actual work. You want them ordering the doughnuts and yelling at people for not doing their assignments—you know, the easy work. Your heart surgeons and your computer programmers—your smart people—aren’t in management. That principle was literally happening everywhere.”

The first time I heard of the Peter principle was during my first job out of college, my boss at the time used it as a humorous explanation to why middle and upper management could at times seem hopelessly deadlocked, and at times totally incompetent to make key management decisions, even in times of fiscal crisis where decisive leadership is called for.  It was an interesting concept, that over time as an unintended consequence, you end up with the level of incompetence of individual workers being directly correlated with the higher pay and fancy sounding titles.

The Dilbert principle I think actually is much more on point, but it is almost like a symptom of an institution that has gotten so deteriorated that it can’t even operate rationally, let alone efficiently.  Then instead effectively managing incompetence by moving people to positions that they are a better fit for, or by training or disciplining the problem, you just push it aside in the most perverse way, through a promotion.

I’ve actually observed and witnessed both of these up front and personal. Had some managers so insanely incompetent that I was left scratching my head as to how the hell they got promoted to management, knowing that at one point they were in my position, yet over time they seem to have forgotten even the simplest aspects of the job entailed.  I’ve also seen individuals that are rewarded for having skills at negotiating office politics to their favor as relative to possessing actual skills relevant to the work, but they get the token rewards – no real power other than a fancier sounding title, and a nominal pay raise.  When systems start acting in these ways, there is a major hit to workforce morale for the rest of the workers in the system, as it flies contrary to what most workplaces like to promote as how promotions and bonuses are handed out, based on the individual doing a good job, and being good at what they do.  The worst is when I’ve experienced a mix of both an incompetent manager that has some real power, and they resist being “managed upward” .

Together, these principles pretty much sums up one of the critical flaws of so called performance-based / merit-based compensation systems, or meritocracies.  The naive assumption is that in the best interest, institutions would want to strive for greater efficiency, producing better goods and services for their customers.  Under this theory, anything or anyone who gets in the way of this goal should be reassigned or replaced, especially policies that erode morale.  You want to motivate your workers with incentives, namely higher pay and bonuses.  However in reality the self-enforcing nature of the system or hierarchy itself, which is a form of corruption at the institutional level.  Hence, what promotions are really looking for are to a varied extent, conformity to the norms of the institution.  Or more importantly, the perception of upper management to the individual’s ability and willingness to conform to the norms of the institution.

Over time things degenerate to the point where system is spending a lot of time managing the individuals that have risen to their level of incompetence with more and more promotions, instead of trying to capitalize on their relative strengths and recasting them in the most beneficial position in the company, in other words, truly developing them.  If this continues on long enough it becomes ingrained into the culture of the institution, inefficiency, incompetence, favoritism, corruption becomes the status quo, the unspoken rule.  Outsiders, reformers, or just newer, motivated workers coming in are then handicapped from making any contributions that might have been a net benefit.  Thus, you don’t get very far in an institution or system by talking or promoting change.  It does make for a good campaign slogan though.

Maybe a solution is to approach promotions and pay incentives differently, keep the pay increases the same, but maybe demote the individuals to their level of competence.  Stop referring it to a demotion, rather make it a transfer, or repositioning.  For those that have a knack for office politics and ass kissing, but lack the core work skills and management skills, maybe capitalize on their skills into marketing and public relations.

Been a rough couple weeks so far following the aftermath of the debt ceiling crisis which proved to be more political theater once again.  Late last week S&P broke the trend of the rating agencies and actually downgraded the US, and then it seems like all hell has broken loose in the financial markets, down 4%-5% one day, and then a quick retrace the next.  Exchanges around the world having technical difficulties due to high volume, governments stepping in to halt trading, or to ban shorting particular stocks or sectors, calls for increased margin requirements, shares of large well known banks getting slaughtered in a matter of minutes.  Its feeling like 2008 all over again, but in many ways worse.

The next looming political battle that will be sure to cause even more uncertainty in the markets is the 2012 budget showdown, which evidently will impact the newly formed deficit reduction committee of 12 congresspeople, at least make their job much harder with all of the distractions that will come from #3 budget battle in 2011.    The downside risk for us as a federal employees is an even greater possibility of a shutdown coming in the end of September, or if the new debt committee is unable to come to an agreement, an across the board cut to all budgets, coupled with a very volatile stock market.  I’ve been feeling like a storm has been brewing for some time now, and it seems like its just getting started.

All in all this doesn’t make for much of a relaxing August, which has traditionally been the time of year where we can take a quick break before a busy fall season.  We decided to try and take it easy by just staying around town, taking the kid out and about. We had talked about planning a trip home, but that got scaled back to a short road trip in the area, and then eventually nixed entirely to cut down on costs.

Meanwhile on more happier news, the little guy has started walking.  I’ve noticed that he had already developed the leg strength and balance to stand on his own, but hadn’t realized it just yet.  Then he just decided one day it was time and now he can’t stop standing up and stomping around the house, hands in the air and grinning ear to ear.

I came across this linked C-SPAN clip from one of the economic blogs that I’ve been reading since the great recession came to a head in late 2008 when everything and anything was seriously FUBAR when it came to the financial and politcal state of the country.  I remember appreciating the authors candor to how seriously fucked up things were at that time, and how the policy fixes being crafted at the time ran the risk of putting us in a situation where we would be seeing the same old shit again in just a few years time.

The clip itself features two distinguished senators from both sides of the the aisle actually debating  some of the more underlying, but arguably more meaningful aspects of the ongoing debt ceiling debate.  One of them has come up in past conversation with friendly D-bags over the years, mostly with scorn to his cost-cutting ways.  The other, was once a candidate for the presidency, who many voted for out of default, not out of any meaningful admiration or inspiration.

This clip which I’m sure won’t see the light of day on any major cable news network does raise the question to what is really going on in Washington DC these past few weeks.  Are we really talking about meaningful reductions in government spending or are we just hearing another episode of partisan political theater to prevent our elected officials from making the decisions that are too politically difficult to make?

Flashbacks to 2008, how many hill staffers were put in a hard place answering overwhelming public outcry something like 1000:1 against the bailout of wall street while knowing their respective member had already made up their mind to go along with the leadership?  How many of them have wised up to the reality of the power structures in this country today and how many are still living in fantasy land?  I’m pretty sure that in the next 48 hours there will be some deal to raise the debt ceiling, this current battle is more smoke and mirrors, I’m more concerned with what reality might be waiting for us around the corner, one that won’t give a shit if we  consider ourselves democrat or republican or independent.

Another day spent watching this train wreck unfolding in DC I got to thinking that part of the problem is that both the causes of our current debt situation and the proposed solutions mirror closely to how many of us approach our personal finances. The various parties involved are starting to resemble a dysfunctional family bickering about how to make the latest credit card payment. Many Americans are already in a hole financially when it comes to their personal finances that the solutions being proposed sound more reasonable than not. Basically, get a new credit card to roll over the debt to give us more time to figure out how to pay things off. Rely on the recent hard times to justify why this increase in the credit line is rational.

We have become a buy it now, pay for it later society that relies totally on credit. Not just in the form of consumer credit card debt, but in the form of mortgages, auto loans, student loans. Further, debt is so universal part of daily life that is in fact a marketable asset through the securitization process that to make cuts so severe and too soon would crash the financial system as we know it.

This reliance goes far beyond the access to credit, but to reliance on the systems that revolve around it. Even those who carry no balances on their credit cards and pay off their bills every month, are relying that the transactions will go through without interruption. same goes with those who relying on electronic payment of bills, or those who believe they are adequately diversified in their investments.

That’s the message I’ve been hearing over and over again, and to the most part it makes sense to the academic side of me, the practical side of me has been rejecting this for quite some time now. These past few years have confirmed my belief that the average family in this country needs to prepare themselves not only to survive financially, but to prepare for long periods of hard times. Its better to have a number of lifelines or backup contingency plans in case the things that aren’t supposed to happen actually do.

Or 105 and counting, depending on which date is the real one. Real one I say because over the past week there have been additional analysis put out there on the governments income stream to suggest that the august 2nd deadline isn’t really what it was made out to be by the administration. Also, that there will be more than enough to cover at least one of the sacred cows that both parties claim to be committed to protect, social security. Just recently it came out that there is in fact a contingency plan to prioritize payments after august 2.

One thing I’ve learned is that whenever someone is trying to convince you with extreme emotions, flattery, but more importantly, fear, it’s best to take a step back and see what is really going on. I have to say that although I’m pretty independent of the partisan label, I have to be leaning a bit one way, on the basis that Obama has spent a lot of time getting a message out there that was at time vague, and other times outright false. This pisses me off because it makes it even harder for the responsible people who are trying to prepare themselves and their families for any potential downside that might come from a default. By moving the target date to score some political points seems too much like business as usual in Washington.

This wouldn’t be as bad if he hadn’t run on promises of hope and change, I was skeptical when he was campaigning but was cautiously hoping that he might be able to make good on at least some of his promises. When I mention this supporters are quick to blame the other party, and the previous president, which ironically is the same tactic that bush used time and time again. Supporters also fail to remember that just a year ago the dems had both houses, and the presidency to pass a budget. I guess they didn’t think all those folks who showed up in dc waving flags and talking about tea would actually get elected.

I’ve been running c-span in the background of my workstation these past few weeks and its been a little but of overload. Trying to figure out what is really going on as a passive observer has been challenging, trying to figure out how to best position myself and family has been impossible, not to mention stressful.

Came across an interesting CNBC interview this morning, covered by some of the financial blogs that I read.  The guest commentator was a representative from more lesser known credit rating company that had already downgraded the US credit rating from a AAA to AA.  In contrast to the big rating agencies who have been talking about the possibility of a downgrade, this company went ahead and did it.

Mentioned in the interview is position that debt ceiling debate is nothing but a red herring, the real issue towards the creditworthiness of the US, as with any other country is the debt-to-GDP ratio, which is growing at an alarming rate, similar to Portugal, one of the famous PIIGS nations.  It goes back to what I have been thinking myself, that no matter what form of new revenue we are able to pull in, the debt/GDP ratio will likely stay at a very dangerous level.  The commentator also addressed the dollar as being the world reserve currency in addition to having a printing press may help paper things over for a while, but over time reliance on it will not help the overall situation.

The commentator also briefly got into the differences between delinquency and default, alluding to the fact that a lot of the rhetoric about financial Armageddon should the Aug. 2 deadline come without a deal may not come if the markets only see the US as delinquent on paying the interest on its debts.  From what I’ve been gathering, that is a valid critique, since the US will still be generating some amount of revenue even after the deadline, the question of default really comes down what priority does the administration apply to which obligations to pay, and which ones to not pay.  There really is discretion to the sitting administration to either continue servicing the debt, or pay entitlements, military contractors, federal salaries, etc. first.  it seems like if there is a default, the timing is the thing to watch out for.  If we do default in early august, it might be a self-inflicted wound for political gain to the current administration.  If it is later down the road, then I’d say both parties are to blame.

Meanwhile congress is announcing their plans to keep in session until the debt ceiling is raised, stating that the US will not default on its obligations, or something to that matter.  I guess it really depends on what one’s definition of default is. Given the way things are looking, we’ve already suffered a default on the political process.

Example of DC cynicism: Whatever the crisis is facing the economy, the powerful elite are “handling it” in the form of closed door meetings.  Regardless of which political affiliation you find yourself cheering on realize that they have too much at stake to disrupt the status quo, so ignore the rhetoric you see on the tv and print, recognize its all a political charade.  Once they get the deal done, it’ll be back to normal, you can continue partying, shopping, watching ESPN and reality TV.  To me this demonstrates a bizarre mixture of blind faith to compensate and distract from a collective helplessness to forces that are bigger and unseen.  The cynicism is more alarming to what it really says: that since most of us are so insignificant to the powers that shape our world, really we are all expendable.  No matter how high you can soar, within a chain of command or bureaucracy, titles, position, power, responsibility, connections, salaries can be taken away from you on a whim, by a single individual, or group of individuals in a closed door meeting.

Been on edge for the last few days, really for the most part of this year. Some of it has to do with the looming budget situation which I may have been overloading myself with reading and my own style of analysis.  But something about this latest round of political theatrics has me wondering if there is something that a lot of us aren’t thinking about.  Maybe it is fact that we as a country even need to have a discussion about the deficit at all.  The established school of economics is that deficits don’t matter, the last 100+ years of fiscal and monetary policy have made the country very wealthy and prosperous.  We have a number of societal safety needs that were spawned from the great depression to ensure that nobody will be left behind, nobody will starve or go homeless.  The established school of political science has said that are the remaining military and economic superpower, champion of the cold war, and policeman of the world.  We are not Greece.  Then why are we being held captive by the bond raters and growing CDS spreads?  The urgency of some of the commentary recently kind of shatters this illusion of life that a lot of us have grown accustom to, that maybe we really are out of money and out of time.

The large majority of folks in this town are just along for the ride on various levels. This is a company town after all, and the federal government is it. It doesn’t matter much if you are a  federal employee, a contractor (revolving door and double-dipper), lobbyist, non-profit advocate, university employee, or a private sector employee whose business relies on federal contracts. Pretty much everyone in this area is either directly or indirectly dependent on the federal government operating.  I have to include myself to this, to a certain extent, however I refuse to keep my eyes closed to the writing on the wall, and just assume that everything will pass, and it’ll be business as usual.  Even if this is just another example of beltway theater, I don’t want to be caught by surprise should things really get interesting.

Over the years I’ve tracked our personal finances both in terms of investments and day-to-day case accounts as short and long term budgeting tool.  I made a visual marker for each financial milestone on my spreadsheet, green for raises and bonuses, red for bills, one-time payments that don’t come very often.  All of this debt talk has made me draw sort of a financial line in the sand as to when we might have to face the reality of not getting a paycheck.  Given the ongoing uncertainty in the past few weeks on the debt ceiling, I’ve resorted to drawing red lines for every month for the remainder of the year.  Now my once colorful spreadsheet is covered in a sea of red.  Fortunately this being a digital file, I can clear some of the red to clear if things somehow start getting better.

Obviously I’ve been closely following the ongoing battle over the debt ceiling, being that both me and Hana are gainfully employed by Uncle Sam, the prospect of a loss of a paycheck due to a government shutdown is something that we both pay great attention to.  I have to admit it has become a little tiring though, both while working at the office and when teleworking, I have C-SPAN going on in the background listening to the floor debates in both houses.

My overall take on the whole mess is that we need to have a serious conversation about the future of the federal budget in terms of the big ticket spending items the biggest which are entitlements and military engagements, right now the discussion has gotten so polarized on partisan lines that it is impossible to even have a meaningful conversation as to what we policies and programs we want as a nation, what is the realistic cost of those things.  I’ve spoken with folks from both party affiliations, and it seems like all they can do is blindly spout the party line, often in rapid succession.  I wanted to ask them point blank if they even understood the position that they were advocating.

As fiercely independent minded as I am, I have to say that I am leaning slightly towards the position of spending cuts making the larger proportion of the deficit solution as opposed to revenue building.  This is despite the fact being that particular party spent the last 10 years piling on to the deficit like money was going out of style.  I still think in this situation spending cuts is the way to go over revenue building.  I liken it to how an average family might deal with the prospect of hitting their limit of their credit card or general line of credit.  The most logical thing to do is to decrease spending relative to the proximity to the credit limit, if it is a few months expenses away, then maybe you spread the cuts over several months, but if you’re right up on it, then immediate cuts in spending are in order.

In contrast, the building revenue side for the typical family would be amounting to the family to just make more money.  It is important to note that longer term revenue sources would be most helpful, not merely selling some household items, or by simply working longer hours, both of which are either one-time, or temporary increases in income.  A more basic definition of revenue increases to what governments think of in terms of raising taxes when it comes to the average family is to go across the street and rob the house of the richer, more affluent neighbors.   Even if this was a widely accepted solution, it would be temporary, because eventually the rich neighbor might move out of the neighborhood.

Someone I recently spoke with seemed totally uninterested in the prospect of an actual default, or credible threat of default.  Their perspective was that congress would pass something at the last minute possibly, and it would be back to business as usual.  I find it hard to tell if people who hold that opinion are either wiser than me to the nature of DC politics, or just have their head in the sand.  It seems like a lot of crazy shit is going on right now not only at home, but around the world to be that oblivious.  To me, at the very least it would be helpful to take a moment to look around and get somewhat ready in case the shit really does hit the fan.

Came across an article about the Federal appeals court ruling upholding the health care reform law which passed in early 2010 and has been under constant legal and political challenges since then. As a novice spectator to the field of appellate law, I’m not keeping score as to how many lower courts have ruled in favor, or against the law on constitutional grounds, but I do know enough that it does raise serious legal issues that will be revisited by the SCOTUS eventually.

At the heart of the debate over the constitutionality  the health care reform law is the individual mandate, that the federal government can compel citizens to purchase a good or service, in this case, to purchase health care. Part of the reasoning as I understand it is that being uninsured has a net economic affect on the commercial transactions of healthcare, therefore it brings in federal authority to regulate via the commerce clause.  This may be due to the nature of insurance dominated health care market, but individual citizens by failing to act or purchase a good or service, are bringing the full force of federal regulation against them.

One of the more useful courses I took in law school was on constitutional law, it was one of the few subjects that I really saw an added value of the material as it applies to daily life and plays into the important historical context of how our political systems have evolved over time.  I saw such a benefit to this information that I would advocate that more of this should be taught at the lower undergraduate levels, even at the high school and intermediate levels.  Too often I come across intelligent, reasonably informed people that have a total ignorance to very basic constitutional issues, and when I say ignorance I don’t mean the ability to recite a few random facts or catch phrases, but a basic ability and interest to have a meaningful discussion about the concepts.  Too often I have seen any discussion of the courts as a legal version of a sporting event, in which one side wins and the other side loses, and the gallery doesn’t care why, just that their party won and the other side lost.

For this I blame mostly the hyper partisan nature of our political system where the party line, whatever it is, is often substituted as the ultimate truth on constitutional issues when more often it is something in between.  Case in point, the latest ruling is I think the third major ruling on the health care reform law that has come out in the last year, but it is the first to go in favor of the administration, the other two or three opinions ruled the law as unconstitutional.  Now supporters of the law will use the most recent ruling as evidence of not just the constitutionality of the law, but as a validation of it, regardless of any understanding of the issues involved.

Something that I’ve been coming to terms is the concept of keeping these cases outside of the court in the first place, especially on ones that challenge things so fundamental as constitutional issues.  Just as the failure to pass a budget to keep the government operating without continuing resolutions, maybe the volume of constitutional challenges to laws is a failure of legislatures to educate themselves about the constitution, or at the very least have an open and thoughtful debate on issues.  Litigation is supposed to be a last resort for non-violent conflict resolution, we should only go there if we can’t work things out through more effective and civil ways.

Greek austerity vote early tomorrow morning, bailout or default, it is looking like a difficult times ahead for the average Greek citizen. Parallels have been drawn to the spring and fall of 2008, with some commentators calling the Greek situation the potential for the EU’s version of the collapse of Lehman Bros, one of the largest investment banks on wall street, and the largest bankruptcy filing in history to date.

Interesting personal point for me as I’ve been spending the last few days at work pouring over legal filings in bankruptcy court on the very same large bank, some opinions still being issued as late as a few months ago. The sheer value of the unwinding, it goes with the saying, a million, billion, eventually we’re talking about real money.

One added value of the new nettop in the living room is that I benefit from the enormous desktop which allows me to stream an ever expanding array of documentaries and other streaming media while I’m teleworking. Lately I’ve been going through several frontline pieces about the credit crisis. Add a smaller window to stream C-SPAN, another for a CNBC ticker, and my TV becomes a policy wonk’s dream workstation.

There is a lingering question in my mind as to whether we have fully recovered from the carnage of a few years ago. In the totality of what I’ve seen and read, we have not progressed much, if anything, we just moved the problem around a bit, bailed out some companies and let others fail, akin to papering over a lot of problems with more debt.

Watching the live feed broadcast from the streets of Athens was something else, looking at hundreds and thousands of people in the streets, battling with the riot police. Hopefully nothing like this will ever come to be on this side of the pond, but given the interconnectedness of financial markets, nothing is out of a possibility.