Buffett

Deming, Health Insurers and the Myth of Scarcity

There's an absolutely riveting article about the record-breaking profits health insurers are making - even as they increase premiums to their customers by double digits.

How are they achieving these incredible financial feats?  Not only is it because of the usurious fees (with ever-increasing deductibles) they charge, but they are also benefiting from the economic downturn.

People keep paying their premiums, but because of those ever-increasing deductibles - now ranging from $2-4K per year - patients are not going to the doctor.  Or having necessary tests.  Or treatment.

Like for cancer.

Because, in this economy, when so many are one paycheck (at most) away from destitution, going to a doctor is a choice.  After all, you may need that money to pay for an unjustifiably priced gallon of gas so that you can get to work.

Unjustified, that is, if you're anyone other than an oil company.

It's gotten to the point that even the shareholders don't feel as strongly as before about the levels of profits the companies they invest in are making.  Even if they receive dividends.

Because, just as the politicians are so disconnected from what's going on along Main Street - or in people's homes - CEOs have lost sight of the fact that their companies are there to serve a greater purpose than simply for the few who own shares.

Or to fill their own pockets.

No matter the product or price point, they're supposed to be contributing to the betterment of society by improving quality of life.  Of everyone's life.

I'm a capitalist to the core.  I want everyone to make money.  I want those who strive - whether minimally or maximally - to proportionately benefit from the work they do and be able to buy what they want.

But I don't believe in exclusivity.  Not when the exclusionary policies and actions on the parts of CEOs and their corporations lead to desperation, disease - and death.

When did corporations lose any semblance of having a clue?

It's more than a Gordon Gekko.  It's not just that "greed is good."

It's that greed - impossible levels of personal and corporate greed - have become standard operating procedure.

It's unconscionable.  Those CEOs, speculators and others pursuing that strategy should be ashamed.

And, frankly, while I applaud the actions of Bill Gates, Warren Buffett and others in the billionaires' club for giving their money to charity - they left it awfully late.

And it's still not enough.

Deming, the management theorist who is the father of what we now call "Lean" and "Six Sigma" (among others), always said that there was no scarcity.  That scarcity is a myth.

That we create scarcity by creating management and corporate systems that either don't access the capabilities of our employees or adequately and fairly share the benefits of what those employees have achieved on behalf of their employer.

Or both.

He was right.  And now it's worse.

Because the health insurers are only one of, literally, a world of corporations that are making, literally, incredible profits.  With war chests of money that analysts and investors are starting to worry are getting too big.

And with speculators who drive prices of commodities up so high that they have to drive their own correction because the public responds by not buying.

What's their justification?  They're afraid - yes, afraid - that things might get worse.  Later.  At some point in the future.  Possibly.

Cowards.

It's time for executives to wake up and smell the coffee.  (I'm being very, very polite here.)

It's time for them to think about the context within which they and their organizations exist.

Everything is not about you and how much you and your cronies make.  Nor is it about "satisfying the shareholders" as you so conveniently excuse your actions.

It's about whether you're willing to do more than do well.  It's whether you're also willing to do good.  On everyone's behalf.

It's time to start.  Now.

Resource:

Health Insurers Make Record Profits as Many Postpone Care (NYT)

Be Careful Who You're F***ing With

The Berkshire Hathaway Audit Committee just came out with its report on the David Sokol/Lubrizol debacle.

Read this report.  Seriously.  Now.  Not just for the facts - which are interesting in themselves - but, more, to see how one of the best players plays it when things go wrong.  Which they did.  Badly.

They go back to their playbook - and they hold to it.  Hard.

It's never a good idea to f**k around with someone like Warren Buffett.  Let's face it, "Oracle of Omaha" and all of his nice guy press aside, he has to have killer instincts to have gotten him where he is - and kept him there.

Add in the fact that the BH Annual Meeting for shareholders is this weekend and you know he had to get this taken care of faster than fast.  Had he not, just as his investment in Goldman Sachs was the big topic at his last meetings, this one would take up way too much time in this one.

He headed that off at the pass.  Now, when asked - which he will be - he can happily point to the Audit Report.  Sweet.

More than anything, the report gives a fascinating look at the nexus of policy and enforcement when it's done right - if a bit late.

Resource

Berkshire Hathaway Audit Report

BP and Goldman: You Manage What You Measure

It is a truism that "you manage what you measure."

The reasons why are simple:

  1. The measures are deemed important enough to warrant the effort to manage directly - which means that the right information at the right time is required.
  2. What is being managed is deemed to be tied directly to the success - or failure - of the department/division/enterprise to warrant the effort.
  3. Someone's - or more than one person's - compensation and/or future existence within the enterprise are dependent upon how that particular area is performing - based on the measures.
In those cases, not only are those measures managed, but they are known by enough people to be usable for everything from strategic and operational decision making to succession planning or terminations.  

There is, however, an obverse to this as well.  Sometimes, you measure and you manage - but you don't tell.  At least not many.

Sometimes, that's necessary.  I'm a great believer in information management.  In fact, I think that not enough thought - and forethought - is put into either measurement decisions or the ways that the information from those measures are being disseminated (or not) in the enterprise.

Information just moves...as if it has a life of its own.  

(Just so you know, it doesn't.  Whenever and wherever information moves - or doesn't - there is a purpose on the part of the person making the distribution decision.  And that purpose is not always in line with what you want or are working to achieve.)

But when information - particularly measures - are seen as being purposefully withheld, more and worse questions arise.  In those cases, you're asking for trouble.  You may well deserve it.

You've entered into the world of "transparency" - and a murky, distrusted world it is.

We're watching this happen now - and you've got your choices of which organizations deserve to join the "Corporate Perp Walk Hall of Fame."  (This is the next iteration of the "Executive Perp Walks" so popular a few years ago.)

Right now, we have two major corporations tied for first place.

To start, there's Goldman Sachs not quite being upfront with their customers about what they know and when they know it - not least whether the firm is betting against what they're selling with as good as insider information.

That decision has led them to being sued by the Securities and Exchange Commission for fraud - which has led to a 26% drop in their share value (to be fair, that includes a lot of other variables causing a market correction) and the possibility - if they can pull it off - of getting away with only a $1billion settlement.  (That's Goldman chump change.  In fact, they'd undoubtedly see it as a good investment.)

(On a side note, Warren Buffett has it completely wrong when he defends Goldman.  That's self-serving - he has a really big investment making lots of money from Goldman - and disingenuous.  This is an ethical issue and he well knows it.)

And, in a tie position, you've got BP - who are making a worse mess of their mess than they already created in the Gulf.

Because BP's executives are so concerned - now - with what will happen later when the litigation really hits, that their unaccepted, disingenuous replies range from:
  • "It's their fault" (not a good strategy in a Congressional hearing with the counterparts sitting next to you doing the same thing) to 
  • "It's only a moderate spill" (which is patently untrue - and sounds even worse to an angry American audience when it is said by the British accented CEO to a British television network) to 
  • "It's impossible to measure the amount of oil being spilled" (which has now been completely debunked by a quartet of scientists who figured out a way all on their own).
It doesn't matter what industry you're in - or, for that matter, what country or sector.  The problem that comes from all of this activity is that there is less and less trust extended to you by your customers.  In their eyes, they have no reason to trust you.  You're probably just like all the rest.

So, before you make your next set of decisions or as you start reviewing the most recent data being handed to you, stop and think for a moment.  Then ask yourself:
  • What are we measuring?
  • Are those measurements giving us the best, most useful information?
  • How do we know?  How are those data tied to strategic and operational goals?
  • How are these data being disseminated - and to whom?
  • Who else should get them?
And the seminal question:  What are we hiding?

Because you can count on it.  If you're hiding anything - then something is being hidden from you.

And you really don't want that keeping you up at night.