February 28, 2020
Dear Interested Readers,
Unexpected Events And Uncertainty in a VUCA World
It has happened again. This last week was one where events seemed to suddenly converge on us to remind us of an important reality, change is a constant in our lives, and though we would like to think that we are in control in a stable world, that is an allusion. There is much that we do not control. Now, we must quickly act in a way that will restore some sense of balance, control, and security, before things spin into a greater state of uncertainty and vulnerability. Sudden changes in our environment create more than uncertainty and confusion about what to do next. They create fear and panic as our surprise and uncertainty reflect that we are on a new course where we neither know what to expect or how to react. Our fear is greatly enhanced when we suddenly realize with great clarity what many of us would not admit before, that our leadership is also dazed and confused and is unlikely to lead us to safety.
In a complex world, the extent of our uncertainty seems to increase exponentially. Suddenly it feels as if nothing is certain or reliable. As we try to explain what is happening or what we should do, we discover that we don’t have all the information we need to make our best decision. We suddenly realize that we need leadership that we don’t have to help us resolve the ambiguities that obscure our prudent next move, and without leadership or information that we trust, our uncertainty increases to the point where we are like the deer that is caught in the headlights. We freeze when we know that we must make a move. We feel that there is something we should do, but not knowing what to do, we feel like potential roadkill.
We wonder whether we can use previous experience to guide us, or is this moment the new product of the interaction of events that have rarely or never happened before. Is what we see is a “black swan?” In metaphorical and realistic terms, do we not know how this virus will work? Until this week it did not even have a name. How does it spread? What will contain it? Will it run its course and be gone? How should we change our daily routines to minimize our risks? Is our doctor or our hospital prepared to help us? Will we need more ventilators than we have? Should we stockpile food in our homes? Do we need masks? What authority knows what we should do? Will a world in quarantine be a disaster for international trade and commerce?
Back in the nineties, as the pace and volatility of military action and political change in the world was “speeding up,” and as the origin of problems became more uncertain because we did not understand the complex interactions that were the root causes of the problems, and as ambiguities in our data prevented a complete picture, and some of the old “certainties” proved unreliable, a new acronym was created by military strategists to describe the “new” reality as the first steps in an attempt to begin to find solutions. The term was VUCA. The world was becoming volatile, uncertain, complex, and ambiguous, and it was clear that the old ways of processing the challenges would not be very effective in managing an uncertain future. It is interesting to me that as I search the posts from the past few years, I discover that I have written less about VUCA than I did during the period between the origin of the ACA in 2010 and the election of President Trump in 2016.
My search did reveal a reference to VUCA three years ago, at the time of President Trump’s inauguration. In retrospect, I am not sure that I applied the term correctly. It was true that the president’s election was an unexpected surprise that felt like a volatile moment. We were very uncertain about what was going to happen once he was in the White House, or just how to effectively resist the attacks on the ACA, immigrants, and the environment that he promised to those who had voted for him. We were struggling to understand the complex web of factors that culminated in his election, and how those complexities which had been misunderstood during the election would continue to operate over the next four years. What to do was veiled in ambiguities, as was how he got elected. Was the election somehow stolen? How should the majority of people who did not vote for the changes he promised effectively defend the policies that they favored that were now in jeopardy. My post on January 17, 2017 began:
Readers of these postings are familiar with my use of the term VUCA, an acronym that is derived from the realization that we live in a world that is volatile, uncertain, complex and ambiguous. I have asserted before that our state of uncertainty about the future of healthcare in the era of repeal and replace complies with the spirit of VUCA. VUCA is a strategic concept. Since the term was introduced to strategic thinkers in the mid nineties, literature has evolved to move the concept from a convenient excuse for failure to a set of principles that can help us figure out how to proceed in difficult times. I have been asking myself about my personal strategy for [dealing with the challenges ahead] and the guiding principles that we all should follow.
What followed that introduction seems now, three years later, to have had some merit. At a minimum, just writing it helped me to deal with my own anxieties. Looking back with the knowledge of what could have happened, I am left with the feeling that it could have been worse. As the president’s term began we did not know that John McCain would turn his thumb down on the grand design to destroy the ACA. We did not know then that voters would rise up in 2018 to rebuke the attempts to destroy the benefits of the ACA by giving the Democrats an effective majority in the House. That note three years ago continued by saying:
As I apply this analysis to the impending Trump administration’s plans for healthcare, it is clear that I have little ability to predict the results of my actions such as writing to you about my concerns. I do have more confidence when it comes to my knowledge of healthcare policy and the feasible options in the repeal and replace process. Unfortunately some of the things I know add more ambiguity to the moment. For instance I am pretty sure that neither the President Elect nor his candidate for Secretary of HHS, Rep. Dr. Tom Price, has a plausible and viable alternative plan ready at this time that will allow him to lead a process where repeal and replace will occur on the same day and certainly not on the same hour as he suggested that he could do in his recent raucous press conference or as he continues to promise “insurance for everybody.” I also know for sure that the repeal process has begun and that Mitch McConnell, the Senate majority leader, is trying to imply that the work is as urgent as a Code Blue in the emergency room of your local hospital.
Just a week ago, I was reading that the Democrats were on the verge of losing the presidency to President Trump for another four years because the stock market was at an all time high. The DOW was knocking on the door of 30,000. We all knew that there we people in China, and on a cruise liner in Japan, who were under quarantine, but there were no cases here that had not had their origin in China, and it was reasonable to assume that before long things would go back to normal, and perhaps the way the Chinese had bumbled the problem originally might turn out to be a win for us.
Earlier this week people began to feel differently as the news of new cases emerged from places like Iran, Korea, and France. Suddenly there were 80,000 known cases and 3000 report fatalities, and as yet no universal strategy that could guarantee control of the problem. The only defense seemed to be quarantining large numbers of people. We became uncertain about China as a supplier or consumer of products. The travel industry began to have questions. Businesses around the world began to calculate the potential impact of coronavirus on the world wide economy, and suddenly we have the prediction from a reliable source of no economic growth this year and the stock market is in free fall. Yesterday, the New York Times published an article by Matt Phillips entitled “Coronavirus Fears Drive Stocks Down for 6th Day and Into Correction: The virus, which has now spread to 47 countries, has put pressure on businesses and supply chains around the world.” In the article Phillips gives us an overview of this VUCA moment:
The widening scope of the health crisis threatens to overwhelm global supply chains, especially in China, the world’s second-largest economy after the United States. In addition, the outbreak could crush consumer demand, as people limit travel or stay home even without a government order to do so.
Scott Clemons, the chief investment strategist for private banking at Brown Brothers Harriman, said the outbreak’s potential to alter American consumers’ habits was at the heart of the sell-off.
“To the degree that consumers change their behavior — so they stop going out to eat, they don’t take the vacation, they cancel the business trip — that consumption, that spending, personal consumption is 68 percent of G.D.P.,” Mr. Clemons said.
Over the past few days, companies as varied as United Airlines, Mastercard and Pfizer have said the outbreak poses a threat to their 2020 earnings.
And analysts at Goldman Sachs predicted on Thursday that companies in the S&P 500 would generate no profit growth this year as a result of the crisis, because of a “severe decline in Chinese economic activity,” disruption in the supply chain for American companies and a slowdown in the U.S. economy.
That’s a “black swan” story with a VUCA plotline that calls for decisive leadership. A 1200 point fall in the DOW on Wednesday was probably not the response that the president had desired from his Wednesday evening news conference designed to convince us that all was under control. The president’s known predilection for disregarding the truth, as the commentators on CNN link above implied, finally has come back to bite him and us. Taking the management of our response to the potential of a pandemic from Secretary Azar at Health and Human Services, and giving it to Vice President Mike Pence who had an immense failure and lack of judgement managing HIV when he was the Governor of Indiana did not generate a lot of confidence as was revealed in an article in the Washington Post by Meryl Kornfield entitled “Mike Pence was criticized for his handling of Indiana’s HIV outbreak. He will lead the U.S. coronavirus response.” Ms. Kornfield writes:
The announcement has cast light on Pence’s record as a lawmaker and his handling of a major public health crisis during his time as governor of Indiana. The worst HIV outbreak in the state’s history happened on his watch in 2015, which critics blamed on Pence’s belated response and his opposition to authorizing a needle-exchange program.
I had meant to write about the disappointing board meetings I had attended this week. The organizations related to the two boards on which I serve are representative of many health systems. One had a very positive balance sheet despite significant operational challenges from external pressures because of its investments. The management team knew before the market experienced its largest losses since 2008, that it had significant challenges. They knew they were in a VUCA world. As patients experience increased copays and deductibles the volume of elective surgical procedures have fallen as nursing costs have risen substantially from a dependency on “traveling nurses.” PCPs and specialists who want to live in a rural environment are becoming much harder to find. Their problems are not a function of poor management, or a failure to recognize or act to mitigate their potential liabilities. It’s a tough world that’s getting tougher for large portions of our system of care, especially those in rural America. Now they can add the one thing that was going well, the market, to their list of liabilities.
The other board is part of a system that serves the urban poor. There have been transitional problems of underfunded needs, as has often been true in healthcare, as we attempt to move from systems that are inadequately supported and hindered by volume driven finance to systems that offer the benefits of reimbursement based on the needs of the population served. These safety net or publicly supported systems are very vulnerable and develop difficult problems when politicians decide to squeeze the budgets of public supported systems before the skills and tools to manage in a risk environment are in place.
I want to believe that over time we will solve our healthcare problems. I feel certain that someday we will come to some consensus on the role of government in healthcare and move beyond just a tenuous guarantee of coverage for preexisting conditions, and that we will agree on a methodology that will give us universal access to good care. I know that sooner or later we will be back on the road toward the Triple Aim. I also want to believe that just like we have eventually found solutions for other potential pandemics, we will survive the coronavirus challenge, but the road ahead is uncertain. I appreciated the wisdom in the column written by Farhad Manjoo in yesterday’s New York Times that he entitled “Admit It: You Don’t Know What Will Happen Next: Coronavirus? The election? A global recession? It’s time to get comfortable with chaos.” He says that he was writing to correct an earlier mistake:
A few weeks ago, I told you not to panic about the coronavirus. No, that’s putting it too mildly. In the big, screaming urgency of a New York Times headline, I all but commanded you not to panic about the novel virus threatening to spread across the globe…
Events have not exactly been kind to my thesis. I still think mass panic is a grave threat, but now that the number of Covid-19 deaths has risen to thousands and the illness has appeared on several continents, I’m starting to get straightforwardly scared of the virus and its potential lethality, too. Am I panicking? Not really, not yet. But after watching the stock market plummet on Monday and governments struggling to get hold of the contagion, I’ve begun to smell doom. This weekend, idly, I found myself looking for N95 masks online, and my wife and I began reining in family vacation plans for the summer. It’s all a swift reversal from the insistent, don’t-worry tone of my last column.
It’s a good sign when a pundit says, “I was wrong.” But, I think Majoo had more in mind than to say “Oops, I’m sorry.” He was making an attempt to educate us that we need to have a healthy respect for uncertainty. Good doctors and nurses have always had a healthy respect for uncertainty. Majoo tries to use his experience to make a point that I endorse:
In retrospect, my analytical mistake is obvious, and it’s a type of error that has become all too common across media… My mistake was that I hadn’t properly accounted for what statisticians call tail risk, or the possibility of an unexpected “black swan” event that upends historical expectation.
… I worry that unwarranted certainty, and an under-appreciation of the unknown, might be our collective downfall, because it blinds us to a new dynamic governing humanity: The world is getting more complicated, and therefore less predictable.
Let’s pause there for a second. His observation suggests at least two things to me. At a mundane level, it is way too soon to concede the 2020 election to Donald Trump “because the stock market is so good.” If Democrats get into a desperate defeatist attitude, they may pass over the candidate that has the most to offer for a candidate that challenges nothing that needs addressing in our fast changing world. Second, we need to use the insights of VUCA thinking or other tools to learn how to move forward even in a VUCA environment.
The future will be a challenge, but volatility can be mitigated by focus on a shared vision of a better the world created through concern for one another and continued innovation. Uncertainty can be mitigated by an open minded search for the the science and facts that give us a greater understanding. Sometimes that means the courage or foresight to accept facts and act on inconvenient truths even when prudent action runs counter to the short term interests of powerful corporations. Complexity can be reduced by a better understanding of systems and becoming more clearly focused on our biases. Finally, ambiguity should not prevent considered actions. Failures produce insight. To do nothing teaches you nothing. The “wait and see” approach is often an expression of denial. Denying the risks and challenges that confront us makes it likely that the problems will be even more daunting when we finally must act in desperation.
The Sap Is Rising, Ready, Set, Go
This time of year when I go for a walk I often see scenes like the one in today’s header that shows buckets hanging from trees. That scene is “old school” and reminds me of the centuries old process that is underway again as a sign that winter is coming to an end and spring is on its way. The buckets may soon become a relic of the past because more and more what one sees are trees connected by blue plastic tubing in a network that looks like a spider web or a huge tangle of yarn. The sap from dozens, if not hundreds of trees, is sucked by a vacuum into huge containers. If you have three minutes, you can see the process nicely demonstrated on YouTube. Innovation designed to lower the cost of production, increase profitability, and enable competitive processes is everywhere, even in the “forest farming” of New Hampshire. I am sure that in the near future, if it has not happened already, artificial intelligence will be applied to this very seasonal industry.
I have a nice window into the way the traditional process works. I have a friend in town who loves to make maple syrup, and he sends out regular emails to all of us when he is “boiling.” His passion is shared by his wife, and they have turned this traditional New England ritual into a social event that runs for about six weeks. Their commitment to “sugaring” is an addictive and expensive affection. Their affliction began innocently enough, tapping a few of the maple trees around their house and boiling down the sap to make syrup on the kitchen stove. Steve, whom I could call, Mr. Maple Syrup, is the same guy who pushes me up mountains and enlisted my wife and me into the delivery of firewood to people who need fuel assistance in our community. He is a “big thinker” and now maple syrup production consumes much of his time from late February through most of March.
Over the last couple of years I have seen Mr. and Mrs. Maple Syrup invest thousands of dollars into their passion. There is a bit of Tom Sawyer in Steve. He enlisted many friends in the building of the “sugar shack” and on the “boiling days” there is wood to move and the fire to tend. Extra hands and backs are helpful in moving around the very big hot pans and filtering the brew at the right time. Those of us who gather to help can be assured that as we sit around the steaming pans there will be good conversations served up with libations and snacks. All are welcome and many stop by to enjoy the process.
I do not understand how anybody makes money producing maple syrup. It takes fifty gallons of sap to make one gallon of syrup. A lot of wood is cut, hauled, and stacked to be available to keep the syrup boiling. The tubing, the buckets, the boiling pans, and the other apparatus necessary for production are a significant investment, just to get started, and then there is the continuing labor to be figured into the cost of production. My guess is that where syrup is produced for income the margins are very thin and the chances for a loss are high. I have joked with my friend that so far he and his wife are years away from recouping their “investment.” Even if he was selling all they produce at a hundred dollars a pint, they would probably be losing money. Fortunately, they don’t sell their syrup, they give it away, and I feel fortunate to be a lucky recipient of the whole process. It’s great fun being a peripheral part of a ancient process, and the product is a delight.
If you want to get a taste of “sugaring,” March 20-22 is maple sugar weekend across New Hampshire. Many of the “sugar shacks” will be open to guests, and you can sample the syrups, as well as many other maple syrup products. We enjoy traveling around on that weekend to the producers in our “neighborhood”: New London, Springfield, Wilmot, Andover, and Sutton, New Hampshire. There is an online directory of where to find them, if you want to plan ahead.
Be well, take good care of yourself, let me hear from you often, and don’t let anything keep you from doing the good that you can do every day,
Gene
