I love John Oliver’s show, and I love that HBO puts the spotlight segment of every episode up on YouTube for free. I think he provides a meaningful, funny, and appropriately disparaging look at both important popular issues as well as important obscure ones.
This is an important issue, and while also extremely depressing, it’s a fantastic episode.
Kevin Kelly, former editor of Wired and the writer who popularized the 1000 true fans idea, decided to give 68 bits of unsolicited advice on his sixty-eighth birthday. It’s an excellent quick collection, but here are a few great ones that apply especially well to medical training:
Being enthusiastic is worth 25 IQ points.
Promptness is a sign of respect.
To make mistakes is human. To own your mistakes is divine. Nothing elevates a person higher than quickly admitting and taking personal responsibility for the mistakes you make and then fixing them fairly. If you mess up, fess up. It’s astounding how powerful this ownership is.
And one particularly timely one:
When crisis and disaster strike, don’t waste them. No problems, no progress.
Morgan Housel, discussing the problematic narrowness and personal bias of most people’s mental models:
I don’t know what I don’t know. No one does. But we can’t walk around confused all day. Nassim Taleb says “I want to live happily in a world I don’t understand.” Which is exactly what we do. We take the world we live in and try to make a coherent story out of it based on the mental models we’ve developed during our lifetimes.
The takeaway: we are more likely to be influenced by our past than to truly learn from it. We are prone to overfitting life lessons to overly specific details instead of taking away useful general principles.
When this is over and we’re making decisions about how to best function in a post-COVID world, how much do you want to bet that people will say, “Yeah, but that was different. Those were special circumstances,” as a way to revert back to bad practices.
Siddhartha Mukherjee, author of the excellent Pulitzer Prize-winning The Emperor of All Maladies, writing for The New Yorker (emphasis mine):
To what extent did the market-driven, efficiency-obsessed culture of hospital administration contribute to the crisis? Questions about “best practices” in management have become questions about best practices in public health. The numbers in the bean counter’s ledger are now body counts in a morgue.
Deep, deep burn.
We’ve been teaching these finance guys how to squeeze,” Willy Shih, an operations expert at Harvard Business School, told me, emphasizing the word. “Squeeze more efficiency, squeeze cost, squeeze more products out at the same cost, squeeze out storage costs, squeeze out inventory. We really need to educate them about the value of slack.”
Medicine is a business, but it shouldn’t be run as just another business.
Everyone loves analogies with Toyota. There’s even one in this story, though it’s one that doesn’t usually make it into your average managerial or quality training, where people just love their black belts in Six Sigma, Lean, and tossing around those Japanese terms like Kaizen and Kanban. As Mukherjee argues, there’s a wide gulf between actually helping professionals take care of human beings and the complex dance of people and parts that requires and just ordering the fewest and cheapest widgets sourced from a factory in China.
What you really want to measure, model, and establish is the capacity to build something when a crisis arises. And this involves human as well as physical capital. We need to measure talent, versatility, and flexibility. Overtaut strings inevitably break.
Not only have they broken, but they’ve been unraveling for years.
William Deresiewicz, author of Excellent Sheep: The Miseducation of the American Elite and the Way to a Meaningful Life, in a lecture on Solitude and Leadership at West Point in 2009:
That’s really the great mystery about bureaucracies. Why is it so often that the best people are stuck in the middle and the people who are running things—the leaders—are the mediocrities? Because excellence isn’t usually what gets you up the greasy pole. What gets you up is a talent for maneuvering. Kissing up to the people above you, kicking down to the people below you. Pleasing your teachers, pleasing your superiors, picking a powerful mentor and riding his coattails until it’s time to stab him in the back. Jumping through hoops. Getting along by going along. Being whatever other people want you to be, so that it finally comes to seem that, like the manager of the Central Station, you have nothing inside you at all. Not taking stupid risks like trying to change how things are done or question why they’re done. Just keeping the routine going.
…I tell you this to forewarn you, because I promise you that you will meet these people and you will find yourself in environments where what is rewarded above all is conformity.
These words are sharp. What a writer. Also, see the Peter Principle.
We have a crisis of leadership in this country, in every institution.
We have a crisis of leadership in America because our overwhelming power and wealth, earned under earlier generations of leaders, made us complacent, and for too long we have been training leaders who only know how to keep the routine going. Who can answer questions, but don’t know how to ask them. Who can fulfill goals, but don’t know how to set them. Who think about how to get things done, but not whether they’re worth doing in the first place.
What we don’t have? Thinkers. People willing to be alone with their thoughts, feel uncomfortable while wrapped in the sometimes cold embrace of solitude, and concentrate.
Morgan Housel, describing how we’ll hopefully “pay” for the truly massive bailouts we’ll need to get through the Covid-19 pandemic:
I’ve heard many people ask recently, “How are we going to pay for that?”
With debt, of course. Enormous, hard-to-fathom, piles of debt.
But the question is really asking, “How will we get out from underneath that debt?”
How do we pay it off?
Three things are important here:
1. We won’t ever pay it off.
2. That’s fine.
3. We’re lucky to have a fascinating history of how this works.
The analogy here is with World War II. It’s a great read.
I think Housel is right that high bracket tax increases will be inevitable. They’re almost comically low now compared with other countries as well as our own history, and this country was far more functional when they were higher. There are plenty of important reasons to do so even before tacking on several trillion dollars in additional debt and now presumably precipitously less political tailwind to preserving the top 0.1% than there has been in decades.
“Is Private Equity Having Its Minsky Moment?” is another excellent article from Matt Stoller’s BIG newsletter, something that anyone who is interested in PE and corporate finance should be reading (I referenced a couple of his newsletters previously).
You’ve probably been hearing about salary cuts, furloughed employees, and big losses in health systems around the country. I myself am currently experiencing a sizable pay cut. You may have even heard about the possible impending bankruptcy of healthcare megacorp, Envision. Envision is now drowning because they grew to massive size by buying companies using tons of debt. Because of that massive leverage, if those businesses do poorly, they can’t meet their debt obligations. To give you an idea of how Envision operates, they have less than $500 million in deployable cash on hand to cover $7.5 billion of debt.
Stoller gives a nice summary of why these highly-leveraged private equity companies (and other companies using the same toolbox) are ripe for failure when credit markets collapse.
Private equity is undergoing what the great theorist Hyman Minsky pointed out is the Ponzi stage of the credit cycle financial systems. This is the final stage before a blow-up. As Minsky observed, a period of placidity starts with firms borrowing money but being able to cover their borrowing with cash flow. Eventually, there’s more risk-taking until there’s a speculative frenzy, and firms can’t cover their debts with cash flow. They keep rolling over loans, and just hope that their assets keep going up in value so that they can sell assets to cover loans if necessary. To give an analogy, in 2006, when people in Las Vegas were flipping homes with no income, assuming that home values always went up, that was the Ponzi stage.
Now, what happens with Ponzi financing is that at some point, nicknamed a “Minsky Moment,” the bubble pops, and there’s mass distress as asset values fall and credit is withdrawn. Selling assets isn’t enough to pay back loans, because asset prices have collapsed and there’s not enough cash flow to service the debt. Mass bankruptcies or bailouts, which are really both a restructuring of capital structures, are the result.
I think you can see where I’m going with this. PE portfolio companies are heavily indebted, and they aren’t generating enough cash to service debts. The steady increase in asset values since 2009 has enabled funds to make tremendous gains because of the use of borrowed money. But now they are exposed to tremendous losses should there be any sort of disruption. And oh has this ever been a disruption. The coronavirus has exposed the entire sector.
Everyone wants to make the easy money in a bull market. It makes finance professionals seem competent in running multiple businesses across multiple industries even though their performance often has more to do with the amount of money in the pot driving valuations up. Rolling up companies in high-growth industries by paying top dollar? Piece of cake. But what do you do when the hard times hit? How can your businesses survive when you’ve saddled them to barely function in the best of times?
The business model of the 1980s has been institutionalized in ways that are hard to conceptualize. Sycamore Partners’ takeover of Staples was a recent legendary leveraged buy-out that shows how PE really works. Sycamore Partners is a private equity firm that specializes in buying retailers. Sycamore bought Staples for roughly $1.6 billion in 2017, immediately had Staples take out $5.4 billion of loans, acquired another company, and then paid itself a $300 million payment and then a $1 billion special dividend. Then, Sycamore had Staples gift its $150 million headquarters in the suburbans of Boston for free, after which Staples signed a $135 million ten year lease with Sycamore to lease back its own building.
Healthcare is different because the biggest cost center of most healthcare practices is personnel. And those providers are also typically the only source of profit. This limits the shenanigans you can pull, limits how you can grow, limits the cost floor, and—because of Medicare and agreements with other insurers—limits your profit ceiling. Taking care of people is not a software company or a tech business that can achieve limitless scale at near-zero marginal cost. And what seemed like an easy positive cash flow business isn’t as simple as selling toner.
Tens of millions of people no longer have income, and even those who do are afraid to go back to their old lifestyles. The Fed can’t ultimately can’t print a functional economy. And at the end of the day, no matter how many games you play with debt loads and capital structures, firms have to have customers, and people can only be customers if they have income.
We’re currently in process of bailing out a lot of companies, and low-interest rates will let some of these folks continue borrowing money trying to bide time until they can raise more capital or potentially grow out of their debt. That may not be feasible for long enough to outlast this downturn, especially if the money spigots shut off.
But the issue with bailouts in situations like these is that in recent history they’ve perpetuated a private-profit public-loss business model where PE firms are rewarded for taking on absurd risk because that risk is really on the shoulders of the American people. And without meaningful regulation, this perpetuates the growth of the industry instead of reining in its excesses. Our historically “strong” economy crumbled within about two weeks of the shutdown. That’s overleverage at work.
The actual underlying businesses within these organizations are often still sound once you remove the onerous debt obligations, leasebacks, and other financial machinations. A tiny silver lining of this horrible scenario may be getting some of the rent-seekers out of polluting healthcare.
Jim Collins, quoting Admiral Jim Stockdale, who called spending seven years in a Vietnamese prison camp “the defining event of my life that would make me a stronger and better person.”
This is what I learned from those years in the prison camp, where all those constraints just were oppressive. You must never ever ever confuse, on the one hand, the need for absolute, unwavering faith that you can prevail despite those constraints with, on the other hand, the need for the discipline to begin by confronting the brutal facts, whatever they are. We’re not getting out of here by Christmas.
Like a good Stoic, you should believe in yourself and focus on the things within your valence of control and stop–as much as possible–hinging your mental, physical, and even economic health on the things you cannot.
Painfully good advice for the world right now.
David Kessler, co-author of one of the classic books with Kübler-Ross detailing the 5 stages of grief, interviewed in the Harvard Business Review:
Understanding the stages of grief is a start. But whenever I talk about the stages of grief, I have to remind people that the stages aren’t linear and may not happen in this order. It’s not a map but it provides some scaffolding for this unknown world. There’s denial, which we say a lot of early on: This virus won’t affect us. There’s anger: You’re making me stay home and taking away my activities. There’s bargaining: Okay, if I social distance for two weeks everything will be better, right? There’s sadness: I don’t know when this will end. And finally there’s acceptance. This is happening; I have to figure out how to proceed.
He goes on to discuss ways to manage pandemic anxiety, including focusing on the present, mindfulness, etc.
And then the bombshell: He’s adding a sixth stage (Finding Meaning) to the classic five.
And, I believe we will find meaning in it. I’ve been honored that Elisabeth Kübler-Ross’s family has given me permission to add a sixth stage to grief: Meaning. I had talked to Elisabeth quite a bit about what came after acceptance. I did not want to stop at acceptance when I experienced some personal grief. I wanted meaning in those darkest hours. And I do believe we find light in those times. Even now people are realizing they can connect through technology. They are not as remote as they thought. They are realizing they can use their phones for long conversations. They’re appreciating walks. I believe we will continue to find meaning now and when this is over.
There will be a pre-COVID and post-COVID world, and they will not be the same. The question is how much of this tragedy can act as a hard reset, enabling us to stop the distraction, infighting, and isolation and start making progress on the things that really matter to us as individuals, as a society, and as a species.
From Maryam Kouchaki and Isaac H. Smith’s “Building an Ethical Career”
So how can you ensure that from day to day and decade to decade you will do the right thing in your professional life?
The first step requires shifting to a mindset we term moral humility—the recognition that we all have the capacity to transgress if we’re not vigilant. Moral humility pushes people to admit that temptations, rationalizations, and situations can lead even the best of us to misbehave, and it encourages them to think of ethics as not only avoiding the bad but also pursuing the good. It helps them see this sort of character development as a lifelong pursuit.
We all have a personal opportunity to make being good an active choice. I’ve always loved the view that being an ethical person isn’t a character trait but an endless series of (often challenging) conscious choices. We see so many examples of people who are good in some capacities but not others precisely because it’s sometimes easier and sometimes harder to make what are–at least in hindsight–clearly right or wrong choices.
Preparing for ethical challenges is important, because people are often well aware of what they should do when thinking about the future but tend to focus on what they want to do in the present. This tendency to overestimate the virtuousness of our future selves is part of what Ann Tenbrunsel of Notre Dame and colleagues call the ethical mirage.
Counteracting this bias begins with understanding your personal strengths and weaknesses. What are your values? When are you most likely to violate them? In his bookThe Road to Character, David Brooks distinguishes between résumé virtues (skills, abilities, and accomplishments that you can put on your résumé, such as “increased ROI by 10% on a multimillion-dollar project”) and eulogy virtues (things people praise you for after you’ve died, such as being a loyal friend, kind, and a hard worker). Although the two categories may overlap, résumé virtues often relate to what you’ve done for yourself, whereas eulogy virtues relate to the person you are and what you’ve done for others—that is, your character.
I often wonder how many of my goals or projects fall firmly into the wrong camp.
Many factors go into choosing a job—but in general people tend to overemphasize traditional metrics such as compensation and promotion opportunities and underemphasize the importance of the right moral fit. Our work and that of others has shown that ethical stress is a strong predictor of employee fatigue, decreased job satisfaction, lower motivation, and increased turnover.
And this brings us to a nice medical dovetail. How many physician jobs now exist within a bureaucratic or corporate structure that is counter to how we feel a physician should be forced to practice medicine and that is counter to the best interests of both the practitioner and patient? How did we ever let a 15-minute appointment become normal? For anything?
And lastly, helpful litmus tests: publicity, generalizability, and mirror:
Three tests can help you avoid self-deceptive rationalizations. (1) The publicity test. Would you be comfortable having this choice, and your reasoning behind it, published on the front page of the local newspaper? (2) The generalizability test. Would you be comfortable having your decision serve as a precedent for all people facing a similar situation? (3) The mirror test. Would you like the person you saw in the mirror after making this decision—is that the person you truly want to be?
These are important things to consider before any big decision. Yes, they’re basically all the golden rule–but how often do you forget to use it?