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Category: 

No_Big_Problem

Date: 

1998-04-16 19:14:33

Subject: 

Debate: Semi-Optimist vs. Optimist

  Link:

http://www.contextmag.com/Archives/Spring1998/LastWord.html

Comment: 

Here is a good debate (in nontechnical English) between economist Ed Yardeni and READER'S DIGEST chief information officer David Starr. You get a good picture of the division over basic issues.

Notice the introduction. It contains the obligatory "I'm an idiot journalist" reference to predictions of planes falling from the sky.

Then notice Mr. Starr's assertion of fact: "Almost every week, I get a letter that's passed on to me from some vendor that says the ATM machines are going to start spitting money and the planes are going to fall from the sky." I see. He actually receives promotions from vendors warning that planes may fall from the sky.

I am offering a challenge to Mr. Starr. If he will mail me photocopies of two of these vendor statements warning of falling planes, I will donate $1,000 to the charity of his choice. I will also remove this challenge -- a challenge based on the fact that I don't believe him. He should mail them to Gary North, P. O. Box 8000, Tyler, TX 75711.

As an example of Mr. Starr's version of reality, consider his response to the problem of coal shortages due to train disruptions. It's a scenario I have been warning about for over a year. Mr. Starr says:

"Most companies -- and this is an ugly little secret that the consultants won't tell you -- have already had the Year 2000 hit, because people like coal suppliers have contracts that go four or five years out into the future. So this problem is not going to occur with a bang."

His argument proves the opposite. If he is correct, then coal suppliers will be ruined. They will be unable to deliver the coal. They will have to pay those buyers who agreed to the price, which will probably involve heavy penalties for breaking the contracts. Meanwhile, they will also suffer horrendous losses because no one will pay them for non-delivered coal.

In any case, there is still the problem of coal-fired power plants. How do they keep running? They won't run on checks (if any) or bankruptcy notices from the coal companies.

This article appeared in CONTEXT (Spring).

* * * * * * * *

No one is predicting the end of the world this time. But horrific forecasts are still rampant. Planes will fall out of the sky, some say. . . .

EDWARD YARDENI: I am an optimist about the Year 2000 issue, and I believe that most major companies will have their computer problems fixed. However, I doubt that we're going to have all the computer systems fixed in time. Maybe 80% to 90% of computer systems around the world will be ready. But surely 10%, maybe even 20%, of computer systems won't be.

The question is: Are these systems vital? I believe the likelihood is growing that the systems that won't be operational in the year 2000 will be important enough to disrupt global economic activity, even to the extent of causing a global recession. I think there's a 40% possibility of a global recession that could be as severe as 1973-74. . . .

I am especially concerned about computer systems run by the government. . . .

DAVID STARR: I agree with half of that. I think government systems are vulnerable. I'm not concerned about business systems for a couple of reasons. One, most of the time when big catastrophes happen in business, it's because of things you don't know. When you know something, particularly this far ahead, most everyone will plan for it. This has probably been the highest-visibility issue in technology in all of my experience.

I think most businesses are asking which systems are going to affect their customers and are fixing all of those. The 10% that don't work should be the Excel spreadsheets and the things that aren't going to have an impact on the business. . . .

These things are really easy to test. On a 1-10 scale of difficulty, in terms of how hard is it to find this bug and how hard is it to fix it, this is a three. The problem is it's so pervasive that you have to go through this triage process. But my experience so far is that everybody I've been talking to has done just that. . . .

YARDENI: I also worry about basic service vendors. Electricity suppliers, for instance, are highly automated. Union Pacific is an example of what happens when you have a failure in an important service. Some fossil-fuel electricity plants are reporting that their coal supplies are pretty low right now because they're not getting the coal they need through the Union Pacific line, which has been plagued by computer system troubles.

So I guess my bad-case scenario-I won't say it's the worst-case scenario-is that we have something that's like a combination of Union Pacific, the UPS strike, and the government shutdown of a couple of years ago. Mix it all together, and it's bound to slow economic activity.

STARR: I want to treat the government separately, but most companies-and this is an ugly little secret that the consultants won't tell you-have already had the Year 2000 hit, because people like coal suppliers have contracts that go four or five years out into the future. So this problem is not going to occur with a bang. It's something that's going to phase in system by system over the next two to three years. . . .

. . . I don't think it's going to have any worldwide economic impact. I think there are going to be anecdotal events that will hit the press, so people will say, Oh, Year 2000 happened. But I think everybody will be all over the problem for the next couple of years, and I don't think it's going to really hit business.

The government is another situation. I think it could crash and burn, but I don't think it will take 10 years to fix it.

YARDENI: Well, it if takes one year, I have my recession, I think. . . .

And your experience is that it is turning out to be less of a problem than you first imagined?

STARR: I didn't think it was going to be a big problem in the first place. But a lot of people I'm talking to are telling me that they're pleasantly surprised it's not as bad as they thought.

It's really not a hard bug to fix. . . .

. . . I think managers have been inundated with terror stories from consultants to the point where they're probably spending more than they should. Almost every week, I get a letter that's passed on to me from some vendor that says the ATM machines are going to start spitting money and the planes are going to fall from the sky.

Link: 

http://www.contextmag.com/Archives/Spring1998/LastWord.html

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