An Asymmetric Conflict

Our state, our nation, and our larger world are under attack by the Covid-19 virus. Many have likened it to a war, and there are certainly similarities. I know a thing or two about warfare and strategy. While the analogy only goes so far, there are some lessons here.

The virus could be seen as "asymmetric warfare", which essentially is an attack by an enemy who uses far different tactics than you are prepared for, causing enormous initial damage. The German use of long range rockets against the British during WWII illustrates how devastating this type of warfare can be. It also gives us clues as to how to win.

Asymmetric warfare has devastating psychological and 2nd order effects, and that is exactly what is happening to us right now.
The economic toll is staggering, and desperation is creeping in. Our lives have become a battlefield, and our people are being hurt in more ways than just the main attack of the sickness. We must incorporate this fact as we develop our strategy for victory.

It's possible to believe the Covid-19 virus is deadly, and still believe that we need a plan for bringing segments of our economy online.

A plan means documented benchmarks for exactly how we will get back to business based on the actual conditions.
A plan includes specific segments of the economy, specific regions of the state, and specific actions that will be taken based on measurements.
A plan includes contingencies for rolling back quickly in the event of unforeseen negative events, as well as acceleration in the event things turn out better than expected.

The data clearly shows that certain segments of the population are most at risk. Let's protect them with vigilance. We have indications that the virus is more pervasive than originally thought, let's examine what this means in terms of the death rate and incorporate into our calculations. Data shows that social distancing is working, let's maintain safety precautions as we start to resume some limited activities. Our hospitals have capacity, our testing and PPE supplies are getting better every day. Let's bring our data, our experience, our knowledge to bear on the enemy. Let's remember our brothers and sisters who are being devastated economically by being completely shut down as well as those who are sick.

The challenge is more complex than arguments over completely opening up, or staying shut down until the virus is completely gone. In short, we need a strategy to fight an enemy leveraging asymmetric warfare. What is needed is far beyond a simple "frontal attack", or a "retreat and hide" tactic. We know how to fight kinetic wars against innovative enemies. Let's use our skill, wisdom, and experience in that terrible realm to bring victory in this conflict. This is our time, our opportunity to rise to the occasion as previous generations have done with courage, innovation, and firm resolve.

A Business Leader's Guide to Planning in a Crisis Environment

If you're a business owner or leader right now, this is probably one of the most difficult times of your life.  Your family, your employees, clients, suppliers, and an entire eco-system of partners and related businesses all look to you for leadership. The weight of responsibility can be crushing, and it's something many people can't understand unless they've been there.

As a business owner and CEO for many years, I understand because I've felt the crush. The economic aspect of this crisis is bad, probably worse than anything we've seen in our lifetime. The good news is that we will get to the other side of it. Even though it may feel like the end of the world, I can guarantee you that it is not. At some point, we will return to normal operations. Whether it's 2 months or 2 years, every tough situation has a beginning and an end, including this crisis.

So, what kind of actions would I suggest for leaders who are bringing their organizations through this crisis?

Obviously, there are many different potential courses of action and strategies available. What works for one business might not be appropriate for another. Over the years, I've found that a defined planning process to help bring structure to what could be chaos is helpful, and I've outlined once such process below. Hopefully in these recommendations you can find something to help you to craft your own strategy to guide your firm through these turbulent times. As always, as you are working through a crisis, it's important to take care of your physical, mental, and spiritual fitness daily - exercise, read, and pray/meditate. Even though those things are critical, I won't dwell on them. Instead, let's jump right into to the planning process.

1. Evaluate your position. Take stock of the situation, with as little emotion as possible. In order to come through this successfully, you need to have a realistic assessment of exactly where you are. You most likely won't have all the information you need, but use what you have, and make your best educated guess as to the rest. There are seven key areas I'd recommend for evaluation:

• Cash - What does your cash position look like? Work on your cash flow projections. How much reserves do you have? How much inventory? How strong are your lines of credit? Will you need your investors to pitch in with a capital call? How are your personal lines of credit? Home Equity? 401K withdrawal? Credit cards? What government assistance programs might be helpful?
• Clients - How are they being impacted? What do their prospects look like? Any chance of them leaving you with bad debt? Now is the time to communicate very clearly with them and set expectations. Will they be able to pay you?
• Vendors and suppliers - How are they communicating with you? Are they still living up to their agreements? Will they be able to provide the flexibility you need?
• Expenses - Which expenses are variable (changing based on volume), and which are fixed? (like a set lease agreement) Which can be cut? Review your entire Profit/Loss statement and examine each expense carefully.
• Team members - How has staffing been impacted? How is their morale? Examine metrics for each department and employee to see if the changing business climate has impacted their utilization and function. Are there areas where their freed up time can be put to use for other functions?
• Operations - What are the core functions of your business? What operations are critical to those core functions? How has the new reality of working during the virus outbreak changed your operation? Can your team members work from home? Is remote work as productive?
• Market - How has your market changed, and what will it look like over the next 12 months? How is demand for your products and services changing? How are client expectations changing? How are your competitors adapting?

Once you have a realistic picture of your current situation, we need to project what the economic environment is going to look like for the coming year for your specific business. Use the results of your situational evaluation, together with your appraisal of the current and possible future threat environment to build 3 scenarios for what the next year looks like.

• Best case
• Worse Case
• Most likely case

2. Consider all of your potential courses of action. Brainstorm every action you can think of, even the ones that may seem ridiculous. Sit down with your leadership team and list out all of the possible actions you could take at this time. For each course of action, detail out the potential benefits and risks of each one in each of the three scenarios you developed.

A few questions to get your creativity flowing:

• Are there functions that can be put "on hold" until they can be restarted?
• How can cash be preserved?
• Are there areas you can find deals, such as real estate or equipment?
• Can you negotiate discounts with suppliers?
• Would clients be open to discount offers if they guarantee purchase volume?
• How can staffing cuts be avoided or delayed?
• Are there new lines of business that could be profitable in the new environment?
• Are there existing lines of business that will be a drag on operations and cash?
• If you need to cut expenses, where can you do it without hurting your core business value proposition?
• How can you build alliances with other business owner? Are there ways to cooperate, share resources and information?

3. Compare all of your courses of action, discuss the relative merits of each, and rank them in order of preference. Use this ranking to decide on your preferred plan. The plan won't be perfect, and there will be risks and tradeoffs, but by comparing all possible courses of action, you will be selecting the  plan that has the best chance of being successful.

4. Document your plan. Hopefully, you have a written business plan for the year. If so, use the information and projections you made in the first step to update it. If a written plan wasn't something you ever completed, now is the time to do it. Even a simple plan is better than nothing at all. It is critical to write it down. Your plan should contain the important relevant modifications and be simple to understand so that every employee down to the most junior team member can explain it.

5. Communicate your plan to your team. Explain in detail how you'll execute on it as a team. Be honest about the risks as well as the potential benefits. Take time to make sure the plan is thoroughly understood. Have your team explain the plan back to you to make sure it is understood. Spend plenty of time answering questions and going through the "what if" scenarios.

6. Communicate essential elements of your plan to those outside of your organization that need to know. At this time, it's critical to keep up good communications so everyone is informed and in the loop on what to expect. Create a communications cadence matrix that includes clients, vendors, and employees. Each of these groups should know what to expect from you and your firm during this crisis. Try and keep up a regular cadence of communication, even if you don't have anything new to report. This will generate confidence that someone is firmly in charge and "on watch" as the situation evolves.

7. Execute the plan. Now is the time to get moving. Have your leaders put the plan into action, and check in with them as often as appropriate to see how they are doing. Meet weekly at a minimum to evaluate results and discuss any new information that should be incorporated into future operations.

I wish you all the best as you work through this. Our economy depends on leaders like you having the courage to face this situation and make the best of it. As a leader on the front lines of the economic aspect of this battle, your actions will have a lasting impact on the lives of many. I am grateful for you and those like you across our nation who will ultimately guide us out of this economic meltdown into a new period of growth and prosperity.

Economic Impact of the Corona Virus

The economic impact of this Corona virus is going to put our economy into a deep ditch, but it will pass. A quick recovery could be helped along by a special tax relief package targeted at the middle class and small business owners. This would provide the stimulus needed to generate confidence, security, and operating cash for both consumers and businesses.

Justification?  Operating capital is the lifeblood of any company. A mature, profitable, well run business will build up substantial cash reserves and credit lines over years of operations to get through a downturn. I always liked to have the ability to make 3 months' worth of payroll even in a worst case scenario. The danger comes in with an economic slowdown like I lived through in 2008-2009. We had been in an expansion phase and had started up a new line of business that had great promise, but wasn't yet profitable. We were plowing operating cash into it, creating jobs and revenue, but it took time to build credibility in the new market and land the substantial projects that we knew we could win. We were leaning forward very hard into growth because we believed in the people and the market. It was a good business, and we were a profitable company, but the investment in growth strained our cash flow. 

Of course, there are always options for financing growth, but organic financing through profit was our first choice. Then the slowdown hit. Some large clients slow payed bills, some went out of business, and a few cancelled contracts. It happened so quickly there was little time to adjust. Credit became incredibly tight, and financing was nowhere to be found. So, what to do? We were only a few weeks from running out of cash to meet payroll and tax requirements. We could have cut 20 jobs and contracted to a safe size, which would have been the textbook solution. That would have put 20 people on unemployment payments and possibly other government assistance. Luckily, I had some home equity I was able to tap and give us the capital needed to get by. In my instance we were very fortunate, and my thrift in early years paid off. However, if I hadn't already had that equity line in place, I wouldn't have been able to get it. We would have either gone out of business, or had massive layoffs. Both of those options would have had a cascade of bad impacts downstream for both our employees, clients, and vendors. It would have also been costly to tax dollars in the form of government assistance. At that point, I had been in business for 12 years. Many business haven't been around that long, and it makes it even tougher for them. 

Now, if the government had come in with an offer of tax relief  through a one-time reduction on personal income tax rate, it would have immediately helped the situation and taken off pressure. It would have been much less expensive to everyone concerned. I say personal income because most profits in SMBs flow through to the owners because of the structure most often used by small businesses. So, it wouldn't have helped the large corporations with deep pockets and the resources to weather the storm. Rather, it would have freed up money for those business owners who were risking everything to keep jobs in place and keep the economy moving. It would also have resulted in tax refunds for more middle class people, who would spend the refunds, injecting much needed cash into the economy. I'd be the first to say you don't want government picking winners and losers in the economy, but it seems like a little stimulus could prevent a lot of suffering. An across the board personal tax rate reduction seems a fair way to do it, benefiting both consumers and small business owners. I see today that the Fed just announced a half point interest rate decrease, and I think that is also a very helpful action.

A CEO's Approach to Problem Solving

Problems don't go away because money is thrown at them, they often get worse.

 Long term solutions are best developed by a planning process that blends innovation, accountability, and fiscal discipline with strategic investment. Results can then be monitored, evaluated, and incorporated into the next planning cycle. The critical question of, "how do we drive accountability and evaluate results?"  is what is often missing from government programs.

Want better government? Actively support better candidates. Every like, comment, share, and donation is a nail in the coffin of the current dysfunction. Thanks to all for your support and encouragement!

Potential Dangers of Artificial Intelligence and Robotics

Why should you be concerned about the potential misuse of Artificial Intelligence (AI) and robotics?
Imagine that someone creates a program to sweep through all social media accounts and make a list of everyone who shared a certain post or video, or liked posts by a certain person.
The list would include not only their name, but their picture, and phone number. This information is then loaded into a database and used to create a target list. AI could also be designed to target certain demographics (skin color, age, gender, etc)
A plane flies over a city and drops out 100,000 small drones, about the size of a hummingbird, but each with a camera, a "phone finder app", and facial recognition technology (like your iphone has).Each drone also includes a single explosive charge designed to detonate once within 1 inch of the target's head, or when the AI determines a door or window needs to be blown open so other drones can fly through. The drones talk to each other, identify the location of targets, and transmit a "mission accomplished" signal a millisecond before eliminating the target.
In a few hours, an entire class of people who believe a certain idea or belong to a certain group could be eliminated.
Farfetched? Not at all. Each component of the technology I described available now. It's just a matter of who gets their hands on it and decides to carry out an attack. These are the types of issues we need to be prepared to deal with in the next decade, and right now we are far behind.

https://youtu.be/GFD_Cgr2zho

Lessons Learned from History

Several folks have asked me if I've been following the impeachment. Honest truth - No, it's political circus that stokes the flames of divisiveness and further pushes us to the extremes. I am, however, thoroughly enjoying my latest deep dive into Roman history, because our government was patterned after, and has many of the same weaknesses as their Republic.
Was Marius or Sulla right? Caesar or Pompey? Octavian or Marc Anthony? Did the Gracchi brothers push social change too far, too fast? With the benefit of hindsight, does it even matter? I would say the true lesson is that hubris, ego, lust for power, and the inability to find common ground led to a steady decline in civil discourse, the rule of law, and the stability of the Republic. "What has been will be again, what has been done will be done again; There is nothing new under the sun". History bears witness to this fact, the only question is whether we learn from the blood stained dust of a ruined Republic and get our act together before we are lost.

https://www.washingtonpost.com/entertainment/books/the-age-of-caesar-a-fresh-look-at-the-key-players-in-a-time-of-historic-unrest/2017/02/01/8c47df12-e49f-11e6-ba11-63c4b4fb5a63_story.html

A Shared Legacy of Values - Let's Do Government Better!

I grew up in a Southern Democratic household. My family believed in the party that brought us electricity through the TVA, infrastructure and jobs through the CCC, and national leadership during WWII. When I registered to vote, it was naturally as a Democrat. (I was attacked for this recently by a politician trying to dig up dirt on me. I guess that was all he could find.)

I switched my affiliation soon after college because I was inspired by Ronald Reagan's courage in standing up to the Soviet Union, and his vision and implementation of a revitalized America. I am a proud Republican, and I am dedicated to the Constitution I swore to protect as a Marine.

I believe there are good folks in both parties who earnestly want what's best for our country, and that the extremes don't represent the vast majority of our people. We owe it to those who have gone before, and to those who will come after, to work together to leave our home a better place than we found it.

Our party has a long history of supporting the causes and values that Americans identify with. From the faith in freedom of Abraham Lincoln to the trust busting and environmental protection of Teddy Roosevelt, to the vision and courage of Ronald Reagan that inspired me. Here in North Carolina, Governor Jim Martin showed us just what it meant to lead with vision and accomplish lofty goals. (driven on I40 lately?)

Let's reclaim the noble legacy that we all share: trust, maturity, dedication to country, courage, and ability to work together as Americans. Let's resist the urge to be forced to the extremes by those who seek to use fear as a weapon. Let's change the tone, and let's start right here in NC District 17. Let's do government better! www.Cav4NC.com