Legacy of the Tōhoku Earthquake: Moral Imperative to Prevent a Future Fukushima Crisis


An article in the New York Times reminds us once again that without a carefully crafted and highly disciplined governance architecture in place, perceived misalignment of personal interests between individuals and organizations across cultural ecosystems can lead to catastrophic decisions and outcomes. The article was written by Martin Fackler and is titled: Nuclear Disaster in Japan Was Avoidable, Critics Contend.

While not unexpected by those who study crises, rather yet another case where brave individuals raised red flags only to be shouted down by the crowd, the article does provide instructive granularity that should guide senior executives, directors, and policy makers in planning organizational models and enterprise systems. In a rare statement by a leading publication, Martin Fackler reports that insiders within “Japan’s tightly knit nuclear industry” attributed the Fukushima plant meltdown to a “culture of collusion in which powerful regulators and compliant academic experts”.  This is a very similar dynamic found in other preventable crises, from the broad systemic financial crisis to narrow product defect cases.

One of the individuals who warned regulators of just such an event was professor Kunihiko Shimizaki, a seismologist on the committee created specifically to manage risk associated with Japan’s off shore earthquakes. Shimizaki’s conservative warnings were not only ignored, but his comments were removed from the final report “pending further research”. Shimizaki is reported to believe that “fault lay not in outright corruption, but rather complicity among like-minded insiders who prospered for decades by scratching one another’s backs.”  This is almost verbatim to events in the U.S. where multi-organizational cultures evolved slowly over time to become among the highest systemic risks to life, property, and economy.

In another commonly found result, the plant operator Tepco failed to act on multiple internal warnings from their own engineers who calculated that a tsunami could reach up to 50 feet in height. This critical information was not revealed to regulators for three years, finally reported just four days before the 9.0 quake occurred causing a 45 foot tsunami, resulting in the meltdown of three reactors at Fukushima.

Three questions for consideration

1) Given that the root cause of the Fukushima meltdown was not the accurately predicted earthquake or tsunami, but rather dysfunctional organizational governance, are leaders not then compelled by moral imperative to seek out and implement organizational systems specifically designed to prevent crises in the future?

2) Given that peer pressure and social dynamics within the academic culture and relationship with regulators and industry are cited as the cause by the most credible witness—from their own community who predicted the event, would not prudence demand that responsible decision makers consider solutions external of the inflicted cultures?

3) With the not-invented-here-syndrome near the core of every major crises in recent history, which have seriously degraded economic capacity, can anyone afford not to?

Steps that must be taken to prevent the next Fukushima

1) Do not return to the same poisoned well for solutions that caused or enabled the crisis

  • The not-invented-here-syndrome combined with bias for institutional solutions perpetuates the myth that humans are incapable of anything but repeating the same errors over again.

  • This phenomenon is evident in the ongoing financial crisis which suffers from similar cultural dynamics between academics, regulators and industry.

  • Researchers have only recently begun to understand the problems associated with deep expertise in isolated disciplines and cultural dynamics. ‘Expertisis’ is a serious problem within disciplines that tend to blind researchers from transdisciplinary patterns and discovery, severely limiting consideration of possible solutions.

  • Systemic crises overlaps too many disciplines for the academic model to execute functional solutions, evidenced by the committee in this case that sidelined their own seismologist’s warnings for further study, which represents a classic enabler of systemic crises.

2) Understand that in the current digital era through the foreseeable future, organizational governance challenges are also data governance challenges, which requires the execution of data governance solutions

    • Traditional organizational governance is rapidly breaking down with the rise of the neural network economy, yet governance solutions are comparably slow to be adopted.

    • Many organizational leaders, policy makers, risk managers, and public safety engineers are not functionally literate with state-of-the-art technology, such as semantic, predictive, and human alignment methodologies.

    • Functional enterprise architecture that has the capacity to prevent the next Fukushima-like event, regardless of location, industry, or sector, will require a holistic design encapsulating a philosophy that proactively considers all variables that have enabled previous events.

      • Any functional architecture for this task cannot be constrained by the not-invented-here-syndrome, defense of guilds, proprietary standards, protection of business models, national pride, institutional pride, branding, culture, or any other factor.

3) Adopt a Finely Woven Decision Tapestry with Carefully Crafted Strands of Human, Sensory, and Business Intelligence

Data provenance is foundational to any functioning critical system in the modern organization, providing:

      • Increased accountability

      • Increased security

      • Carefully managed transparency

      • Far more functional automation

      • The possibility of accurate real-time auditing

4) Extend advanced analytics to the entire human workforce

      • incentives for pre-emptive problem solving and innovation

      • Automate information delivery:

        • Record notification

        • Track and verify resolution

        • Extend network to unbiased regulators of regulators

      • Plug-in multiple predictive models:

        • -establish resolution of conflicts with unbiased review.

        • Automatically include results in reporting to prevent obstacles to essential targeted transparency as occurred in the Fukushima incident

5) Include sensory, financial, and supply chain data in real-time enterprise architecture and reporting

      • Until this year, extending advanced analytics to the entire human workforce was considered futuristic (see 1/10/2012 Forrester Research report Future of BI), in part due to scaling limitations in high performance computing. While always evolving, the design has existed for a decade

      • Automated data generated by sensors should be carefully crafted and combined in modeling with human and financial data for predictive applications for use in risk management, planning, regulatory oversight and operations.

        • Near real-time reporting is now possible, so governance structures and enterprise architectural design should reflect that functionality.

 

Conclusion

While obviously not informed by a first-person audit and review, if reports and quotes from witnesses surrounding the Fukushima crisis are accurate, which are generally consistent from dozens of other human caused crises, we can conclude the following:

The dysfunctional socio-economic relationships in this case resulted in an extremely toxic cultural dynamic across academia, regulators and industry that shared tacit intent to protect the nuclear industry. Their collective actions, however, resulted in an outcome that idled the entire industry in Japan with potentially very serious long-term implications for their national economy.

Whether psychological, social, technical, economic, or some combination thereof, it would seem that no justification for not deploying the most advanced crisis prevention systems can be left standing. Indeed, we all have a moral imperative that demands of us to rise above our bias, personal and institutional conflicts, and defensive nature, to explore and embrace the most appropriate solutions, regardless of origin, institutional labeling, media branding, or any other factor. Some crises are indeed too severe not to prevent.

Mark Montgomery
Founder & CEO
Kyield
http://www.kyield.com

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Interview with Jenny Zaino at Semanticweb.com


Just wanted to share this interview and article with Jenny Zaino over at Semanticweb.com on my recent patent and related IP.

Manage Structured Data and Reap the Benefits

A detailed paper on this topic is nearing completion and will post a brief and description in the next few days.

Key patent issued


My key patent for Kyield was issued today by the USPTO as scheduled earlier this month.

Title: Modular system for optimizing knowledge yield in the digital workplace

Abstract: A networked computer system, architecture, and method are provided for optimizing human and intellectual capital in the digital workplace environment.

To view our press release go here

To view the actual patent  go here

I will post an article when time allows on the importance of this technology and IP, and perhaps one on the experience with the patent system. Thanks, MM

On Her 235th Birthday, America Desperately Needs Lean, Open, and Secure Governance


Baby boomers like myself clearly recall the tumultuous years leading up to the Bicentennial of the United States.  The world we grew up in was near the peak of the industrial revolution, dominated by the aftermath of the Great Depression, WW2, and the Cold War.  We were raised in a culture that had witnessed first-hand the power of a unified government, which led to the victory of fascism in our parent’s generation, followed by a round trip to the moon in our own. In the childhood of my generation, nothing was impossible with sufficient government power.

By 1976, however,  America had endured the 1960s cultural revolution, the Vietnam War,  a serious energy crisis, stagflation, and Watergate.  We were experiencing the shocking end to the post war boom, with new revelations that success had a price, military power had limits, government was not always trustworthy, and our industrial economy had a soft underbelly leaking oil.

By the late 1970s, interest rates were skyrocketing, inflation seemed out of control, the Cold War was threatening to become white hot, and U.S. public debt had risen to the shocking level of $900 billion, representing one third of U.S. GDP.  During the next decade of economic expansion led largely by financial engineering and services, the U.S. debt more than tripled in dollar terms, rising to nearly 60% of GDP.

During the 1990s, with the commercialization of the Internet and exponential adoption of computer networking worldwide, the global economy began to shift, but the information revolution did not result in taming the industrial revolution—at least in the short-term, but rather acted as a catalyst in shifting heavy industry from West to East in our never ending quest for growth and scale. The dot-com bubble provided a very brief respite from accumulating debt in the form of capital gains, but it was a one-time gain.

By the late 1990s it became apparent that the unfettered Internet, in ironic contrast to the core message in The Wealth of Nations, offered such disruptive efficiency that many industries would be radically transformed, including the service economy that had become dominant in the U.S.

Meanwhile, global companies became too big to fail, increasingly divorcing themselves from U.S.interests in what became the primary global strategy for risk reduction and growth, which only compounded the challenges facing the U.S. economy.  By extension, regional and national economies dependent on the industrial revolution or services would also need to adopt the efficiencies offered by the new medium in order to avoid eventual bankruptcy.  In modern parlance, the trajectory of our national budget was increasingly in misalignment with the needs of our economy, the super majority of our citizens, and our collective future.

Rather than downsize to meet the new reality and future obligations, the post 9/11 economy witnessed increased liquidity that  “saved the economy” (Alan Greenspan), combined with post war guarantees in banking, systemic corruption, and ideological activism to enable the mega housing bubble, followed by the inevitable correction and almost certain economic depression if not for historic levels of Keynesian intervention. Rather than invest massive stimulus in converting to a sustainable trajectory, however, most of the spending was targeted at populist programs that continued to expand government overhead, thus increasing long-term liabilities, primarily in very temporary form that now leaves regional economies facing an even more challenging future, and citizens faced with much greater national debt; short, mid, and long-term.  The promises made by government during and after the Great Depression were obviously not only unfunded, but increasingly unfundable.

The most recent example of kicking the can down the road has been unprecedented life support from the FRB in financing 70% of the U.S. debt in QE2, while once again warning Congress and the White House to get its long-term fiscal house in order.  The result, once again, was to witness excess liquidity flow to the most speculative markets, not the fundamental investments required to transition to a sustainable economy, confirming that we have yet to address the underlying structural problems.  The cost of avoiding another Great Depression by stimulus and liquidity has been to advance U.S. insolvency by more than a decade; and quite probably more than two.

Port of Call in the Voyage of Fiscal Denial

Regardless of how one interprets the voyage, the destination that our culture is finally beginning to awaken to is tragic. Under what most believe to be an optimistic forecast, the Congressional Budget Office (CBO) warns us that public debt will rise from around 70% of GDP currently to 84% by 2035, with interest payments rising to 4% of GDP from 1% at current levels. This “extended-baseline” scenario is dependent upon a great many things that have not occurred in the past, however, nor are expected by most, including low inflation and a relatively disciplined Congress. The more consensus forecast, or “alternative fiscal scenario”, projects public debt to rise to 100% of GDP by 2021 and 190% by 2035. However, anyone observing financial crises can attest that these events do not occur on an even gradual basis, but rather reach a tipping point.

The warning I offer today is that economists have based their forecasting on comparable situations in very small economies relative to the U.S., not the world’s largest that also manages the global currency, not to mention the only global military power.  Every forecast, scenario, and metric I have observed in economics is based on a very different history than the situation we face today, all of which assumes the post war experience of a stable U.S. economy.

To capture the situation, consider that while each have proposed different remedies, the best economic forecasters of our time, to include investors, Nobel Laureates, current and past FRB chairs, and regardless of party or ideology, all essentially agree that this unsustainable trajectory has nearly reached its pinnacle.  All are raising red flags, and none can (or have to my knowledge) deny that when the herd finally changes course in bond markets, as we’ve seen most recently in Greece, the stampede is swift and brutal.

Lean, Open, and Secure Governance = The Semantic Enterprise

The Levin–Coburn Report found that the financial crisis was the “result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”

The U.S. Financial Crisis Inquiry concluded that the crisis was caused by:

  • “Widespread failures in financial regulation, including the FRB’s failure to stem the tide of toxic mortgages”

  • “Dramatic breakdowns in corporate governance”

  • Key policy makers “ill prepared for the crisis, lacking a full understanding of the financial system they oversaw”

  • “Systemic breaches in accountability and ethics at all levels”

In early January of 2008, former GAO Director David Walker suggested that four types of deficits caused the underlying fiscal problem: budget, trade, savings, and leadership. While these four causal factors are without question, I suggest that all of our deficits depend upon the integrity of governance structure, including our increasing deficits in knowledge, competitiveness, security, and happiness.

The only reliable method to achieve a sustainable governance infrastructure in the network economy is with semantic enterprise architecture, which is based on many years of research and testing. For a brief video description of the semantic enterprise, see my elevator pitch, and for a more in-depth discussion, view this keynote at the recent SemTech conference by Dennis Wisnosky on the transformation of the DoD.

Too Big to Fail or Too Primitive to Succeed?


Our economy very nearly experienced a financial version of Armageddon due to the gap between a primitive governance structure and highly sophisticated tools employed by a few with interests that were deeply misaligned with the needs of sustaining our national and global economy. We have all since unwillingly experienced the negative impacts of untamed technology while experiencing few of the benefits of the tamed; whether for resolution of the current crisis or prevention of the next.

Given the systemic nature and scale of the financial crisis, and in consideration of the poor ongoing economic conditions, it’s clear that the financial industry, political process, and regulators have all fallen short of achieving the individual mission of each, particularly in consideration of current technological capabilities.

For the past several months financial institutions have been attempting to convince regulators that they should not be labeled a Systemically Important Financial Institution (SIFI). The process of implementing the 2010 Dodd-Frank law in the U.S. has resulted in spin offs in an attempt to avoid increased U.S. regulation, while the new global rules for multi-national banks on top of Basel III, including surcharges and increased capital ratios, is resulting in a comprehensive rethink of the fundamental assumptions surrounding the global banking model.

Observing this dynamic invites a mental imagery of bureaucrats, politicians, and academics in team competition, each applying favored remedies such as duck tape over economic journals in a futile attempt to plug giant leaks in the hull of a Nimitz-class aircraft carrier.

When basic human greed clashed with globalization, networking, and technology, the combination introduced a complexity far beyond the organizational structures and tools available to regulators or corporations. Indeed, the reaction we’ve observed suggests that remedies employed to manage this crisis were designed for a war fought over seven decades ago during the Great Depression; an era when state-of-the-art technology was represented by the IBM Type 285 Numeric Printing Tabulator– capable of tabulating 150 cards per minute. The hourly sales of IBM today are approaching the annual sales of 1933, and billions of records are now run in seconds, yet our archaic regulatory system is employing printing presses in response to the largest financial crisis in 75 years.

A great deal has been learned in recent years beyond traditional economic theory about the systemic nature of networks, social behavior, contagion, and the global economy, with considerable investment in basic and applied research focused on technologies specifically designed to prevent systemic crises.

In the era of high performance computing on an increasingly interconnected planet with ever expanding pipes, economic tipping points can be reached very quickly that can bankrupt even the previously most wealthy nation on earth, particularly in a weakened economic condition suffering from structural problems. Focusing on SIFIs is of course essential, even if tardy by decades, but the emphasis should be on managing real systemic risk, which requires a very specific data structure that ensures data integrity, enhanced security, system-wide automation, modernized organizational structures, and continual, real-time improvement.

Without deep intelligence on the constantly changing relationships in a carefully constructed semantic layer, and automatically managed by pre-configured data valves, systemic risk is impossible to manage well, or even I argue at a level that is minimally acceptable.

Sophisticated new multi-disciplinary systems have been designed specifically to address the modern challenges in systemic risk management, but have yet to be built out and deployed. Policy makers should insist on the new generation of technologies to better protect citizens and the economy; regulators should embrace and promote the technology for it’s impossible to meet their mission otherwise; and financial institutions should adopt the technology due to rare ROI and sharply reduced levels of risk.

Clever is Cute as Sustainable is Wise


If the financial crisis confirmed anything, it is that the majority of humans are followers, not leaders, and that leaders throughout our society have yet to capture the significance of technology to their members and organizations.

One of the primary causal factors cited by thought leaders in studying crises is poor leadership, to include those who accept misaligned or conflicted interests. When we see “skimming off the top” in others we label it corruption, yet few see it in themselves at all, or choose to ignore it, resulting in the same outcome. While balance is obviously needed for survival—indeed managing that balance well is key for modern leaders, when we over-emphasize short-term profits, we then elevate the influence and power of those who are skilled at winning very short-term battles, rather than long-term wars. I have personally experienced that strategy in organizations and observed it in many others; it doesn’t end well.

One problem with the short-term leadership model is that the skills for software programming, instant trading, manipulating markets, or otherwise amassing great wealth quickly, does not necessarily translate to good leadership in a private company, government, or stewardship in philanthropy. Indeed, in my own observations and those of many others, quite the opposite is often true, yet our information institutions instruct society to emulate the clever rather than the wise. Should we be surprised then at the trend line of manipulation, polarization, and ever deeper crises?

Unlike the early days of the industrial revolution, in the second inning of the information revolution we now understand that most of the challenges facing the human species are long-term in nature, so we must realign our thinking and structures accordingly, including financial incentives and leadership development. Alas, since the long-term has been greatly compressed by consistent failure of short-term behavior, our entire species must now learn to act in the short-term on behalf of our mutual long-term interests. Easier said than done in our culture. The good news is that it’s quite possible…tick-tock, tick-tock, tick-tock.

The process of identifying, mentoring, and recruiting strong leaders often consists of conflicting advice that tends towards self-propelling cultures, regardless of organizational type. In addition to skill sets and track records sketched from misleading data, leaders are often selected based on ideology, dysfunctional networks, and susceptibility to peer pressure, instead of independent thought, good decision making, and wisdom.

Given the evidence, a rational and intelligent path would be to reconstruct our thinking and behavior surrounding the entire topic of leadership and organizational structures, and then tailor that thinking specifically for the environment we actually face, with tools specifically designed for the actual task. For many cultures, such a path begins by emerging from deep denial and embracing evidence-based decision making. Once emerged from the pit of denial, they soon discover among other truths that resources are not infinite after all, personal accountability is not limited to the inefficiencies of organizations, and that both the problems and solutions we face are inextricable from computing, organizational management, and personal accountability. Only then will the path to sustainability began to take shape in the vision field in sufficient form to differentiate the forest from the trees.

Yet another of the many disciplines related to this topic defines psychosis as a “mental disorder characterized by symptoms, such as delusions that indicate impaired contact with reality”.  An appropriate translation of insanity might be “refusal to adopt tools and models designed to achieve sustainability”, aka survival.

If this sounds familiar in your organization, it could well be traced to your leadership development model and process, for leaders are the decision makers who have budget authority. Perhaps it’s time for your organization to redefine strategic from clever to wise, and synchronize the organizational clock with present-day reality?

Unacceptably High Costs of Data Silos


Above is a screen capture of an internal Kyield document that displays an illustration of the high costs of data silos to individual organizations, regions, and society based on actual cases we have studied; in some case based on public information and in others private, confidential information. This is intended for a slide-show type of presentation so does not go into great detail. Suffice to say that human suffering, lives lost–human and otherwise, and wars that could have been prevented that were not are inseparably intertwined with economics and ecology, which is why I have viewed this issue for 15 years as one ultimately of sustainability, particularly when considering the obstacles of silos to scientific discovery, innovation, and learning as well as crisis prevention.

 
Mark Montgomery
Founder & CEO
Kyield
http://www.kyield.com