Every organization, industry and society is going through wrenching change right now.  There will be no return to a “normal” state that resembles a prior period in world history.  I am observing this first-hand in the health care and film industries, and as a well-informed observer in the industry I left 2 ½ years ago, the mailing industry.

The film industry is particularly going through wrenching change, but, as a recent entrant to the industry, I have seen both the challenges and the new opportunities that change has created.  Clearly, the move to digital technology has effectively destroyed the traditional retail DVD rental market, with the limited exception of Red Box kiosks.  It has also thrown into confusion the economic model for digital downloads, since Netflix has built an economic model based on fixed monthly rentals, although its founder Reed Hastings recently noted that the low monthly rentals may not work if subscribers want mostly new films, as opposed to a mix or new and old ones.

I experienced the consequence of this complexity with the difficulty my strategic consultant had in describing the new potential economic model for our film From the Rough in preparing our investor memorandum.  He found the data and did the analyses we needed, but it took longer and was far more complicated, because any data that was more than a few years old on non-theatrical revenue streams was essentially obsolete.

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Upton Sinclair, the author of The Jungle, and a renowned journalist from the early 20^th century, once said that “it is difficult to get someone to understand something when the continuation of his livelihood depends on him not understanding it.” This is a profound, but simple, truth.

Whole industries and marketplaces, and often political and social paradigms, depend on people willfully denying reality.  In health care, the stubborn myth is that more care is always better care.  This myth enables health care providers to make more money, not have to make tough end-of-life decisions, and appear to be giving the patient what he or she wants.

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In the early 1980’s, shortly after George Harvey became the Chairman and CEO of Pitney Bowes, I asked a more senior colleague why he thought George was the best candidate among those who vied for the CEO position.  He talked about George’s wisdom and track record, but he also said: “Unlike many adults who collect a paycheck, he actually makes tough decisions.”  He went on to explain that many highly-paid, well-credentialed people are afraid to put themselves at risk by making difficult decisions, but that no leader of a major organization could afford to be afraid to take the risk of being wrong or pretend to be taking certain actions.

That comment has not only stuck, but seems more astute than ever.  I have been both more admiring of people who stick their neck out, and more frustrated with those who should, but do not, when tough situations occur.  In the last few years, we have moved into the most difficult economic environment since the 1930’s.  It has effectively “smoked out” whether people want to embrace tough decisions and engage others in constructive conflict, or whether they will develop even more elaborate ways to avoid those decisions.  I have seen more of both kinds of people in the last three years than ever before, especially the non-performers who have learned to survive by “pretending” to perform.

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Catherine Rampell of the New York Times wrote an article that, unfortunately, reports on an all-too-common problem, the increase in the long-term unemployed population, on December 2, in a story entitled “Dwindling Prospects.” I know people who fit her description. In fact, I have spoken to a local support group of individuals who are part of the long-term unemployed population, in one of the wealthiest communities in the world, Darien Connecticut.

I was effectively unemployed once in my life, for about a 4-month period  (January, 1979, through May, 1979) between my second law firm job and my hiring by Pitney Bowes.  I was told in October, 1978, that I would not be offered a partnership, was given a few months to look for a job while on the payroll, and then was put in an “of counsel” status, meaning that I would be hired only for hourly project work. I had a little work, but nowhere near enough to support my family.  It was initially scary, and I felt all the self-doubt that Ms. Rampell described in the people she profiled.  When I became unemployed, despite a Harvard Law degree, I did not know when I would be hired to work again.

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Although the induction of Jerry Rice and Emmitt Smith to the Pro Football Hall of Fame would not seem to be a subject consistent with what I normally discuss in this blog, the success of both athletes illustrates two broader points:

• Traditional measures of ability do not predict success to a sufficient degree to justify how much those who select athletes, executives, managers, or professionals rely on them.
• What can we learn from the success of those who are outliers in terms of the gap between what traditional predictors of success would say about them and what they have accomplished?

In an article in the November 6, 2010, issue of the New York Times.com entitled “Rice and Smith Inductions a Reminder of the Limits of 40 Times,” reporter Toni Monkovic points out that, by traditional measures, neither Rice nor Smith would have been expected to succeed to the degree they did.  Professional scouts look at both height and weight and at the speed football players achieve in the 40-yard dash.  By both measures, neither athlete was remarkable.  Smith, in particular, the running back with the highest number of career rushing yards all time, was both below average in size (below 6 feet tall) and speed.

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On the set of the film From the Rough, which I am producing and which is in production until November 5, I spoke with the film’s costume designer.  She told me that there is a shortage of tailors, shoe repair people, and weavers everywhere she goes. I can believe what she says, because it is consistent with my experience.  When my wife and I lived in New York City between 1981 and 1991, I needed to get a tear in a nice suit repaired.  A Saks Fifth Avenue sales professional referred me to a weaver, an elderly Italian woman, who was the only weaver he could identify.  She had a four-week backlog of work, and had hundreds of suits, trousers, and coats piled in her small retail space.

When I hear or read about the latest unemployment statistics, which, by the way, are significantly understated (the real unemployment rate is probably about 15-16% instead of 9.6%, since someone who is “discouraged” from seeking work is still unemployed, even if he or she is not formally applying for jobs), I get frustrated with the inflexible and short-sighted way in which governments and individuals are addressing the problem.

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Reporter David Segal of The New York Times wrote a piece in the Sunday, September 19, issue entitled Just Manic Enough: Seeking Perfect Entrepreneurs – The New York Times which really resonated with me.

I am producing a feature film, and many have said to me, in one form or another, what one investor said in the article about starting a new company:  “You need to suspend disbelief to start a company, because so many people will tell you that what you’re doing can’t be done, and if it could be done, someone would have done it already.”  Segal describes entrepreneurs and people like me who are engaged in entrepreneur-like activity as having to be “just crazy enough.”

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In the Thursday, September 9, 2010, New York Times, Matt Bai, a political columnist, in an article entitled “In Obama Economic Stance, Risk of Confusion,” points out that President Obama made a significant, and probably mistaken, decision to turn the crafting of the 2009 stimulus legislation over to Congress.  As Bai points out, the legislation could have achieved one or both of two goals: first, to create targeted, short-term economic stimulus; or second, to fund longer-term investments in infrastructure, technology, and human capital that would have provided the foundation for sustainable growth and competitiveness.

As Bai points out, while the legislation had some investments that accomplished each of the two goals, neither potential goal was adequately pursued with the stimulus legislation. Instead, as Bai stated, Congress essentially used the legislation to address the most vocal “demands of disparate constituencies.”  There is a political consequence to this conclusion, which is that the majority of Americans now consider the stimulus legislation to have been a failure. Bai quotes Rahm Emanuel, the White House Chief of Staff, “you should never let a serious crisis go to waste.” The crisis, which precipitated the passage of the legislation created an opportunity for fundamental societal change that was not taken.

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This past week, I was on vacation, first at Martha’s Vineyard and then in Mashpee on Cape Cod.  I have an I-Phone, which means that I have ATT cellular phone service, as was the case with my wife, my sister-in-law and brother-in-law, whom we visited on Martha’s Vineyard, and many of their other visitors.  Additionally, I rented a home that had all cordless phones.  The owners, whom we met Saturday morning, July 10, before leaving had Sprint cellular phones.

The telephone and Internet service were so bad for the eight days we were away that we were effectively cut off from communicating with others except for very brief periods when we could find a signal at a handful of locations.  Moreover, when there were power outages because of weather and horrific heat, we also were unable to use the landline phones in the rented house or the wired Internet service the owners had provided us.

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As stories appear day after day about the dire financial positions of state and local governments, the question that pops up is: where did all our tax money go?  I would suggest three answers:

• Excessive benefits for government employees and their families;
• Excessively high payments to vendors; and
• Excessively high welfare payments.

I would also suggest that states, over time, because of well-intended, but poorly conceived, laws, substituted unproductive clerical and bureaucratic rules-oriented employees for those who did productive work.  For example, governments today very likely have more clerical and administrative employees, but lack skilled professionals of all kinds to manage projects and programs.  In schools, there are many more administrators and service employees relative to teachers than there were a generation ago.

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