As a businessperson, I was never obsessed with numbers. Not a good thing. I basically got the hang of income statements, cash flow and the excruciating ibitda (income before interest, taxes, depreciation and amortization). I knew these things were important, but it was a struggle and always kind of boring to me. Again, from a business standpoint, not a good thing, and I developed a great admiration for people who knew how to use these tools to achieve success.
So, to compensate, what I did get good at was testing the assumptions that underpinned the numbers. And, ever since, I have found it useful to look at the underlying assumptions to various statements, big and small. It is a valuable exercise, although it can be quite annoying to people who would just as soon not look at assumptions, especially if these assumptions are likely to turn out to be shaky or false.
Start with the big picture, and then we’ll come to the Virgin Islands, specifically, GERS and pensions. In the United States, especially in election years, two fundamental assumptions are rarely challenged. The first is that, in our messy world, the United States is the “indispensible nation.” What this means is not entirely clear, but we all kind of get the drift, the biggest part of which is that we need to keep spending a fortune on the military.
So let’s take a quick look at this assumption. It means that, without the “indispensible” United States, the following things would have happened. Vietnam would have gone communist, Egypt would have been a corrupt dictatorship, Yugoslavia would have descended into civil war and disintegrated, Rwanda would have experienced genocide, the Israel-Palestine “peace process” would have failed, Cuba would still be under commie rule, North Korea would have nuclear weapons, the war on drugs would not have been a big success, Post-Soviet Russia would have become a kleptocracy, Iraq would not be a flowering democracy, and 14th century Ayatollahs would be running the show in Iran.
At least someone should have had the temerity to ask: indispensible for what?
Then there is the related assumption: “We’re number one” and its unforgettable anthem, “USA! USA!” To say, let’s test this assumption, that is, “what does it mean?” would be to bring down the wrath of many American patriots. It would mean being a pessimist, naysayer and troublemaker, probably part of the “blame America first” crowd.
But, what exactly are we No. 1 at? Two things come to mind. We still have the biggest economy measured by GDP, but that is temporary since China will pass us in the next few years.
The GDP part is not that big a deal, given the fact that China’s population is four times as large as ours. But China just inaugurated its latest high-speed rail line, 1,200 miles in 8 hours. Fortunately, by assuming that we are #1, we don’t need any of that stuff, what with our great highways and shiny efficient airports. Who needs trains? Or public infrastructure in general.
So where else do we rank No. 1? Answer: we spend more on the military than the rest of the world combined. The usually unstated assumption is that this is the natural state of things, given our indispensability in the world, the need to “support the troops,” and, always unstated, the entrenched power of the military/congressional/industrial complex.
Few people challenge the indispensability assumption, the massive military budget assumptions or the unhealthy arrogance associated with each. And those who do are consigned to the margins, not serious people since they are not part of the Washington, mass media consensus.
Each of these assumptions should have been challenged when they were constantly repeated by the presidential candidates. They were not, and one result is that, while slashing the federal budget is now a near obsession, there is little or no discussion of the trillion dollars a year that constitutes the military’s entitlement spending.
Rather than falsely assuming that we are, by divine right, No. 1, maybe we should ask, what do we want to be No. 1 in the world in? Where would world leadership best reflect our core values? Testing some of these implicit assumptions would be a good place to start.
Which brings us, in not exactly a straight line, to the Virgin Islands and GERS. It would be a mistake to say that basic assumptions were on display at the recent GERS board meeting because they were not. Instead, important ones were implicit or hidden. As a result, and unfortunately, there was no real opportunity to challenge them. To his great credit, Judge Ross gave it a real try.
Here are some of the important, but implicit or hidden, assumptions that could be gleaned from the Source article on the meeting.
Assumption number one: If you zero in and spend time talking about a little good thing, in this case occupancy of the hotel on St. Croix, there will be less time to spend on the big bad thing, that is, we, like many pension funds, are going broke. And maybe the bad thing will go away. It won’t.
Assumption number two: “This is how we do things here,” in this case, how we prepare financial reports. Subtext: Do not ask a lot of questions, and don’t expect us to change how we do things, even if some of the things we do don’t work. We are not interested in change. The landscape is littered with failed organizations that operated on the basis of this assumption.
Assumption number three: Ambiguity and opacity are good things. Subtext: The public is too dumb to understand this stuff anyway, and board members should rely on the staff’s good judgment and not ask a lot of questions. There is a simple rule here: clarity is good, and ambiguity is bad. Once again, Judge Ross took the right position. It is unfortunate that he stood alone.
Assumption number four: Everyone else is doing it. This assumption may turn out to be a tragic one for pension funds in lots of places. The fact that it may be true for others will not reduce the pain and suffering of Virgin Islanders.
Assumption number five: Tomorrow will never arrive, or, if it does, I won’t be here. At the time of the financial collapse in 2008, one of the reckless bankers said that you have to keep dancing until the music stops. If there exists a more irresponsible approach to problems than that one, it would be hard to find it. Clocks are ticking.
Assumption number six: You can run a successful organization of this kind with Board members who do not show up for meetings or who may not understand the documents that they are reviewing because the documents are not comprehensible. Subtext: this is a peculiarly Virgin Islands problem. It is hard to find another jurisdiction where no-shows at board meetings are considered normal and acceptable.
Making these assumptions explicit changes the nature of the discussion. Or, at least, it should. It leads to a number of conclusions. First, to name and accurately define the problem that we face and to understand the choices that we have in addressing this problem. Feel-good talk about the hotel won’t cut it. The fact that these are hard choices makes defining them all the more important.
Next, clarify these choices and communicate them to GERS stakeholders. Third, as Board members, hold one another accountable for preparing for and attending meetings and performing the Board’s oversight function.
Finally, focus on executing reality-based change that will secure the retirements of Virgin Islanders. If, at this point, anyone is still complacent and unfocussed, they need only look at what is occurring in Puerto Rico. “This is how we do things here” is not going to work in the future. There has to be an openness to change.
