Wednesday, February 11, 2009

What should a plan contain?

I was just reading some of the 'new plan' from the US Govt. about how they will get the economy fixed. I have not been formally training in Economics, so to some extent I'm not quite sure I understand their mental model and vocabulary.

But from any sensible perspective, a plan should consist of the following parts:
  1. A statement of the current problem (where are we?)
  2. What are the objectives? (Where do we want to go? and Why?). Objective need to be S.M.A.R.T
  3. Assumptions made in order to determine the problem as well as the objectives
  4. What are the resources available, and How will they be put to use to achieve objectives.
  5. What is likely to go wrong? (Risks!)
  6. Sanity Check -- Is the plan internally consistent? Is the plan likely to work in the external context?

To some extent, the common item that comes to mind for most people when the word 'plan' is used is a 'Gantt Chart' or something similar like a Work Breakdown Structure. This will explain what work will get done and by which resource. Unfortunately, in many cases the problem statement and assumptions matter a lot more. The human brain is wired to look for solutions based on how a problem is framed.

The actions from the US govt. suggest that they see 'lack of consumption' as the problem. But, what if we state the problem as debt driven consumption? Would the current solutions be still valid?

Now, back to 'new plan' by the US govt., as far as I could see .... the problem, the objectives, the assumptions, nor the resources available have NOT been stated clearly. As far as I can tell, there is no validity checks made.

So, here is my attempt at articulating it...

Problem: People are not spending money, causing the economy to shrink (as it is currently measured).

Goal: Expand the economy by getting people to spend money again.

Assumptions:
1. Economy can expand forever -- no questions.
2. Resources available are infinite.
3. Where resources are finite (as evident to a 4 year old), it is possible to increase productivity infinitely, because humans are creative, inventive etc. This will imply resources are infinite.
4. When we do not have resources today, we can borrow from the future or other people. Paying back these people is optional.
5. Energy is cheap, will continue to be cheap forever.
6. People around the world will continue to work for low wages, face hard choices, pollute their local environments and send their savings/manufactured goods to USA forever.
7. Most of the people on the USA will focus their efforts increasingly towards inventing/'designing' new gadgets. People from the rest of the planet (particuarly Asia) will take these designs and convert them into gadgets for consumption/enjoyment of the Americans. This will continue forever, because people around the planet can think of nothing better to do.
8. Climate 2.0 will never be released.
9. People from around the world will continue to give precious resources and energy to the USA in exchange for Hollywood movies.
10. People are happy to be employed. The salary they take home is not as important as a job.

Resources Available: US dollars, good-will, a super-large military, land, buildings, civil servants.

Actions to solve problem: "Spend money". Where money does not exist, borrow it. If borrowing is not possible, print it.

Risks: The money printing press may run out of ink as we add more zeros. Mitigation: Force everyone to use digital currency.

Sanity Check: All assumptions are valid. External environment/Global political and social context will be static.
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So, do I think it will work? .... I'll let you arrive at your own conclusion. But, I'm looking towards the day when hard-currency will be completely banned in favor of digital currencies and transactions to the risk outlined above. There is going to be a lot of work for IT professionals :)

1 comment:

Anonymous said...

"Resource: a super-large military", hahaha. "That's some mighty-fine oil you've got there....."