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The Search for Budget Wisdom

January 2009

Did you see Dick Cheney in his final interview as Vice President with Jim Lehrer? Lehrer was asking him about whether Cheney felt that the presidency should act as a steward over the nation's economy. Somehow the topic of foresight was raised and Cheney defensively snapped, "You're an expert. Did you see any of this coming?"

Man, it sucks when you are at the helm and an enormous wave tries to capsize your boat.

Basically, Lehrer was in essence asking why the smartest people we could come up with (our president and staff) lacked wisdom when it came to the economy.

But what is wisdom anyway?

Check out this opening paragraph from an article in the January 19, 2009 edition of Newsweek called "Don't Forget the Owls" by Jerry Alder.

The quest for wisdom is as old as Socrates, but it's also an up-to-the-minute economic indicator. A contrarian one; when things are going well, you don't have to go searching for wisdom. It streams nonstop over CNBC, its avatars sit smugly atop the Forbes list of billionaires and each day it proves again the eternal truths of the free market. Then in due course things go to hell; the sages and gurus humbly confess their ignorance to Congress or a grand jury, and the search for new paradigms begins. Tellingly, scholars date the modern scientific study of wisdom to the work of the American psychologist Vivian Clayton in the malaise-ridden 1970's. Clayton devised the first empirical tests for wisdom, which she defined as the ability to acquire knowledge and analyze it both logically and emotionally—picking up on the work begun by Socrates, around the time the Peloponnesian War began to turn into what we would call a ‘quagmire."

Or the dictionary's definition of wisdom:

1. The ability to discern or judge what is true, right, or lasting; insight.
2. Common sense; good judgment: "It is a characteristic of wisdom not to do desperate things" (Henry David Thoreau).

Trying to hit a moving target

Some folks have an unrealistic expectation regarding budgets—they actually expect budgets to be accurate and for folks to stick with them no matter what.

But, if you are fully aware of what is going on in your surroundings, you will notice that the budget isn't ever exactly right. Budgets are like hitting a moving target—and in some years, the target moves more than others.

For instance, if a significant part of your operations rely on the price of gasoline—2008 was quite a rough year. The price of gasoline moved from around $1.50 to $3.70 and then back down to $1.60. Whoa—that is quite a ride. Cabbies were driven crazy by the rising prices. They put in double the hours to earn less than they did the year before because their fares were fixed by regulators and did not move with the price of gas.

Or consider Round Rock, Texas—the home of Dell Computer. Round Rock (yes, they have a large round rock in the middle of their creek!) who experienced astronomical growth in the late 90's and early 00's because of a housing boom. In 2009, the boom is done and many homes are abandoned. The city leadership is rapidly cutting back on services and staff.

Who could have seen any of this coming? Dick Cheney missed it. Yes, a few economists warned us—but most of us expect the same plodding sameness year after year… or at least expect most of our worlds to stay stable. In my adult years, however, the economy has not exactly been stable or predictable.

Back to our definition of wisdom

Clayton defined wisdom as the ability to acquire knowledge and analyze it both logically and emotionally. So first you have to fill yourself with information and then synthesize it into something brilliant.

John Lennon was once praised for the Beatles innovative music and he shrugged the complement off saying that he was simply creating what he called another version of the same chair. He and his band mates gorged themselves on a variety of musical genres and lived, ate, and breathed music for years to develop the Beatle's sound.

Albert Einstein did the same. He immersed himself in the theories of other scientists, spent countless hours discussing science with his colleagues, and eventually gave birth to his theory of relativity.

So gorge yourself on relevant information. Develop a broad, diverse understanding of the world around you. Yes, it is very easy to go day-to-day only involved in your little piece of the universe—but in order to have a good projection, you need to feed yourself with as much information as possible so you have fodder for your brilliant theory!

Now none of us is going to spend every waking hour studying the economy or our industry—but every little bit we can dedicate to it will pay off. I suggest:

• Getting your news from a variety of sources—spread your attention around between print, television, blogs, radio and try to occasionally take in an alternative viewpoint on a situation by watching Fox News one night and NSNBC the next. I enjoy watching BBC News occasionally to see how those outside the USA view things. I am also enjoying a new magazine called "Conde Nast Portfolio." It talks about broad economic trends in a reader friendly way.
• Read industry rags and attend industry conferences—keep up with the trends in your industry by reading something like Foodservice Industry News, Computerworld Magazine, or Progressive Engineer.
• Read an industry rag in another industry entirely. The more obscure and unlike what you do, the better. Because you will always see basic similarities in approaches and concerns that may help you see the same old problem you are facing in a new way. Again, we are all just working on similar versions of the chair and all seem to solve problems using similar methodologies. Maybe an article in an engineering journal may cause that epiphany you have been looking for.
• Find out who your heroes turn to for guidance. Who do you admire? Who really seems to know there stuff? How did they get so smart? Probably from hanging out with other smart people, reading something brilliant, or from hard-knock experience. Ask them who they go to for information and mimic their steps.
• Discuss your particular budget dilemma with someone in an entirely different industry or with an entirely different professional background to get their take on it.

Now that you have stuffed yourself with information—give your brain a chance to present it to you

One of Einstein's colleagues, Banesh Hoffman, described the day that Einstein created his famous theory this way "Einstein said his basic discovery came on waking up one morning, when he suddenly saw the idea. This idea had been going around and around at the back of his mind for years, and suddenly it wanted to thrust itself forward into his conscious mind. We know brilliant ideas come at crazy times. You may be just walking, or lost in a forest, and suddenly the idea comes—almost as if it's coming from somewhere."

In other words, on important decisions, give your brain time to come up with a wise and brilliant answer!

Sometimes it is about asking the right question

I also find that if I have a question that needs an answer, and if I am patient, the answer will find me. The answer finds the seeker.

For instance, one of my favorite professional documents recently incorporated the term "intellectual honesty" in one of its new chapters. You can't look that up in the dictionary. So I asked, out loud, "What is intellectual honesty?" And then that evening, the answer started coming my way. John Stewart used the term on the Daily Show, I saw it a few days later in the paper, and discussed it during a class I held and came through discussion to an even deeper understanding. So posing the right question and waiting patiently works, too.

The Bible says "If you want to know what God wants you to do, ask Him, and He will gladly tell you, for He is always ready to give a bountiful supply of wisdom to all who ask Him; He will not resent it." -James 1:5, TLB

Wisdom is not passive

A good budget relies on the wisdom and foresight of its creators. And wisdom isn't something you are born with—it is something you have to work towards. But the work isn't that hard and can be sort of fun—again, if you are willing to be patient and let things work themselves out.

If a particular issue is really bugging you about your budget:

• Start by posing a meaningful question. Where are sales of widget X going to be next year? What does IT need to do to keep our data secure? Are we going to fill those positions?
• Then gather as much information as possible from a variety of sources
• Give your brain and God a little time to work things out

And work it out it will! Maybe not on your timeline, but it will work out. Wisdom is not microwaveable.