http://www.worldnetdaily.com/bluesky_hyatt/19991007_xcmhy_for_whom_b.shtml

For whom the bell curve tolls

) 1999 Michael S. Hyatt

A year ago I co-authored an article with my associate, Bill Dunn, which discussed Bell Curve theory and Y2K. We suggested that the completion of Millennium Bug repair projects should follow a bell curve distribution pattern. Similar to a roomful of students taking an exam, there should be a trickle of early-finishing high achievers, followed by a growing wave which crests at the top of the bell, and finally tapering off until only the under-achieving stragglers remain.

If most businesses and government agencies could complete their Y2K projects before the end of 1999, surely our economy and society would not be devastated by the handful of straggling, under-achieving organizations. The key would be whether the bell curve crested before the Year 2000 or after.

In October 1998, with 15 months to go until the new century would arrive, we expressed concern at the absence of any major organizations which had reached Y2K compliance -- despite many firms claiming that they had begun working in earnest as early as 1995 or 1996. If the trickle of early-finishing high achievers had yet to begin, we speculated that the bell curve would not crest in mid-1999 -- as public relations spokespersons kept assuring us -- but instead would crest after the immovable deadline of Dec. 31, 1999, with disastrous results.

In other words, a year ago we were sure that time was going to run out. Unfortunately, nothing during the last twelve months has convinced us to change our view.

In fact, the situation has gotten worse. The results of a new survey were released on Sept. 30, 1999. This survey, called the Y2K Experts Poll, was conducted by CIO magazine, the Information Systems Audit and Control Association (ISACA), and Dr. Ed Yardeni's Y2K Center. The poll results are alarming:

 Fully 81 percent of large, global companies are still not Y2K ready. The trickle of high achievers has finally begun, but the cresting wave is nowhere in sight.

 Forty-three percent have pushed their project completion dates from the third quarter of 1999 to the fourth quarter of 1999 (and, I wonder, when Dec. 31 comes and goes, will they move their completion dates to the fifth quarter of 1999, and then the sixth quarter of 1999?).

 Twelve percent of large, global corporations admitted that they now expect to finish their Year 2000 repair projects in the Year 2000 or beyond.

 Twenty-three percent are still waiting for Y2K compliant mission-critical software from third-party suppliers. (What do they think, that software is like a toaster: you take it out of the box, plug it in, and it works perfectly?)

 Despite all this, 91 percent of poll respondents expressed optimism about the Y2K issue. (Reminds me of the optimism expressed by George McGovern and Michael Dukakis just before their respective election days.)

According to Dr. Yardeni, the chief economist at Deutsche Bank Securities and a noted Y2K expert, "I am puzzled that information technology professionals are so optimistic about the impact of Y2K on their organizations. Many of them are not ready yet. They are clearly expecting a victorious outcome, which may be raising complacency levels so high that people will not prepare for any possible malfunctions and failures."

Abbie Lundberg, the editor-in-chief of CIO magazine, said that she is "alarmed at the number of companies that do not expect to complete their Y2K work before the end of the year. Of those that do expect to finish in time, entirely too many expect to do so at the eleventh hour. Given the business world's abysmal track record for technology project delivery, this does not bode well."

With less than 90 days remaining until Jan. 1, those people who understand that four out of five organizations are not yet done with their Y2K projects, but still insist that that most projects will be finished in time, are asking us to believe the bell curve distribution will look something like the Washington Monument. No trickle, no slow acceleration to a crest, no gradual tapering off. In other words, no bell-shaped curve.

Instead, we are told to expect a sudden spike. But for this spike to happen, the vast majority of organizations -- regardless of size, type, or when they started working on the problem -- must suddenly finish their Y2K repair projects within weeks of each other.

I submit that this notion is untenable, unrealistic, and statistically impossible.

Bell Curve theory tells us that the distribution of completion dates should look like, well, like a bell -- certainly not a sudden spike.

If, after many years of working on Y2K repairs, only 19 percent of large, global companies have completed the job with less than 90 days to go, I think it's very safe to say the bell curve crest will not occur during 1999.

A year ago we wrote, "So what can we conclude? If no major outfit has yet been able to complete (the job), if the trickle of high-achievers has not yet begun, it is obvious that the bell curve will not crest in mid-1999. It will instead crest well after January 2000 -- which means our economy and our prosperous way of life are in for some serious, possibly life-threatening, disruptions."

Twelve months ago, I expected that Y2K project deadlines would be routinely missed, especially given the time-consuming and tedious nature of software repair work. This has indeed come to pass.

However, 12 months ago, I did not expect corporate and government leaders to present such a concerted and relentless campaign of public relations optimism. This happy-faced spin campaign is, as Dr. Yardeni noted, "raising complacency levels so high that people will not prepare for any possible malfunctions and failures."

It's not too late to take some action to prepare for possible Y2K-related disruptions. Optimistic PR statements will count for nothing if the essential products and services of our modern society are in chaos in a few short months.

Let me cite one final item from the new Y2K Experts Poll: although 91 percent of respondents expressed optimism about the Y2K issue, 56 percent of these corporate leaders are personally stockpiling food. As I've said before, forget what they are saying. Watch what they are doing.

-- Uncle Bob (UNCLB0B@Y2KOK.ORG), October 07, 1999

Answers

If people are told to buy months worth of preps and nothing happens then many would be angry and complain by voting in new pols. If people are told to prepare for 3 to 5 days ( do nothing ) and TSHTF then many people will be dead and cannot complain. Listen to complaints and maybe lose office or raise taxes to bury people and spin the outcome. Easy decision for most pols. Whats more important, a politicians future employment or the lives of the people. Depends on your viewpoint.

-- Mr. Pinochle (pinochledd@aol.com), October 07, 1999.

Uncle Bob:

Extraordinarily good post. Really made me sit up and take notice.

Having said that, I have a point for you: the normal distribution can take many forms - flattened, pretty pointy, etc. This may greatly affect what transpires

-- Peter Errington (petere@ricochet.net), October 07, 1999.

Michael Hyatt is called a weasel by the airheads over at Debunking Y2K. Yet not one can explain why his simple logic expressed here is invalid.

-- a (a@a.a), October 07, 1999.

Explaining why Hyatt's logic is invalid isn't hard. Explaining to a's satisfaction is impossible by definition.

First, assume that bell curve model holds. In that case, as Hyatt writes, we should be seeing a wave of compliance. Problem is, how is such compliance to be determined? We indeed have a wave of announcements, but we reject those as self-reported and unverifiable. We recognize that adequate verification of millions of remediation efforts is a physical impossibility. We have even rejected some verifications as insufficient. Wall street says their interoperability testing was extensive and successful? Can't trust them. FDIC says the banks are OK? Can't trust them. NERC says power is fine? Can't trust them. When you come right down to it, we reject ON PRINCIPLE any indications of successful remediation or testing. And if you reject them all, then of course you see no wave.

But the bell curve may not be the right model at all. Hyatt's model has an underlying (and invalid) binary assumption -- that an organization has either reached compliance (however mythical) or it has not. Consider: If (say) 50% of organizations were fully compliant and 50% had done nothing, we'd be in the middle of that bell curve. However, if 99% of organizations had reduced their y2k exposure down to the irreducible minimum (but not 'fully' compliant, which may be impossible), then NONE of that curve would have passed the finish line by now. So the first case would look much better by the Hyatt model yet be a disaster, while the second would look terrible according to Hyatt and yet evaluate to business as usual, not even a bump.

Perhaps an educational model would be more useful. In that model you are trying to *minimize* the number of pupils who fail, rather than trying to *maximize* the number who get straight A averages while letting the large majority fail and drop out. Hyatt's model lumps the B students in with the dropouts -- neither is perfect, and our only categories are perfect and failure, so they both fail!

-- Flint (flintc@mindspring.com), October 07, 1999.

Flint, the world as a whole is nowhere near ready. Most small to medium businesses will fix on failure. The US government is hopelessly unremediated. NERC, FAA and DoD assurances are based on wishful thinking and "drills". And banking, while definitely in the best shape of the bunch, is still very questionable. I am not using "spin" when I say the remediation as a whole has failed. I am being realistic and I am being honest. You should try it sometime.

Oh, and let's not forget the stock market crash probably weeks away. Face it, Flint. Your nemesis was right.

-- a (a@a.a), October 07, 1999.

Since Hyatt was basing the Bell Curve results to date on the basis of self-reported respondents to a survey, Flint's main argument is totally irrelevant. It doesn't matter what I think of NERC's phony drill, what do the companies themselves think of their progress.

Oh, I know the response, "companies don't want to announce their readiness for fear of liability." Well, besides that answer being total horseshit, this was a survey where companies were not identified.

No, it's just a few weeks away and by far most big and small companies are not ready. Hyatt is right. Watch what they do, not what they say.

-- Dog Gone (layinglow@rollover.now), October 07, 1999.

Face it, 'a', you are chanting catechisms again. But assuming some thought was put into them:

[Most small to medium businesses will fix on failure.]

This is probably true. You somehow always neglect to mention that most small businesses (at least) *can* fix on failure. They tend to be running packaged software on PCs. They can purchase upgrades (many are free) and install them in a day. You neglect to mention the estimate that the average small business can remediate for under $1000 in under 3 hours. I will admit this doesn't apply to the all- too-many medium size enterprises that are crossing their fingers. But you should be honest enough to recognize the reality the small business also.

[The US government is hopelessly unremediated. NERC, FAA and DoD assurances are based on wishful thinking and "drills".]

Since I tend to agree with this assessment, I'll be devils advocate here. Certainly we have plenty of publicized assurances that the US government is in great shape [grin]. Even Horn's grades have many agencies passing (barely, in some cases). Also, we can probably survive fairly well even if only a few economically important government activities function. So really your (and my) assessment of government's remediation status is based more on what we consider a really lousy track record of doing anything right, than on any good hard (or even soft) data.

And NERC is a case where we'll have to agree to disagree. I am persuaded that the grid is in good shape. Come January, we'll see just how good that turns out to be.

[And banking, while definitely in the best shape of the bunch, is still very questionable.]

I'd like to ask (seriously, not rhetorically) what part of the banking system you find most questionable. I'd nominate some 3rd- world banks, and I'd like to see more test results from international settlements. But on the whole, I find it hard to see what more we could ask from banking. There are times when I suspect that if I wrote that the sun rises in the East, you'd find it "questionable" (joke).

[I am not using "spin" when I say the remediation as a whole has failed. I am being realistic and I am being honest. You should try it sometime.]

Just because I disagree with you, doesn't necessarily make me dishonest. That's a cheap shot. I can understand why you take the position you do (I think), and I consider you honest but not realistic. To me, there's a long distance between full remediation and failed remediation. I believe (honestly) that most will come close enough to struggle by, and many are far closer than that. But some percentage will also fail, and I expect that percentage to be above the usual business failure normal range. I also expect that other existing (and new) businesses will step in to fill the gaps fairly quickly. It's how competition works. And I would NOT consider it honest to pick a list of failed businesses next year, point to it and say SEE, I was right! Especially if we suffer no more than a 1973- type recession. [Oh, and let's not forget the stock market crash probably weeks away]

If that happens, do you plan to argue that y2k caused it? Sysman would jump all over you for claiming it was a y1999 problem after all!

-- Flint (flintc@mindspring.com), October 07, 1999.

Dog Gone:

You say, "by far most big and small companies are not ready." This is a flat assertion of belief. What I was trying to say was that Hyatt's model is not properly informative. We're trying to find out where companies really stand, based on known unreliable data both ways.

You continue to suffer binary thinking -- that "ready" is a yes/no duality. It's not. It's a spectrum. When you study for a test, at what point are you "ready" for it? Well, the more studying you do, the more ready you are. Surely you can picture the normal situation -- that companies' profitability is impacted to *some* degree by y2k problems. And these degrees will be all over the map. If profits are cut in half due to such problems, is that a "failure"? If a company suffers a loss for a quarter, is that "failure"? Or does the company need to go bankrupt to fail?

And if company A suffers severe functional problems and the customers switch to competitor B which does not, and company A goes belly up but no customers are particularly inconvenienced, what's the economic impact?

We need to look at the whole messy reality of this, rather than chanting "remediation has failed, we're all toast" over and over ad nauseum.

-- Flint (flintc@mindspring.com), October 07, 1999.

[And NERC is a case where we'll have to agree to disagree. I am persuaded that the grid is in good shape. Come January, we'll see just how good that turns out to be. ]

I think the grid will hold also, barring any external problems like sabotage, or everything going to hell all at once rather than a slow unwinding. However, the chance is extremely good that power will be at a premium and outages frequent. Note that this is still far from a rosy picture, as the pollies would accuse. They rejoice when I admit that an Infomagic devolutionary spiral will probably not occur and then claim I said "things weren't gonna be that bad". There are more than enough variables other than power to sink us. For instance, I still think many large cities will be nearly unlivable, and I see many casualties that are directly and indirectly related to y2k, unlike you who I believe foresaw 500. I'm talking about using the same standards as other disaster stats. For instance Hugo killed only 1 person in my area directly, but another 30 died of chainsaw accidents, falling off ladders, traffic accidents, etc.

[I'd like to ask (seriously, not rhetorically) what part of the banking system you find most questionable.]

3rd world banks, international settlements, and bank runs combined with the financial meltdown I see as inevitable are plenty enough to worry about even assuming that all US banks are fixed and tested. I think it suffices to leave it at that.

[Just because I disagree with you, doesn't necessarily make me dishonest. ]

Intellectually dishonest.

[Especially if we suffer no more than a 1973- type recession. ]

I will be very grateful for a repeat of '73 which I give a 28% chance. 50% depression and 20% Milne. 1% for BITR and Infomagic.

[ If market crashes, do you plan to argue that y2k caused it? ]

Absolutely. Hell, I was counting on magicians like Greenspan keeping it going until well past my retirement had y2k not cropped up. It was due to happen, but I don't necessarily think it would have happened. But now y2k promises to make it worse when it does (and it will) happen.

-- a (a@a.a), October 07, 1999.

'a':

There's a clear distinction between honest and consistent. I don't have the ability to grasp and integrate the whole world, especially based on highly equivocal and incomplete information. So I'm struggling with this. I don't consider that dishonest, but it guarantees inconsistency. On the contrary, I think those who have inflexible opinions are kidding themselves. Not dishonest, but deluded nonetheless.

I predict you will be very pleasantly surprised. But I'm not willing to bet everything I have on that, either.

-- Flint (flintc@mindspring.com), October 07, 1999.

Fair enough Flint. Although I consider myself a "realistic pessimist", I've still got a little optimism left. Blame it on Diane :)

-- a (a@a.a), October 07, 1999.

Although the Bell Curve is an attractive metaphor, I'm not sure if it's appropriate here. A better metaphor might be the behavior of people who file tax returns before the April 15th deadline, or perhaps the behavior of students who have to turn in a term paper by some arbitrary deadline.

Unless there is some benefit associated with "delivering" early, why would anyone bother? In the case of tax returns, there's an obvious incentive to file your return on January 1st if you are owed a refund. But if, like most of us, you owe the government more money, you're likely to procrastinate right up to the last minute ... and then perhaps ask for an extension. The final, FINAL deadline for filing 1998 tax returns, with all extensions, is October 15, 1999.

In the case of Y2K, there is no benefit to announcing early completion in most cases, because the corporate attorneys won't let you say anything definitive in the SEC 10-Q statements. Thus, even if a company has finished (for the sake of argument) 99.7% of its remediation, it has the luxury of dragging out the last part until the very end.

Having said that, I should emphasize that I still feel fairly pessimistic about the overall state of readiness and Y2K compliance. But I'm reluctant to base that pessimism on the assumption that companies will follow a bell-curve distribution in their efforts...

Ed

-- Ed Yourdon (HumptyDumptyY2K@yourdon.com), October 07, 1999.