Author’s Notes On Plumbing

Author’s Notes On Plumbing

In the three recent blogs (for use on three sleepless nights): A Brief History of Plumbing; A Tale of Three Cities; and John’s Folly, I hope I haven’t insulted any real cities.  I intended them to all be fictitious.  I want to point out that this is not a private enterprise is good and public agencies are incompetent story.  From my perspective, the worst of the stories are in Paris with Bill the businessman.  These are intended to highlight how something as simple as sink repairs can have such dramatically different outcomes depending on how the organization imposes constraints or allows creativity.  How enabling risk taking when the consequences and the benefits are bundled together can foster a better outcome for everyone.  And just how fragile excellence can be and how many kinds of greed and arrogance can threaten it as in the case of Ernie’s success leading some to suggest that something must be wrong.

I will note that I started writing this after a discussion with a presidential candidate (not the US).  He asked me one evening how I thought he should approach reforming healthcare in his country if he was elected.  Clearly I recognized his judgment was impaired if he would even ask me and so I declined to answer him that night but the question kept hounding me. 

I might also note that when I started writing this I expected my answer to be a Managed Government plan.  Even though I had professionally grown up in a Fee-For-Service approach I believed that if healthcare is to be treated as a citizen’s right then a Fee-For-Service model is not tenable.  It was very good model if healthcare is considered a privilege but if it is considered a right that model produced perverse incentives.  It was much to my surprise to find that as I wrote this I came to the conclusion that the Balanced Risk Benefit model made more sense.  The last blog in this series was my effort to anticipate the perversions that a Balanced Risk Benefit model might spawn and they were obvious.  The good news is that the mechanism to prevent them was not only obvious but was part of the same tools that a contractor would want to allow them to execute efficiently.

John’s Folly

John’s Folly

The only thing that never changes is change.  So it is with plumbing and sink repair.  For those not familiar with plumbing history in days past there had been vast differences in the approach to keeping the sinks of the city flowing well.  In Paris, this had been approached as a Fee-For-Service program and Bill the businessman had embraced this approach and taken it to new highs.  In London they approached it as a Government Managed Sink Agency under the guidance of Mike the manager.  In Madrid they approached the problem as a Bundled Risk Benefit program and the work was contracted to Ernie the entrepreneur. 

There came from Toronto, John, a man whose family had a long history in Paris who returned to serve as the Mayor of Paris.  He had a sincere desire to improve the lot of the citizens of Paris.  He knew that for Paris to become a strong and vibrant community it had to have sinks that flowed well.  Being a thoughtful man he sought guidance on how the sink problem might be reformed.  Needless to say there was lots of guidance offered.  The good news was that there were those who made rational arguments for every possible approach. 

The old guard in Paris suggested that their approach which harnessed the power of the free market was the way a free people should get their services.  And since the people of Paris longed to be the free and independent people they knew themselves to be this was the right approach. 

The approach taken in London was that this was something of such import that it needed to have the stable hand of bureaucracy at the helm and could not be subject to the vagaries and shifting tides of free market.  To create a fair and equitable society this clearly should be under the purview of the government.

The approach taken in Madrid was that the risks and benefits of how plumbing care was delivered should be coupled.  This coupling encouraged and rewarded the creative energy of the private sector.

So it seemed there were proponents of every approach.  Coming from a more pragmatic background, John asked the following two questions:

• How many days a year did the average citizen have a clogged sink? 
• What was the percent of GDP spent on well flowing sinks?

In London they had fairly good data.  The data on days with a clogged sink were somewhat out of date because the agency charged with maintaining the data had been short staffed for a few years due to budget constraints (they have a balanced budget law in London you know).  The cost data were for the program, excluding any cost for the program office space or electricity since those were embedded in the general operational expenses for the city government and could not be extracted meaningfully.  For the last year the data were available (three years ago), they estimated the average citizen had 5 days per year with a clogged sink and approximately of 12% of their GDP was spent on their Managed Sink program.

In Madrid they had 3.1 days per year with a clogged sink and 9.3% of their GDP was spent on sink repairs.  These data on days with a clogged sink were as of yesterday since Ernie had real-time data so he could manage the process.  The costs were the complete costs and were known exactly because they were specified in the contract with Ernie.

In Paris no one had any good data but the estimates were that the average days with a clogged sink was around 3 days per year.  They had records of the total reimbursements.  Similar to London the cost of the governmental aspect of the program (processing claims and payments) were less easily extracted but could be estimated.  The best estimate was that around 18% of the GDP was spent on sinks.

John’s deliberations were brief.  The best performance was clearly that of Madrid and their data were the most reliable.  His decision was made.  Under his tenure they would reform clogged sinks and move to a Bundled Risk Benefit plan.

I will spare the reader the resistance that John encountered.  Arguments were that Paris didn’t need big government, that the individual freedom to choose a provider of plumbing service should not be taken away, and that reforms should be small and incremental to preserve the great things about the current system.  For example, in Paris people enjoyed more sink repairs than in any other city and this attempt to ration service would likely mean the formation of Clog Committees who would decide whose sink was worth being unclogged and whose was not.  Bill the business man was more circumspect in his comments.  He voiced unequivocal support for the spirit and intent of the reforms but that change needed to be undertaken with an appropriate degree of caution (as opposed to some inappropriate degree of caution we assume).

The resistance notwithstanding, John managed to implement his new program.  The city would conduct a competitive bid.  Under this bid the potential vendor would assume the responsibility for all of the sinks in the city and would propose a fixed cost per year for those services.  There were two bidders for the contract.  One was Ernie the entrepreneur and the other was Bill.  Ernie offered to perform the service as he had in Madrid for 9.3% of the GDP.  Bill offered to service the contract for 8.9%.  Bill was awarded the contract.

Alas, John was to be disappointed.  The city was able to reduce its cost of sink repairs to exactly the level of 8.9% since the costs were established ahead of time.   However there were complaints that frequently citizens were told that if their sinks were draining at all (albeit slower than in the past) that they did not qualify for repairs.  There were complaints that Bill had hired a number of Plumber Assistants who were not formally trained as plumbers but who he felt could do some tasks as well or perhaps even better than licensed plumbers.  There were complaints that if a sink became clogged after 11:00 AM on a Friday it would not be repaired until Monday (or as soon thereafter as they could get to it).

John asked Bill for the actual data on these complaints.  Bill initially indicated those data were not available.  When pressed he suggested that if John wanted additional services such as quality reporting he would be glad to present John with a contract amendment and cost for that service.

John shifted tactics and confronted Bill with instances of poor performance.  Bill’s legal team asked John where in the contract it indicated that sinks that were still draining were Bill’s problem.  Bill’s legal team asked where it stipulated that the work could only be done by licensed plumbers.  Bill’s legal team asked where the contract specified how long a sink could be allowed to be clogged before it was repaired.  Much to his chagrin, John acknowledged those items were not specified. 

Bill went on to say that John was being inappropriate.  John had wanted to reduce to costs from 18% of GDP to 8.9%.  Did he really expect that such a level of cost reduction would not have to be accompanied with some change in the actual service?  Get real.

John contacted his friend Mayor Mayer from Madrid and asked him how they addressed these problems.  Being a friend, Mayer told him the truth.  They hadn’t anticipated these problems either but that when they were first setting up the program, Ernie had come to them and suggested that it would be to everyone’s benefit to agree on what should be expected.  Ernie himself suggested that if the rate of clogged sinks was over a given level (they settled on 4 per citizen per year) that a penalty would be imposed that reduced payments to him.  He went on to propose that if the level persisted above that rate that his contract could be terminated.

At first John didn’t understand how that would help.  Mayer pointed out that if Ernie became aware that a citizen had a sink that was flowing slower than normal, Ernie would fix it so it never counted as a clog.  That Ernie did use some Plumbers Assistants but judiciously because if their performance was insufficient the penalty was greater than the cost savings over using licensed plumbers.  Ernie also provided repairs 24 hours a day so a clogged sink didn’t add any more than necessary to his performance metric.

John had become somewhat of a cynic and asked how Mayer would know if Ernie was performing up to standard.  Well that too was part of the service Ernie provided and was the lynch pin in the whole plan.  Ernie used an information system that captured every sink care event and made those data accessible to the city.  Ernie’s perspective was that his job was to provide excellent sink care that accountability was essential and the program could only be sustainable if there were data to objectively document the benefits.

John could see where they had failed.  The Bundled Risk Benefit model had to have a system of data for accountability and a well delineated level of performance that was meaningful.  They had adopted the model without these safeguards and now things were worse than ever.  Not because they model was flawed but because they didn’t have the required safeguards.  It seemed possible that Ernie had a more accurate moral compass than Bill but the real success for Madrid was based on verifiable data.  Trust but verify, just like they had with nuclear weapons.

Needless to say when John proposed such ideas to Bill the response was that such expectations were out of scope for the existing contract but in an effort to be a responsive contractor Bill would be glad to amend the contract to include them along with a cost adjustment to around 19% of GDP.  Otherwise when the current contract expired in six years that John could require that in his new competitive bid at that time.

Long before the expiration of that contract, the city of Paris began to see migration away from Paris.  It was said that people were voting with their feet.  As the people moved, businesses left with them.  Some clearly went to Madrid but some even went to London finding the bureaucracy and high taxes preferable to the dismal quality of sink care in Paris. By the time John came up for re-election all of the positive things he had done for the city were overwhelmed by the negative of John’s Folly as it was called.  His beloved Paris became a sad remnant of its glory days, unable to compete in a new global economy.

John’s Folly.  John’s Folly.  The phrase rang in his ears as he opened his eyes.  Much to his relief John realized it had just been a dream.  No not a dream, a nightmare.  He still had a chance.  He was to take office today.  He hadn’t yet fallen into the trap.  He could adopt the Bundled Risk Benefit plan but with the safeguards in place.  He need never hear that phrase.  It was a glorious morning.

A Tale of Three Cities

A Tale of Three Cities

It was the first of times and it was the last of times when the Council of Three Cities was held wherein the city fathers from Paris, London, and Madrid came together to address common problems.  It will come as a surprise to no one in our day and time that their most urgent issue was sinks.  All three cities had them and in all three cities they occasionally became clogged and needed fixing.  After a long and passionate discussion, they came to the conclusion that having a sink that flowed well was a citizen’s right.   The Council of Three Cities issued a proclamation to this effect and commissioned a study to understand the true scope of the problem.

I will spare the reader the details of that study (it was several thousand pages long and it is not clear that anyone ever actually read it although staffers produced an executive summary more appropriate for the city father’s use).  This summary disclosed that the average citizen needed two sink repairs per year and that they spent, on average, $100 per year for repairs.  We now know that there was some fine print in the details of that study.  Specifically, the data were from several years back and to ensure the purity of the report no effort was made to adjust for inflation.  There were a few petty and picky souls that questioned the validity of the data on this basis.  However, it was rightly pointed out that the data must be accurate because this had been a government study after all.

Now that they understood the scope of the problem, what should be done?  Clearly the first role of government in any problem is to create a governmental program.  Without that nothing can be done.  Once that is done then we sometimes fund the program depending on whether we need to just show our support for the problem or actually try to impact the problem.  In this case they actually intend to have an impact and so the program needed funding.  Without funding how could the citizen’s right to a well flowing sink be ensured?  Fortunately, our cities all had a tool for just this purpose they call taxes (note there are numerous synonyms for taxes).  And so it was that all three cities passed the Sink Access and Protection Act which established a tax of $100 per person per year.

To this point this has been a tale of uniformity and consensus.  Alas, the remainder of our tale uncovers the reality that the cities were all in favor of uniformity so long as it was done their way.  So here begins the Tale of Three Cities…

Paris Minnesota and the Fee-For-Service

Fade from black to the town of Paris, Minnesota.  In the great city of Paris, the city fathers established a program they dubbed Fee-For-Service.  Under this program when a sink was clogged the citizen would contact a plumber of their choice.  When the plumber had completed the repairs, the citizen would pay the plumber.  Then the citizen would obtain Form Q17 from the city, complete it, and submit it to the city in a plain white envelope along with a copy of the bill from the plumber.  Once that form had been processed, generally within a few years, the city would issue a check to reimburse the citizen $50 dollars (the calculated average rate from the study for each repair visit) or the cost of the repair which ever was less.

Those who are students of the history of plumbing will recognize the importance of Paris, Minnesota.  For millennia plumbing had been a skilled trade and those who did this for a living generally ran their own businesses.  It was in Paris that plumbing entered the industrial age.  Bill the businessman was a visionary and he singlehandedly revolutionized plumbing.  He brought a loose knit bunch of individual, independent workmen together into the well greased business organization we know today.  Long before the city fathers introduced their Fee-For-Service program Bill had consolidated a noticeable fraction of the plumbers in Paris. 

By the time Paris got their program running it turns out that the costs for a clogged sink had gone up to $55 per event but it was far too late to change the law (the city fathers only met once each decade after all).  The decision was made quite wisely to let the free market address this shortcoming. 

That might seem to be a problem for our esteemed Bill but that is because we are not the visionaries that Bill was.  When the new program was introduced, Bill brought together his advisors (most had previously worked at an energy concern called Beenwrong before joining him).  He posed the problem to them.  The city was now going to only pay the customer $50 dollars for a sink repair but they were charging $55.  Everyone outside of this creative group presumed that the customer would have to pay the extra $5 dollars. 

The advisors first noted that the $5 differential was a disincentive for the customer.  If they were to maintain the growth expectations of the all knowing market analysts they had to eliminate this barrier.  Well, his advisors had just the answer.  They would submit their normal charge of $55 but they would accept in payment the $50 and being the nice guys they were “forgive” the extra $5.  This meant the customer would not have any financial reason not to have their sinks repaired.  Who could argue with that?

Bill cut to the heart of the problem and pointed out that if he reduced his revenue per event to $50 his profits would go down by $5.  This is where it gets a bit complicated. After long technical deliberations in the research lab they found the answer.  Use cheaper parts.  They had determined that they could use lower quality parts which cost $5 less.  So while their revenue per sink would sink, their profit margin would be preserved, as financial experts I consulted will attest.

Now to the casual observer this might seem to pose a risk.  Wouldn’t the cost reductions result in more frequent repairs?  Certainly they will.  However, there was no limit on the number of repairs per citizen per year.  So Bill will have more business.  The citizens would not complain because they didn’t have any cost out of their pockets and in fact might respond favorably to the idea they were getting more service now that the government had taken over sink repairs. A win all the way around.

Bill’s advisors didn’t stop there.  They also pointed out that some percentage of their customers never paid their Bill (pun intended).  Under the new program this might be even worse.  After the customers paid their taxes it would be a hardship for many of them to pay the plumber and wait for their money back from the government.  Just to make bad matters worse, Form Q17 was complicated and unintelligible and unless it was filled out properly and on time the city wouldn’t reimburse the citizen anything.  So in the interest of eliminating the hardships imposed on the citizens they would develop software to automate the completion of Form Q17, they would fill it out for the citizen and submit it to the city, and on that form they would indicate that the city should send the payment directly to Bill.  This meant the citizens would not even need to go to the trouble of getting the money from the government and sending it to Bill.  For most of them it was as if the payments for sink repair didn’t have any financial impact on them at all.  By sheer coincidence Bill wouldn’t have any bad debt problem so in fact his net profit per event would rise.

It was impossible to see what would happen next.  First, the city hadn’t taken into account the fact that they would have to hire additional staff to process all of the claims.  While this did help reduce the unemployment rate in the city, the cost of processing forms added $15 per citizen, per year, to the cost of the program.  Second, much to the chagrin of the city fathers and for reasons they never have figured out, the actual sink repair rate turned out to be 3 per year rather than the 2 they had expected.  So the expenditures for sink repairs turned out to be $165 per citizen per year.  They managed to fund the shortfall the first year by cutting out the free lunch program for the inner city school children and then in an emergency session increased the tax rate for the following years to $165.

Eventually, an inquiry uncovered the root cause of the debacle.  That fine print in the commissioned study was read (perhaps for the first time in history) and it was recognized that they had relied on flawed data.  Since the company that did the study was clearly at fault they would never use them again.  A resolution never to use that company again absolved the city fathers of any responsibility and life was good.  Unless perhaps if you had to pay taxes in Paris.  Fade to black.

London, Texas and the Government Managed Sink

Panorama of the city of London, Texas.  Zoom into the city council chambers.  The council has determined that the city sink problem was one that the city should take on.  This was too important to leave to the whims of the private sector.  We find the city comptroller presenting his analysis to the city council.   Based on the number of sinks in the town, the rate at which they became clogged, and the time it took to fix a clogged sink he had determined they had enough work to keep 3 plumbers busy.  So a motion was made and carried and they created a new city department for sink fixing.  This new department shall be called the Government Managed Sink program. 

They recruited Mike the manager for the department who then hired three plumbers.  Mike endeavored to formulate the proper supplies they would need and after several intense junkets (designated as due diligence research trips) and working dinners, the city put out tender requests for each type of supply and got the cheapest price they could on each of them.  Ultimately, they had 15 suppliers.  They also put out a tender for renting equipment and also awarded that contract to the lowest bidder.  All of this was above board and completely transparent.

Life went along fairly well except for a few problems.  One was that the pipe supplier had specified (and delivered) pipe that had a diameter of 3/8^th inch.  The problem was that such narrow pipe had a tendency to become occluded and so had to be replaced more often than expected but at least it was cheap.  Another problem was that to get the low rental rate on the equipment, Mike the manager had agreed that if the rental company had another customer that needed the equipment at the same time that the city would wait until the equipment was not busy.  So sometimes there was an unavoidable delay in getting the sinks repaired.  But what could you expect, it was a government program and at least it was free.  It has been said some people resorted to the black market to buy plumbing services when they just didn’t think they could wait any longer.  It has been said, but no one really thinks it ever actually happened.

Sam was one of the plumbers hired initially but it was clear he wouldn’t last long.  He kept saying they could ultimately save money if they bought better pipe because they would have to do fewer repairs.  He went so far as to contact a supplier and get a quote so he could show Mike just what was possible.  Yes, dear reader he was just that misguided.  Mike was forced to formally reprimand him and he was told that it was inappropriate and potentially criminal for him to participate in negotiations with vendors.

Sam just didn’t fit in with the city program in other ways.  For example, one day Sam suggested that during the time they had between sink repairs that the three of them could begin a program of preventative maintenance that his friend Joe had told him about.  I am sure you can imagine how popular that made him with the other two plumbers, but their concern was for naught.  When Mike the manager caught wind of this he explained that they didn’t have the money to spend on preventative maintenance and even if they did they were funded to fix sinks and didn’t have the financial authority to use those funds for anything else.   If Sam was caught spending the city’s time on unauthorized programs that could result in his being fired and perhaps even prosecuted for something.  Sam was clearly treading on thin ice.  Sam eventually left.  No one knows where he has gone. 

As for the other two plumbers life was not bad.  They didn’t make as much take home money as their private counterparts but they worked less time (not having to handle all that ugly business stuff like billing and collection since this was a city service) and had great benefits.  With the unexpectedly high pipe breakage rate and the work schedule regulations for city employees, Mike was forced to hire a total of four plumbers.  Since the city had a balanced budget law, this increase had to be balanced with increased tax revenues.  So in an emergency session, the city council had to increase the sink tax.  What were they to do?  This was an indispensible city service now.

One last note, it seems that the citizen’s overall satisfaction rating for the sink repair service has gone down.  No one knows why.  This decline parallels an increase in clogging events and an increase in the wait time for repairs.  But we all know the dangers in ascribing causation to correlation.  Most rational minds suspect that this is just another sign of the unrealistic expectations of the younger generation.  Zoom out to panorama of London.

Madrid and Bundled Risk Benefit

Camera slowly comes into focus on a glass etched with the name Madrid Country Club in Madrid, Ohio.  Seated at a table is the Mayor Mayer along with his closest political allies from the city council.  Mayer is sharing the disappointing news that their last candidate for the manager of the planned city department of sink repairs, one Mike the manager, had accepted a similar position in London.  They were stuck and had no prospects to move this important initiative forward and expand the government.

As fate would have it, seated at the next table over was Ernie the entrepreneur and since Mayer had a booming voice Ernie found it impossible not to hear the frustration in the Mayor’s message.  Taking the initiative, Ernie soon inserted himself into the conversation.  Ernie asked how much the city had budgeted for this department, how many sinks were involved, and what kind of service level they hoped to achieve.  Doing a little quick math in his head he said, so you plan on spending $100 per citizen per year for sink repairs?  What do you think will happen if the city grows?  Well responded the city fathers, clearly as the city grows and the city coffers grow along with it the total budget will grow proportionately.

Based on this, the next morning Ernie made a radical proposal.  His company, Ernie’s Ever Expanding Enterprises had a division called the Bundled Risk Benefit division that would like to supply the service for the city for exactly the per citizen rate they had budgeted and that he would guarantee that price for six years along with the service levels they wanted.  It was fortunate that the city had a good dental program because there followed much gnashing of teeth.  Finally, the city decided this was their only alternative so they agreed. 

Ernie brought in the four most reputable plumbing parts suppliers and explained to them he had no interest in parties or dinners or junkets.  What he wanted was good quality parts, a reliable supply chain, and low prices, in that order of importance.  Furthermore, he didn’t want to have to deal with multiple suppliers.  He would choose one supplier and that agreement would be reviewed every two years.  He got excellent parts.  The winning supplier also offered to keep some of their inventory at Ernie’s facility so they could always get their parts in minutes.  Lastly, the supplier proposed a 12% discount in pricing.

Ernie then hired three plumbers, one a young plumber named Sam.  Sam was full of ideas.  One of Sam’s ideas was that it there were long term cost savings from using better supplies like larger diameter pipe.  Sam also had this idea of preventative maintenance.  Even though that wasn’t part of Ernie’s contractual obligations he could see how that would be better in the long term and since he had a six year contract he decided to give it a try.  In the first year that extra work cost him an extra 5%.  Since Ernie had agreed to a fixed fee from the city that meant he lost money the first year.  But in the second year the number of sink repairs went down by 30%.  With fewer sinks to repair his supply costs went down saving him a lot more in the second year (and ever year thereafter) than he lost the first year.  In addition since there were fewer sinks to repair Ernie was able to start offering hot water heater servicing with the same staff. 

The city sink department is now in the sixth year and life has been good.  Sam is now in charge of the division.  The city has been within budget, the sinks of the city have been flowing wonderfully, and Ernie has just donated a new public swimming pool to help the city grow. 

But trouble is lurking on the horizon.  A new city manager has been hired and he has asked Ernie to give him an accounting of the costs Ernie has for sink repairs.  Ernie’s response was that his costs are his problem so long as he provided the service for the price he had agreed to.  The city manager has been heard to say that in the last city he was in they had their own department and clearly Ernie must be over charging them or he couldn’t provide such excellent service much less having the money to donate that pool.  Clearly they need to look to their neighbors for a better way to do this.

Camera slowly goes out of focus.

Brief History of Plumbing

A Brief History of Plumbing

Or

The Businessification of Healthcare

Let’s take the case of Joe the plumber in Paris.  Paris, Minnesota that is.  Here in Paris when our sink gets clogged we call Joe to come intervene and unstop our sink.  We pay him a fee for a service.  If that service is simple and quick we just pay him a small fee.  If that service is complex and/or time consuming we pay him a larger fee.

The more services Joe performs the more money Joe makes.  Some services are more lucrative than others and try as he might it is tempting for Joe to offer you a service solution that is more profitable for him and one that is less profitable for the client.  Since Joe is a good plumber, he never makes his recommendation on that basis but he knows plumbers who do.  Some of those have even convinced themselves that the service they routinely recommend is really better for you.  But not Joe.

But the central point is the more Joe does the more Joe makes.  Joe faces another moral problem.  Let’s imagine Joe sees that you have a problem in the making.  From his experience and knowledge as a plumber he can anticipate that as time goes by you are going to need to call him for three complicated and urgent problems.  The problem Joe faces is that there is a simple thing he could do today that would prevent those three problems in the future and he would get a small fee for having done it.  But as a result he won’t get the three complex and urgent calls from you in the future.  Being a good and moral man, Joe gives you the information and lets you decide what you want to do.  You on the other hand are a cynical person and wonder if Joe is just trying to get you to let him do something to get money from you today.  Ah well…

The financial world of Joe has other interesting facets.  When he does some work for you he frequently needs some supplies (e.g. pipe, fittings, or seals).   He charges you the retail price of those parts.  The same price you would pay if you went to the store and gave them to Joe to use but without you having to go to the trouble.  But because Joe uses so many supplies his supplier gives him a discount of 10% off the retail price.  So, poor Joe has to watch his moral compass even closer.  Since he makes money using parts (the difference between the retail price for the parts and the price he pays), he needs to be sure in his own heart that he is never tempted to use extra parts. 

Then one day he learns that another supplier says they have pipe that is a little better than the pipe his current supplier has but since he doesn’t do any business with this new supplier he would not get the discount.  It would be easy for him to say, “I bet that new pipe isn’t really better and besides I know the pipe I am using now and it works just fine.”  But he doesn’t because Joe is a good and moral man.

At some point the new supplier calls Joe up and says Joe I am pleased that you have started buying your pipe from us but I would like to talk to you about my supplying your other parts as well.  Can we meet?   Well, says Joe, I really don’t have any time during the day to meet with you; I have lots of sinks to repair.  Well says new supplier, how about we meet in the evening, and since that is when you would normally have dinner I will buy you dinner for going to the trouble of letting me explain why I think your customers would be better served with my other parts.  Joe goes to dinner.

It won’t come as any surprise to learn that when Joe needs to rent equipment to work on your plumbing he passes that charge along to you without any markup at all.  As a matter of fact, professional plumbers are such an important part of the rental shop’s business that once a year they throw a party and invite all of the professional plumbers to it.  Joe would never consider renting equipment just to make sure he is on the invitation list to the party.  To suggest that he would is insulting.  And those free pens with their name on it don’t ever influence him either any more than the free pens the Holiday Inn puts in your room.  He doesn’t stay at the Holiday Inn because they leave free pens in the room.  That is really insulting.  He stays there because they offer nice rooms at a fair price.  While the cynics among you will say that Joe is rare I don’t think that is true. 

If that was the whole story it would be little more than a defense of the moral practitioner of plumbing.  But wait, there is more. One day Bill the business man came to Paris..  Bill decides that the plumbing business looks like a good business since everyone has sinks.  He doesn’t know anything about plumbing himself and doesn’t really want to lay down under smelly old sinks on his back.  What Bill does is to go to some of Joe’s friends and say to them that he suspects that keeping the books and managing the business is something they don’t enjoy. Boy did he get that right.  However that is something that Bill not only enjoys but does  very well.  Why don’t they let Bill take over those nasty old business tasks for them?  Then they could have more time to expand their client list which would make them a lot more money than Bill will charge them for running the business.  It makes perfect sense and what harm could it do?

Some of the plumbers in the area take Bill up on his proposition.  As time goes by Bill helps out even more by making sure they have all the parts they need in the storage room at the shop.  And since Bill has several plumbers he is helping out, he arranges to buy the equipment they used to rent and just charges them the same rate the rental shop used to charge.  Or actually, he charges the clients because now the invoices come from Bill since that is part of the ugly old business stuff he takes care of.  But even though they don’t get an invitation to the appreciation party at the rental center no one notices because there is the company party that Bill throws instead.

Bill now is buying a lot more supplies and has been able to negotiate an even bigger discount.  He doesn’t see why that is any business of his plumbers, that is his business.  That savings should and does accrue to Bill.  To get an even bigger discount, Bill negotiated a long-term agreement that prevents the plumbers from changing supplier for an extended period of time.  But not to worry, the clients are still getting billed only the retail rate for those parts.  Or at least somebody’s retail rate…

Being the conscientious manager he is, Bill forms a quality assurance team for their plumbing services.  That team is charged with helping to make sure the plumbers that Bill serves are delivering quality services.  They formulate, with guidance from Bill, a number of important quality metrics.  A disturbing finding of that team was that not all plumbers are the same.  Believing that the plumbers all want to deliver quality perhaps they just need to be guided.  So it was that the plumbers that Bill helps whose performance was in the lower 25% on this metric begin to get letters from him that go something like this…

We have recently had some concerns raised about quality of services delivered.  In the course of our investigations we have come across some worrisome facts.  We notice for example that you replace fewer pipes when you fix a sink than your colleagues.  The possibility that you are leaving defective pipes in homes that will just cause problems again is concerning.  We have initiated a monitoring program to ensure that the proper pipe replacement rates (based on the amount of parts used) are maintained in the course of fixing sinks.  We are sure you join us in this effort to improve our services.

Well certainly none of the plumbers wanted to be singled out as delivering poor service so they did their best to improve their pipe replacement rates.  Clearly they must have been making errors in judgment and when a pipe was questionable it should be replaced.  Perhaps even when it might become questionable it should be replaced.  Of course the customers had to be charged for the additional pipe as well as the labor, after all this was a business and Bill couldn’t be expected to absorb the cost of what was surely better quality.

The encouraging news is that many of these plumbers improved their performance.  The discouraging news is that now there was a new group in the lower 25% who needed guidance.  Quality is something that must be pursued with dogged persistence.

These improvements to the plumbing industry were quantifiable.  It is true that the customers didn’t have any fewer repairs.  It is true they didn’t get any faster service.  It is true they didn’t get any cheaper service.  But the quality data confirmed they were getting better quality as a result of Bill’s diligence.

Since the plumbers didn’t have to spend time doing all that business stuff, each plumber was able to repair more sinks.  So in fact, they made more money than they had before.  Just to simplify things even further, Bill eventually hired the plumbers to work for him rather than him working for them.  The security of having a guaranteed income and the better benefits programs was a welcome change for our tireless plumbers.

One very surprising thing did happen.  Even though the plumbers with Bill were doing more services the other plumbers in the area kept their service volume steady as well.  So the community had an increase in the total plumbing services.  This was reflected in an increasing percent of GDP spent on plumbing but the citizens deserved nothing less.  Besides, this reflected the will of the people since this was free enterprise at work.  

Oh yes, the previous pipe supplier and the equipment rental business both went bankrupt.  Fortunately Bill was able to arrange it so that plumbers who didn’t work for him could rent equipment from him but he had to charge a higher rate (which they passed on to the customers the way it always had been).  Clearly, the defunct rental company had gone under because they had set their prices too low.  Being a fair and rational man, Bill realized that to be equitable he needed to charge his own customers the same new higher rate as well.

And that is how plumbing entered the industrial age.  This is how independent providers like Joe began to disappear from the land.  Theirs was a time that had come and gone.  When it comes to progress, resistance is futile.

Share and share alike

Share and share alike

I recently went to the doctor (in the interest of confidentiality I cannot disclose the reasons).  My doctor, yes she belongs to me, is amazing.  After listening to me for 18 seconds, the doctor stepped out of the room and gave some instructions to the nurse to draw some blood.  She didn’t think I could hear her but I heard her say that I had a cracked pot.  I was sick when we dissected frogs in high school so I didn’t even know I had a pot much less that it could be cracked.  But I wasn’t going to disclose the details of my case so please ignore those comments.  The nurse drew my blood and sent me home with instructions that they would call me with the results.

Just like clockwork, my doctor called me with the results a few anxious weeks later.  She said my serum porcelain level was 127 and that I would be fine.  I didn’t want to waste the doctor’s precious time with petty questions about whether the crack would heal.  Presumably, if I was going to be fine, it would.

But there was something that struck me.  The serum porcelain level of 127 was mine, the doctor said so.  Here is where the reader will need to pay attention.  I wondered if anyone else had ever had a serum porcelain level of 127 or if someone else might have it in the future.  I realized I didn’t know the rules of ownership here.  Did those data belong to the first person to ever have that value?  If that was the case then I must be the first.  An alternative rule is that it might belong to the last person.  If that was the case it might not still be mine.  How would I know?  What would happen to me if someone else suddenly had what had been my serum porcelain level and it was now theirs?

I am a student of forensics and have learned to use the tools of that trade (I have seen every episode of Criminal Minds at least twice).  One of the most valuable tools is the clue board.  You may not know that technical term (I made it up) but you have no doubt seen it in action.  It looks like a cork board on which clues are tacked up and then pieces of string are used to connect clues.  I have one of my own at home which I employed to solve this mystery (as I have others related to Lincoln, Kennedy, and Zuckerberg).  I tacked up a picture of me.  That reminds me, I need to write some notes on the nature of self but that will have to wait.  I then tacked up a piece of paper with the number 127 written on it.  I also put up a picture of Obama but this was just meant to represent the common man.

I stared at the clue board for a few hours (solving mysteries takes time).  I then put a piece of string from Obama to the 127.  This was meant to represent the idea that the serum porcelain level was his.  Imagine if you can, at this point there was no connection between me and the 127.  Then I moved one end of string from Obama to me.  Now 127 was mine but now Obama didn’t have a serum porcelain level.  Was this the way things really worked?  Or more philosophically, is this the way things should work?

Days passed and then it came to me.  What if I took a second piece of string and attached it from Obama to 127?  Now we both had a serum porcelain level.  Share and share alike my Momma always said and I knew she was smiling down on me and suspected she was guiding me.

Now the astute reader has no doubt already seen the problem here.  Who owned that value?  Did I own it or did Obama own it?  Whose was it?  At this moment I felt my mother’s hand at work.  I realized I didn’t own that value and neither did Obama.  I decided that I owned the string that connected me to 127 and Obama owned the string that connected him to 127.  That had to be the answer.  I didn’t own the data.  Data couldn’t be owned.  I owned the thing that connected the metaphysical me to the data.

Just like Einstein, I then said, that takes care of the special case, but what about the general model?  I grabbed my note pad and made up a whole bunch of additional numbers and letters and tacked them onto the board.  These would be additional data in my general model.   I then attached strings from each of these to me.  Some of them I attached to Obama but others I didn’t.  It seems that Obama and I have a number of things in common (that made me feel important, I have to admit).  I stepped back and looked at the crisscrossing of strings between data and people.  The same solution seemed to hold in the general case.

I don’t know what made me do it (it was probably my Momma again) but I then took down my picture and that of Obama but left all of the data and the relationship strings up there.  I had thought I would see all of the stuff that belonged to me and all of the stuff that belonged to Obama.  But I was surprised.  The strings that spread out from the hole where I had been looked different from the strings that spread out from the hole where Obama had been.  But I wasn’t there anymore.  My pattern was different than Obama’s but I wasn’t there.  I could tell which was which because I had other information (I remembered where my picture was).

So did those strings belong to me or not? Maybe another experiment would make it clear.  First I took down all of Obama’s strings.  Then I grabbed a spool of string of a different color.  Everywhere there was one of my strings (I still thought of them as my strings at that point) I put a string of the new color.  These were for Joe Biden.  Hmmm.  The patterns were identical.  Now there was nothing that told me which of the collection of strings should go to me and which to Joe Biden.  I suppose I could add another data point that might have a string to me that would differentiate me from Joe.  Unless, that is, he also had a relationship to that same data point.  Einstein and I shared the same experience. The general case was much harder.  I could not tell which strings were mine and which were Joe’s.  If I couldn’t tell the difference between them then perhaps the strings don’t belong to me either.  Since the patterns of strings (for the data I had access to at this point) were the same I could not even claim ownership of the pattern of strings.  Joe and I had the same pattern.

But wait a minute.  Something in here belongs to me.  It must, this is America after all.  Again the days wore on until one cold winter night I was cleaning up my desk and saw my picture laying there.  I picked it up and put in back on the clue board.  Then it struck me.  I could tell which pattern of strings was mine.  It was the one that attached to me.  I took my picture down and as if by magic it the pattern was again generic.  I put it up and the pattern was mine.  I was at the center of the solution.  It was all about me.

What I “owned” was the tack that attached all of the strings that attach to all of the data.  The tack in the center of my picture was what I owned.  That magical item that established the relationships between me as a person and the collection of data linkages was mine.  Not the data written on the slips of paper.  No one could own them.  Not the actual strings because they could be linking data together from lots of people.  No one could own the strings.  Not even the pattern of strings because other people could have the same pattern.  No one could own the patterns.  What I could own, nay what I do own, is the tack that links me to the pattern.

I felt so silly in retrospect.  That day my doctor told me that my serum porcelain was 127 I had thought that datum was mine.  Thank goodness I didn’t try and protect my property.  Just think, I might have kept some other poor soul with a cracked pot from getting the news that they would be fine.  I might have even impeded efforts by my servants (government workers are civil servants after all) to keep track of how many people suffer from this terrible affliction.  It is even possible that this very day someone is researching cracked pots and without that datum might not find a way to prevent this kind of medical travesty.  They can now do all of those things without ever having to know I am the person that has a cracked pot (that I want to keep private and will ask the reader to please ignore that information).

Yet another mystery solved with my clue board and this one didn’t even involve a conspiracy.  Thanks Momma.