Estate Tax Repeal

Topic: Economics - Estate Tax

The estate tax is the most capitalist tax that exists. Capitalism, which some seem to think is based on people inheriting assets from their relatives, is not. Capitalism is based on the concept that each person gets to receive rewards for their work.

Long before Adam Smith, noble rich passed on their wealth to their heirs. It was not Capitalist then and it is not Capitalist now.

Unfortunately many seem to have skipped economics in school and accepted the claim that Capitalism is about protecting the rich. They seem to believe it is a tenant of Capitalism that those that have the gold make the rules. That is in fact a risk that Capitalists must protect the economy from, not something Capitalist approve of. Those who believe in the wealth being passed from those who earn it to those who they like, believe not in Capitalism but in the state not taxing the idle rich but instead taxing those who don't have millions given to them. While many have come to believe that such idiocy is Capitalist, it is not. People should read the Wealth of Nations by Adam Smith to get a much clearer idea of what Capitalism is about than those in Washington DC have.

You have to have some taxes to run the government. The income tax is a poor tool, as it is a direct disincentives to positive economic activity. The best tax is one that doesn't take anything from someone who earned it. And that is exactly what the estate does, tax a portion of the millions someone is given.

The income tax, however, is the largest source of income and therefore it will not disappear. But if you are going to lower taxes, that is the tax you should lower not one on people being given millions of dollars. You might want to replace the income tax with a value added tax, but that is an issue for another day.

The idea that you would cut the estate tax when you have taxes like the social security tax and income tax is very poor economic thinking. The only reason to cut the estate tax would be if you collected more than enough money to run the government from the estate tax alone (you had already eliminated all other taxes).

It is a shame to see so many fall for the 1984 Orwellian doublespeak, where protecting the rich offspring of those who earned money is seen as Capitalist. Capitalism is about the free market and allowing the invisible hand of the market to direct resources. Capitalism is not about protecting the wealthy. It is a shame, but not surprising, to hear so many political leaders speak as though Captialism were intended to let those with the gold make the rules.

Adam Smith knew the wealthy would try to setup rules to distort the free market. One of the important roles of the Government was to protect the free market from collusion by the wealthy to distort the free market. The powerful trying to set rules where they, and their friends, benefit and those who don't have the power lose (are taxed), is new.

Marketplace (a great economics program on NPR) had two commentaries on the topic of estate taxes: Robert Reich and Steve Moore.

The idea that Capitalism is about letting someone not work a day in their life and live off the wealth of their ancestors annoys me. I think Capitalism is a great system for improving the living conditions of humanity. But such poor thinking by our politicians threatens to cause great harm. My favorite charity shows how Capitalism can improve lives. Trickle Up is a charity that helps the lowest income people worldwide take the first steps up out of poverty, by providing conditional seed capital, business training and relevant support services essential to the launch or expansion of a microenterprise. Thousands take that opportunity and change their lives and the lives around them.

I find it frustrating that we have political "leaders" that claim that taxing some of the millions of dollars a relative of some millionaire is giving them is anti-capitalist. That such claims are not ridiculed is infuriating.

• Estate Tax Myths, Washington Post Editorial, July 24 2005.
• 5 Big Myths About the Estate Tax, MSN Money
  

Myth No. 3: The tax can be avoided
Estate planning can reduce the tax bite. If you’re rich enough, however, your estate will eventually face taxes unless:

* You die in 2010, the one year in which the estate tax is scheduled to be totally repealed, or
* You give everything to charity, or
* You give everything to your spouse

Now, if it is a death tax, why, if you give the money to charity when you die there is no tax? Oh maybe, it isn't a death tax at all but instead a tax on those recieving millions from the person that earned it.

• Myths and Facts about the Estate Tax, United for a Fair Economy
• Rich Americans Back Inheritance Tax, BBC quoting Warren Buffett
  

Stretching Agile to fit CMMI Level 3

Topic: Management Improvement

Stretching Agile to fit CMMI Level 3 by David J. Anderson.

I highly recommend reading this article. My work happens to straddle both the management improvement and software development areas that this article covers. But, if you are interested in either area, this article offers some great material. And if you are interested in both, you are in for a treat.

At Microsoft, we've adopted the teachings of W. Edwards Deming and stretched our MSF for Agile Software Development method to fit the requirements for CMMI Level 3. The resultant MSF for CMMI Process Improvement is a highly iterative, adaptive planning method, light on documentation, and heavily automated through tooling.

Capability Maturity Model Integration (CMMI) is the process developed by the Software Engineering Institute (at Carnegie Mellon) that was heavily influenced by Quality Management. When I first ran across it (then called Capacity Maturity Model) in the mid 1990's, as I remember, I was struck that the model did a better job of integrating Quality Management ideas than most programs specifically calling themselves Quality programs.

I was also struck that it was extremely documentation heavy. It was developed for large, complicated, critical software system (for the Department of Defense). While the heavy documentation focus made sense for that type of development it seemed to require too much overhead for less complex software development efforts but still had lots of good ideas that smaller efforts could benefit from. And the ideas in David Anderson's paper show how to get the benefits of CCMI without the normal drawbacks (including importantly, as he mentions:

CMMI process implementations are often associated with conformance to plan, low trust environments, with command and control structures. These require a big design up front approach with auditing of conformance and by implication punishment for non-conformance.

As the paper mentions this is not necessary even though it is often the result of using CMMI.

This paper shows that it is wrong to associate these undesirable software engineering behaviors with the CMMI. It doesn't have to be that way.
By embracing the teachings of W. Edwards Deming and understanding their relationship to agile principles and practices, it is possible to develop a truly agile full life cycle process which meets the requirements for all 5 levels in the CMMI model. Specifically by using agile metrics such as velocity, cumulative flow and trends in open issues, we have designed planning and monitoring methods which embrace variation and allow for postponed, late commitment and adaptive iterative planning.

Online resources on Deming's ideas

Articles on Deming's ideas

Vice President Presents Baldrige Awards

Vice President Presents Baldrige Awards, press release from NIST (July 20, 2005).

The 2004 Baldrige Award for Quality recipients (links to case studeis):

The Bama Companies, Tulsa, Oklahoma (manufacturing category)

In its endless quest for improvement, Bama uses a battery of advanced strategies and tools, including the Bama Quality Management System, based on the quality improvement philosophies of W. Edwards Deming and the company’s own performance excellence model. The Bama Excellence System provides a framework for all decision-making. A Principle Centered Bama Culture, based on tenets developed by Stephen Covey, provides a context for creating and measuring excellence. Using Six Sigma methodologies since 2000, Bama has dramatically improved processes throughout the company. Total savings from Six Sigma improvements equates to over $17 million since 2001.

Texas Nameplate Company, Inc., Dallas, Texas (small business category) They also won an award in 1998.

Technology and training have led to dramatic improvements in production. Between 1998 and 2004, the incidence of product nonconformity with specifications, as a percentage of sales, dropped from 1.4 percent to about 0.5 percent, significantly lower than the Industry Week median (2 percent). In that same period, TNC reduced its quote response time from 6 hours to less than 2 hours, and it trimmed the length of its production cycle from 14 days to under 8 days.

Kenneth W. Monfort College of Business, Greeley, Colorado (education category)

MCB continually evaluates its performance and incorporates those evaluations into its short- and long-term planning cycles. The process includes use of Key Performance Indicators

Robert Wood Johnson University Hospital Hamilton, Hamilton, New Jersey (health care category)

Also with a focus on Excellence Through Service, the leadership team works within a system that links all management functions—from planning and implementing policies, new technologies, and new facilities through ongoing cycles of evaluation and improvement—with unhindered communications at all levels. Each Executive Management Team member, including the CEO, holds daily briefings that are designed to share key information with the staff and to answer questions. As a result, over the past four years, employee satisfaction with hospital leadership has
improved to almost 100 percent.
...
RWJ Hamilton has reduced its rates of mortality, hospital-acquired infections, and medication errors to among the lowest in the nation.

New Toyota CEO's Views

The Man Driving Toyota from Business Week:

Toyota has grown in the past few years, but [there's a risk] that a belief that the current status is satisfactory creeps into the minds of employees. That's what I'm worried about.

We should never be satisfied with the current status. In each division, function, or region, we still have numerous problems to cope with. We need to identify each one of those tasks or problems and fully recognize them and pursue the causes. This needs to be done by all the people working for Toyota.

I think, this echoes my recent comment on post, Is Quality Foolproof?, on the Vision Thing blog:

I think the instances of such failures are just a sign that even Toyota still has quite a bit to improve. I think this announcement likely is a result of common cause variation (it is the natural result of the current system). The natural result (of the system) is not that they have this particular failure, but that this recall is consistent with the % of vehicles that required a recall of this general character. I believe they are getting better over time but they still have a long way to go. With a result based on common cause you want to look at the entire system when designing an improvement plan not at the root cause of the seat belt issue. See Responding to Variation online and the book, Forth Generation Management, by Brian Joiner.

It is good to see the new Toyota CEO still believes they need to keep keenly focused on continuous improvement.

Simple, but true, point by the new CEO, Katsuaki Watanabe:

Management has to visit the shop floor and gain first-hand experience of what's taking place. We need to look at the manufacturing processes, listen to voices, and clearly recognize problems.

Agile Management

David Anderson publishes the Agile Management Blog, wrote the Agile Management for Software Engineering: Applying the Theory of Constraints for Business Results, and works for Microsoft. Robert Scoble, technical evangelist, also with Microsoft, has posted an online video interview with David Anderson on Microsoft's Chanel 9 online.

Quote by David Anderson, from the video: "My work focuses on applying the teachings of two management science gurus, one is Eli Goldratt and the other is W. Edwards Deming".

Take a look at the video and also the Agile Management Blog for all sorts of great posts on software development and management topics. Such as:

Trust is Essential to Agile:

Agile software development brought the idea of trust to the forefront. When there is trust, there is less waste, less extra work, less verification, less auditing, less paperwork, less meetings, less finger pointing, less blame-storming. Building trust between the engineering group and the customers is the first goal for any agile manager. Equally building trust with and amongst the engineering team is also essential.

No More Quality Initiatives

That's why in MSF for CMMI(R) Process Improvement, I've included daily standup meetings to surface issues and monitor and manage risks, eliminate special cause variation and make it everyone's business to do so. That's why we're dropping conformance to plan and conformance to specification in favor of conformance to process and focus on variation reduction. That's why we're encouraging a bottom up, empowered team, consensus model. That allows decentralized decisions to be made quickly. The way to institutionalize continuous improvement across an organization is to make it everyone's business, every day!

The video and blog post provide great ideas on how to apply Deming and Goldratt's ideas from someone who is applying them to improve the performance of the organization.

Saving Lives: US Health Care Improvement

Topic: Management Improvement

8 part special report by US News and Word Report on improving the US Health Care system.

Join IHI in an ambitious initiative called the 100K Lives Campaign. Its goal is to save 100,000 hospital patients' lives by 9 a.m. on June 14, 2006, exactly 18 months from Berwick's call to arms, by introducing six changes in hospital procedures. Each change addresses a problem, such as deaths from infections following surgery, and presents an arsenal of weapons to fight it, such as tighter timing of antibiotic doses before surgery.

I have long felt the Institute of Healthcare Improvement and Don Berwick were the leaders in health care management improvement. The Breakthrough Series is a great white paper on an excellent improvement methodology IHI developed and use. IHI white paper library.

A Breakthrough Series Collaborative is a short-term (6- to 15-month) learning system that brings together a large number of teams from hospitals or clinics to seek improvement in a focused topic area. Since 1995, IHI has sponsored over 50 such Collaborative projects on several dozen topics involving over 2,000 teams from 1,000 health care organizations.
...
Teams in such Collaboratives have achieved dramatic results, including reducing waiting times by 50 percent, reducing worker absenteeism by 25 percent, reducing ICU costs by 25 percent, and reducing hospitalizations for patients with congestive heart failure by 50 percent.

Management is Prediction

Topic: Management Improvement

re: post on prediction on the Deming Electronic Network:

Petter Øgland wrote:

...that intelligence more or less boils down to updating a predictive model of the world. As far as I can see, this is the C.I. Lewis epistemology that Shewhart and Deming based their philosophy upon.

...but is there any kind of operational definition for 'prediction' that would explain what Deming means when he uses this word in various contexts?

I think your first point is correct, which I see as: learning by predicting, then looking at the result and then adjusting understanding to this new information is very powerful.

I believe Deming's thoughts about prediction are most effectively put into action using the PDSA cycle. Specifically, you must predict what the results in the planning phase (prior to piloting improvements). I find that this is rarely done. I don't think the form of that prediction is critical (narrative with loose numerical guesses, precise numerical prediction...). The critical issue is making the prediction, then comparing the results to that prediction and then figuring out how your original understanding can be improved based on the new data.

Learning will not only be about the specific case being examined, but also, over time, learning about yourtendenciess in prediction. For example, do you: overestimate the size of the improvement, underestimate the time it will take to institute a new process improvement, underestimate the complexity of IT projects...? Basically, over time, learning from your prediction history the biases that affect your predications (which are then tied to your model for viewing the world...). Then, that knowledge can be used to improve your ability to make better predictions in the future. Without actually predicting and then examining the results people often make the same errors in their belief about the potential outcomes of changes for not just years, but decades.

I believe the act of formally making a prediction is critical to improving the learning process. I think prediction and examination of results is rarely done. And I think it is a very powerful component to creating an organization that can improve rapidly.

The understanding Deming had of prediction was as a component of the Theory of Knowledge. The importance of prediction is due to the impact it has our our learning. Prediction, with subsequent evaluation of results and then adjust to the model used to make the original prediction is a process that improves a person's ability to understand how they think. By going through this prediction cycle many times the person becomes better at using the knowledge the have. Even if they don't learn about the theory of knowledge abstractly as a concept they learn about the theory of knowledge in practice. On page 101 of the New Economic and for several pages thereafter Deming addresses prediction.


John Hunter

Managing Fear

Topic: Management Improvement

The post, Root Causes of Crunch Mode from the Game Manager blog makes the good point that

Fear and anxiety are known to reduce comprehension and learning ability. W. Edwards Deming made "drive out fear" one of his 14 management changes America needed to make in order to compete with Japan. Fear is a valuable physiological reaction in some situations, but fear make(s) it difficult to think, and thinking is generally superior to fighting in most corporate settings.

A good article on this topic is, Driving Out Fear by Gerald Suarez (who I worked with for several years). There are also 3 videos on this topic by Dr. Suarez, available from Management Wisdom, the producers of the Deming Library tapes. I must admit I didn't really understand the effects of fear and anxiety on performance until hearing Dr. Suarez speak on the topic many years ago.

From the Driving out Fear article:

Fear erodes joy in work, limits communication, and stifles innovation. Fear fosters short-term thinking as people search to avoid reprisal, perhaps at the expense of others in the system.

Fear also produces questionable data, as people tend to focus on eliminating the threat instead of working to achieve the desired positive outcomes.

See previous post: Targets Distorting the System

John Hunter