Vacation Risk Management

I grew up in Massachusetts, but I haven't been to Cape Cod for ages, so I thought it might be fun to rent a vacation home on the Cape for a week or two this summer.  Using Vacation Rental by Owner  (VRBO), I found a place that seemed to fit the bill.  I reached out to the owner (let's call him Duke) to reserve the property, and Duke advised me all I needed to do was sign and return his rental contract along with a 50% deposit and he would mark it as rented. Simple enough, until I saw his rental contract.

Full disclosure here--I am one of those people who reads most contracts before I sign them. I have a healthy respect for contracts, developed initially during my claims training at Liberty Mutual and steadily strengthened throughout the forty years I spent in the insurance business.  Maybe my life would be simpler if I could just learn to smile and sign on the dotted line once I've been presented with a "standard" contract, but I am not comfortable doing that.  So I read most contracts.

Duke's Vacation Lease Agreement did look pretty standard, at first, until I got to section 11, which opened with this declaration:

Tenant waives any right to allege deficiency in the premises or to otherwise claim that Owner or Owner's Representative has misrepresented the property.

Since I wouldn't be seeing the property in person until July when I arrived for vacation, it seemed a bit unreasonable for Duke to be asking me to waive my rights to allege deficiency and/or misrepresentation now, but I kept reading until I hit the showstopper two sentences later:

Tenant will indemnify Owner's Representatives and the Owner for any injuries, accident(al) or otherwise, that may be incurred or suffered upon the premises by tenant and guests or anyone associated with tenant for any cause whatsoever during the term of this contract even if caused by gross negligence on the part of the owner.

The emphasis in the last line above is mine. Requiring a tenant to agree to reimburse the owner for any loss associated with any injuries that might occur on the premises, even if those injuries were caused by the owner's gross negligence, seemed to border on the outrageous.  Imagine Duke had been warned that his electrical system was so old and poorly maintained that it represented an imminent fire hazard, or that his house was at serious risk of collapse because of severe structural termite damage, yet he failed to do the necessary repairs and continued to rent it. Then imagine the house collapsed and/or burned and injured the tenants and others in the house, who had no knowledge of the potential danger.  According to Duke's Vacation Lease Agreement, the tenant would be required to reimburse him for any sums Duke was required to pay to the injured people.  Somehow that didn't seem fair, to say nothing of the probability that it's against public policy, and might be void and unenforceable, even in Massachusetts. Remember, gross negligence is distinctive, since it embodies a materially greater lack of care than ordinary negligence.  The law.com definition: 

...carelessness which is in reckless disregard for the safety or lives of others, and is so great it appears to be a conscious violation of other people's rights to safety.

So I wrote back to Duke and told him I wouldn't be able to sign the Vacation Lease Agreement unless he was willing to tone down the indemnification language. Duke responded immediately, saying he needed to keep the language intact in order to:

...add some shared responsibility onto otherwise unconcerned and unattached weekly renters who we are entrusting with our very expensive property. 

Shared responsibility? He also told me his rental contract was "very standard, very boilerplate" and that no one had ever raised the issue I was raising in the seven years he had been renting the property. That intrigued me, so I took a look at the standard, boilerplate rental contracts available for owners who list their properties on VRBO to use, but I couldn't find an indemnification clause as broad and deep as Duke's.

Thinking that perhaps Duke wasn't familiar with the concepts of indemnification, gross negligence and public policy, I wrote back to him and outlined my concerns more fully.  He responded that the risk/reward ratio in life isn't always equal, explaining:

As it pertains to our house, 99% of our guests think that the reward of spending time with family and friends in a great house, outweigh the lack of recourse they may give up in a rental agreement that they sign.

 

Why didn't 100% of his guests think that way, I wondered, particularly since they couldn't become guests unless they signed his contract?  What about the other 1%? Did they disagree with the balance of risk and reward but still sign the Vacation Lease Agreement?  We'll never know, since I decided to end my correspondence with Duke and make different vacation plans.

I did briefly wonder whether Duke's tenants had actually read his Vacation Lease Agreement and fully grasped the nature of the liability exposure they were assuming. Probably not. Most people don't read contracts, and of course the penalty for not reading and comprehending potentially adverse contract clauses is zilch, unless and until something bad happens and triggers those clauses.

Does it make sense to do a risk evaluation on something as mundane as a vacation home rental?  As a potential short term vacation home tenant, do you really need to analyze the rental contract, identify exposures, try to secure more favorable terms and conditions, and make sure you have insurance coverage or other risk transfer mechanisms in place that will protect you if things go wrong? 

Since risk management is often described as a process of identifying, assessing, and reducing risk to an acceptable level, the answer depends upon the mindset you bring to the transaction, your risk tolerance, whether you believe things might go wrong, and your ability to deal with the financial consequences if they do go wrong. I decided to pass on Duke's house because I didn't like his attitude or his contract, so for me the potential risk associated with signing the contract was greater than the reward.  But Florencia Marotta-Wurgler, a professor of law at New York University, says people usually don't change their behavior simply because of what's in a contract.  In Alina Tugend's article Those Wordy Contracts We All So Quickly Accept, Marotta-Wurgler explains why:

For the most part it [what's in the contract] doesn’t matter. Things don’t usually go wrong — except when they do. And then it matters.

I know one thing for certain, however.  Once a contract matters, it really matters, and suddenly everybody wants to read it.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property casualty insurance claims and operations.  He can be reached at dean.harring@theclm.org or through LinkedIn or Twitter.

Tick Tock: 30 Seconds to Connect

Somehow it feels thrilling and frightening at the same time, like when you stand too close to the edge of a cliff.  Your heart starts thumping, the air passages to your lungs expand, your blood pressure increases, the pupils in your eyes enlarge, and your blood glucose levels fluctuate, all because the stress-triggered hormone adrenaline is flooding your bloodstream.  Your body is preparing to deal with a nerve-racking, physically demanding situation, all because inside the packed convention center ballroom you have just been introduced as the next speaker. You stride purposefully to the podium; the applause dies down and the room goes silent with anticipation. You take a deep breath and look out at the audience.  They look back at you--curious, and expectant.  You are on the verge of doing something that most humans fear more than death: public speaking. 

Not long after I graduated from college and started working, I enrolled in the Dale Carnegie Course in Effective Speaking and Human Relations. I had heard tremendous things about the program and I really wanted to become one of those people who was always ready, willing and able to stand up and speak when necessary, no matter what the situation. At the first Dale Carnegie session, there were people in the class who were so terrified of speaking in front of an audience that they could not even stand alone at the front of the room.  At the end of the course three months later, the instructor could barely get those same people to stop speaking and sit back down! I learned a lot in that course by delivering two or three talks a week (often on topics assigned just minutes before), getting feedback, and giving feedback. In the years since I've spent a large part of my working life delivering, listening to and critiquing presentations.  So when I work with students now to help them become more effective presenters, I always share this Dale Carnegie quote with them:

A talk is a voyage with purpose, and it must be charted. The man who starts out going nowhere generally gets there.

Almost anyone can conquer their fear of public speaking with appropriate coaching and practice, but conquering the fear doesn't necessarily make you a good speaker--it just makes you a more comfortable speaker. If you haven't framed your message, polished your content, and planned your delivery carefully you might be able to blather long enough to fill your time slot, but you'll end up nowhere, as in no audience connection and no message delivered.

Years ago, folks weren't too concerned about messaging during the opening of a talk.  The prevailing wisdom was that audiences didn't really hear anything a speaker said at the beginning because they were too busy processing the speaker's non-verbal signals: facial expressions, gaze and eye contact, clothing, haircut, shoes, posture, gestures, etc.  So since the audience wasn't listening anyway, speakers were encouraged to use that time to get comfortable at the podium, smile, relax, maybe chatter a bit. You know--thank the person who did the introduction, thank the meeting sponsor for the invitation, describe how wonderful it is to be there, tell a joke, make witty comments about the weather, or the travel challenges encountered on the way to the venue, or the local sports team. Then, dive in to the speech.

That chatty style of opening is still being used (I saw two speakers use it last week, with predictable results) but I think it is fair to say that it probably worked better 20 years ago than it does now.  Back then, audiences were usually captive, they seemed to have longer attention spans, and they certainly didn't have what Dr. Carmen Taran of Rexi Media calls "digital pacifiers" in their pockets (or on their wrists) capable of providing them with a dizzying array of distracting alternatives to listening to the speaker.

If you believe, as I do, that audiences today are ruthlessly inattentive victims of information overload, then as a speaker with a message to communicate, you must do something to capture their attention quickly, within 30 seconds according to the experts (check out Better Beginnings by Carmen Taran and The Best Way to Start a Presentation by Nick Morgan.) Sounds difficult, but it really isn't--good speakers do it all the time. Television commercial producers routinely do it to sell products and services. Writers do it by inserting intriguing first lines in novels and articles to get you to keep reading. 

Let's break it down. If you think of a talk as having three phases--opening, body, and conclusion--in a 20 minute talk the opening might be 3 minutes, the body 15 minutes, and the closing 2 minutes.  So in the first three minutes, a speaker needs to accomplish three things:

1. Hook the audience within 30 seconds. Grab their attention, engage and enroll them in what you are about to do.
2. Lay out your approach and establish your credentials. What do you want the audience to know, do and feel at the end of your talk? How and why are you qualified to talk on this topic?
3. Provide a compelling answer to the audience's unspoken question: Why should I listen to you, and if I do, what is in it for me?

Next time you prepare to give a talk, focus on energizing the first 30 seconds of your opening. The best way to do that is to supercharge the communication environment by pushing or luring listeners out of their comfort zone and into their learning zone.  Surprise the audience somehow, throw them off balance, interrupt their inertia. Replace the expected with the unexpected. Create suspense and drama. Open with a provocative question or quote. Make an outrageous statement. Tell a powerful personal story. Share your view on a controversial aspect of your topic and ask for a show of hands of those who agree, or disagree. Do a show and tell with a compelling object, photo, news story or statistic. Challenge a widely held belief, or a sacred cow. Make a bold prediction and tell the audience to write it down.  Or even offer the audience something helpful and irresistible, as Amy Cuddy did in the opening line of her extremely popular (22 million views) TED Talk on body language.

For other potentially useful details and examples, check out these resources:

• ·         How to Start a Speech--12 Foolproof Ways to Grab Your Audience! by Dr. Gary Genard
• ·         12 Ways to Hook an Audience in 30 Seconds by Bruna Martinuzzi
• ·         Start Your Presentation with PUNCH by Garr Reynolds
• ·         6 Ways to Hook Your Audience by Alex Rister
• ·         The 30-Second Rule: How to Create Unforgettable Presentations by Peter Economy

Finally, since capturing an audience's attention is one challenge, and holding it is another, you might also enjoy speech and presentation coach Sims Wyeth's brief overview of techniques to help you keep the connection going. And never, ever forget this practical speakers' maxim:

Each of us here has a job to do. My job is to talk and yours is to listen. The challenge is for me to finish my job before you have finished yours.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property casualty insurance claims and operations.  He can be reached at dean.harring@theclm.org or through LinkedIn or Twitter.

Confident Idiots

Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?

Every time comedian George Carlin posed that question in a performance, the audience roared because they knew they were all absolutely guilty of being at least that judgmental when comparing the driving skills of others to their own. Studies have shown that most drivers believe they are more skillful and more careful than the average driver on the road, but what's really fascinating is how that self-serving bias and illusion of superiority extends to many other areas. In his article We Are All Confident Idiots, Psychology professor David Dunning describes it this way:

A whole battery of studies conducted by myself and others have confirmed that people who don't know much about a given set of cognitive, technical or social skills tend to grossly overestimate their prowess and performance, whether it's grammar, emotional intelligence, logical reasoning, firearm care and safety, debating, or financial knowledge.

Surprising? Hardly. You and I have known and worked with a formidable collection of confident idiots, and we've probably played the role ourselves on more than one occasion. We just didn't realize we were doing it.

Professor Dunning is an expert in metacognition, the processes by which humans evaluate and regulate their knowledge, reasoning, and learning. He and his colleague Justin Kruger first described what is now known as the Dunning-Kruger effect in a 1999 paper entitled Unskilled and Unaware of It: How Difficulties in Recognizing One's Own Incompetence Lead to Inflated Self-Assessments. From the paper's introduction:

People tend to hold overly favorable views of their abilities in many social and intellectual domains. The authors suggest that this overestimation occurs, in part, because people who are unskilled in these domains suffer a dual burden: Not only do these people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it.

Dunning calls this "unrecognized ignorance". As he explains in the We Are All Confident Idiots article:

For poor performers to recognize their ineptitude would require them to possess the very expertise they lack. To know how skilled or unskilled you are at using the rules of grammar, for instance, you must have a good working knowledge of those rules, an impossibility among the incompetent. Poor performers—and we are all poor performers at some things—fail to see the flaws in their thinking or the answers they lack.

While the notion that "we don't know what we don't know" seems reasonable and familiar, the scary part is that even though we might be incompetent to deal with a particular situation, we're not troubled because we are blissfully unaware of our incompetence. Even scarier, we usually feel pretty confident about our chances for dealing with the situation effectively. Dunning again:

What’s curious is that, in many cases, incompetence does not leave people disoriented, perplexed, or cautious. Instead, the incompetent are often blessed with an inappropriate confidence, buoyed by something that feels to them like knowledge.

Blessed with inappropriate confidence? As much as we admire and react favorably to confidence and self-assurance, most of us wouldn't rely upon someone to do something important for us if we knew the person was confident, but not competent. Or would we?

Overconfidence is very common. According to a TED Talk by University College (London) professor Tomas Chamorro-Premuzic, who has studied the relationship between confidence and competence for over 10 years in 40 different countries, the distribution looks like this:



To make matters worse, in most parts of the world people equate confidence with competence, so they assume people who are confident are also competent, allowing confidence to mask incompetence. In the HBR Ideacast The Dangers of Confidence , Dr. Chamorro-Premuzic drew the distinction:

In reality however, there is a very big difference between confidence and competence. Competent people are generally confident, but confident people are generally not competent. They are just good at hiding their incompetence and their insecurities...

Yet success "correlates just as closely with confidence as it does with competence" according to The Confidence Gap by Katty Kay and Claire Shipman. And men tend to be more confident than women. A few bullet point takeaways from the article:

• Having talent isn’t merely about being competent; confidence is a part of that talent. You have to have it to excel.
• Confidence is... the factor that turns thoughts into judgments about what we are capable of, and that then transforms those judgments into action.
• In studies, men overestimate their abilities and performance, and women underestimate both.
• ... there is a particular crisis for women—a vast confidence gap that separates the sexes.

So if talent (the ability to do something well) requires both confidence and competence, what do you call confidence without competence? Dr. Shahid Qureshi calls it arrogance. Professor Chamorro-Premuzic is in the same camp. In Why Confidence Is Overrated he describes the consequence of appointing leaders on the basis of confidence rather than competence:

...if we keep rewarding those who think highly of themselves, simply because they think highly of themselves, then we will always end up with incompetent charlatans in positions of power and influence.

So why is it that we keep bumping into incompetent charlatans and confident idiots in leadership positions? It's our fault! We like and admire people who are self-assured and confident, and we're not that troubled if they happen to be incompetent. Professor Chamorro-Premuzic in the HBR Ideacast, on why we find confident people so compelling:

I think there are two main reasons. So the first one is that confident people tend to be more charismatic, extroverted, and socially skilled– which in most cultures are highly desirable features. The second one is that in virtually every culture, and especially the Western world, we tend to equate confidence with competence. So we automatically assume that confident people are also more able-skilled or talented.

What can we do about it? Chamorro-Premuzic in Why Confidence is Overrated:

When we hear people making claims about their talents, let's not assume that they are true, even if they are being honest (as a consequence of being self-deceived). Most talented people don't brag about themselves, and most of the self-promoters in the world are simply impostors.

You might be wondering whether talent plays any role in all this. I like to think that while your confidence may help you land a big job, sooner or later you need to perform and deliver in order to keep that job, so it's your talent (ability and results) that will ultimately determine your success. That may be the way it works on American Idol, but of course it doesn't always work out that way in business. Just think of all of the incompetent and feckless executives you've known who succeeded in holding on to key positions for far too long simply because they had a talent for dodging accountability--creating diversions, making excuses, and shifting blame and responsibility to others.

Confident idiots.  I can just imagine Mark Twain scratching his head and marveling at their success as he scrawled this line: "To succeed in life, you need two things: ignorance and confidence."

Dean K. Harring, CPCU is a retired Chief Claims Officer who advises on property-casualty insurance claims and operations.  He can be reached at dean.harring@suite200solutions.com or through LinkedIn 

Uncertainty

I remember being taught, a long time ago, that if you can't describe something, you can't measure it, and if you can't measure it, you can't manage it. I have been fascinated by management metrics since then, and I still believe that if performance metrics are designed correctly and aligned with an organization's strategic objectives they will naturally encourage employees to behave such that those objectives are achieved (for more on this, see my 2005 article Keeping Score .)

So when I came across the book Managing Uncertainty by Michel Syrett and Marion Devine, I had to look twice because the title troubled me. Uncertainty, of course, is the opposite of certainty--so being able to describe it well enough to measure it would seem to present an enormous challenge. According to the authors, while there is no precise, widely accepted definition of uncertainty, there are definite degrees of uncertainty. The book opens with a 2002 quote from Donald Rumsfeld:

There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are things we do not know. But there are also unknown unknowns--the ones we don't know we don't know.

Clear? One problem with planning (projects, strategy, risk or change management, financial, estate, etc.) is that we often use planning models that assume we can collect enough information about strengths, weaknesses, threats and opportunities to predict with acceptable certainty what challenges we will face during the plan period. Once the challenges are identified, we simply develop action items to address them, craft metrics to track performance against those items, assign accountability and put the plan in motion. But early in Managing Uncertainty the authors credit Arnoud De Meyer, President of Singapore Management University, with identifying four types of uncertainty:

• Variation--where small influences cannot be easily anticipated individually, but the resulting total impact can be identified and managed
• Foreseen--where identifiable and understood variances may or may not occur
• Unforeseen-- where an event's possibility is not recognized or its likelihood/probability is sharply discounted (unk unks)
• Chaos--where unforeseen events invalidate the strategy

In their paper On Uncertainty, Ambiguity, and Complexity in Project Management , Professor De Meyer and colleagues Michael T. Pich and Christoph H. Loch suggest that projects (and other plans) can be expressed as equations or "payoff functions" that are dependent on two things:

• The state of the world
• The choice of a sequence of actions

In other words, success in planning requires knowledge of the challenges presented by an operating environment, and the perspective to come up with appropriate action steps to deal with those challenges--although "adequacy of the available information" is critical to that success.  In their words: “Inadequacy of information is caused either by events or causality being unknown (ambiguity), or by an inability to evaluate the effects of actions because too many variables interact (complexity).” The more inadequate the information, the more difficult it is to plan successfully. But since information inadequacy arises from a lack of awareness or a lack of understanding, there are techniques (centered around learning and selectionism) that can be used to improve planning in unforeseen uncertainty situations. For a few practical examples, take a look at Three Tools to Manage Uncertainty by Kim Girard.

All of this struck me as interesting and relevant because I could see an obvious parallel within the insurance industry, particularly with the processes and procedures insurance claims managers use to set loss cost reserves. Anyone responsible for setting loss cost reserves on claims deals with De Meyer's four types of uncertainty, and they have no choice but to grapple with the adequacy of information available to them.

For example, when setting loss reserves on complex litigated claims that we believed were going to be tried to a verdict, we used to consider the likely verdict value (tied to damages, liability, venue, etc.) and modify it using a multiplier we called the "percentage chance of losing." So if the case had a verdict value of $500,000 and we had a 60% chance of losing, the reserve would be $300.000.

Ambiguity and complexity routinely invalidated that approach, however, because even if we were confident in our predicted verdict value and the % chance of losing, the actual verdict would rarely match our loss reserve. But when we did things to reduce ambiguity and complexity, when we developed better information about the likely trial environment (the state of the world--jury research, verdict history, attorney qualifications, etc.) and when our resolution plans included the most appropriate and impactful sequence of actions prior to and during trial, we usually got better outcomes.

I smiled when, in the course of thinking about this topic, I remembered situations during my career when I encountered individuals who were trying to manage uncertainty involving case or portfolio loss reserve adequacy in rather unorthodox ways. One claims officer "managed" reserve development by insisting on personally approving all reserve increases over $10,000, and he then moved very slowly on those requests. Another refused to improve any proposed reserve increase unless a corresponding and counterbalancing reserve decrease on another file was also submitted. A third incented his employees to minimize claim payouts each month, knowing that reserve adequacy for his environmental claim portfolio was determined based upon burn rate (number of years the reserve would last at current payment rates). A business unit leader, who was new to long tail lines and uncomfortable with the concept of prior year reserve development, insisted on sending teams of consultants out into the field offices to "fix" long tail line reserves. In the process he spooked the claims managers, artificially inflated case reserves and destroyed the reserve consistency that the actuaries relied upon to calculate ultimate loss exposures.

But my most enduring memory involved the business unit leader who told his assembled claims management group in September one year that he was tired of prior year reserve development, and that he didn't want to see any more of it after the first of the year. I don't need to tell you what happened with loss reserves in the fourth quarter that year.

All of which goes to show, I suppose, that some efforts to manage uncertainty end up creating even more uncertainty.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property casualty insurance claims and operations.  He can be reached at dean.harring@theclm.org or through  LinkedIn or Twitter.

Bristling with Adaptive Capacity

 

One of my favorite leadership books is Geeks and Geezers, by Warren G. Bennis and Robert J. Thomas, in part because the book introduced the notion of "adaptive capacity" in leaders:

... adaptive capacity is applied creativity. It is the ability to look at a problem or crisis and see an array of unconventional solutions.

According to Bennis and Thomas, adaptive capacity permits individuals to:

...confront unfamiliar situations with confidence and optimism. Those with well developed adaptive capacity are not paralyzed by fear or undermined by anxiety in difficult situations. They believe that if they leap, a net will appear--or, if it doesn't, they will be able to find or fashion one in time. Where others see only chaos and confusion, they see opportunity.

If you are in the insurance business, you know that good claims leaders absolutely bristle with adaptive capacity. Flexibility and resiliency are requisites for managing claims, and successful claims leaders find meaning and strength by grappling with the adversity and uncertainty they face every day. The best claims leaders also have the confidence and the will to get personally involved in contentious and difficult situations and creatively move them toward successful resolution. They embrace challenges, overcome obstacles, and learn and grow and become more confident as they go. In other words, they act a lot like Teddy Roosevelt!

I was watching the Ken Burns documentary The Roosevelts: An Intimate History last week and I was reminded of a story I once read about the 1912 presidential campaign. Teddy Roosevelt had served two terms as president and had decided not to run again in 1908, so his Secretary of War and hand-picked successor William Howard Taft won the presidency. Teddy wasn't happy with Taft's term, however. He also missed the action and excitement of national politics, so he decided to challenge Taft and seek the Republican nomination for president in the 1912 election. He didn't secure the nomination, so he decided to run as a third-party candidate representing the new Progressive (also known as Bull Moose) party.

It was an arduous campaign, raucous and hard fought. So intense and relentless that at one point Roosevelt was shot in the chest during a campaign appearance in Milwaukee, but went on to deliver a 90 minute speech before agreeing to go to the hospital. He was fighting an uphill battle with voters, and his campaign was running short of time and money, but his staff decided to push forward and print an elegant pamphlet with Teddy's photo on the cover for distribution to voters during the final round of whistle-stop tours.

They had three million copies printed, but as they were readying the pamphlets for distribution someone noticed that Moffett Studios in Chicago held a copyright on the cover photo of Teddy. Unfortunately, no one had bothered to obtain permission from Moffett Studios to use the photo. The potential penalty for unauthorized use was staggering-- $1 per pamphlet, or $3 million. The campaign didn't have the time or funds necessary to reprint the pamphlets using another photo, and simply moving forward and incurring the penalty and bad publicity associated with using the photo without permission was not an option. Staff members knew they had no choice but to strike a deal with the photographer, but they hesitated because they believed their bargaining position was weak.

Enter George Perkins, executive secretary of the Progressive Party and Roosevelt's campaign manager, who after being briefed on the situation took immediate action, sending this cable to Moffett:

We are planning to distribute millions of pamphlets with Teddy's photo on the cover. This will be great publicity for the studio who took the photo. How much will you pay us to use yours? Reply immediately.

Moffett replied immediately:

We've never done this before, but under the circumstances we'll offer you $250.

Problem solved!

I have always enjoyed that story, and I've told it many times to illustrate what adaptive capacity looks like. While you might not agree with his approach to Moffett, Perkins was a successful businessman, a heavy hitter, well connected to financier J. P. Morgan, and he knew how to get things done. He had the ability to look at a problem and quickly come up with an unconventional yet brilliant solution, and in this situation he converted a $3 million exposure into a $250 revenue item rather handily. Adaptive capacity, personified! Of course Theodore Roosevelt himself could have served as an adaptive capacity poster boy--a charismatic leader who also happened to be a tireless and prolific writer, an innovator, a problem solver, an obstacle surmounter and an odds-defying achiever and adventurer. Take a look at what he accomplished during his remarkable life here.

Well, the pamphlet got distributed as planned, but as we all know Woodrow Wilson went on to win the 1912 election with 42% of the votes, followed by Roosevelt at 27% and Taft at 23%. The Progressive party nominated Teddy as its presidential candidate again in 1916, but he refused the nomination and never got directly involved in politics again. Two and a half years later he died in his sleep at Sagamore Hill, his family home at Oyster Bay, NY.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property casualty insurance claims and operations.  He can be reached at dean.harring@theclm.org or through  LinkedIn or Twitter.

Just How Difficult Are You?

You are without a doubt the most pretentious, self-absorbed, arrogant, vain and ruthless little tyrant I have ever had the misfortune of knowing. You are emotionally unbalanced and delusional.  For some reason you believe you are special and entitled, demanding praise and attention and privileges you haven't earned and don't deserve--yet you are shamelessly uninterested in the needs and feelings of others. You exploit, criticize, scapegoat and treat others contemptuously, yet you can't tolerate a single word of criticism.  There's only one way to describe you. You are:

(a)  A real jerk

(b)  An infant

(c)  A CEO

(d)  A narcissist

(e)  Other _______________

People I ask seem to be able to identify, without hesitation or difficulty, somebody they know who fits this description, so they quickly and emphatically answer this multiple choice question.  Corporate types tend to choose answers (a) or (c) although in the write-in category (e) the most common answer is "A real asshole" (more on this crass yet technical academic term later.) Politicians, lawyers and ex-spouses also get honorable mention in (e).  Parents of young children, and students of Freud who have read "On Narcissism" (which introduces the concept of His Majesty the Baby) might choose (b).  Psychology majors and anyone who has ever read a book or an article in Time Magazine by Jeffrey Kluger tend to offer up the textbook answer (d), i.e., a person who behaves this way is usually described as a narcissist.
Most of us know the story of Narcissus, retold succinctly in a New Yorker piece by Joan Acocella called Selfie:

In Book III of Ovid’s Metamorphoses, from the first century B.C., we meet Narcissus, a young man so handsome that all the nymphs are in love with him. He doesn’t understand why; he wishes they would leave him alone. One day, in the woods, he comes upon a pool of water and leans over to take a drink. In the reflection, he sees his face for the first time, and falls in love. He swoons, he kisses his image, but he cannot have the thing he desires. In despair, he stops eating, stops sleeping. Finally, he lays his head down on the greensward and dies.

There are longer and darker versions of the story, but the prevailing theme is that Narcissus is so taken with himself that he is incapable of paying attention to anything or anyone else. Narcissism is sometimes described as a "fixation with oneself" but the American Psychiatric Association actually classifies it as a personality disorder.  In Selfie, Acocella also tells us that according to the most recent edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM-V) the primary characteristic of narcissism is grandiosity:

Narcissists exaggerate their achievements and what they are certain will be their future triumphs. They believe that they are special and can be understood only by special people, of high status. They feel entitled to extraordinary privileges. (They have the right to cut in line, to dominate the conversation, etc.) They show no empathy for other people. They envy them, and believe that they are envied in return. They cannot tolerate criticism.

If you really want to dig into narcissism, there is no shortage of reading material out there.  I recently read Why Is It Always About You? The Seven Deadly Sins of Narcissism by Sandy Hotchkiss.  She describes seven categories of narcissistic behavior (Shamelessness, Magical Thinking, Arrogance, Envy, Entitlement, Exploitation, and Bad Boundaries) so well that if you read her book you might begin to feel a bit uneasy about your own narcissistic tendencies.  The good news is that if you worry about such things you probably aren't really a narcissist, but just to be sure you can take a quiz here.  It is the Narcissistic Personality Inventory developed by Robert Raskin and Howard Terry of the University of California, Berkeley. I felt a little better after taking the quiz.

Of course the world is teeming with all kinds of people we perceive as difficult, not just narcissists but an eclectic assortment of know-it-alls, liars, cheaters, whiners, complainers, slackers, back-stabbers, perfectionists, illusionists, abusers, bullies, tormentors, mean-spirited rogues, and otherwise nasty weasels.  Robert Sutton, a professor at Stanford University, lumps them all into one descriptive category: assholes.  His entertaining book The No Asshole Rule: Building a Civilized Workplace and Surviving One that Isn't establishes two tests for determining whether someone fits into that category:

• After talking to the alleged asshole, does the "target" feel oppressed, humiliated, de-energized, or belittled? Does he or she feel worse about him or herself?
• Does the alleged asshole aim his or her venom at people who are less powerful rather than at those people who are more powerful?

Sutton also identifies twelve techniques assholes commonly use:

• Personal insults
• Invading "personal territory"
• Uninvited physical contact
• Threats and intimidation
• Sarcastic jokes and teasing, used as insult delivery systems
• Withering email flames
• Status slaps, intended to humiliate victims
• Public shaming
• Rude interruptions
• Two-faced attacks
• Treating people as if they are invisible

Any of this sound familiar? Of course it does. I hear you, and I feel your pain!  I can think of dozens of people I've worked with just in the past ten years who fit quite comfortably into this category. Sutton reminds us that even Steve Jobs, celebrated for his ability to imagine, inspire, motivate and create, was notorious for behaving poorly and routinely used many of these techniques. But while most of us have such tendencies and may slip into poor behavior patterns on occasion, there's a big difference between what he calls "temporary" and "certified" assholes: to qualify as "certified" you have to behave poorly persistently.  If you want to see where you fit on the scale, take Sutton's Asshole Rating Self Exam (ARSE, of course...would you expect anything else?) here, but steel yourself: if your self-rating score gets to a certain level, you will see this admonition from Sutton:

You sound like a full-blown certified asshole to me, get help immediately.  But, please, don't come to me for help, as I would rather not meet you.

Good luck, and be careful out there.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property-casualty insurance claims and operations.  He can be reached at dean.harring@theclm.org or through  LinkedIn or Twitter.

Digital Destruction and Big Bang Disruption

My wife is a project manager who is responsible for business operations at our local high school. She hired some people this summer to process and distribute new textbooks within the school, but they hadn't finished the job and school was about to open, so she needed someone to come in at the last minute and help get the work done. More specifically, someone who would follow her instructions and would not expect to get paid. So I spent a long Saturday with her at the school, schlepping pallets and boxes of new textbooks to the classrooms, getting everything in place in time for the start of the new school year.

I wasn't happy with the work (the school was hot, the textbooks heavy) and more than once I thought wistfully about Steve Jobs, who according to biographer Walter Isaacson, had targeted the school textbook business as an "$8 billion a year industry ripe for digital destruction." Targeting textbooks seemed like a good idea to me because not only are they big and heavy and expensive--they don't update easily, either. Unfortunately, Jobs didn't live long enough to disrupt the textbook industry, but others are on the same path and, selfishly, I wish them well! Check out The Object Formerly Known As The Textbook for an interesting look at how textbook publishers and software companies and educational institutions are juggling for position as textbooks evolve into courseware. Also, As More Schools Embrace Tablets, Do Textbooks Have a Fighting Chance? takes a look at how The Los Angeles Unified School District—second largest school district in the country—is equipping students with iPads and delivering textbooks digitally in a partnership with giant book publisher Pearson.

Harvard professor Clayton Christensen, author of The Innovator's Dilemma, is credited with coming up with the term "disruptive innovation," which he defined as:

...a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.

These days we tend to associate disruptive innovation with a new or improved product or service that surprises the market, especially established, industry-leading competitors, and increases customer accessibility while lowering costs. The notion is appealing, and it makes for exciting business adventure tales featuring scrappy, innovative underdogs overcoming entrenched, clueless market leaders. Of course disruptive innovation has been happening for a long time, even if it was called something else, but lately technology has made it easier and cheaper for upstart firms to take on industries they think are "ripe for digital destruction."

In her recent article The Disruption Machine, Harvard professor and New Yorker staff writer Jill Lepore squinted hard at disruption theory, though:

Ever since “The Innovator’s Dilemma,” everyone is either disrupting or being disrupted. There are disruption consultants, disruption conferences, and disruption seminars. This fall, the University of Southern California is opening a new program: “The degree is in disruption,” the university announced.

By the way, USC's Jimmy Iovine and Andre Young Academy for Arts, Technology and the Business of Innovation is in fact opening this year and will focus on critical thinking with plans, according to the Academy website, to "...empower the next generation of disruptors and professional thought leaders who will ply their skills in a global area." And yes, that is Dr. Dre's name on the Academy!

But there are others who believe we have now entered a decidedly more treacherous innovation environment, one that Josh Linkner in The Road to Reinvention says is forcing companies to systematically and continually challenge and reinvent themselves in order to survive. His fundamental question is this: "Will you disrupt, or be disrupted?" And Paul Nunes and Larry Downes, Accenture folks who wrote an article for the Harvard Business Review Magazine in 2013 entitled Big Bang Disruption (they have a new book on the same topic, summarized by Accenture here) warn of a new type of innovation which is more than disruptive--it's devastating:

...a Big Bang Disruptor is both better and cheaper from the moment of creation. Using new technologies...Big Bang Disruptors can destabilize mature industries in record time, leaving incumbents and their supply-chain partners dazed and devastated.

Should CEOs be worried? When Mikhail Gorbachev visited Harvard in 2007 and said “If you don’t move forward, sooner or later you begin to move backward”, he was talking about politics and multilateral nuclear treaties, not companies, but the warning certainly could have been directed at company CEOs. That message, refreshed to incorporate the disruptive and big bang innovation threats that have emerged since then, seems a bit unsettling: If you run a company and you aren't dedicating resources to continually scanning the marketplace for threats and improving and reinventing your business, if you are instead taking a "business as usual" approach, you are at risk of being marginalized or supplanted by competitors who will bring new products, services, experiences, efficiencies, cost structures and insights to your customers. Maybe not this year, or next year, but sometime soon. It's not a question of whether it will happen, but when. Thus Linkner's question, restated: Will you disrupt yourself, or be disrupted by someone else?

Of course some industries, like property casualty insurance, may not be high on anyone's "ripe for digital destruction" list, so maybe there's no need for insurance company CEOs to worry. Except perhaps about Google and Amazon. I keep thinking back to Blockbuster CEO Jim Keyes' comments to The Motley Fool in 2008: "Neither RedBox nor Netflix are even on the radar screen in terms of competition." You know the rest of the story, which illustrates the real-life consequences of an incumbent underestimating and then becoming "dazed and devastated" by a competitor.

Dean K. Harrring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property casualty insurance claims and operations.  He can be reached at dean.harring@theclm.org or through  LinkedIn or Twitter.