Get me Out of the Swamp

“We were amazed,” I wrote home that week, “to find that the President [of the United States] had testified before Congress that there was actually an attack on the USS Maddox on August 4, [1964] and that it was unprovoked.

“We had been listening to reports coming over our ship’s radio from Maddox indicating a high degree of confusion, which led to some of the more senior officers [senior to me, as a boot ensign] to say that in the heavy seas and weather that we were having, there’s no way that those Maddox sonarmen would have been able to distinguish a torpedo from a knuckle in the water caused by a sharp rudder turn.”

Cleaning out some old files last week, I unearthed a few letters from my Navy days. In early August, 1964, my ship, the destroyer USS Harry E. Hubbard, had been operating in the Tonkin Gulf off the coast of North Vietnam for a week, ostensibly gathering intelligence together with the USS Maddox and the USS Turner Joy, among other Navy ships in our task group. On August 2, Maddox provoked some North Vietnamese patrol boats into a fire-fight, which resulted in several North Vietnamese casualties.

Two nights later, we heard ship’s radio transmissions from the Maddox reporting that they were under attack again. We were sixty miles away; before Hubbard could come to their aid, Maddox had broken off the “engagement” and begun to assess what had happened. The White House, which also had been patched into the radio reports, reacted immediately.

What really happened didn’t come to light until seven years later, when publication of the controversial Pentagon Papers revealed what we in the Fleet truly believed in 1964, that the initial reports of unprovoked attacks on Maddox were erroneous. They had been used without confirmation or follow-up inquiry as a pretext for escalation of U.S. involvement in Vietnam, culminating in President Johnson’s request and Congress’ passage on August 7, 1964 of the Tonkin Gulf Resolution, which granted the President the authority to conduct military operations in Southeast Asia without the benefit of a declaration of war.

A rush to judgment and a subsequent call to action based on limited and unverified information is seldom a good practice, whether you’re in international waters or in the swamps of small business management. And decisions made in the heat of battle are often not the ones that would have been made given time for reflection and objectivity.

As we turn the page to a new year, and as I consider the first few weeks of a new client engagement starting January 1, I am suggesting to my clients that there’s never a better time to reflect on where their companies are going and how they’re going to get there. My role in the next few weeks is to get the owners and managers of my client companies to think and talk about the following issues in some depth:

  1. What were we thinking? By reviewing the initial budget for 2010 and the assumptions that went into it vs. what actually happened during the year, what can we learn? What didn’t we know that we should have known? What came up that was totally unpredictable? What were the largest budget variances, and why did they occur?
  1. Learning from our mistakes: What decisions, in retrospect, were clearly wrong? In making them, did we lack the relevant information, the right experience, or was it simply bad judgment? How quick were we to recognize the error and to rectify it? With any of these decisions, could we have hedged our original bets to limit our losses?
  1. The operating environment: What’s going on around us? Has the competitive landscape changed? How many old customers have we retained this year? How many new ones have we added? What are five-year revenue trends? The current flat economy is too easy an excuse for a failure to thrive.
  1. The talent inventory: What have we learned from the departures of good people? Are we competitive in the talent marketplace? By what measures? Do we have the right skills among our employees? Equally important, do we have the right attitudes? How do we know that? If there are metrics-measured performance gaps that can’t be closed with training, coaching, and education, are we prepared to terminate individuals?
  1. Cache-ing cash: What were the factors that created each of our high and low cash positions in 2010? Did we anticipate and manage those? Are we cash-constrained by our external financing sources? How fast can the company grow based on internal cash generation? How much money do we need to fund our 2011 Plan?

Without someone to ask and a number of people to answer these questions, you may be stuck in the swamp – or out to sea – for quite a while in 2011. We certainly were in 1964 – out to sea, that is. While Time, Life, and Newsweek pumped up the case for war, the Navy didn’t want anyone asking us questions. By the end of August, the Tonkin Gulf incident was old news, LBJ had his case for the fall Presidential election campaign, and we were finally allowed to come back to port. The rest, as they say, was truly a swamp…

Alligator Bites

A brief history lesson:

“In October, 2005 the New York Times reported that Robert J. Hanyok, a historian for the U.S. National Security Agency, had concluded that the NSA deliberately distorted the intelligence reports that it had passed on to policy-makers regarding the August 4, 1964 incident. He concluded that the motive was not political but was probably to cover up honest intelligence errors…

“According to intelligence officials, the view of government historians that the report should become public was rebuffed by policymakers concerned that comparisons might be made to intelligence used to justify the Iraq War… that commenced in 2003. Reviewing the NSA’s archives, Mr. Hanyok concluded that the NSA had initially misinterpreted North Vietnamese intercepts, believing there was an attack on August 4. Midlevel NSA officials almost immediately discovered the error, he concluded, but covered it up by altering documents, so as to make it appear the second attack had happened.

“On November 30, 2005, the NSA released the first installment of previously classified information regarding the Gulf of Tonkin incident, including a moderately sanitized version of Mr. Hanyok’s article, ” Skunks, Bogies, Silent Hounds, and the Flying Fish: The Gulf of Tonkin Mystery, 2-4 August 1964 .” The Hanyok article stated that intelligence information was presented to the Johnson administration “in such a manner as to preclude responsible decision makers in the Johnson administration from having the complete and objective narrative of events.” Instead, “only information that supported the claim that the communists had attacked the two destroyers was given to Johnson administration officials.”

“With regard to why this happened, Hanyok wrote:

“‘As much as anything else, it was an awareness that President Johnson would brook no uncertainty that could undermine his position. Faced with this attitude, Ray Cline [head of the CIA’s Directorate of Intelligence] was quoted as saying “… we knew it was bum dope that we were getting from Seventh Fleet, but we were told only to give facts with no elaboration on the nature of the evidence. Everyone knew how volatile LBJ was. He did not like to deal with uncertainties.'”

– Wikipedia, The Gulf of Tonkin Incident

Draining the Swamp

Selected Economic Data – 12/31/2009 12/6/2010
Dow-Jones Industrial Average 10,428 11,362
NASDAQ 2,269 2,595
S & P 500 1,115 1,223
Euro: U.S. Dollar $1.43 $1.33
G.B. Pound: U.S. Dollar $1.61 $1.57
Canadian $: U.S. Dollar $ .95 $ .99
Gold, per oz. $1,096 $1,418
Brent crude oil, per bbl. $79.36 $91.89


Source: Market Data Center , Wall Street Journal