August 25th, 1998

My personal year 2000 summary of why it will be a problem, or why not: All the facts came from the top of my head, and is the result of what I remember most from all my research on this topic in the last 5 months, from March to August. I write this because I cannot speak on all issues at once without being interrupted when talking with another person. Iím going from start to finish, across all major industries and issues regarding y2k, listing first the negatives and then the positives that I know. Iím excluding government from the topic, because they are the least prepared, as anyone knows who has read a newspaper in the last month or so. I can document and link to just about every fact.

Overall personal view of the mess and how we got here:

For a corporation or government, the task of becoming y2k compliant is a long-term major infrastructure overhaul. Itís possible that 5 years ago, this problem might have been alleviated enough to result in only a major recession. Completing the task provides no benefit to the company that does it, other than they will be able to continue business as usual. Iíll say it again, they have to do something major, well in advance, just to keep breathing. But, of course, corporations and governments do not act like humans do, not exactly. For y2k, procrastination is a threat. Short-term thinking is a threat. Rational cost-benefit analysis is a threat. Why spend major resources (a lot of money) to fix something about 3-7 years down the road if I donít even know if this company will be in business 5 years down the road? Even if the company will be in business, Iíll probably not be working there anywayÖ After all, sometimes, it makes more economical sense to let a company go out of business than to keep it going. Y2K infects companies and governments, not humans. If a human had this virus, heíd be far more willing to get the disease cured. When people find out they have something like syphilis or AIDS, they usually see the doctor right away and do not wait until it becomes a life-threatening illness. The other reason why this problem was not fixed 5 years ago, and the reason why it is not fixed today, is that 5 years ago, new computers, chips, & software were all still being made that were non-compliant. In fact, even today non-compliant software and chips are still being made. Unfortunately, there is no more time left. The fact is, most companies or governments do not have the luxury to think and plan 5-10 years ahead, and thatís why this problem was not serious in 1995. Look at the roads, case closed. Interestingly, that, too is an infrastructure problem just like y2k is.

Embedded chips:

Negatives: These non-y2k compliant chips infect virtually all computer controlled large systems. Embedded chips cannot be re-programmed, nor can they be replaced. Old chips are no longer manufactured. Chips are manufactured in 18-month production runs, and old, defective chips cannot be bought or replaced at any price. If a chip is in a motherboard, you canít replace the chip, you have to replace the entire motherboard. If you replace the motherboard, if the motherboard is old enough, just about all of the old components that it worked with and controlled will no longer work. Failure of embedded chips in large systems often mean that the entire system needs to be replaced.

In many cases the faulty non-y2k complaint chips cannot even be detected in advance because they rely on internal clocks that cannot be tested with "date advancing" tests. Therefore, many systems using embedded chips will fail regardless of how much testing is done beforehand. Many devices and systems being produced today use embedded chips that will not work in y2k. Computer systems, x-ray machines, current computer upgrade projects, that are being done in mid 1998, are, in many cases NOT y2k compliant. Thus, even if large systems are overhauled today, there is no guarantee they do not replace the system with another non-y2k compliant system.

The average offshore oil rig has 10,000 embedded chips. The average power generator at a power plant has 1000 embedded chips. Jet planes, modern merchant ships, etc. all use embedded chips. 2-3% of these chips will fail and have failed in testing. This results in 10-15% of systems failures. One system failure is usually enough to halt production entirely, and in testing usually multiple systems fail y2k compliance tests, and it takes weeks to simply discover and assess which systems failed. More might fail because testing is not 100% sure unless the actual date rolls by in real time.

Positives: Embedded chips that work on internal clocks (without battery-backup like in PCís) can be reset simply by unplugging the device, and plugging it back in, a la the ever-blinking VCR clock that says 12:00.

Negatives: Embedded chips that calculate dates based on a two digit date field will fail (your VCR) when they attempt to calculate 00 dates and beyond, regardless if they have been unplugged or not. If software is re-written to use a 4 digit date field, and the chip can only calculate using a 2 digit date field, the thing will not work.

More negatives: Itís a simple solution, but a big problem. If your job is to polish a can of marbles in a week, you can do it. If your job is to polish a "grand canyon" full of marbles, it does not matter how much help you have, you wonít be done in a week, not in a year, not in ten.

We have a 50-year-old system of infrastructure that will collapse in 1999-2000. Many chips, software, etc, read 99 as "end of run" do not work/ error, stop calculations, etc., because the designers knew it would not work in 00, sorry, year 2000, anyway.

Power:

Negatives:

35% of the 7000+ power companies have not yet started working on the problem as of mid 1998. The systems that need fixing because of faulty embedded chips are regularly replaced about once every 15 years. The people who make those systems are not likely to ramp up production by a factor of 15 in the next month to meet demand. Why not? Those 35% are still not moving to fix the problem, and have no plans to do so. Why? Ignorance.

All nuclear power plants are much more complex, requiring more computers to run things and regulate things. Embedded chips will cause all nuke plants to fail. If not, they will have to shut down if there is a lack of emergency response teams.

Positives:

Fewer than 90 power companies supply 80% of the power in the U.S. Many of these companies have plants that are not running at full capacity because it is not currently economical to do so, (excessive cheap power currently available).

Hydro-electric plants are the least susceptible to this problem, and Hoover Dam is not even at 50% capacity. The are many hydro electric plants in Northern America and Canada that may also be able to supply additional power.

A very large chunk of electric power in America is consumed through air conditioning. The availability of cheap nuculear power caused a booming change in the American landscape with people moving to warmer areas, and making air conditioning almost universally available. The simple solution to a lack of full electric power would be to make air-conditioning illegal, and to raise the overall cost of power. These two simple measures will balance out a shortage of a lack of power. Thus, we should still have electricity for everything but air conditioning, if we can get everyone to agree and hold hands on the AC issue.

Nuclear power supplies 20% of the power in the US, and in some parts of the country it is a major supplier, like 60% or so for the region.

Banking:

Negatives:

There will be bank runs mid 1999 because people will not get assurances that there will be no problem. 1. Problem is unfixable, and liability issues prevent the issuance of guarantees. People will take out cash, and there is not enough cash available. A maximum of $1000 per household will be made available (100 Billion), but that is not enough cash for most people for one month, and many people will want a three month supply or more. People will write checks to buy other tangible assets (instead of cash) like gold, etc., and remove much more than 100 Billion in cash from the banks.

There will be a number of factors creating instability as people buy gold, T-Bills, money-market accounts, & sell hard assets like houses or take out second loans to access their equity and liquify it, and buy things like food, generators, sleeping bags, bicycles, etc. I donít know why, but banks are offering 125% loans on home value right now.

There will be inflationary pressures as people increase spending, increase personal debt that they believe might not need to be paid back, and refuse to pay taxes into a system that will not be able to process/detect/prosecute payments or lack thereof.

There will be deflationary pressures as there will be a removal of cash from the banking system and the destruction of 1 Trillion or more through "fractional reserve banking." If people remove 1 Trillion in cash ASSETS from the banks and pour it into things like gold, which has a current world value of 4/5ths of a Trillion, that will destroy 10 Trillion on the balance sheets of banks. If gold doubles in value, itíll have a world cap value of 1.5 trillion.

Positives:

We have an 8 Trillion Banking economy. Even if people remove the 100 Billion in cash that will be made available in case of bank runs, that would only remove 1 Trillion in equity from the banking system, not enough to cause a systemic collapse. The Fed could easily loan 1 Trillion into the U.S. Banking system to make this a non-event.

Money today is created out of thin air at whim. The job of the Fed is to balance the money supply through interest rates and loans, etc. The Fed knows the problems, and will be prepared.

Money might rush into U.S. y2k compliant corporations from around the world, boosting stocks and banks in the U.S.

Oil and Gas:

Negatives:

Thousands of embedded chips are needed to produce oil and gasoline at every stage, from ground removal, to ground transportation, to world shipping, to ground transportation, to refinement, to distribution. Offshore oil platforms have 10,000 embedded chips, 80% are underwater or underground. These cannot be fixed/replaced and will fail. Large oil tankers are computer-operated these days, and will not be able to sail after y2k. The tracking and directing of the hundreds of oil tankers is equally computerized and will fail.

Each stage should suffer a loss of at least 10% in productivity at the most positive estimate. That would reduce supply by over 50%. A 15% supply reduction in oil had a devastating effect on our economy in the 70ís. This will be much worse.

Positives:

The production of oil is a simple process and it will not fail. The large oil corporations are very prepared, and have been working on this problem for over 5 years. Shell is very prepared.

Major Manufacturing:

Negatives:

General Motors has proven to the nation what a catastrophe it would be for one of their critical plants to failóregarding the strikes last month.

GM tested one plant, and advanced all the dates forward on all devices. Result? Total plant shutdown, with none of the machines and robotics working, and they even locked themselves inside the plant when the security system failed.

Positives: General Motors is aware there is a problem.

Negatives: Awareness will not polish all the marbles, and is about 1% of the fix.

Transportation Trains:

Negatives:

Trains are computerized and they will fail. Switches are computer controlled and will fail. Computers track the cars, and will not know where they are, or where they are going, nor will computers be able to direct the traffic and cars.

When Union Pacific merged last fall with another railroad, the computer integration problems of tracking the cars, and managing the trains caused 3 major train wrecks, and resulted in a major drop in transportation. The Department of Defense simply stopped using them, and many companies lost tens of millions of dollars because of delayed shipment of goods. This was a major news-worthy problem for over a month last year. The y2k problem will be much worse, because instead of using two incompatible computer systems to manage the trains, they will have no computer systems managing the trains.

Positives:

You can easily station a person at each switch to get them to work.

Business Management:

Negatives: Most business plans donít go for more than a year. Y2K computer problem awareness has become popular only now, by mid 1998. 1999 is too late, since many computer failures will occur not on Jan. 1 2000, but on Jan. 1, 1999. Many power companies are still struggling to stay in business month to month since deregulation, let alone be able to consider y2k, which is over a year away.

Positives: Most business managers are smart people, worthy of our admiration for always getting things done, being able to see the big picture, see "outside the box" etc. Yeah right.

Information Technology:

Negatives:

Typically, IT projects are over budget and late. Y2K is a fixed deadline.

There are not enough programmers for the regular high tech economy, let alone for fixing y2k problems. This shortage will not change, even if you pay programmers a million a year, there will still be a shortage because programming is a very high-tech skill requiring years of training.

During the past 50 years, society has laid down a basic infrastructure of information technology, the entire basis of which will have to be revamped. Modified old code will not work because there is not enough time for testing, and all-new replacement code cannot be written in time.

Automatic data-sharing programs will not work.

Positives:

Automatic data-sharing programs will work, provided you are able to translate incoming data to fit your format.

Information technology is continually becoming more and more efficient.

Litigation:

Negatives:

Lawyers are gearing up for 1 Trillion worth of y2k litigation. We have an 8 Trillion economy. Litigation alone will destroy the insurance industry. Most insurance companies do not include y2k in their coverage plans. Many state governments have passed legislation to indemnify themselves against any y2k catastrophes. If insurance refuses to cover y2k, business will fail from the litigation because they will have no protection.

Fear of litigation and liability are preventing companies from doing two things. 1. Issuing guarantees that they will be ready. 2. Sharing IT y2k fixes and known problems with others.

Positives:

Threat of litigation can motivate a company to fix their IT y2k problems if they have not started fixing their systems yet.

Litigation against Microsoft might drive them out of business after y2k because most of their software is not compliant and/or requires multiple patches to fix, although Iím not sure if this is a positive or a negative.

The General Publicís mild "panic" response of getting a grand in cash, and a monthís worth of extra food:

Negatives:

Even if everything goes well, a public panic can destroy our society. If everyone attempted to keep their gas tanks ĺ full all the time, there would be hour-long lines or worse at gas stations everywhere.

If everyone attempted to fill their cupboards with a monthís supply of food all at once, demand would be 30 times to 3000 times greater than capacity. IE, most people donít eat grocery store canned food on a regular basis, but on a 1% basis. Most food is distributed through restaurants, or "other" grocery store food.

If everyone attempted to get cash or liquid assets, banks would fail, and home and property values would fall to 1/3 of current values or worse, and Trillions could be removed from the economy causing bank failures, and business failures, making everything worse.

A threefold increase in food shopping would clean out store shelves, because stores only have 2-3 days of supply at any one time. IE, they are supplied three times a week from most major suppliers.

If everyone were to buy an "extra" weekís worth of food all in one week, (in addition to their normal weekís worth of food), it would be a doubling of the regular demand, which would, in this case, clean out not only the store shelves, but also their suppliers in that week. Why? Because suppliers/distributors donít have much more than the supermarkets due to "just in time" computer inventorying practices.

If everyone were to buy an "extra" monthís worth of food, spaced out over one month, in addition to their regular monthís purchases, demand would also be two times greater than normal, and they would clean out not only store shelves every day of that month, but also their distributors, and perhaps even manufacturers.

If food shelves were empty for a month, the panic would be extreme, and people would want a year of food on hand, making the problem crazy.

Positives:

If people donít panic, or plan, people may end up starving, rioting, and killing each other if food production and distribution slips because of banking problems, train problems, power problems, water problems, etc.

Negatives of the positive above:

If people donít panic, perhaps less will be done to fix y2k, and all the basic underlying systems will end up much worse off, and so will all the people.

Surveys have been done to assess public panic. There are two that I know of.

The first was a phone survey of the general public. 50% plan to remove some or all of their money from the banks by mid 1999 if they cannot be guaranteed that the banks wonít lose it. 38% of the public did not know that there was a year 2000 computer problem, so I assume that if they did, the 50% number would be higher.

The second was an online survey, which said that 44% of people thought it was going to be a major problem and they plan to stock up on food & cash or that they already have started doing so, and 45% saying they thought it would not be a problem. 10% said they did not know or had not heard about y2k.

Thus, the surveys show that Ĺ of all people plan to take panic/planning measures, but most probably have not started yet.

I know of at least three things that are becoming scarce because of public planning already. Generators, gold coins, and MREís (meals ready to eat) are all being consumed in greater quantities than normal. Generators are on up to 3 month wait lists. MREís are almost impossible to buy when you could have gotten them about 3 months ago as supplies were only diminishing. Certain bullion Gold coin types are, for the first time ever, being exhausted completely from dealers. Gold is still cheap because failing national banks and nations are selling reserves, like Russia, Japan, Latin America. Europe is selling because of thoughts that the Euro wonít require national gold holdings, even though the Euro dollar itself will be backed by 10% to 15% in gold.

The people at the Boulder y2k conference seemed also to be split among people who thought personal planning (buying food, holding cash & guns) was important. There were significantly vocal people who thought doing such was a "negative" and/or "isolation" tactic that would be unfruitful because people with more guns would simply kill you for your stuff. Many people expressed the idea that if we all hold hands and think loving thoughts and believe that all people are equal that nothing bad would happen and food would appear on its own. That togetherness is the only way to get through any problem. These irrational thoughts of "togetherness is the only acceptable solution" is the main reason why people in crisis will flock to the cities, and not rove the countryside for food in y2k if there are food shortages. The other reason why I think the mountains will be safe is that the terrain naturally protects. Switzerland was a safe place to be through two world wars because of the terrain, and the fact that everyone had guns. Guns and mountains seem to be a good and safe mix.

Programmer Panic (different than general public panic)

Negatives:

Most business programming languages were written in cobol or any of a number of early programming languages, with no documentation. These programs have been translated out of cobol, and others into binary 0ís and 1ís and have been modified with patches on top of the old work. The cobol programmer is about as extinct as the dinosaur, and even if we had enough cobol programmers, there is no documentation, and the language has been translated into a language that is indecipherable to human beings. The y2k software program is largely unfixable with many large old business software programs that track things like money, customers, orders, shipments, etc., and many programmers know this, but continue work anyway, because itís their paycheckÖ. Programmers are among the most optimistic people when it comes to saying "it can be fixed" and "I can do it". However, the reality is that most programming projects take twice as long and twice as much money to do, and many times they simply fail to deliver a working piece of software altogether. Most programmers optimistically say that assessment is 1% of the y2k fix, that re-programming is 10% of the project, and that 90% of the time will be devoted to testing. Many companies predict they will have their code fixed, the 10% mark done by mid or late 1999, and many governments are predicting dates like 2002 or 2003.

Programmers have been among the first group of people to panic/plan in response to y2k. They are abandoning the field, and moving to remote areas for several reasons. 1. To avoid personal liability in case their "fixes" donít work. 2. They donít think society will fix the problem, and donít want to get caught in the cities during the time of panic.

More negatives: Programmers who work on y2k are the most informed individuals on the entire subject, are intensely "rational," "analytical," and "emotionless" group of people, and if they are freaking out, why should we be confident that they will fix the problem?

More negatives: If programmers leave the y2k fix it projects, the projects will not get fixed.

More negatives: Many programmers are planning on continuing work on y2k fixes until mid 1999 or late 1999 when they plan to jump ship.

More negatives: If a faithful and loyal programmer who is not worried about y2k today sees that his y2k project will not be finished in time, why will he continue to remain loyal to a company that will fail due to y2k? In other words, if he knows his company will fail Jan. 1, 2000, will he quit in December or November 1999, or even begin looking for another job even earlier?

More negatives: There are not enough programmers, we are short 300,000 programmers, and the ones we have are currently overworked and underpaid. Do you want to put your faith in this group of overworked, underpaid, highly technical group of people who are already doing the rational thing of moving to the mountains?

Positives:

Programmers are creating a panic on purpose just so they can get paid more for y2k fixes. They are opportunists who are attempting to take advantage of the rest of us. They will fix things at their current rate of pay, and in less time they have told us it will take.

The fact is that many y2k consulting companies have already boomed and busted on the stock market, because demand for their outsourcing services was not as heavy as anticipated.

Negatives:

Demand has not reached a peak yet, because many managers, like the public, are still unaware. Many managers have STILL not started on fixes yet, or they believe that they will still have time to hire the programmers they need, and/or have not increased the wages of programmers to crazy amounts yet.

More negatives: If programmers ARE paid extremely high wages, will they tell the truth that the problem cannot be fixed if that is the truth, or will they take the money and begin work in earnest, saying that theyíll fix it in time while planning to quit at the last moment anyway?

More negatives: Who wants to be a y2k computer consultant/expert if you will be blamed if things go wrong, and you will be unemployed if things go right?

Human nature:

People are generally in denial when presented with facts they donít like or go against their personal belief system. Our personal belief systems are that the sun will rise tomorrow, that if I turn the switch in my room my light comes on, that I must be concerned only about my own business and not others (why worry about that which you have no control), that if other people are not in panic, neither should I panic. We have to hold such beliefs in order to function effectively. Unfortunately, such assumptions do not take into account the facts regarding y2k. Cognitive dissonance is a feeling of uncomfort that people feel whenever peopleís beliefs are not consistent, or when actions and beliefs are not consistent, or when new ideas conflict with current beliefs. Interestingly enough, people, when faced with cognitive dissonance of action/belief differences, change their beliefs instead of their actions. When faced with new ideas that conflict with their beliefs, they reject the new ideas. This is a fundamental finding of modern psychology, and it fits with ancient wisdom. Beliefs and actions are in harmony, and people change beliefs before they change actions when faced with beliefs/knowledge/facts that conflict with what what they know. In other words, businesses that are showing losing profit margins attempt to stay in business as long as possible rather than close doors. The man who makes his living hauling ice from the mountains continues to do so, even for a period of time after the invention of a freezer. The man who uses a pick-axe to dig into the mountain continues to do so for a living even after the invention of dynamite or a steel machine hammer. The business of textile manufacturing in the United States continues to try and survive in the face of cheap labor overseas. Any person breaking any of Godís laws, rationalizes that the laws should not apply in this case, or that he/she is still a Ďgoodí person, etc.

Denial caused the problem to begin with, and it will make it worse and worse as time goes on. The only ones who can fix the problem are human beings, and most people are still in denial, no matter how much they know about the problem, because that is human nature. Some managers, knowing the problem refuse to do anything, knowing they canít do anything. They think, why start polishing the marbles if thereís no way they will all be fixed. Some managers, hearing about the problem, refuse to do anything in the face of the monumental challenge. Some managers, hearing about the problem, cannot do anything due to budget constraints. No money = no solution. Some managers still have not yet heard anything at all about y2k. After all, they are only human.

The problem was created both by necessity, but also by convention! Saving data storage space, yes, but also popular convention of listing dates as 04-05-70, or April 5, í70. Thus, the problem continued long after we had the storage capacity in computers. Many modern software programs have the y2k problem coded into them because of convention, not because the modern 6 gig computer drive canít hold 04-05-1970.

People who created the problem, or who knew of the problem 10 years ago, those people thought any number of rationalizations:

  1. They wouldnít be around when it would come time to fix it.
  2. The code is running on hardware thatíll have to be replaced anyway.
  3. The code is running on an operating system thatíll have to be upgraded anyway.
  4. I was merely following convention, and I didnít know what I was doing.
  5. Itíll be upgraded with everything else.
  6. The code, if I write it y2k compliant, will not work with any of the other systems that are in place today that are not complaint, and my code has to be compatable with current systems and technology, which are non-compliant.

My Personal opinion:

Since all of the above is merely the facts that I have studied regarding y2k, and other peopleís opinions in a few cases, here is my chance to say what I think will happen given all of the above facts.

Breakdown! Riots! Starvation! Bank failure! Worse than the great depression, which was born out of only one systemic failure, a contraction of the money supply in banking, which eventually got so bad, even banks failed. When banking, power, oil, law, water, transportation, distribution, manufacturing, General Motors, Xerox, Coca-Cola, etc., all suffer major computer crisis simultaneously, it will be nothing less than a horrific catastrophe. The crisis of the 70ís was a shortage of 15% of oil. Imagine a 10% drop in productivity across all sectors of the economy at once. In many sectors, this is what knowledgeable people are predicting who are the MOST optimistic. Catastrophe of enormous proportions and major economic hardship is the result. Itís a mathematical certainty that more than 10% failure across the board is going to happen, or worse, in all sectors of the economy, in all locations of the nation, in all parts of the world, all at the same time. There has never been an event of this proportion, scope, size, or nature. There is nobody with any experience who has gone through and understood such an event such as we are facing. Currently, we are spending more on y2k fixes than we are spending on national defense. This is a major problem, and itís time to stop denial, and start preparation and action.

Once you begin to take action, itíll be easier to throw out old beliefs as thatís what cognitive dissonace theory says. Thus, you can be helped by the way we work as humans, instead of being hurt by it.

Here's a few y2k links:

  1. http://www.year2000.com/
  2. http://www.millennia-bcs.com/
  3. http://www.garynorth.com/
  4. http://www.yardeni.com/
  5. http://www.prepare4y2k.com/
  6. http://www.survivey2k.com/
  7. http://www.euy2k.com/
  8. http://www.y2ktimebomb.com/
  9. http://www.senate.gov/~bennett
  10. http://www.gao.gov/y2kr.htm
  11. http://www.yourdon.com/
  12. http://www.wild2k.com/
  13. http://www.co-intelligence.org/Y2K.html
  14. http://www.tmn.com/y2k





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