The Fifth Risk : Undoing Democracy - Micheal Lewis I Summarized Books
The Fifth Risk : Undoing Democracy
Chris Christie, the New Jersey governor, volunteered for Donald Trump’s presidential transition team
In February 2016, Chris Christie noticed an articlein theNew York Times that the New Jersey governor dropped out of the presidential race and had thrown his support behind Donald Trump — and that’s how it all started.Chris saw this article in late April, which also describes meetings between representatives of the remaining candidates still in the race — Trump, John Kasich, Ted Cruz, Hillary Clinton, and Bernie Sanders — and the Obama White House. Anyone who still had any kind of shot at becoming president of the United States apparently needed to start preparing to run the federal government.
Christie volunteered himself for the job: head of the Donald Trump presidential transition team. “It’s the next best thing to being president,” he told friends. “You get to plan the presidency.” He went to see Trump about it. Trump said he didn’t want a presidential transition team. Why did anyone need to plan anything before he actually became president?“It’s legally required”, said Christie.
Trump asked where the money was going to come from to pay for the transition team. Christie explained that Trump could either pay for it himself or take it out of campaign funds. Trump didn’t want to pay for it himself. He didn’t want to take it out of campaign funds, either, but he agreed, grudgingly, that Christie should go ahead and raise a separate fund to pay for his transition team. “But not too much!” he said.
Partnership for Public Service trained civil servants to be business managers and lobbied Congress to fix deep structural problems
By the fall of 2016, Max Stier might have been the American with the greatest understanding of how the U.S. government actually worked. Oddly, for an American of his age and status, he’d romanticized public service since he was a child.A few years out of law school he’d met a financier named Sam Heyman, who was as disturbed as Max was by how uninterested talented young people were in government work. Max persuaded Heyman to set aside $25 million for him so that he might create an organization to address the problem. Max soon realized that to attract talented young people to government service, he’d need to turn the government into a place talented young people wanted to work. He’d need to fix the United States government.
Partnership for Public Service, as Max called his organization, trained civil servants to be business managers; it brokered new relationships across the federal government; it surveyed the federal workforce to identify specific management failures and success, and it lobbied Congress to fix deep structural problems. In 2002, Max created an annual black-tie, Oscars-like, awards ceremony to celebrate people who had done extraordinary things in government.
Max detected a pattern: a surprising number of the people responsible for the success stories were first-generation Americans who had come from places without well-functioning governments. People who had lived without government were more likely to find meaning in it. On the other hand, people who had never experienced a collapsed state were slow to appreciate a state that had not yet collapsed.
Max’s biggest challenge: explaining the value of this enterprise at the center of a democratic society to people who either took it for granted or imagined it as a pernicious force in their lives over which they had no control. He’d explain that the federal government provided services that the private sector couldn’t or wouldn’t: medical care for veterans, air traffic control, national highways, food safety guidelines.
Enter the presidential transition. A bad transition took this entire portfolio of catastrophic risks — the biggest portfolio of such risks ever managed by a single institution in the history of the world — and made all the bad things more likely to happen and the good things less likely to happen. Even before Max created an organization to fix the federal government, the haphazard nature of presidential transitions drove him nuts.
Max Stier’s Partnership for Public Service had helped to push through three separate laws related to the transition. In 2010, Congress gave free office space and other resources to the nominees of the two major political parties right after the summer conventions.
In 2011–2012, to enable the president to put people in jobs more quickly, Congress reduced the number of presidential appointments that require Senate confirmation from about 1,400 to roughly 1,200 — still over a thousand too many, in Max’s view, but a start. Finally, in 2015, Congress required the sitting president to prepare in various ways to hand the government over to his or her successor. The person who had already taken the test was now required by law to help the person who may not have studied for it.
Did you know? The United States government employed two million people, 70 % of them one way or another in national security. It managed a portfolio of risks that no private person, or corporation, is able to manage.
The Trump administration had no competent people to gather knowledge of his predecessor
The morning after the election, the people who ran the U.S. Department of Energy turned up in their offices and waited. They had cleared thirty desks and freed up thirty parking spaces. They didn’t know exactly how many people they’d host that day, but whoever won the election would surely be sending a small army into the Department of Energy and to every other federal agency.Eight years earlier, Barack Obama had sent between thirty and forty people into the Department of Energy. The Department of Energy staff planned to deliver to Trump’s people the same talks, from the same five-inch-thick three-ring binders with the Department of Energy seal on them, that they would have given to the Clinton people.
Dy 1, Day 2, there was a deafening silence, Trump’speople weren’t anywhere to be found. The few places they did turn up, they appeared confused and unprepared. A small group attended a briefing at the State Department, for instance, only to learn that the briefings they needed to hear were classified. None of the Trump people had security clearance — or, for that matter, any experience in foreign policy — and so they weren’t allowed to receive an education.
On his visits to the White House soon after the election, Jared Kushner expressed surprise that so much of its staff seemed to be leaving, “He thought everyone just stayed."
If nuclear power plants around the world are not producing weapons-grade material, it is because of the DOE
The one concrete action the Trump transition team took before Inauguration Day was to attempt to clear the DOE and other federal agencies of people appointed by Obama. But there was actually a long history of even the appointees of one administration hanging around to help the new appointees of the next. The man who had served as the Department of Energy’s chief financial officer during the Bush administration, for instance, stayed a year and a half into the Obama administration — simply because he had a detailed understanding of the money end of things that was hard to replicate quickly.The CFO of the department at the end of the Obama administration was a mild-mannered civil servant type named Joe Hezir. He had no particular political identity and was widely thought to have done a good job — and so he half-expected a call from the Trump people asking him to stay on, just to keep the money side of things running smoothly. The call never came. No one even let him know his services were no longer required. Not knowing what else to do, but without anyone to replace him, the CFO of a $30 billion operation just up and left.
This was a loss. A lunch or two with the chief financial officer might have alerted the new administration to some of the terrifying risks they were leaving essentially unmanaged. Roughly half of the DOE’s annual $30 billion budget is spent on maintaining and guarding the United States nuclear arsenal. Two billion of that goes to hunting down weapons-grade plutonium and uranium at loose in the world so that it doesn’t fall into the hands of terrorists.
If nuclear power plants around the world are not producing weapons-grade material on the sly by reprocessing spent fuel rods and recovering plutonium, it’s because of these people. The DOE also supplies radiation – detection equipment to enable other countries to detect bomb material making its way across national borders. To maintain the U.S. nuclear arsenal, it conducts endless expensive experiments on tiny amounts of nuclear material to try to understand what is happening to plutonium when it fissions, which, amazingly, no one really does.
The Trump people didn’t seem to grasp how much more than just energy the Department of Energy was about. They weren’t totally oblivious to the nuclear arsenal, but even the nuclear arsenal didn’t provoke in them much curiosity. “They were just looking for dirt, basically,” said one of the people who briefed the Beachhead Team on national security issues.
In the run-up to the Trump inauguration, the man inside the DOE in charge of the nuclear-weapons program — Frank Klotz was his name — was required to submit his resignation, as were the department’s 137 other political appointees.
Frank Klotz was a retired three-star air force lieutenant general with a Ph.D. in politics from Oxford. The keeper of the nation’s nuclear secrets had boxed up most of his books and memorabilia just like everyone else and was on his way out before anyone had apparently given the first thought to who might replace him.
It was only after Secretary Moniz called U.S. senators to alert them to the disturbing vacancy, and the senators phoned Trump Tower sounding alarmed, that the Trump people called General Klotz and — on the day before Donald Trump was inaugurated as the 45th president of the United States — asked him to bring back the stuff he had taken home and move back into his office. Aside from him, the people with the most intimate knowledge of the problems and the possibilities of the DOE walked out the door.
Did you know? In eight years alone — 2010–2018 — the DOE’s National Nuclear Security Administration collected enough material to make 160 nuclear bombs.
The DOE provides low-interest loans to companies to encourage risky corporate innovation in alternative energy
It was early June 2017 when Michael Lewis, the author, walked through the DOE door to see what was going on. The DOE makes its home in a long rectangular cinder-block-like building propped up on concrete stilts, just off the National Mall. It’s a jarring sight — as if someone had punched out a skyscraper, and it never got back on its feet.By the time Michael arrived in Washington, the first eighth of Trump’s first term was nearly complete, and his administration was still largely missing. He hadn’t nominated anyone to serve as head of the Patent Office, for instance, or to run the Federal Emergency Management Agency (FEMA). There was no Trump candidate to head the Transportation Security Administration, and no one to run the Centers for Disease Control and Prevention.
At this point in their administrations, Obama and Bush had nominated their top ten people at the DOE and installed most of them in their offices. Trump had nominated three people and installed just one, former Texas governor Rick Perry.
Inside the DOE building, people claiming to be from the Trump administration appeared willy-nilly, unannounced, and unintroduced to the career people.
“There’s a mysterious kind of chain from the Trump loyalists who have shown up inside DOE to the White House,” said a career civil servant.
“That’s how decisions, like the budget, seem to get made. Not by Perry.” The woman who ran the Obama department’s energy-policy analysis unit received a call from DOE staff, telling her that her office was now occupied by Eric Trump’s brother-in-law. Why? No one knew.
The DOE has a program to provide low-interest loans to companies to encourage risky corporate innovation in alternative energy and energy efficiency. And it has been demonstrably effective: it lent money to Tesla to build its factory in Fremont, California, when the private sector would not, for instance. Every Tesla you see on the road came from a facility financed by the DOE. Its loans to early-stage solar energy companies launched the industry. There are now thirty-five viable utility-scale, privately funded solar companies — up from zero a decade ago. And yet today the program sits frozen. “There’s no direction what to do with the applications,” says a young career civil servant.
Over and over again, Michael was asked by people who worked inside the DOE not to use their names, or identify them in any way, for fear of reprisal. “People are heading for the doors,” says Tarak Shah. “And that’s really sad and destructive. The best and the brightest are the ones being targeted. They will leave the fastest. Because they will get the best job offers.”
There might be no time in the history of the country when it was so interesting to know what was going on inside these bland federal office buildings — because there has been no time when those things might be done ineptly, or not done at all. But if you want to know how the DOE works — the problems it manages, the fears that keep its employees awake at night, the things it does you just sort of assume will continue being done — there’s no real point in being inside the DOE. Anyone who wants a blunt, open assessment of the risks inherent in the United States government now has to leave it to find it.
Early-stage innovation in most industries would not have been possible without government support
How can an organization survive that stresses and responds only to the worst stuff that happens inside it? How does it encourage more of the best stuff, if it doesn’t reward it?The $70 billion loan program that John MacWilliams had been hired to evaluate was a case in point. It had been authorized by Congress in 2005 to lend money, at very low-interest rates, to businesses so that they might develop game-changing energy technologies. The idea that the private sectorunder investsin energy innovation is part of the origin story of the DOE. “The basic problem is that there is no constituency for an energy program,” James Schlesinger, the first secretary of energy, said as he left the job.
“There are many constituencies opposed.” Existing energy businesses — oil companies, utilities — are obviously hostile to the government-sponsored competition. At the same time, they are essentially commodity businesses, without a lot of fat in them. The stock market does not reward even big oil companies for research and development that will take decades to pay off. And the sort of research that might lead to huge changes in energy production often doesn’t pay off for decades.
John MacWilliams had enjoyed success in the free market that the employees of the Heritage Foundation might only fantasize about, but he had a far less Panglossian view of its inner workings. “Government has always played a major role in innovation,” he said. “All the way back to the founding of the country. Early-stage innovation in most industries would not have been possible without government support in a variety of ways, and it’s especially true in energy. So the notion that the DOE is just going to privatize early-stage innovation is ridiculous.
Politically, the loan program had been nothing but downside. No one had paid any attention to its successes, and it’s one failure — Solyndra — had allowed the right-wing friends of Big Oil to bang on relentlessly about government waste and fraud and stupidity. A single bad loan had turned a valuable program into a political liability. As he dug into the portfolio, MacWilliams feared it might contain other Solyndras. It didn’t, but what he did find still disturbed him.
The DOE had built a loan portfolio that, as MacWilliams put it, “JPMorgan would have been happy to own.” The whole point was to take big risks the market would not take, and they were making money! “We weren’t taking nearly enough risk,” said MacWilliams. The fear of losses that might, in turn, be twisted into anti-government propaganda was threatening the mission.
Did you know? The Obama administration set a goal in 2009to get the cost of utility-scale solar energy down by 2020 from 27 cents a kilowatt-hour to 6 cents. It’s now at 7 cents, and competitive with natural gas because of loans made by the DOE.
The federal government offers the only hope of a coordinated, intelligent response to threats to the national grid
“They knew exactly where to shoot. They knew exactly which manhole covers were relevant — where the communication lines were. These were feeder stations to Apple and Google.” There had been enough backup power in the area that no one noticed the outage, and the incident came and went quickly from the news.In his briefings on the electrical grid, MacWilliams made a specific point and a more general one. The specific point was that we don’t actually have a national grid. Our electricity is supplied by a patchwork of not terribly innovative or imaginatively managed regional utilities. The federal government offers the only hope of a coordinated, intelligent response to threats to the system: there is no private-sector mechanism.
His more general point was that managing risks was an act of the imagination. And the human imagination is a poor tool for judging risk. People are really good at responding to the crisis that just happened, as they naturally imagine that whatever just happened is most likely to happen again. They are less good at imagining a crisis before it happens — and taking action to prevent it.
MacWilliams thought that, while such things did happen, they were not the sole or even the usual source of catastrophe. What was most easily imagined was not what was most probable. It wasn’t the things you think of when you try to think of bad things happening that got you killed, he said. “It is the less detectable, systemic risks.” Another way of putting this is: the risk we should most fear is not the risk we easily imagine. It is the risk that we don’t. Which brought us to the fifth risk.
One crude way that MacWilliams ordered the 150 or so risks on his final list was to plot them on a simple graph with two axes. On one axis was “probability of an accident.” On the other axis was “consequences of an accident.” He placed risks into one of the graph’s four quadrants. A nuclear bomb exploding in an assembly plant and blowing up the Texas Panhandle: high consequence, low probability.
A person hopping a perimeter security fence at one of the DOE facilities: low consequence, high probability. And so on. Mainly, he wanted to make sure the department was paying sufficient attention to the risks that fell into the graph’s most unpleasant quadrant — high probability of an accident/big consequences if it happens.
Did you know? In 2016 the DOE counted half a million cyber-intrusions into various parts of the U.S. electrical grid.
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