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Many of our clients have asked about the year 2000 computer problem. Naturally they are concerned how they and their investments might be effected. The United Nations recently set up a
special monetary reserve fund because it believes that up to 50% of its
member countries will not solve the problem before the year 2000.
The fund was set up specifically for the International Banking community
to address any banking crisis that may come about.
Depending on the source, anywhere from
30% to 50% of major US corporations will not be able to address the problem
in time. No one really knows the exact figure because most companies
are keeping their mouths shut so customers do not panic. In other
words, no one is saying to their customers how they are addressing the
problem, if they even are.
A major US banking institution completed
an internal study in 1998 and concluded they would have systems problems
in the year 2000. The programmers also concluded they could not fix
the banks computer systems in time. I know, because I read it.
The Chinese government has created a
task force of government officials and airline executives to address any
airport navigational systems problems that may come about because of the
year 2000. To provide some motivation, the Chinese government ordered
that everyone on the task force must be in the air on a commercial airplane
January 1, 2000.
Before we offer some thoughts on the
subject, let us discuss what the problem really is. That is
to say, it is a human problem and not a computer problem. Computer
programs are written by human beings and as such are only as good as the
thought and skill of the people responsible. But before we place
blame on the programmers, we must understand human nature.
The problem actually dates back to the
early mainframe computers on the 1960’s. The programming language
used to run most of these mainframes was COBOL. This early language
was somewhat cumbersome to write and used a tremendous amount of space.
In order to save space, programmers decided to drop the first two digits
that represented the year. For example, 1960 became simply 60.
The year 1972 became 72, and so on. While you might think such an idea
could not save space, if you realized how many times a program must refer
to a date on the calendar for things like bank statements, your electricity
bill, you would start to understand the methodology. In all honesty,
programmers writing these programs and installing these mainframe systems
in major corporations never thought their programs would be used thirty
years later. It was assumed that new technologies would take its
course and that new systems would be in place twenty years later when the
1990’s came along. What has actually happed is new programming languages
and faster, better computers did come along. But, the new computer
programs were often written over the old or were designed to work with
the older programs already in place. To make an analogy, we can discuss
the building of a house. If we build a house in the year 1960 with
a concrete foundation that only has a life span of say 30 years, all of
the new remodeling and new building materials we use in the year 1985 are
resting on a shaky bottom. So, who is really to blame? The programmers
who were given a specific task to do twenty-five years ago, or the senior
management of the corporations who knew about the problem in 1985 and choose
to do nothing because of the costs or personal embarrassment involved?
It all comes back to human nature and how we would often prefer to put
problems aside so we can look good in front of the boss and get our next
raise.
The ironic thing about the United Nations
Banking Reserve Fund is that the concern is really aimed at so called third
world countries that may not have the money or the resources to fix this
problem. In reality, many financial institutions outside the US rely
more on paper than on computers for the very same reason. Let us
take the Dominican Republic and Panama as an example. Banks
in the Dominican Republic and Panama still use the old savings passbook,
which has gone with the wind in the US. In most banks, the teller
also initials each transaction in the passbook regardless if it is a manual
or computer printed entry. Time Deposits, Certificates of Deposit
and Commercial Paper investments are usually manually created and recorded
by hand. Customers still receive actual paper certificates, which
bear the signatures of the bank or institution officials.
Because many of these institutions do
not have the familiarity with computerized systems, they are still doing
business the old- fashioned way. It is not because of desire or always
a budgetary problem. Banks and businesses in some countries
are simply ten to twenty years behind because they do not have technology
savvy personnel as with their counterparts in the US. This may prove to
be a blessing in disguise.
Ask your bank, brokerage firm, telephone company, and credit card company for a statement in writing regarding what they are doing to address the problem with their computer systems. It is also a good idea to try and get something in writing from your branch manager guaranteeing that your account with the bank or your ATM card will not be adversely affected from the year 2000 computer problem. I would wager to bet you will not get such a letter, but ask anyway. You will have a better time with legal action should you have a problem and if you documented the fact that you inquired before hand. Ask for updated statements on or before
the end of December. It could not hurt to ask your bank for a manually
printed statement on say December 27 indicating your account balances,
etc. Try to get the branch manager to sign off on the statement as
well. This will take thirty minutes of your time and with the bank
officer’s signature, you have a documented record of what you have on deposit
(with a human being who is affixing their name to it).
Keep some extra cash on hand just in case. I am not advocating that everyone head for the hills and hoard gold, but the fact of the matter is you just do not know if you will have a problem with your ATM card in January. Even if your bank is 100% up to par, the other banks may not be. In all honesty, no one really knows just
how bad or how good things will be. Unlike some countries in Latin
America, every part of our life in the US is in some way run by a computer.
The postal service uses computer systems to read and sort mail. The
telephone company uses computers for call switching. The electric
company uses computers to track billing and issue statements. Even the
traffic lights in your city or town operate via a computer system.
So, it is safe to say that there will be some problems. As the boy
scout motto says; Be Prepared.
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