Convention Center Hotel Promoters are a Bunch of Get-Along Business Guys Who May Not Even Realize Their Own Deception
Does truth get more difficult the smarter you are?
On August 17, 1998, President Bill Clinton told a Washington grand jury, "It depends on what the meaning of the word 'is' is....[I]f 'is' means is and never has been, that is not—that is one thing. If it means there is none, that was a completely true statement."
He was trying to explain why he had allowed his attorney to tell a judge he hadn't had sex with a White House intern when he had.
On March 22, 2009, The Dallas Morning News quoted Dallas Mayor Tom Leppert as saying, "I asked then and I keep asking, 'Is there anything that at this point in time would keep us from crossing the goal line?' Their answer is no."
Leppert was trying to explain why he had told voters two years earlier that federal officials had "signed off" on safety issues in a major public works project when, in fact, they had not.
The Dallas May 9 referendum on a city-owned convention hotel, as Sam Merten explained in our cover story last week "Who Do You Trust?," has become a referendum on Mayor Leppert's honesty. Is he a truth-teller? Or a liar?
The mayor goes before audiences every day and vows the hotel project is all good: Construction costs will be within the half-billion-dollar estimate; the hotel will make its ambitious revenue numbers; the city will bask in black ink for decades with new revenue the hotel will bring Dallas in increased convention trade.
In ads and debates, however, opponents of the hotel point out that Leppert's word has been less than golden on similar issues in the past. This is the same man, after all, who vowed to voters before the 2007 referendum on the Trinity River Project that the U.S. Army Corps of Engineers had "signed off" on all of the important safety and engineering issues associated with building a high-speed, limited-access highway between levees along the Trinity River where flooding occurs on a biennial basis.
Leppert also told voters he had spoken personally with the North Texas Tollway Authority and was "very comfortable" that the NTTA would fund the entire cost of the road above and beyond the city's modest share.
Leppert also based his advertising campaign on a claim that changing the alignment of the toll road—moving it outside the levees—would "send a billion dollars down the river" in lost cost-sharing from other agencies.
All three of those claims turned out to be false. The Corps of Engineers had signed off on nothing. The NTTA had promised nothing. There was no billion dollars at stake.
Three major untruths, three explicit declarative promises made to voters in exchange for their votes, all false.
But in a column by business writer Cheryl Hall in last week's Morning News, Dallas oil and real estate tycoon Ray Hunt voiced anger at the anti-hotel forces who have questioned Leppert's honesty.
"This is an attack against the office of mayor," Hunt told Hall. "The mayor is being punished because he disagrees with the opposition on a legitimate civic issue. That's unacceptable."
The subtext in Hall's column was that almost all of the city's business and social leaders, with very few exceptions, support the hotel and support Leppert. The suggestion—identical to the claim made during the Trinity River toll road campaign two years ago—is that not everybody in business and social leadership in the city can be a liar. Not everybody!
It's a powerful argument, with an equally devastating obverse. In order to believe that everybody in leadership is a liar, wouldn't you have to be a tinfoil-hat-wearing, self-mumbling paranoiac? Isn't it sort of crazy to imagine that it's all one vast conspiracy?
That's why I was so fascinated by an academic article recommended to me last week by community activist and political consultant Lorlee Bartos. Called "Delusion and Deception in Large Infrastructure Projects" in the winter edition of California Management Review, it's a study explaining exactly how and why everybody involved in a big project can be a fool, a liar or both. And to explain it you don't have to invoke anything tantamount to a real conspiracy.
It's more like human nature.
The study's three authors, business professors at the University of Oxford, University of Sydney and the University of Western Australia, start out with three global truths that seem to apply equally to all cultures all over the world. 1) Most people love their mothers. 2) Almost all people are afraid of large predators. 3) "...across the globe, large infrastructure projects almost invariably arrive late, over-budget and fail to perform up to expectations."
The authors cite three flamboyantly disastrous examples. One was a German project in 2003 called Toll Collect that wound up losing so much money in toll road collections—a quarter of a billion dollars a month—that Germany had to put its entire national highway program in mothballs until the Toll Collect project was fixed.
The second was the Eurotunnel or "Chunnel" under the English Channel, a project so wildly over cost and under its revenue projections that economists have decided the entire economy of Europe would be better off today had the Chunnel never been built.
The third, my favorite because of its obvious local parallels, was the Sydney, Australia, Opera House. Construction began in 1959 with an estimated budget of 7 million Australian dollars. When it opened in 1973, 10 years late, the full cost was $147 million.
But the authors don't merely offer scare stories. They present cumulative data for entire classes of projects, from rail to software games, and demonstrate how and why each class tends to break budgets and calendars in its own characteristic way and at its own pace. They argue that the human frailty that causes large projects to go haywire occurs equally in government projects and private ones.
The authors look at incentives, relationships, feedback, transparency and consequences. The baseline they use is the weather forecaster on TV. He or she has no reason to lie. The feedback is quick. Everybody sees how the predictions come out. The forecaster pays a cost if the predictions are lousy.
But take a very different scenario: Let's say, for example, a complicated public project with major impacts on private players. Why, we might as well take that downtown convention hotel we're about to vote on and use it as an example.
The incentives of some of the players pushing hardest for the hotel—The Dallas Morning News, for example, which owns real estate virtually ringing the hotel site—are quite distinct from the incentives of the ultimate shareholders, who would be you and I, the taxpayers.
The owners of the Morning News and their friends quoted in Cheryl Hall's story have a major incentive to see an investment made in downtown that might drive action to their own properties.
We taxpayers, on the other hand, need the project itself to make money, so that we won't have to bail it out, and then we need it to increase overall economic activity in the city so we can tax that activity and use the proceeds for public purposes.
We have different incentives.
We also have a glaring case of what the authors call a "principal-agent problem." You and I are the principal here. We are the ultimate owners. But we have this agent working for us, whose name is Tom Leppert. Now, he becomes the principal when he goes to city manager Mary Suhm and tells her he wants a hotel built, and she becomes his agent. She's the principal when she tells a construction company to build it and hotel company to run it, and they are her agents.
But here's what the authors of the article find when they look at relationships like this across the world: Every time you get differing or even conflicting incentives in a project and then spread those out over all kinds of principal-agent relationships, you wind up with lots of reasons up and down the line for people to fudge or delude themselves or flat-out lie.
People don't necessarily sit down and say, "Let's lie about it." They may. More likely, people at each stage of the game say to each other, "Let's be positive, and let's be upbeat, and let's say and do what we have to in order to get the deal."
Then in a place like Dallas, where the social structure of the business world is still a glass pyramid, slippery and steep, people have very strong reasons for getting along, for wanting to be thought of as right types and team players.
The result is a kind of group self-hypnosis which the authors describe as "delusion and deception." Part of it is rose-colored glasses. Part of it is lying. The two go together like horses and carriages.
"Delusion and deception are complementary rather than alternative explanations of the failure of large infrastructure projects due to cost underestimation and benefit overestimation," they write.
The thing I find most convincing in their argument is that they present simple solutions. For example, they suggest one good way to cut down on fudging, lying and rose-colored exaggeration is to make sure everybody, public and private, top to bottom, has real skin in the game.
"[T]o obtain more realistic forecasts and reduced risk, full public financing or full financing with a sovereign guarantee should be avoided," they write. "Whenever possible, the decision to go ahead with a project should be made contingent on the willingness of private financiers to participate without a sovereign guarantee for at least one-third of the total capital needs [authors' emphasis]."
The hotel deal we vote on May 9 is exactly what the authors say not to do. None of the ultimate risk is on the people pushing the hotel the hardest. The pushers all have incentives for self-delusion and public deception.
I think that's what Harlan Crow sees. He's the project's main opponent, the money behind the Vote Yes campaign. He sees a bunch of people all enthusiastic and upbeat about playing around with somebody else's money.
That's not a conspiracy, exactly. It's more like a fever, a kind of joy-juice war dance. Everybody's singing the same song, whipped up and sweaty, feeling great, feeling angry about the ones who won't sing along.
Actually I think I'd be a lot more comfortable with a conspiracy. There's some point at which you can reason with conspirators.
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