Five Lessons From Y2K That Resonate Today

(Bloomberg Opinion) -- As we address the tragedies of Covid-19, we should learn from past calamities, whether epidemics or economic collapse. But we can also learn from a crisis that was successfully managed — the Y2K threat to computer operations 20 years ago..For those too young to remember the late 1990s, the Y2K bug had the world on edge. “Will computers melt down? Will society?” screamed a Time magazine cover about “Y2K insanity.” Newsweek warned of “The Day the World Crashes.” Survivalists stocked up on blankets and bottled water in anticipation of Jan. 1, 2000, the day when the modern world might grind to a halt, and planes, perhaps, fall out of the sky..At root of all this fear was a technical problem that went largely unnoticed for decades: Computer programs had long represented years using only two digits, not four. That system worked well enough for decades, but when 1999 turned into 2000, the concern was that computers would only see “99” followed by “00” and not be able to tell which year was current and which was past. That glitch might sound small, but if not corrected it would cause major malfunctions in manufacturing, aviation and financial services, among many other industries..Yet when Jan. 1, 2000, came around, there was very little impact. The world didn’t crash. The threat was averted. This was not because the threat wasn’t real. It was. Instead, systems kept working because experts helped the nation prepare and prevented a catastrophe..While it’s too late for major preventative actions to mitigate the coronavirus crisis as we did with Y2K, it’s not too late to prepare for the inevitable next outbreak. Nor is it too late to learn from other aspects of the Y2K story that can help us understand where we are now and where we’re heading..And I can share some of those lessons based on personal experience. At the time, I ran a software company that provided critical systems to about 6,500 banks, including most of the 100 largest in the U.S. We were one of 72 U.S. bank services companies FEMA identified as critical to the financial system. Failure of our software was not an option. Ours was new enough that we didn’t have the Y2K issue ourselves, but we interacted with and relied on other systems that made us vulnerable..Here’s what I observed and learned during that time:. Tight regulation tied to mandatory testing — painful as it was — saved the day. As the Y2K date approached, federal regulators prohibited financial institutions from installing new systems between September 1999 and April 2000. That was a huge hit for those of us who provided such systems, but it ensured there was clear focus on software fixes and system integrity. We need to use the same kind of approach as the Covid-19 curves flatten, so we don’t generate a major resurgence by lifting safety measures before we know the data calls for it. This is what the experts are telling us now, as they did in 1999. We need to listen today as we did then. As in 1999, it starts with a laser focus on testing. The public trust is sacred and must be nourished in times of crisis. Then as now, there were many instances of panic buying. The U.S. saw increases in gun sales and hoarding of food and fuel. (However, the toilet paper fixation seems to be a new one.) But it didn’t get out of control because government leaders, armed with credible data, provided trustworthy reports on progress. By about September 1999, they were able to assure Americans that, while there might be some problems, things were going to be under control — as they were. Sadly, we do not currently have this same degree of transparency or data, and the trust they engender. The national coronavirus efforts are led by a president who rejects science and data. Federal credibility during Y2K was a huge asset that the herculean efforts of governors can only partially replace today. Markets won’t just bounce back. In 2000, we learned that fear and caution linger far past the end of a crisis. All our market research during 1999 told us that once Y2K was over, the banks would have an explosion of buying to get the new systems that had been put on hold for several years. I bet our company’s strategy on pent-up demand, and I was totally wrong. Instead, after spending all that money to fix the problem, banks decided to stick with what they had. It was years before bank software markets returned to normal. It was a painful lesson, but one to remember for anyone who thinks the economy is going to suddenly jump back into hyperdrive. Dealing with the disruption of our current situation will be the top priority. Covid-19 and the shutdowns have been huge economic shocks, and people’s psyches have absorbed a shock as well. Those impacts are likely to linger for a very long time. We need to proceed with caution and recognize that remedies —such as financial and psychological support for furloughed and terminated workers, people in poverty, and vulnerable small businesses — will need to carry well into 2021 and beyond. Documenting the facts will protect us in the future. In 2000, we had our fair share of truth-deniers who tried to rewrite history and claim Y2K never posed a threat. The revisionism began almost as soon as the new year arrived and everything kept working. Today, the far right refers to Y2K as a fake crisis that was overblown by “Deep State” bureaucrats. When a crisis is averted or effectively addressed by government action, we see how those who despise and fear government claim it never was a problem in the first place. We need to remember what really happened, or we will never learn the lessons that can prevent or mitigate future crises. We can build on the solutions that come out of the crisis. During Y2K, we created systems that could test the integrated functioning of financial institution systems with reliability. That was a critical benefit after Sept. 11, when systems shut down and needed to be brought back to life, often in different locations. The system testing from Y2K enabled us to do that with virtually no problems. Even a crisis offers learning opportunities, and we should seek them out with Covid-19. For example, we’re creating lots of new systems that enable us to work remotely. Thus, a large hospital system in the Pacific Northwest that had 400 remote consultations last year projects 460,000 this year. That new capacity could lead to cost reductions and better services in the future. The coronavirus has disrupted everything from dining to education and created fear related to interpersonal contacts. As we deal with this, we need to examine the solutions we are creating and determine if they may have broader, positive, long-term applications. .Perhaps the most important lesson from Y2K is that we can prevent many crises with appropriate planning and by relying on the experts who understand the issues. We did that with Y2K and created resilient systems that stood up to a major threat. So far, I fear we have failed to do the same with Covid-19. Erratic presidential hunches are not a sound basis for action. We need consistent federal leadership that is rooted in science and driven by data. Absent that, we can at least turn to regional and state leadership — and remember the lessons from past crises..This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners..Matt Chapman is a retired executive who led organizations in the financial services and the education markets, and remains an active board member of technology companies and education nonprofits..©2020 Bloomberg L.P.

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Five Lessons From Y2K That Resonate Today

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