The Y2K Problem:
Millennial Madness or A Real Threat
By Bill Beardall
Updated: March 24, 1999
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Note: This is an evolving commentary. I will add to it as I review additional information. I welcome your comments and will post those I find of value, no matter what position you take on this issue. Please send your comments to: bbeard1@ix.netcom.com. |
I bought my first computer in 1983 and have have had an interest in computing since that date. Though not much of an expert, I have found myself with sufficient knowledge to help with computer problems at work and give some advise to others on what to buy or how to deal with minor problems. I had heard that there could be some computer problems at the turn of the century, but decided that it was just another computer glitch to be dealt with. I thought that until a few weeks ago, when I listened to a four-hour interview with Gary North on the Art Bell radio program.
Much of the content on the Art Bell show is far out stuff. Usually I listen for its entertainment value. But this interview caught my attention. Having been around computers for 15 years, I knew that there was a ring of truth to what Mr. North was saying. He explained the problem, what it would mean to government, banks, utilities, and a host of other organizations, and the potential consequences to society. He painted a doomsday picture. I found it hard to believe that society had postponed this problem until it was too late. But then I started doing some research on my own and was amazed at what I found. What follows is my own summary of what I have come across thus far and my feeble commentary on it. Take it for what it is worth. I will be glad to provide what information I can to assist you in deciding what action you should take to prepare for the first days of the new millennium.
Madness or Threat
Gary North writes on his Home Page (http://www.garynorth.com), “We’ve got a problem. It may be the biggest problem that the modern world has ever faced. I think it is. At 12 midnight on January 1, 2000 (a Saturday morning), most of the world’s mainframe computers will either shut down or begin spewing out bad data.... Think of what happens if the following areas go down and stay down for months or even years: banks, railroads, public utilities, telephone lines, military communications, and financial markets.”
An article in the Seattle Weekly for June 18, 1998 stated, “For no matter how detailed and engineerishly reasonable the explanations of Y2K problem and its potential consequences, I have never found it possible to believe that it amounts to anything genuinely dangerous. The problem with the millennium bug in my mind has always been that it is too perfect a bug for our times. It is too apt a symbol to be real, to ingenious and appropriate an end to 20th century civilization to be credible.”
Who is correct? Is Gary North’s apocalyptic prediction madness or is there a legitimate threat? Is the writer for the Seattle Weekly one of the few sane members of the press to address the problem or does he have his head buried in the sand? What is the real truth about Y2K? I’m not sure. I’m not sure that anyone knows the full answer. Robert J. Samuelson wrote in the web edition of the Washington Post on May 6, 1998, “For the press, I grasp the difficulties of covering this story. It’s mostly hypothetical. Until we have a corpse, we don’t know whether there’s been a murder.” So, do we wait to see what happens or do we prepare ourselves in case the murderer decides to show up?
Evidently the President of the United States has been informed of the possible consequences of the Y2K problem. In a statement (Office of the Press Secretary) made on July 14, 1998 President Clinton made reference to the coming new millennium and the possibilities and challenges that lie ahead. He went on to say, "It is fitting, if more than a little ironic, that this same stroke of midnight will pose a sharp and signal test of whether we have prepared ourselves for the challenges of the Information Age. The Vice President discussed the design flaw in millions of the world's computers that will mean they will be unable to recognize the year 2000. And if they can't, then we will see a series of shutdowns, inaccurate data, faulty calculations." Mr. Clinton goes on to say that the consequences might "simply be a rash of annoyances, like being unable to use a credit card at the supermarket, or the video store losing track of the tape you have already returned," but it could also be as profound as affecting "electric power, phone service, air travel, major governmental service." The President goes on to outline progress being made in the government and lists initiatives taken with the states, private industry, and foreign countries. He concludes with an upbeat statement that "this will be the first challenge of the 21st century successfully met." The President said what I think most men would say if put in his position. Regardless of the known consequences, the President will outline the steps that are being taken and remain mostly upbeat. The fact that the President has made this five page statement should be sufficient notice for every individual to wake up and make an effort to discover what the potential impact of Y2K will be on his or her life.
Senator Bob Bennett, in a speech before the National Press Club (July 15, 1998) used stronger language than President Clinton. He says that this is a "serious problem, and one that cannot be minimized." Later in his speech he says that "I think that civilization as we know it is not going to come to an end. It's a possibility. Possibility, if Y2K were this weekend insted of 76 weekends from now, it would." Senator Bennett has admitted that this problem is serious enough to end civilization as we know it. He says that he believes we can win, because we have 76 weeks to prepare. If one accepts Senator Bennett's premise, then we must accept the possibility that life may never be the same after January 1, 2000. One can only imagine the potential problems that could arise because of failed computer systems.
Senator Bennett was asked why we just don't forget about all "this computer nonsense" and go back to using typewriters. Bennett's response, "Well, first you're going to have to find one!" His point is that the infrastructure that made our society work 25 years ago is gone. We have become dependent on computers. Either we solve the problem or face the consequences. There is no alternative. The concern I hear raised by the alarmists is that there isn't enough time or enough trained technicians to solve the problem. I read from many sources that governments and companies are working towards compliance, but I hear of few entities that say their organization is fully compliant.
The Government
"We just don't know the status of the federal government," according to Rona Stillman, chief scientist for the General Accounting Office (June 29, 1998). Stillman went on to say, "Our entire way of life is at risk, we are so dependent on digital equipment. We won't be able to conduct national security, collect taxes, distribute benefits, manufacture products or manage commerce."
Where do certain agencies stand in terms of preparation?
Federal Aviation Administration: This agency is responsible for air traffic control throughout the United States. The FAA has 250 computer systems, using 50 computer languages, with about 23 million lines of code. They did not begin taking the problem seriously until last year and as of August 1998, 67% of the mission critical systems have been repaired. The FAA claims they will be ready to begin testing in October 1998.
March 1999 Update: On March 15, Joel Willemssen of the U.S. General Accounting Office, testified before the Subcommittee on Government Management, Information, and Technology. In his statement, Mr. Willemssen said that "much remains to be done to complete validating and implementing FAA’s mission-critical systems, and the agency continues to face challenges in making these internal systems Year 2000 compliant. Additionally, the risk of failures by external organizations, such as airports and foreign air traffic control systems, could seriously affect FAA’s ability to provide aviation services—which could have a dramatic effect on the flow of air traffic across the nation and around the world." Mr. Willemssen went on in his testimony to explain the FAA plans for completing compliance work. I find it amazing that we are now nine months from the next millennium and an agency so vital to this important aviation industry, has not completed its work both in compliance and testing.
U.S. Army: As of mid-year, 1998, the Army has spent $331 million on Y2K fixes. Half of the Army's 800 major systems are not compliant. 35% of the Army's 378 mission-critical systems are fixed.
Social Security Administration: If there is any good news in government preparation, it lies with this agency. They have 90% of their critical systems ready (July 1998).
Local Governments: The National Association of Counties conducted a poll last November (1998) of 500 of America's 3,000 counties. Half of these counties had no Y2K plan and most had spent nothing on Y2K prior to fiscal year 1998.
Banking
Banks are spending hundreds of millions of dollars to make their computer systems Y2K compliant. Why would they do this if there wasn't a problem?
Treasury official, Lawrence Summers, testified before the Senate's Special Year 2000 Committee on July 6, 1998. He testified, "All financial firms are potentially at risk. Even those entities which act responsibly to renovate their own systems can still be harmed, because of the intertwined nature of the financial system. A failure by a counterpart, supplier or vendor can have a negative impact on an otherwise-solvent firm" (Washington Times, July 7, 1998). Although a company spends millions to make its computers compliant, their systems can be infected with bad data from non-compliant systems. Mr. Summers expressed his concern over the fact that many non-U.S. banks will not be compliant by January 1, 2000.
FP Online Daily News reported on December 26, 1997: "In a survey conducted by research firm Dalbar Inc. reports that only 38%, or 8 of 21 custodian banks servicing the $4 trillion mutual fund industry, are Year 2000 (Y2K) compliant. The Survey did, however, find that 53 percent, or at least 7 of the 13 non-compliant custodian banks plan to be Y2K-compliant by the end of 1998." So what about 47% of the banks that are not compliant? What if your mutual fund is serviced by one of those banks. Among the banks that Dunbar reports as compliant is Bank Boston. And yet, Bank Boston, on its own website does not claim to be Y2K compliant. The bank reports that in its effort to become compliant it must review "60 million lines of code in more than 190 software applications." This is a major undertaking. They conclude by stating, "The inter-dependence of businesses makes it imperative that Bank Boston concern itself with more than its own systems." Bank Boston is telling me that even if they are ready for the year 2000, their interlinked systems are at risk if their business partners are not compliant.
One of the biggest concerns related to banking is the possibility of bank runs. This won't even take a Y2K failure, only the belief that Y2K will mess up the banking system. Andrew Pegalis, owner of Next Millennium Consulting Inc., and a licensed lawyer was quoted in a the Pittsburg Tribune-Review (July 12, 1998). Pegalis said that "general hysteria" will occur as this century draws to a close. As news increases in the media, he predicts there will "be a run on banks". He says this will occur more among the retired population that remembers when their money was not accessible. CNN (June 12, 1998) reported that a survey, taken by Newsbytes CIO magazine, found that 52% of the respondents said they would move their money if the problem isn't solved by mid-1999. 25% of the respondents said they would put their money "under their mattress" until the problem is solved. CIO publisher Gary J. Beach said, "Think about half of the assets of the US middle class being moved around, and half of that taken out of the system completely over a period of six months. It would be a disaster." I recently asked an acquaintance if they had heard of the Y2K problem. Their response was that they heard they should take their money out of the bank. Not a possibility? Then why is the Federal Reserve Bank increasing their reserve of currency (see AllPolitics) stored in government vaults to $200 billion?
Business
Consider the situation with Sears as reported in InfoWorld Electric on July 18, 1998. Although Sears has been working on Y2K compliance since 1994. They have over 5000 suppliers, 900 of those supplying 80% of Sears merchandise. Sears surveyed these suppliers and of 60% that responded to the survey, only a few reported that they had repaired the code, tested it, and put it into production. Sears has a problem. They have worked for four years to bring their own system into compliance and now they find that the vast majority of their suppliers are not ready for the year 2000. What will happen at Sears? One can only imagine the headaches Sears will encounter with ordering, payments, inventory, etc. as we approach the year 2000. By mid-January, Sears may not be able to get that part for your washing machine. Snow tires may not have been shipped. And when you run out of paint half-way through that project, Sears may be unable to provide you with a matching color. And Sears is probably a fair representative of the retail industry as a whole.
Utilities
The providers of electricity are the single most important link in keeping our society functioning. All claim to be moving ahead on their compliance and state their belief that all systems will be ready by January 1. How true is this? Consider this statement from DTE Energy's (Detroit Edison) Securities & Exchange Commission 10-Q report (for the quartering ending September 30, 1998):
"Based upon information to date, the Company and Detroit Edison anticipate that abnormal operating conditions may be experienced within the Detroit Edison production, transmission, and distribution systems as a result of Year 2000 conditions. These conditions could result in temporary interruption of service to customers. Abnormal operating conditions may also be experienced in other affiliates of the Company of a magnitude not determined at this time....
"However, despite all efforts, there can be no assurances that Year 2000 issues can be totally eliminated. In addition, no assurances can be given that the systems of vendors, interconnected utilities, and customers will not result in Year 2000 problems."
Detroit-Edison is admitting the potential for a problem. If I was living in Detroit, I think I would do something to prepare for the first days of January 2000. I here it gets cold there in the winter.
Foreign Compliance
It has been reported in the press, that even though we in the United States are making good progress towards resolving the Y2K problem, most foreign countries are woefully behind. How will this affect the United States? Look around your home. So much of what we now consume is manufactured overseas. What will happen if these supplies are unavailable?
Germany: It was reported in the German press (February 1999) that Y2K compliance and security in German nuclear power plants is more than doubtful and that they ar far behind schedule. "According to Prof. Klaus Brunnstein, a recognized and respected computer specialist and Y2K expert in Germany, the starting date of July 1998 is 'much too late in any case', because systems of such complexity need at least 24 to 36 months for the testing and repairing-phases."
United Kingdom: The Sunday Times reported on March 20, 1999, that several large financial institutions are so far behind on their Y2K preparation that, "they could pose a serious risk to their customers and the markets." According to the report, one financial insider stated, "The financial industry is like a house of cards. If one business founders, the others feel it." This is the great risk of Y2K, the domino effect. A majority of institutions may be compliant, but if there are enough that are not, they can effect the rest.
Venezuela: A CNN report (March 21, 1999) stated that about half of U.S. oil comes from countries that are not prepared for the Year 2000 problem. According to the report, Venezuela supplies the U.S. with most of its imported oil. Venezuela is running from 9 to 15 months behind the U.S. in preparation.
What does this mean? If the U.S. was compliant today, at best, Venezuela would be ready by the end of the year. The U.S. is not ready. If I can still do the math, there isn't enough time left in this century for Venezuela to meet the year end date. It would seem to me that if the majority of our foreign oil comes from this country, and if about 50% our oil comes from outside of the U.S., there will be gas shortages come January 2000.
How Big Is The Problem?
| Organization |
Est. Cost |
Lines of Code |
| U.S. Government | $6.8 billion | |
| MCI | $400 million | ? |
| AT&T | $700 million | 500 million |
| General Motors | $780 million | 2 billion |
| Merrill Lynch | $375 million | ? |
| Citicorp | $800 million | 400 million |
| Unilever (Dutch) | $500 million | ? |
| Detroit Edison | $50-$75 million |
What To Do
We have two options:
The Good News
A list of agencies or organization claiming l00% compliance:
What Is Happening - A Dated Commentary
January 7, 1999
Consider this from the WorldNetDaily: "The National Guard is planning its first national mobilization of troops since 1940 in preparation for civil unrest resulting from the Y2K millennium bug, WorldNetDaily has learned." It appears that our government believes that Y2K will be a problem.
To further emphasize the fact that the government is taking the problem serious, FEMA is now encouraging the emergency management, fire and emergency services communities and the public to get ready now for Y2K. Consider this quote from their website: "It is very important that counties, municipalities, school districts and other organizations that have not yet begun to work on Y2K issues, start now," FEMA Deputy Director Mike Walker said. "While some failures will be minor annoyances, some may have more serious consequences."
September 1, 1998:
With sixteen months to go before the Year 2000, the situation does not seem to be improving. Consider the words of Joe Boivin, former Director of CIBC’s (Canadian Imperial Bank of Commerce) renowned Year 2000 program: "With the current stress in the global financial markets, it is easier to understand the lack of a comprehensive international Year 2000 campaign. The leaders of many countries are faced with significant immediate threats that demand top priority. This also explains the reluctance of many national leaders to view the relatively "distant" Year 2000 problem as one that deserves more attention. The same view is present in many of the largest corporations which continue to race forward in an attempt to achieve market dominance through mergers and acquisitions."
Mr. Boivin's assessment of events come the beginning of the new millennium is grim: "The Year 2000 problem will strike the most advanced societies hard. Only a few people accept the possibility of major disruptions. The majority of people in North America continue to believe that life will carry on, more or less as it is today. When the failures begin, there will be few safe havens. Only a small number of people will be prepared and their efforts could easily be overwhelmed by the majority who did not prepare."
There have been several evenings in recent weeks when I have walked home from the bus and pondered the possibility of a collapse of the infrastructure of society. Everything seems peaceful, and as Mr. Boivin indicates, it is hard to accept the possibility of major disruptions. Yet, the facts are out there. We know there is a major problem. Few organizations are compliant and prepared to deal with the possibilities. What else can we expect?
One of the best articles I have read in dealing with the challenges of the year 2000 is entitled The Year 2000: Social Chaos or Social Transformation? It considers a positive approach to societal preparation for the events of the next couple years.
August 7, 1998:
A survey reported in InfoWorld Electric stated that 50% of 6,000 programmers surveyed said they would withdraw from 1 to 3 months salary prior to January 1, 2000. This percentage had been revised up from 38% in November 1997. What does this mean? Those who are working to fix the computer systems are becoming increasingly skeptical about the chances of fixing sufficient mission critical systems prior to the new millenium. It also would indicate the increased possibility of bank runs late next year.
July 21, 1998:
In an article on AFR Net Services, it was reported that international technology consultant, The Gartner Group, revised their prediction of organizations that would suffer mission-critical year 2000 outages. Their estimate has been raised from one-third to between one-third and one-half of all organizations worldwide that will experience mission-critical system failures. Their reason is that the push for compliance began much later than expected. This is not good news. Information sharing by non-compliant systems can affect compliant systems, thus posing the possibility of increasing failures.
Sources Not Referenced Above
Mosquera, Mary. "GAO Official Raps Federal Y2K Compliance." CMPnet (www.techweb.com), June 29, 1998.
Chandrasekaran, Rajiv. "Agency Is Back on Schedule." Washington Post web edition (www.washingtonpost.com), August 3, 1998.