Update 2000

A collection of short articles about the Y2K problem. Includes an interview with Millennium Bug guru Ed Yardeni; the solutions five CEOs came up with on their own; and a list of Y2K resources.

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You've heard the warnings--over and over. We're in for big trouble after New Year's Eve, 1999. Old code in an awful lot of computer programs can't tell the difference between the year 2000 and the year 1900. Systems may crash, services may be interrupted, phones could shut down, and electrical power could be lost. If you don't do something about it, your business could be in jeopardy. The year 2000 warnings have become so frequent and loud that they've almost merged into one giant din. And yet you still haven't figured out what you really need to do to safeguard your company into the next century.

How bad will the bite of the millennium bug be? What can growth businesses do to protect themselves? If you haven't done anything yet to inoculate your business against the Y2K bug, it's time to get serious. We've filtered through the blizzard of confusing information to get some real answers about dealing with the Y2K uncertainties.

Making Sense of the Millennium Bug

Ed Yardeni built a reputation as one of the top market forecasters of the 1990s, predicting the bull market way back in 1988. Now he is the premier doomsayer among the analysts handicapping the coming effects of the Y2K problem. Chief economist of Deutsche Bank Securities (North America), in New York City, and the author of numerous publications, Yardeni, 48, has roused the ire of Wall Street prognosticators with his dark vision of the potential impact of the Y2K glitch. Yardeni's forecasts are regularly updated on his Web site. Inc. contributor Eric Kriss, past CEO of MediVision Inc. and MediQual Inc., both former Inc. 500 companies, sat down with Yardeni recently to get his latest predictions for the year 2000.

Inc.: How bad do you think the Y2K glitch will be?

Yardeni: In mid-1997 I thought a global recession in 2000 was a 30% likelihood. Now that I've seen more information, I've raised the probability to 70%.

Inc.: A lot of economic forecasters say the problem will not have a major economic impact. Why is your view so much more pessimistic?

Yardeni: Few economists spend as much time on the year 2000 question as I do. To understand the issues, you really have to immerse yourself in the subject on a daily basis.

Inc.: Many owners of growth businesses don't think this is really a problem for them.

Yardeni: You can't make any assumptions. You should consider dealing with the Y2K problem to be one of the biggest jobs you face. What might be a minor problem for a large organization could be a huge headache for a small business. What if everyone's so busy putting out Y2K fires that you can't get anybody to come fix your problem for six months? Small businesses are likely to be the last in line when it comes to getting help.

Inc.: But a lot of organizations are already working on the problem.

Yardeni: Yes. There's no doubt in my mind that a lot of these programs will be fixed in time, but I think you have to be navely optimistic to believe that they're going to get to them all. There are some very important programs that would directly disrupt a lot of business if they malfunctioned. Or they could start a domino effect with other computer systems that they exchange information with. If a number of important computer systems are not ready in time, we'll experience a huge disruption in the flow of information. Whatever is going to fail will all fail at exactly the same time. We've never had an experience like that with technology before.

Inc.: Are there practical steps a growth company can take to escape the problem or lessen its impact?

Yardeni: For starters, keep complete records in hard-copy form of everything you do in 1999. You'll need that for tax purposes. You'll need it for the banks. And you'll need it if any of your key customers or vendors have major problems, and their computer records no longer match your paper files. You should be very concerned about credit lines. Will banks lend you money if they believe you're not ready for the Y2K bug? If you can't make a convincing case that you are prepared, there's a possibility the loan officer may get instructions at some point in 1999 to cut you off from credit.

Inc.: You've been a strong advocate for community and group action.

Yardeni: You're probably in no position to deal with the Y2K problem by yourself. You have to get together in small-business organizations to make sure your suppliers and services are covered. Take the local utilities, for example. You need the political pressure of a small-business group to assess the readiness of your power supplier. You're going to be in big trouble if the electricity fails, not to mention phones. The phone system may simply be out of order for several days, a few weeks, maybe a few months. You've got to be ready for that. That's why I'm a real believer in community action. If we all go off in our own survivalist way, it's going to make things much worse. You can imagine a scenario where most systems are fixed, but the panic level is so out of control that we create a secondary crisis. I want to contribute to the alarm, but at the same time I believe we have to work together to prepare contingency plans, to fix problems, and to recover from any disaster.

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