On Second Thought
with Alan Spear
If you feel baffled by our information-intense culture, you’re not alone. Not only are we bombarded with “stuff”—some useful, most not—we are fed daily statements which are misleading and/or inaccurate. It has become more difficult to adhere to KISS (Keep It Simple, Stupid), which I have always believed to be the most important management concept in existence.
KISS does not imply easy answers. “Simple” may actually be hard, especially when people are trying to expand work to fill the time available. Things that appear simple may be full of hidden meaning that we are not intended to see.
Data can be inconvenient, especially when accurate, but it can also be used to misrepresent the truth, or make up “truths” that are convenient or politically useful. The common phrase is “statistics never lie, but liars use statistics.” The explosion of information sharing over the past 10 years or so has not been balanced with any assurance of accuracy, so it is now more possible than ever to create new “truths” from nothing of substance and keep them alive with repetition.
The process of creating mythical “truths” has been especially rampant in my field of cargo theft prevention. For many reasons, collection of accurate and complete data concerning cargo theft has been difficult. Because of this difficulty, people in the field have struggled to come up with the big numbers that they believe represent the amount of cargo theft around the world. The bigger the number, the easier it is to create out of thin air. It’s harder to fudge statistics from a small sample.
The search for big numbers reaches the highest levels. The FBI website offers a 2006 article suggesting that $15 to $30 billion of annual cargo theft in the United States is possible, although there never were, and still are not, any data whatsoever to support these figures. Various “subject matter experts” have extrapolated even bigger numbers, proposing that as industry has grown, the national theft number has grown with it.
So why do numbers like these proliferate? In most cases, they are used to justify the creation or continued existence of a group or organization.
In my view, three organizations collect legitimate cargo theft data. They are Freightwatch International, Lojack/SCI Integrity, and CARGONET, which have been collecting data on cargo crime in the United States for a number of years. Although they use differing methodologies, the data is relatively consistent: each show similar methods of theft, types of cargo being targeted, average values for theft events, and number of overall events in each year. The data average as follows:
The value of the average cargo theft (defined as full truckload, warehouse theft, or major partial load generally over $5,000) over the period is about $225,000 per event. The three groups have been able to collect data on 1,000 to 1,300 events per year, yielding an average of about 1,200 events annually. If we take that number, times the overall average value, the total is $247.5 million in reported annual cargo theft losses. That figure represents 1.6 percent of $15 billion, and .08 percent of $30 billion.
It’s reasonable to argue that not all cargo theft is reported, but it’s illogical to argue that only 1/60th of all cargo crime is reported to law enforcement, insurers, and the press. Cargo crime is a highly damaging event for carriers, shippers, and manufacturers, but it is a low-incidence, high-impact event that should be described for what it is, not by using inflated and unjustifiable statistics. Here’s an example:
Whoopie New Thing Co. spends two years developing a new electronic toy. It markets the toy to retailers nationally, negotiates placement within retail toy departments, buys advertising nationally and regionally, has the toys built by a contractor in China, ships the toys to its warehouses on the West Coast, and trucks them to retailer distribution centers. On the way to a distribution center in New Jersey, a truckload of the new toys, valued at $300,000, is stolen. While $300,000 is the insured value of the cargo, the real loss is greater. The manufacturer now has no toys to sell into a major East Coast market and cannot get new toys made fast enough to fill the void. The retailers now have no toys from that manufacturer to put on the shelves, so they fill the space with toys from other manufacturers. The advertising is already designed and paid for, and cannot be cancelled in the print media as space for it is already designated, and cancellation of TV advertising costs the company a substantial penalty. The stolen toys are likely to be sold, probably via the Internet, in the original target market, but at 50 cents on the dollar, which compromises the price point the company had originally intended for the toys. Further, the company may be bound to support warranty claims on the toys, even though they made nothing from the sales.
It is reasonable to project the actual losses from this kind of theft at between three and five times the insured value of the loss. Thefts and illegal sale of foodstuffs, cosmetics or pharmaceuticals which make direct contact with the human body could have greater implications and costs, but even taking all of this into consideration, it’s impossible to justify figures like $15 billion or $30 billion. Cargo theft is not only a very bad thing that causes major damage to victims involved in manufacturing, shipping, storing and insuring cargo, but it should be understood for what it is, not based on erroneously described statistics which cannot be supported.
Spear, a long-time cargo security specialist in the insurance industry, now operates his own consultancy. He can be reached at email@example.com.