GUEST COLUMN.

Chess is widely recognized as a complex battle between competing forces where errors abound, and mastery is difficult to achieve. As one who was awarded the national master title by the US Chess Federation in 1989, I’ve had my share of chess successes – and also plenty of failures. The same could also be said about the 17 years I spent working on budgets for the state of Iowa. I’ve often observed the similarities between a game of chess and a budget process. Readers may not all be chess players, but even if you don’t know the difference between a rook and a pawn, the lessons here will likely be of use to anyone in the budgeting business.

§  Both require skill in various phases in the process/game. Most chess games have an opening (develop your pieces); a middlegame (create weaknesses and threats that gain an advantage), and an endgame (convert the advantage into a win). The same can be said for budgeting as well. These usually include an environmental scan, data gathering and cost benefit analysis, completion, implementation, and tracking/reporting budget results. Each phase is a necessary part of the whole.

§  A bad plan is better than no plan at all. Former world champion Garry Kasparov wrote this in his 2007 book “How Life Imitates Chess,” and other strong players have made similar observations. In chess, the players (and their pieces) need a “sense of purpose” as to why they are doing what they do. A good budget process is the same. I’ve often lamented across-the-board budget cuts (or increases) – which are the budget epitome of no plan at all. They are the antithesis of what a budget process is supposed to be about.

§  Understanding the “value of the pieces” is key. In chess, even the humble pawn can sometimes be more valuable than the mighty queen. As one chess author put it, “The game of chess is like the ocean, which a gnat may cross and where an elephant may drown.” What looks powerful can be deceiving, and it all depends on the position. In budgeting as well, the relative value of the pieces of the budget must always be considered. I’ve observed budget processes that routinely provide increases or will not make cuts to budget “sacred cows” when a rigorous cost benefit analysis would not have made that decision. Maximizing marginal utility is important in both chess and budgeting.

§  Mastery recognizes that situations change. Every move in chess requires re-evaluation of the resulting position – many a game is lost because a player doesn’t recognize a subtle (or not so subtle) change from move to move. The same can happen in a budget process. It is necessary to constantly evaluate new information, at each stage of the process, from budget formulation, through implementation, and its administration. Many governments get into trouble by putting the budget on “automatic pilot.”

§  Structural weaknesses can ruin a position. Chess beginners will often rush their pawns forward with little regard for the consequences – as pawns cannot move backward, those advances often create permanent structural weaknesses that cannot be repaired. The same happens in budgeting, where major program spending increases (or tax cuts) create structural imbalance that is practically impossible to overcome, at least in the short-term.

§  Masters learn from their mistakes. One of the better ways to get better at chess is to analyze your own games and honestly assess the play, in particular, by identifying mistakes and the reasoning (or lack thereof) that went into them. This should help to recognize and correct recurring problems. Budget mastery requires that same approach: it is a process, not an event. A budget should be tracked, and its performance should be measured and reported.  In that way, when recognized, a bad plan’ can be corrected and made better. I recall one popular program that simply didn’t match up to expectations. The first response was to seek to make it better, but when that didn’t lead to materially better results, it was eliminated from the budget.

§  Sometimes, the expected result will be a draw. It’s generally believed that without major errors by the losing side, a chess game will generally end in a draw. Likewise, in a budget process with competing legislative and executive priorities, often the best result is a negotiated compromise where neither side ‘wins’ – and that can be an acceptable result as well.

The contents of this Guest Column are those of the author, and not necessarily Barrett and Greene, Inc.

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