Cheryl offers: I’m currently working in Hong Kong. It’s my first trip here and I’m really enjoying the experience. One of the things I’ve noticed in my short stay so far is the naming conventions of the local population. Almost everyone I’ve met has a Western or truly American name. I’ve met young men named Rick, Alan, and Tommy. I’ve met young women named Louise, Maud, and Shirley. I must admit you don’t meet too many young people in the US with those first names any more. The last names are all traditional Chinese like Chen, Wu, or Ming. What I’ve also learned is that almost any English noun or adjective can be a first name. I met a young woman named Milk and another named Purple! These are considered normal names here. So far, I haven’t seen one Courtney, Taylor, or Alyssa. This reminds me of Thomas Freidman’s book; The World Is Flat where he discusses the forces moving us towards a more integrated world. Maybe Gwyneth Paltrow naming her daughter Apple or Nicole Richey naming her son Sparrow weren’t so weird after all. If these children were to visit other parts of the world, like Hong Kong, they would fit right in. Because these celebrities have had the chance to frequently visit outside the US, they likely have a very different view of the world. Maybe… it’s a view we could all learn from.
(note from Randy – this is one of my “I’ve been thinking” posts.)
It’s been hard to miss Michael Lewis lately. I saw him on 60 Minutes, I heard him interviewed by Terry Gross on Fresh Air (By the way, I think Terry Gross may be the champion interviewer. Listen to that interview here – you want the broadcast from March 16, 2010). A friend caught him on CNBC. I’m ordering The Big Short, and I’ve read the article from Portfolio from two years ago, The End: The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong. And I’ve read the book excerpt from The Big Short on Slate’s The Big Money: Crapping Out at the Subprime Casino: An exclusive excerpt from Michael Lewis’ The Big Short.
The more I listen, the more I wonder – what are the lessons we will learn?
You know the litany of lessons that are trickling out:
Lesson # 1: we need more regulation, to catch up with the changing times.
We basically never created the regulations needed for this modern complex financial market. I heard an interview on NPR that described how new regulations came about three years after the crash of 1929. So, it takes a while for regulations to be decided upon and put in place. But, as we know, regulations do a pretty good job with yesterday’s problems, but may not have the foresight to deal with tomorrow’s problems.
Here is a quote from This Time is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart & Kenneth S. Rogoff:
“it would be extremely desirable to create a new international financial institution to help develop and enforce international financial regulations. Our argument rests not only on the need to better coordinate rules across countries but also on the need for regulators to be more independent of national political pressures.”
Lesson #2: Beware of bubbles – they will repeat, and they are always trouble.
Again from This Time is Different:
The huge run-up in housing prices – over 100 percent nationally over five years – should have been an alarm, especially fueled as it was by rising leverage.
There are other culprits, including a little, or a lot of, greed and corruption. But surely not everyone was a crook.
But the lessons and the growing list don’t quite feel adequate to the enormity of the problem. And that’s where Michael Lewis comes in. He tells the stories. And the stories are about real people, who saw things differently, and acted differently
I think that we are slowly learning that there is data, and there are stories, and the stories are about both data and the personalities of the people. I read this quote about/from Jerry Brown, the once and hopes-to-be future Governor of California, in The Daily Beast’s The Madonna of Politics by Lloyd Grove:
How would Jerry Brown 2.0 be different from the original?
“I think the difference,” Brown answers, “is best encapsulated by something my chief of staff, B.T. Collins, the Green Beret who lost his arm and a leg in Vietnam [and died of a heart attack in 1993 at age 52], once said: ‘If you want to understand politics, it’s all personalities, it’s not ideas.’ Well, that was his point of view, and I do think ideas are very, very important. But this time around, I think the personality of every single legislator, all 120, is extremely important. Being able to get the requisite number of Republicans and Democrats to sign on to a budget that takes a two-thirds vote means a very serious engagement with the world view, the political life, of each of these legislators in a very extended set of meetings and exchanges, such that I can build camaraderie, mutual understanding and the kind of working together that existed to a much greater degree when I was governor and to even a far greater degree when my father was governor.”
One part of the excerpt from Lewis especially captivated me. It’s about “Steve Eisman, the CEO of FrontPoint Partners, a hedge fund that detected the subprime mess before nearly everyone else – and the clueless masses.”
The Venetian hotel—Palazzo Ducale on the outside, Divine Comedy on the inside—was overrun by thousands of white men in business casual now earning their living, one way or another, off subprime mortgages.
“I’d been to equity conferences,” said Eisman. “This was totally different. At an equity conference you’re lucky if you get 500 people. There were 7,000 people at this thing. Just the fact that no one from the equity world was there told you that no one had figured it out. We knew no one. We still assumed we were the only ones who were short.”
Think about that. 7,000 people, many of them smart, well-educated, hard working. All wrong.
Lewis tells the story of the meltdown through the stories of individuals who saw it coming, like Steve Eisman. And it is through such stories that we learn the lessons. Here’s one lesson – if the crowd is going one way, maybe we ought to stop, look, and listen.
This crisis is a crisis facilitated by, enabled by, a whole lot of people following the crowd. It is groupthink at its worst. The wisdom of crowds is a wonderful, powerful thing for the good. The foolishness of crowds is a deadly, dangerous thing at its worst. And we have definitely seen the foolishness of crowds in the midst of this crisis.
A piece that made the rounds a few years back was by Robert Fulghum’s All I Really Need To Know I Learned In Kindergarten.
It included this gem:
And then remember the Dick-and-Jane books and the first word you learned – the biggest word of all – LOOK.
It looks like we needed a whole lot of people to stop, and look, and ask, before they said “sign me up.”
Just because we hear it, or read it, even from trusted sources and authors and advisors, we may still need to exercise a little skeptical caution. To quote from The Black Swan, maybe nobody knows anything. Or, at least, very few know anything.
Look at the room in the Venetian. 7,000 were wrong. Steve Eisman was right. One out of 7,000. It truly is a cautionary tale.
In several of his previously published books (notably How to Become a Rainmaker and Secrets of Great Rainmakers), Fox duly acknowledges the nature and extent of difficulty that aspiring rainmakers experience when attempting to end a “drought” of sales and profits. As he explains in How to Be a Fierce Competitor: What Winning Companies and Great Managers Do in Tough Times, those who aspire to become fierce competitors encounter comparable difficulty. Hence the relevance of Jack Dempsey’s observation that “champions get up when they can’t.”
However, Fox, observes, more than courage is required. Those who aspire to be Fierce Competitors must never let anyone else outwork them. “It is noteworthy that he or she who is in the proverbial ‘right place at the right time’ is the hardest worker.” They also believe that everyone is a possible customer. “Don’t be biased against a possible customer by the way they talk, what they wear, or where they live.” Here in Texas, many people “wear a big hat but have no “cattle.” Fierce Competitors work hard and smart to know who are the “cattle owners.” Then they make the sale and get the business. “Figure out how and when to deliver later. Getting the sale is the hard part.” And finally, Fierce Competitors “always answer the phone” whenever it rings and are then well-prepared to provide the information requested or the solution needed.
Last night, I presented my synopsis of This Time is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart & Kenneth S. Rogoff. I presented this at a gathering hosted by a financial planning team, and a member of that team took the floor following my presentation for his observations and Q & A. Here is the quote from the book that he said deserved special attention:
Crises often occur in clusters.
His point was clear: there is not one problem in the financial world, but a group, a cluster of problems. The subprime mortgage crisis, the banking crisis, the Wall Street crisis, the international debt crisis, they are all different – they are all interlocking…
It reminded me again of an important principle I first learned from Scott Peck’s book, In Search of Stones. The idea is found in the word “overdetermined.” And the word means this: there is no one cause for a problem, and there is no one solution to the problem(s). Here’s an excerpt from the book:
I want to scream this from the rooftops: “All symptoms are overdetermined.” Except that I want to expand it way beyond psychiatry. I want to expand it to almost everything. I want to translate it, “Anything of any significance is overdetermined. Everything worth thinking about has more than one cause.” Repeat after me: “For any single thing of importance, there are multiple reasons.” Again, “For any single thing of importance, there are multiple reasons.”
So, there is no one problem: Crises often occur in clusters.
And there is no one solution. In The Working Poor: (Invisible in America) David K. Shipler speaks strongly to this. He states that the problems of the working poor are many, and the solutions must also be many, varied, interlocking. Here are some quotes:
For practically every family, the ingredients of poverty are part financial and part psychological, part personal and part societal, part past and part present. Every problem magnifies the impact of the others, and all are so tightly interlocked that one reversal can produce a chain reaction with results far distant from the original cause.
If problems are interlocking, then so must solutions be. A job alone is not enough. Medical insurance alone is not enough. Good housing alone is not enough. Reliable transportation, careful family budgeting, effective parenting, effective schooling are not enough when each is achieved in isolation from the rest. There is no single variable that can be altered to help working people move away from the edge of poverty. Only where the full array of factors is attacked can America fulfill its promise.
And here’s my summary paragraph of the book:
The working poor are poor because of an interlocking array of reasons. Any approach to solutions has to grasp the complexity of the problem(s), and provide a multi-faceted strategy to pursue solutions, all at once – continually.
This blog is about: business books, business book authors, business ideas… Actually, it is a blog about problems, and solutions. And there will be many who read this blog looking for clarification on the problem(s), and looking for the (one) answer. I’ve got bad news. There is no one problem. And there is no one solution. There are problems. There are solutions. And it is/they are all interlocking, overdetermined.
That’s why there is always another thought to blog about. And that’s why we have a blogging team. Because we will never arrive at “having fully learned.” We simply keep learning.
In fact, a third of the “excellent” companies cited by Tom Peters and Robert Waterman in a book published in 1982 almost immediately no longer met the criteria by which they were selected. Few of the companies identified by Jim Collins as “built to last” and “great” in books published in 2001 and 2004, respectively, now qualify according to the criteria he used and the reasons for that are explained by Collins in How the Mighty Fall (2009).
Now consider this excerpt from Creative Destruction: Why Companies That Are Built to Last Underperform the Market–And How to Successfully Transform Them, co-authored by Richard Foster and Sarah Kaplan and published by Broadway Business (2001):
“McKinsey’s long-term studies of corporate birth, survival, and death in America clearly show that the corporate equivalent of El Dorado, the golden company that continually performs better than the markets, has never existed. It is a myth. Managing for survival, even among the best and most revered corporations does not guarantee strong long-term performance for shareholders. In fact, just the opposite is true. In the long run, markets always win.”
Nonetheless, despite the facts, the “myth of corporate persistence” persists. Why? That’s a subject for another post.