June 19, 2007

Better Deeds

Over the past several years, America's best run non-profit housing organizations have dramatically outperformed the subprime lenders in serving financially-strapped folks seeking to buy or refinance a home. Many of these stellar performers, though, struggle from year to year to ensure they have the financial wherewithal to continue their efforts -- and few, if any, have been rewarded with the capital to expand. There's no real reason -- other than the always potent cocktail of ignorance and greed -- that capital markets cannot work with nonprofit housing organizations. The fact that otherwise sophisticated folks do a double take at this suggestion merely confirms the extraordinary level of self-interest and distorted language that now pervade our culture. Remember this: mortgages are forms of debt. Not equity. Non-profit lenders can produce debt instruments just like for profit lenders. What happens to those debt instruments down the road -- that is, how they get converted into equity like forms -- is not limited or constrained by the tax status of the initial lender. As I explain further in Slate, however, the quality of the mortgage evidently is affected by the tax status of the lender. America's nonprofits produce much better deeds than the the subprime lenders. Much better. Delinquency rates for the nonprofits run between 1 in 20 to 1 in 50. For the subprimes? 1 in 5 and rising.

Posted by Doug Smith at 02:07 PM | Permalink

March 19, 2007

Memo To Journalists: Move From Reporting Ideology to Reporting On Problem Solving

There are many explanations for the flight over the past decade or so of journalists toward reporting about ideology. Among them, of course, is the chicken-and-egg spiral whereby political discourse shifts to 'either/or', 'on/off', 'my way or the highway' presentation and appeal that, in turn, influences journalists to report about the horse race of 'which ideology is winning' that, then, encourages and reinforces the thread bare 'either/or-ism' of the political discourse. In addition, though, are many, many other factors too numerous to list in this post. But, just to illustrate; there's also the incredible, geometric expansion of subject matter, the traumatic shifts in the economic and other realities of journalism and news businesses in this new information/web age of ours, and the rapid drift toward celebrity as a means of competition both for journalists' own careers and for the businesses that employ them. In response to all of these are some clear patterns of how journalists now practice their craft. One, for example, is what I call 'press release' journalism: simply printing the press releases of others and calling it reporting. (My far too subtle intended irony here has to do with the interpretation where journalists 'press the release button --that is, release themselves from their best values and aspirations to actually inform us -- which would take some work -- instead of merely being parrots.)

It's been years now since we've all learned to expect and experience the 'he said, she said' form of what passes for jounalistic balance in this new world of press release journalism. No matter how outrageous any ideological position, the minimal obligation of journalists seems to be met by merely including any comment from anyone who opposes that position. Among the many ways this hollows out journalism, much like termites eat away at a house, is that it eliminates any threshold of accuracy. So long as someone can be quoted, it matters not that the quoted statement is devoid of any fact. We've seen this time and again with regard to Valerie Plame's job status as a covert agent. We see it time and again with regard to creationism, the WMD lies that led to the Iraq disaster, the either/or journalism about No Child Left Behind and more.

Put differently, in a world and culture that spins out of control toward politicizing everything into a black-and-white loyalty test regarding ideology and identity, there becomes no room left for actual problem solving -- for actually trying to do anything about anything. Karl Rove triumphs. All journalists are branded as right v left or, more likely, supporters of Bush and the Republicans versus supporters of the 'left', the 'Democrats, of 'Satan' and of our 'enemies'.

Note again, please, how easy this makes the job of a journalist. The articles basically write themselves. And, the obligation to actually think for one self and to learn about the issues disappears.

None of which is to say that this description matches the best aspirations, the real concerns, the private lives or the truly professional best efforts of most journalists. From my experience, most journalists I know would prefer a better, more constructive way of moving forward into the 21st century. And, I'm guessing, most journalists I don't know would too.

We're dealing with issues of profound change. And, among them, are the challenges of shifting course within the context of jobs and organizations. That's very hard. At a minimum it entails taking risks to do things differently -- risks that affect job security, friendships within the organization, and sense of self. In most organizations, the 'either/or' aspects of our culture can rapidly become 'either/or' loyalty tests or career risks -- perhaps because they really are; or, more likely, perhaps because there is a perception that the "CEO" will come down hard on any risk takers. (Such perceptions, by the way, are as often mistaken as they are correct.)

Changing 'the way we do things around here' within any organization is very difficult. It is one explanation for why new entrants often take market share away from existing players -- at least until the existing players get the message and begin to recast themselves accordingly.

This is now happening in journalism. New players -- blogs, crowdsourcing journalism, citizen journalism, user generated content and more -- are moving quickly and independently toward taking advantage of a core new reality: the essential 'many-to-many' nature of our webbified world.

News organizations that, over the decades stretching from the 1970s to early 2000s, adjusted and grew based on a 'one-to-many' world, today have decades of skills, instincts, processes and economics that don't fit a 'many-to-many' world. This was shocking news to most of these organizations -- and, for the most part, even a year or so ago, most were in denial. Now, across this country, news businesses are rapidly moving from denial to doing something about it.

As they do, I've got a recommendation. Put a stop to 'press release' journalism. Put a stop to reporting about the horse race between a well defined ideology (Rovian Republicanism) and the assumed ideology in opposition (which, by the way, as every single one of us knows is and has also been defined by Rove).

Put a stop to this. And, instead, start to explore and learn journalism oriented to reporting about 'problem solving' -- that is, journalism that seeks to report on and inform people about options worth considering for how to move forward against the many challenges we face as a people.

In this 'problem solving' journalism, there will be no 'totally right answers'. Rather, there will be approaches that 'work sometimes'. And the job of journalists will be to help us figure out when various solutions work and when they don't. (And, yes, also what those promoting any solution have to gain personally -- that is, sources of self-interest that might or might not reach beyond objectivity.)

To take just one example, consider charter schools. Charter schools really do work sometimes. And, at other times they do not work. And, yet still in other situations, charter schools can exacerbate and make worse various ills. In a world where journalists report on education, they'll help us distinguish among the three cases -- unlike today where far too many articles one reads basically present a 'balance' between those who claim, "Charter schools are right!' and "Charter schools are wrong!"

Posted by Doug Smith at 01:41 PM | Permalink

March 17, 2007

What Does The Republican Party Brand Really Stand For?

What can we tell from how we experience the actual behavior of the Republican Party about the values Republicans really stand for? We are aware of a series of beliefs that the Republican Party wishes to include in the brand it markets and sells to Americans (and the world). And, let's be clear, political parties -- like companies -- need to have clear brands in our new world of markets, networks, organizations, friends and families. The issue we're putting on the table is about how actual behavior matches those branded beliefs.

In this regard, let's review how the best organizations think about and use brand. There are three phases:

Brand Promise: Using a set of clear beliefs, the best organizations promise behavior that matches those beliefs

Brand Delivery: How the best organizations go forward with products, services, information, distribution, customer service, technology, and more to deliver against the promises made.

Brand Experience: How the customers, investors and others experience what gets delivered -- that is, whether the promise, the delivery and the actual experience match up and reinforce one another.

Recently, for example, Howard Schultz, the brand mastermind who runs Starbucks, sent a memo to his senior executives asking aloud about whether Starbucks efforts to streamline stores (and increase revenues and profits) had damaged certain key aspects of the brand promise: 'romance' and 'theater'.

By stocking prepackaged coffee and using automated machines, Schultz worried that the brand delivery shifted from the promise of 'romance' and 'theater' to the experience of -- my words -- your basic retail grocery store-like assembly line.

"Romance" and 'theater' may be difficult to deliver on in ways that create the intended customer experiences. But, if Starbucks chooses those beliefs and promises to be core to their brand promise, then, as Schultz alerts the executives, it's incumbent on Starbucks employees up and down the company and all across the world to take steps that do the best job possible of delivering against those promises.

The Republican Party has a set of core beliefs with which it has branded what it promises America. These include small government, efficient government, fiscal responsibility, family values, defending America, prosperity through individual opportunity, low taxes and so on.

But, all Americans of all political stripes -- and especially Americans who belong to the Republican Party - need to ask whether the brand delivery and brand experience match up with these brand promises.

What happens to companies can also happen to political parties -- indeed, any organization in this new world of ours. At some point, if the brand delivery and brand experience radically contradict the brand promise, then the customers (in this case, voters), the investors (in this case, contributors) and even the employees (in this case those who work and volunteer for the Republican Party) will actually look at the delivery and the experience to define the brand of the Party and not to the promises themselves.

If, for example, Starbucks fulfills Howard Schultz's worst fears and focuses so much on efficiency and profits that it's coffee -- and the experience of being in one of it's stores -- has zero to do with romance and zero to do with theater, then Starbucks will be branded by customers, investors and, again, even employees as 'just another coffee company'.

This is the reality of managing brands in a world of markets, networks, organizations, friends and families.

And this reality applies to the Repubican Party.

Many news organizations, pollsters, political professionals and other insiders can (and will) continue to monitor the Republican Party's brand solely at the level of promise. In this sense, they can report on and talk about promises, promises, promises -- as if those were -- as in the now ancient days of marketing the only thing that mattered.

But, while they are essentially just talking to themselves about tautologies ("The Republican Party stands for family values because The Republican Party stands for family values!"), an ever increasing number of voters, contributors, volunteers and employees who live in the rest of this new 'real world of markets, networks, organizations, friends and famliies' will persistently -- that is daily and weekly -- bump up against the actual delivery and experience that -- if they radically contradict the promises-- reach a tipping point that then brands the Repubican Party in ways that will be extraordinarily difficult to reverse because -- well, because promises of reversing them will sound like 'promises, promises'.

All of which is to say: Take a moment and reflect on the brand promises of the Republican Party and then ask, what do you observe about how the Party delivers on those promises as well as how you and people you know experience what the Republican Party really stands for.

Do this and, if you can put aside partisanship of any kind (pro or con) -- if you are capable of that -- then try to objectively observe: What's the current real brand of the Republican Party?


Posted by Doug Smith at 12:39 PM | Permalink

February 09, 2007

Self Loathing

Mary Matalin, press advisor to Vice President Cheney, dislikes herself:

" I do not like anyone .. who purports to be a purveyor of truth and serving the public by serving the truth out there who flagrantly is making up stuff."

Posted by Doug Smith at 01:02 PM | Permalink

February 01, 2007

Take Advantage of Market Failure In Energy!

Okay folks. Here's your opportunity to make some money and contribute to the sustainability of the planet for future generations -- all by taking advantage of a market failure in today's energy industry.

Here's the situation, which you can read more about in one of the best new blogs on finance, markets and capitalism (www.nakedcapitalism.com): Deregulated electricity markets shift pricing out of the hands of regulators and into the lap of the industry's marginal cost supplier.

That's a mouthful. Why? Because folks like you and me and Aunt Sally do not factor price into whether we flip the switch when we get home at night. Our demand for electricity is impervious to price (the technical word: inelastic).

Price, then, will reflect the profit requirements of that supplier whose energy sits out the outer limit of total demand (i.e. the marginal cost of the 'last' supplier). Of course, other, lower cost suppliers could charge less in theory. But, absent regulation, why would they?

So, how is the price set by this 'last supplier'? Based on the supplier's profit appetites that sit on top of that supplier's costs. And what would be that supplier's costs? The amortized cost of the investment to build the plant plus the operating costs to run it.

Well, it turns out that it's easier to gain financial backing (i.e. capital investment) to build plants that have lower up front investment costs and higher operating costs. That means investors and capitalists make a nice profit by getting a return on lower investment tied to higher ongoing prices for consumers.

Consumers, folks. As in you and me and Aunt Sally.

Of course, it's also possible that you or your Aunty Sally may have the kind of megabucks to get in on the investment side of this game - and the contacts and relationships to be invited into the game. In which case, you'd have to check to see if your energy costs to run your home (or, more likely, your many homes since you're very rich) are adequately offset by the return on investment you get.

Now, what to do about it?

Well, it is in the planet's interest -- in the interest of protecting our precious earth for our children and their children and so on -- to replace the irrationality of this market failure with a market success. Instead of subsidizing capital through government action (note well: deregulation is an act of government!) which, in turn, causes higher energy prices (reread the above) -- and, if you go to the link -- also causes geopolitical instability as well as environmental degradation -- it would be great to find a market mechanism to correct for all this.

How? Well by finding a way to invest in something that has lower operating costs.

What would that be?

Renewable energy sources.

But, they have higher up front investment requirements.

Yes. And, that's where the opportunity comes in.

Listen up Goldman Sachs and pals. Here's what you do. You create an investment security for the broad public that combines up front capital with ongoing price reduction. In exchange for the capital that will go to build higher cost renewable-type plants, the investor gets a claim on the lower ongoing prices promised from that source of electricity. And, Goldman Sachs, if you're really clever and have any good government connections, you throw in some kind of investment credit to the total package.

Come on, now, all you financiers and capitalists. Let's get going.

(PS: Are there a variety of obstacles and details to work out? Yes. And that's why folks at Goldman and elsewhere get paid the big bucks.)

Posted by Doug Smith at 12:45 PM | Permalink

December 09, 2006

Responsibility and Instability

In a post about the Iraq Study Group Report earlier this week, Josh Marshall notes, "The rub of the issue I don't see being discussed -- at least not directly -- is this category question: are US troops more a cause of instability in Iraq or a solution/buffer against instability?"

It is a crucial question. Yet, I think, there is a more critical category question, one that has to do with the essential role of adult responsibility in fostering change. In any human enterprise faced with profound change (a nation, a company, a set of friends, a family, a church and so forth), only the adults involved in that situation can take responsibility for bringing about whatever changes are to come -- whether those changes are good, bad or in between. To illustrate: if you smoke, only you can take responsibility for stopping (or continuing). No one else can do it for you. (In this, by the way, I'm not using 'responsibility' in the sense of credit or blame; but, rather, in the sense of ownership, duty and care required to act and be accountable to one's self for those actions -- the kind of responsibility that, by the way, George W. Bush has not been fitted out by nature or nurture to exercise.)

In the case of Iraq, this means that Iraqis must take responsibility for whatever changes are to come -- neither US soldiers nor US contractors nor anyone else can take that responsibility for Iraqis unless we and/or other non-Iraqis are intent on carrying out that responsibility over a long haul. Thus, should we choose, we could take responsibility for implementing changes in Iraq over an open ended, long period of time (10 to 20 years). So, could Iran.

But absent our or Iran's or anyone else's choosing to participate as open ended, long term players in Iraq, we revert to this reality: only Iraqis can take responsibility for their own changes and situation.

Now, if stability is one desirable change to be sought, then only Iraqis can take responsibility for that stability. We cannot do it for them.

The inevitable route to stability in Iraq (absent a miracle) is through the instability currently characterizing what's happening there -- and, probably, worse instability to come. There must be instability on the path to stability. But, and this is key, there will not be stability unless and until Iraqis take responsibility for whatever instability comes first. And, as long as we are present, this will not happen. In this sense, the question about whether we are a cause, or buffer against, instability is unresponsive to the question of what must happen to create conditions where Iraqis take responsibility for their own change. If we are the cause of instability, Iraqis do not take responsibility. If we are the buffer against instability, Iraqis do not take responsibility.

In this sense, all the chat about embedding our forces and doing other things to train Iraqi security forces misses a huge point: however important such training and education might be, they never substitute for the act of an adult taking responsibility for his or her own change. I can educate you until the cows come home about the negative effects of smoking cigarettes. But, until you decide to go buy a patch or otherwise cut down on cigarettes, all that education is just so much wind. Yes, education might be a rational approach to inducing you to take such responsibility -- to persuading and convincing you. But, it is demonstrable that education works best when it is directed at adults who have already chosen to take responsibility for whatever changes are to be aided by such learning. This is not the situation in Iraq.

Among the tragic consequences of this reality is that The United States of America initiated a unilateral war of choice that, in turn, led to a horrendous situation where only an inevitable period of instability in which Iraqis take responsibility for killing one another will lead to a return to stability. The United States of America has this blood - and the blood to come -- on our hands. This is the other sense of the word responsible, as in credit and blame.

But, at this point, our only option to exercise responsibility in the sense of owning the way forward demands an open ended, long term occupation of Iraq -- a 10 or 20 year commitment to, first, enforce stability and then, gradually, gradually, gradually manage the situation toward Iraqi responsibility for the direction and evolution of that stability into something better than stability alone.

If we are not going to make such a commitment - a commitment where we take responsibility for bringing about stability -- then our only responsible option is to leave so that Iraqis have no option but to take that responsibility themselves. And anyone suggesting or claiming otherwise, including the Iraq Study Group, Josh Marshall, Dick Cheney, Nancy Pelosi or anyone else is more interested in responsibility as blame/credit than responsibility as a duty of care toward Iraqis and Iraqi stability.

Posted by Doug Smith at 01:18 PM | Permalink

November 26, 2006

Honest Problem Solving

Problem definition is among the most critical -- essential -- elements of effective problem solving. Taking the time, putting in the effort and gathering as many views as possible about the nature of the problem at hand dramatically increases the odds that effective solutions will be found. As a quick illustration, consider the family who, month after month, see themselves falling deeper in debt. Does this family have a credit problem to solve or a spending problem to solve? The airwaves are filled with commercials offering to help such families solve their credit problem -- an indirect, anecdotal piece of evidence that a whole lot of families in this situation are choosing to define their problem as access to credit instead of finding different approaches to spending. Until the families change the way they define their problem, the odds are against them finding solutions that work.

That's plain common sense.

So, what are we to make of these sentiments from Senator Chuck Hagel on the problem we call Iraq:

"The time for more U.S. troops in Iraq has passed. We do not have more troops to send and, even if we did, they would not bring a resolution to Iraq. Militaries are built to fight and win wars, not bind together failing nations. We are once again learning a very hard lesson in foreign affairs: America cannot impose a democracy on any nation -- regardless of our noble purpose.

We have misunderstood, misread, misplanned and mismanaged our honorable intentions in Iraq with an arrogant self-delusion reminiscent of Vietnam. Honorable intentions are not policies and plans. Iraq belongs to the 25 million Iraqis who live there. They will decide their fate and form of government."

Problem definition: We've got to move beyond noble purpose and honorable intentions if we are to find a solution to this problem.

That, of course, is dishonest. Senator Hagel knows very well that the government of George W. Bush did not enter Iraq with a noble purpose or honorable intentions. The record shows that less than two weeks after taking office, the Bush Administration began plans for "taking out Sadaam". It used 9/11 to push those plans forward. They lied about WMD. They lied about Sadaam's connections to 9/11. They lied about Sadaam's connection to al-qaeda. They lied about the cost of the war. They lied about their preparedness for the post-war occupation. They lied about how things were going. They lied about their questionable methods, such as those used at Abu Ghraib. They continued to change the definition of the problem they were seeking to solve (e.g. what constitutes 'victory') and misrepresented and lied about how they described the situation in order to fit the message of the day. Throughout the affair (and as recently as a month ago in the run up to the mid-term elections), they demonized as traitors anyone who did not agree with their lies.

There were no honorable intentions. There never was a noble purpose. Quite the opposite. Yes, there was ideology. But, ideology and noble purpose are not synonyms. Did Hitler have a noble purpose? Did Stalin? Would you call the events triggered by the madness of Rev. Jim Jones linked to a noble purpose? How about Osama bin Laden? Noble purpose? Honorable intentions?

The Bush Administration defined the problem to be solved in at least three ways: First, to win and retain political power in the United States. Second, to "take out Sadaam" as part of Rumsfeld's 21st century military vision. And, third, to strike anywhere and everywhere that, famously, there was even a 1 percent chance that anti-Americanism and/or terrorism could be found.

There is nothing either noble or honorable about any of this.

And until folks like Senator Hagel rid their problem definitions of perpetuating these lies, the big lie of honorable intentions and noble purpose will continue to cloud our capacity for clear problem definitions and clear problem solutions.

We will make much faster progress when people like Senator Hagel find the stomach to acknowledge the full picture. The Senator correctly describes the actions of the US government when he writes: "misunderstood, misread, misplanned and mismanaged."

Now, the Senator -- and others -- must also speak as clearly about the fact that the Government of The United States acted dishonorably and did so with purposes linked to power, greed and arrogance. If our government is now to move forward, it must do so with a renewed fidelity to the rule of law and our historic aspirations toward decency, fairness, tolerance and liberty and justice for all. And the first and truest step toward doing this is: stop lying.

Our government has acted wrongly. And like a family who continues to seek easy credit instead of taking responsibility for spending, we will not find workable solutions to the mess we've created if we perpertuate the dishonarable lies that produced this mess in the first place.

When one reads Senator Hagel -- especially when he concludes on the note of supporting the Baker-led Iraq Study Group - one sees that the real problem being defined is still the first plank of the problem as defined by George W. Bush's crowd from the beginning: how to win elections and retain political power in the United States? How to spin the messages through our media and political markets about Iraq in a way that will let political leaders who compete in those markets -- as well as the media companies and their celebrities who have replaced news with promotion -- get the troops home without acknowledging that those same troops were sent off to fight, get injured and die for a lie.

Senator Hagel -- and James Baker -- are seeking access to more credit. And they most definitely are not prepared to take full responsibility for our spending problem -- i.e. what's been and will continue to be spent in blood, treasure, values, the rule of law and our national honor and decency.


Posted by Doug Smith at 12:45 PM | Permalink

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