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 | PermalinkMarch 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 | PermalinkMarch 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?
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.)
November 25, 2006
Day Of Reckoning
The United States remains one of the rare -- and certainly the largest -- pharmacuetical markets where government has refused to step in to curb pricing and other practices. Defenders of these practices point to the ideological instruction of shareholder value extremism: we must have free markets in which companies use profits and capital to innovate through research and development that, in turn, bring us ever new and more effective pharmaceuticals. The problem, of course, is when any single answer -- in this case profits and shareholder value -- is repeatedly used like a catechism without reference to it's actual, fact based effects, even the constructive aspects become emptied of all reason, all possibility.
Should we construct our affairs so that pharmaceutical companies make profits and offer an attractive return to those who provide them capital?
Yes.
Yes.
Yes.
Should we construct our affairs so that pharmaceutical companies drive profitability through kick-back like rewards to doctors who promote their high priced drugs, research and development trials conducted without oversight by independent agencies with sufficient resources to maintain objectivity, campaign funding provided to politicians (who declare themselves anti-science) in exchange for extending legalized monopolies needed to support high prices, product development processes that favor marginal advances on existing drugs over fundamentally new drugs (including life-style drugs instead of life-saving drugs), marketing and advertising campaigns that draw attention toward life-style and away from real need, and, finally, legislation that sets up complexly regulated distribution of drugs to older folks who neither themselves (nor their adult children) can even ever hope to understand -- and all because each and every one of these practices and more help pharmaceutical companies do in the United States what they cannot do elsewhere: make unsustainable profits?
Should we continue to allow all of these usurious and unethical practices?
No.
The free market crowd of zealots have become so detached from the facts on the ground about how markets actually operate that it comes as no surprise that Big Pharma is gearing up to fight against allowing for the free market importation of lower priced drugs from Canada.
Here's the problem. If you're an executive in a Big Pharma company, you know that the United States market is your last, best hope for sustaining unethcially high prices and shareholder value. Why? Because other markets are now 'off limits' to such practices because the governments in those marekts have chosen to blend their concern for Big Pharma profitability with their concern for the health and well being of all of their citizens (not just the top 10%).
For the red meat eating ideologues out there, please re-read: these governments blend their concern for profits and people. Blend. They do not prevent or advocate or wish that Big Pharma become indigent groups operating at unsustainable losses.
No. They wish for and hope and listen to reason to help Big Pharma and all private sector companies make profits -- reasonable and sustainable profits. Because that's how markets work.
But, these other governments -- unlike the government of the United States -- have said "No" to single answer, shareholder value extremisim. They know that this form of extortion is no more sustainable than continual, persistent losses.
So, if you're a Big Pharma exec and you look at the markets around the world and you see that, for the most part, your profits will be hemmed in except for one -- the US -- then what do you do?
You put the peddle to the metal in the US and do whatever it takes to drive as much profitablity as possible out of this last 'frontier'. Do the math! If you have 10 markets and 9 of them -- at best -- would produce, say, 10% return on investment while your financial markets are 'demanding' you maintain 25% in total -- then you better get a heckuva lot higher profitability out of that 10th market if you hope to make the total performance meet these expectations.
So, when a mid-term election shifts Congress from R to D, and the D group knows there's not much reality left to what we used to refer to as 'middle class' -- quick fact: the top 1% in this nation have 40% of the assets and they can definitely afford the high prices of Big Pharma's US market drugs while the lowest 60% of families have 1% of the assets and cannot -- and this D group identifies the free market idea of importing lower priced drugs -- well then the 'free market' Rs and their Big Pharma paymasters are going to go to work quickly to ensure that free market thinking like the D's offer do not imperil the 'free market' profits of the status quo.
November 19, 2006
Invest Today In A Free Press
How would you like to invest in the growth of an independent press? Well, go to the Media Development Loan Fund today and you can do just that by putting your money in a safe, low yield bond.
Over the past decade, MDLF has provided low-cost financing and technical assistance (learning related to financing, distribution, business planning, etc) to more than 50 independent media companies -- radio, TV, newspaper, internet and more -- in nearly a score of nations in Asia, Latin America, Africa, Central Europe, Russia and elsewhere that are transitioning toward the possibilities of democracy.
MDLF provide both low cost loans as well as takes equity stakes. They, in turn, use innovative instruments to gather the capital needed for their important work. In particular, with the participation of major financial institutions, MDLF offer investors low interest returns (e.g. up to 3%) in safe bonds -- what they call 'social bonds'. In effect, you can invest in press freedom around the world.
Posted by Doug Smith at 01:33 PM | PermalinkNovember 14, 2006
Market Magic
See my article in Slate about how we can use the idea of "dynamic deductibility" to create a new kind of security around the right to trade the timing and size of a charitable deduction -- and, thereby, foster a real capital market for non-profits.
Posted by Doug Smith at 01:40 PM | PermalinkNovember 12, 2006
Six Sigma Upside Down
Six Sigma programs have been a common aspect of the quality movement that swept industry over that past twenty years. Among the key principles of these programs are (1) all work can be described in terms of step-by-step processes; (2) there are always 'customers' of these processes (that is, people, whether inside a company or, more traditionally, beyond it like real customers) who receive the benefits of the work at hand; (3) defects or errors matter to these customers; (4) data can be kept about such defects; (5) a variety of problem solving and improvement efforts can be made to continuously root out the causes and eliminate such defects; and, (6) those involved will do better if continuously challenged to reduce the number of defects.
Six Sigma itself is a statistical notion conveying that there will be less than 3.4 errors or defects for every milllion opportunities. This is a steep mountain to climb. Still, as an aspiration, it has vastly improved the quality of work over many years now -- especially when combined or driven through an expectation of continuing reducing the number or incidence of errors at some rate (e.g. every year cut defects by 70% or 90% or some other goal).
The six sigma statistic crossed my mind while reading about the track record of the federal and state Road Home program designed to help Katrina victims with the money needed to repair or replace damaged homes. Whether organizations are governmental or private sector, one doesn't expect six sigma performance in an effort only 14 months old. 3.4 four errors out of a million opportunities would be too high a bar.
Still, it came as a bit of surprise that, in a process essentially aimed at providing money to needy homeowners, the pace at getting it wrong would be so wildly at odds with six sigma. Indeed, the numbers turn six sigma on its head. Instead of getting it wrong 3.4 times out of million, this program has gotten it right only 22 times out of 79,000.
Only 22 home owners have actually received cash -- out of nearly 79,000 who have applied.
In six sigma upside down terms, this translates as "of every million opportunities to get it right, those doing the work in the Road Home program succeeded 278 times."
So, here's a suggestion to the Road Home program:
Invite all who have applied to the program to a football stadium. Ask them to use their application as their ticket to get in. Take the $7.5 billion allocated to the program, divide it up by the projected number of those in attendance, put that amount in a cashier's check on the stadium seats, provide some entertainment and call it a day.
Will there be defects?
Will there, for example, be folks who spend the money on something other than home repair or rebuilding? Will there be folks who shouldn't get the money? Will people get the wrong amount of money?
Yes.
But, here's my guess: The number of defects will be far lower than the current rate of getting it wrong at a pace of 999,732 times out of a million.
November 11, 2006
Note To Joe Nocera: Almost There
Joe Nocera of the The NY Times visited the annual Corporate Social Responsibility conference this past week and came away dazzled by the paradoxes. The contradictions would have been hard to miss. For example, what must Joe have wondered as he spoke to Exxon Mobil's and Chevron's corporate social responsibility representative the week following the Stern Report catalogue of the catastrophic risks of continuing to treat environmental damage as an externality. Ditto for Pfizer's 'do-gooder' who, as a person undoubtedly seeks to better human kind and cannot be held individually accountable for his company's maniacal focus on bottom line practices such as kick-back like rewards for doctors who push Pfizer products, research and development trials conducted without objective oversight, campaign funding to politicians who support extending legalized monopoly, product development efforts aimed at minor improvements over fundamental innovation, and marketing campaigns that draw attention away from health risks while misleading consumers about the actual costs of new drugs.
Ditto for Ford Motor Company -- whose advertising mantras for years and years (e.g. "No Boundaries") use the imagery of pristine environmental experiences to push gas guzzling SUVs. Or, how about General Electric? Having fouled the Hudson River for decades, GE poured tens millions of dollars into delaying court-ordered cleanup and miselading the public about it's actions because, from a shareholder point of view, the costs incurred in delay outweighed the costs of the clean up. McDonalds? The same week it's representative chatted about the company's sense of social responsibilty at the NY City confab, McDonalds was also funding the effort to fight a NY City ordinance banning transfats.
The list could go on. Joe could not avoid the paradoxes. When, for example, the McDonald's rep claimed corporate social responsibility is "core to the way we do business", Joe noted: "You could wonder about that."
Nocera picked up this theme again in his conclusion. Having ceaselessly breathed in paradox and contradiction, Joe opined that for companies to become substantively responsible -- as opposed to PR-oriented "responsible" -- would demand all responsible values become core to those companies' business models.
Hurrah for Joe! He is dead on correct. Now, Joe, go back, re-read and re-think this declarative statement you make earlier in the article:
"Do shareholders come first -- above other stakeholders (another favorite buzzword at the conference... encompassing customers, employees, activists and so on)? Of course."
Joe, Joe, Joe. There can never -- never -- be fundamental change to the core business models if shareholders come first and their concerns are the trump card of any discussion. Never.
But, Joe, listen up carefully. This last comment does not reflect today's either/or orthodoxy. The orthodoxy embedded in your all-too-facile "of course". The orthodoxy that insists that either the shareholder comes first. Or the shareholder comes last.
No. The shareholder cannot come last. We saw a long run of the poor consequences from the 1950s through the 1980s of what happens when the shareholder came last. We must pursue shareholder value. We must celebrate shareholder value.
But we must not make shareholder value the trump card of all human affairs conducted by business -- especially if we, as I think we should, choose capitalism as an essential philosophy for the well being of the planet.
Joe, if you are to help us change the core business models then you've got to erase your robocall "Of course" about the primacy of shareholder value. You've got to think again and somehow, some way discover the more profound declaration that the shareholder, like other core constituencies, must abide in equivalency of importance. The shareholder does not come first. Nor does the customer come first. Nor does the employee come first.
The shareholder does not come last. Nor does the customer come last. Nor does the employee come last.
Sustainable and ethical corporations must shift their core business models to this formulation: "Shareholders provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who..... and on and on."
That is an ethical and sustainable scorecard. And it reflects this unprecedented and undeniable fact of the 21st century human condition: we live in a world of markets, networks, organizations, friends and families in which our organizations are the new communities that determine the fate of our planet. Our primary ethical challenge can only be met when organizations reintegrate our legitimate concern for value with our equally legitimate concern for other values. Failing this, our most dominant organizations -- for-profit enterprises -- will continue putting value first and, thereby, continue propelling our global society toward social, environmental, political and economic disasters.
Joe, consider only this illogical aspect of your all-too-easy-and-orthodox "of course": Who are these shareholders who come first? I'm imagining you are a shareholder. But, let me ask this, are you a customer? Are you an employee?
Put differently, does Joe Nocera the human being come first? Or, do your concerns only matter to the extent that you happen to own stock in one more enterprises?
Should we put one of our dominant shared roles (investor) above the other dominant shared roles of our new age of human kind (employee, customer, family member, friend)? And where does that leave the extraordinary number of folks on this planet who are not investors?
Joe, if we wish to take your constructive insight about changing core business models as an essential condition to the fate of this planet, then we must move beyond either/or-ism to both/and. We must not elevate any role to trump card status while also avoiding subordinating any role as a last concern.
We must learn to practice the new golden rule: "As employees do unto others as customers, investors, family members and friends what we would have them do as employees to us as customers, investors, family members and friends."
When the employees and executives of Chevron, Exxon Mobil, Pfizer, Ford, General Electric and McDonalds begin practicing this golden rule in earnest, we'll all witness social responsibility (as well as environmental, medical, legal, political, technical, family, spiritual and economic responsibility) blended into the daily lives of those who make, sell, distribute and service the many good things we depend on for leading our lives.
We will experience and have good things to have that are truly 'good'.
Posted by Doug Smith at 12:44 PM | Permalink
October 22, 2006
Weakness
In any human situation -- a relationship, a family, a team, an organization, a market, a war -- the blend of arrogance and incompetence is one of a handful of formulas for weakness. Why? Well, of course for myriad reasons. Just one, though, suffices as illustration: Arrogance in the form of "I/We are never mistaken and, therefore, never need to invite other viewpoints into our choices" guarantees that incompetence remains incompetence forever. As I say, a prescription for weakness. And, therefore, a prescription for certain failure.
All of us must make our own choices (e.g. in voting as well as the exercise of speech) about paths forward. As you approach such choices - for example, this coming Nov. 7th -- think about whether, in light of the troubles and difficulties from terror to Iraq to disaster recovery to social security to education and on and on -- you choose to pull the lever in favor of a Republican Party deeply and permanently committed to being weak.
Put differently, you have a choice: Support a Republican Party whose blend of arrogance and incompetence ensures perpetual weakness; or, choose another possibility that, whatever your anxieties or hopes, is not yet permanently condemned to failure.
Posted by Doug Smith at 11:56 AM | PermalinkOctober 01, 2006
Value versus Values
From Der Spiegel in Germany:
"In its report on Afghanistan, CorpWatch - a U.S.-based corporate watchdog - concluded that the companies were more interested in making money than helping the people. Thousands of foreign experts have been dispatched to Afghanistan.
The consulting firms in Kabul have been given multi-million-dollar budgets from their governments to establish a central bank and three ministries: Finance, Justice and Commerce. They have also been tasked with slowing poppy cultivation and finding alternative sources of income for the farmers. Their remit further extends to building schools, roads and hospitals.
{snip}
American taxpayers would be stunned to hear where their tax dollars were actually going, the CorpWatch report says: beyond being wasted on failed projects, it helped pay for "contractors' prostitutes and imported cheeses." The CorpWatch investigators spent months monitoring the flow of international funds and concluded that business-savvy representatives of donor nations rather than Afghans were the real beneficiaries.
The U.S. government lavished $150 million on the private security firm DynCorp. Its mission: to close down Afghanistan's poppy fields. Ninety Americans and 550 Afghans set about the task. The result: thousands of extremely irate farmers who - despite having their crops destroyed - were denied realistic compensation.
The Rendon Group from Washington, D.C. was charged with winning public support for the United States and its military in Afghanistan. According to CorpWatch, the PR firm - which reportedly has close ties to the Bush administration - has received contracts worth more than $56 million since September 11, 2001. It has failed miserably in Afghanistan: never before have the Americans and their allies been as unpopular as they are today.
The euphoria that greeted Americans in Kabul on Nov. 13, 2001 has long been replaced by suspicion. Today many Afghans regard the erstwhile liberators as occupiers."
All of which begs these questions:
What do the people who work at these companies really stand for?
What do the people who work in the government organizations that hire these companies really stand for?
September 02, 2006
The Size Of The Pie And The Share Of The Pie
For those who have the courage and wisdom to pay attention, among the most important contributions of the now decades-old quality movement in the contemporary business world is it's demonstration of 'both/and' thinking and acting. When people adopt and pursue shared purposes built on 'both/and' principles, they identify and articulate two or more objectives that are in constant tension with one another. For example, within the broader field of quality, an organization might pursue both fewer errors or defects and faster speed of delivery. These two objectives struggle with one another. A group pursuing only speed has an easier, less constrained set of solutions than the group pursuing both speed and fewer defects because the former can simply speed things up and accept more errors.
The benefits of both/and approaches, though, go far deeper than the stated objectives themselves because they support and promote effort that is more fully human -- more challenging and, therefore, more creative and more fulfilling. While elitists might disdain the deeper meaning within the work of a team of folks at the front lines of a company pursuing both speed and fewer defects, the people on the team itself will and do report that with success comes the experience of both deeper affiliation and deeper meaning. No, such folks do not equate either the affiliation or meaning with the poet's truth or beauty -- but they do know and sense the importance of collaborating with other human beings on something that matters. As Marlow in The Heart of Darkness admiringly, respectfully says of the man who helps him guide the boat up the river, these folks do work, they do something.
And they do it together, fully challenged by both/and realities of human existence.
Our planet is beset by powerful men and women who ignore the way of both/and humanity in favor of single goals and single answers. In this, they pursue self-interest over shared interest and personal power and wealth over shared purpose and the rule of law. In contemporary geopolitics, we see this abhorrent, destructive self-interestedness in the form of powerful governmental, corporate and media officials who claim truth stripped of reason as a shield to their own pitiful failure to embrace the opportunity for a more fully human experience given to them at birth. They love single answers because they are the easy road to self-enrichment. They eschew both/and because, down that road, lies shared struggle and shared responsibility.
In economics and business, we see this single answer extremism primarily in the form of our age's deep and widespread acceptance of shareholder value as the trump card for business performance. The primacy of shareholder value is today as widely shared as the belief in motherhood. And, yet, unlike motherhood, the beliefs and behaviors of shareholder value extremism march us toward and over the cliff of despair and destruction every single day. Whether it is exploding mortgages, layoffs, deteriorating benefits, moves to privatize social security, ongoing environmental destruction, decades-old erosion of real wages, poverty that is hidden by false statistics, rising obesity and eating disorders, failure to equate energy policy with national security -- etc, etc, etc -- the either/or thinking and action of single answers have now endangered our planet and put the futures of our children and their children at grave risk.
The Philistine plutocrats admonish us to either accept the primacy of shareholder value or destroy our markets, our business prospects, our jobs and our country. That is the 'either/or' proposition that has an iron grip on our society today.
And, it is the either/or proposition that has propped up the irresponsible, self-interested officials in government, corporations and media who have spent the last three decades promoting the false notion that the 'size of the pie' -- the size and growth of GDP -- somehow exists in isolation from the 'share of the pie' -- the distribution of income and wealth. Both matter.
Both matter to the aspiration embedded in our national heritage known as 'liberty and justice for all'.
Not for some. For all.
Not just for the top 1% who now control more than 40% of our wealth.
For all.
Not just for the top 20% who control more than 80% of wealth.
For all.
"For all" includes the bottom 40% who actually have less than 2% of our society's wealth.
For all.
Just like the quality team who challenge themselves to be more fully human by tackling both speed and fewer errors, all of us -- every day we wake up -- have the choice to demand of ourselves and those who would claim to lead us that we commit our resources, our capabilities, our hearts, our minds and our guts to building a society that aspires to both a larger pie and a just distribution of that pie.
We cannot and will not find our way to this 'both/and' pursuit of happiness, though, until we once again adopt belief and behavior that demonstrably care about people beyond ourselves. Nor until we -- and especially the 'we's' of organizations -- explicitly evict shareholder value extremism from our midst. We must not condemn shareholder value itself -- only the tenets by which it is made a golden idol, a trump card of either/or-ism whose shininess blinds us to the corrosive reality with which it destroys our common humanity -- including, importantly, the humanity of those who practice and espouse it.
Let us now -- right this moment -- turn our eyes toward both the size of the pie and the share of the pie. And let us do that work together.
Because the clock is ticking. And our children our crying out for us -- their elders -- to take shared responsibility for creating a safer, saner and more sustainable future.
For all.
Posted by Doug Smith at 01:30 PM | PermalinkAugust 19, 2006
Planning For The 20th Century
Evidently, officials at Ford -- the company that yesterday announced drastic cuts in auto production -- have been working hard over the past several years planning for success in the 20th century through betting on cheap interest rates and low gasoline prices to support a product line featuring SUVs. We are, of course, smack in the middle of 2006. But, on Friday, Ford officials contended that "no one in the industry could have anticipated that gasoline prices would remain so high".
No one.
In the industry.
Or, did they mean, "No one at Ford"?
Actually, no one ought to be surprised by the Ford production cuts. They are a natural consequence of me too, inside the boxplanning aimed squarely at solving strategic problems defined through the rear view mirror.
The auto industry has been aware of the core dimensions of the shifting strategic landscape for well over a decade -- arguably two decades. These shifts are profound. They inevitably call for a fundamentally different business model -- one that demands innovation and deep, behavior and skill change. Those, in turn, have always -- always -- meant that the solutions would require trading off today's profits, shareholder value, jobs, benefits and salaries (both union and executives) for tomorrow's sustainability.
Those at Ford, GM and elsewhere have confronted the question, "Are we willing to take real risks -- risks that might upset the financial markets, the unions and our executives?"
"Or, can we somehow find a way toward a viable future through luck and incremental, deck-chair (I mean, parking spot) rearranging?"
These are not easy questions. The executives, unions and other decision makers deserve our sympathy for the difficulty they find themselves in. But in choosing the incrementalist approach, those involved have wreaked real world damage on tens of thousands of families and, in part, they have done so out of obeisance to shareholder value fundamentalism.
They have picked short term value over a blended values approach that includes, but does not worship as false idol, value itself.
August 17, 2006
Exploding Mortgages V
From Billmon writing about the housing bubble:
"But what makes things different -- and potentially more exciting -- this time around are the gaudy new financing gimmicks Kevin mentions: no money down loans, interest-only mortgages, ARMs that reset to truly usurious rates, etc. If and when these loans blow up, and they will, it could leave many home "owners" with no alternative but to sell and sell quickly -- or simply mail the keys back to the bank."
Who is responsible for this situation?
In our popular culture, the responsibility will get placed largely on the customer - on individuals who signed up for exploding mortgages.
Caveat emptor -- buyer beware -- has a long and important history and some of the responsibility always should lie with the customer.
But in a world where place still fostered shared values, individuals were much more likely to be bouyed in their choices by the shared wisdom of extended yet present family and neighbors who lived nearby and participated meaningfully in their shared lives. Folks would not let folks sign up for exploding mortgages.
Most of us no longer live in a world of places. We live in a world of markets, networks, organizations, friends and family. In this new world, an extraordinary amount of responsibility for the safety, sanity and sustainability of our society rests with organizations -- because organizations are where we come together for an experience of community -- of thick we's -- that allow us to ask and answer: What difference do we wish to make -- together -- to the world we live in?
Our long history of markets in a world of places does not always serve us best in answering this. The singularity of the profit motive arose in a world of places because place itself fostered shared values that moderated the effects of businesses operating out of self-interest. Today, our most prevalent shared values - that is, predictable patterns of belief and behavior -- happen because of markets, networks and organizations -- not places. Of these, organizations are the most important: they set the tone of what matters, of what we really stand for.
While undertandable from a standpoint of history, what most private sector organizations really stand for is profit. But, that is neither sustainable nor sufficient in our new world. It has led, for example, to widespread and entrenched shareholder value fundamentalism every bit as virulent as religious fundamentalism. That, in turn, leads to financial institutions, realtors, mortgage brokers, speculators and others who -- as thick we's -- make it their shared purpose to build profits and shareholder value at any cost without regard for other values.
That, in turn, leads to exploding mortgages.
Responsibiity? Customers? Yes, somewhat.
The core responsibility lies however with the folks who show up to work every day in companies that create and sell exploding mortgages. And until a critical mass of employees and executives of those companies figure out they are responsible for the horrendous things happening to their 'customers' -- and their customers' families and children -- we will continue to move blindly and recklessly through a world we refuse to take responsibility for.
Posted by Doug Smith at 11:25 AM | PermalinkJuly 15, 2006
Exploding Mortgages, IV
According to this NY Times' article, the share of interest-only mortgages jumped from ten percent of new mortgages in 2003 to over 25% in 2005. In addition, a different variant of exploding mortgage -- called payment option adjustable -- represented nearly 16% of new mortgages in 2005. In total, 42% of new mortgages in 2005 had explosive potential -- that is, could blow up if the borrowers found themselves in any of the following situations: (1) rising interest rates that triggered significant increases in monthly carrying costs beyond the income capacity of the borrower (and this goes for the mortgage as well as credit card debt); (2) falling home prices that trigger similar problems or make refinancing out of the question; (3) increases in other costs such as gasoline, health insurance or home heating which force the borrower to make tough choices; (4) loss of job which, if the borrower is actually a couple who premised affordability on two incomes could mean unaffordability if either spouse loses a job; or, (5) illness that either puts the borrower out of work for too long or means a spike in uninsured or underinsured medical costs (which might arise if either the borrower or any other family member gets sick).
These are just some of the risks facing 42% of the borrowers who got exploding mortgages in 2005.
Executives in the mortgage industry who are quoted in the article, however, are not concerned. "It offers an opportunity," said Brad Brunts of CitiMortage, a Citigroup unit. According to Freddie Mac -- the giant mortgage packager that has been under a cloud for years for unethical practices -- the exploding mortgages offer a bonanza opportunity for Mr. Brunts and his professional colleagues to refinance existing mortgages -- to, in effect, wring yet more profits out of financial arrangements already unaffordable to borrowers.
Exploding mortgages were predatory by luring people into unaffordable situations. Now millions of families may lose their homes -- or be forced to drop critical expenditures such as medical or dental help or heating during winter. Millions of families. But it's not likely that many of them sit in the top 20% of society. Instead, the top 20% hold the paper - they are, directly or indirectly, the ones providing the capital and, because the top 20% hold more than 80% of the assets, we know that the capital markets in the US have huge capacity to ride out the difficulties through refinancing and streching out payments before declaring bad debt not to mention capacity to profitably write-off a lot of debt.
The current way markets work, then, favors the holders of capital at the expense of millions who cannot afford the exploding mortgates threatening their futures. One might, in theory, consider turning to courts for redress. But, such efforts to rectify predatory practices have fallen very short. Ameriquest, for example, suffered a mere few hundred bucks per bad mortgage in a settlement aimed at its unethical practices. Road kill.
So, if you're like Mr. Brunts, you look at the more than $1 trillion of likely business that will get re-financed over the next two years and see bonuses and commisions, not misery. In his lack of concern, Mr. Brunts is joined by the head of the National Association of Realtors - you know, the folks bringing you the recent wave of commercials about how comforting it is to have a broker you can trust.
As the Times article notes, "Mr. Brunts says only a minority of mortgage holders will face real problems."
Statistically, of course, 'minority' can mean any percentage less than 50. Linguistically - and culturally -- however, when a person says, "only a minorty....', the rest of us are supposed to hear: 'very minor problem that won't affect you."
In other words, 'tsk tsk... let's just move on'.
Posted by Doug Smith at 02:59 PM | PermalinkJune 28, 2006
The Courage To Act As Employees
In the 21st century, the most powerful venue for principled action -- for voice and dissent -- has shifted from the places we reside to the organizations in which we meaningfully participate and especially the organizations where we work. Most of us no longer live out our lives in places. Instead, our most meaningful interactions with other people happen in markets, networks, and organizations; and, among family and friends. Of these five contexts, organizations are the main one where meaningful aspects of our fates -- jobs, status, daily affiliation, opportunities to pursue meaning -- depend on other people who are not necessarily friends or family yet we know by name and interact with daily. Beyond friends and family, these are our 'thick we's' and, therefore, if any of us wishes to act on and perpetuate the democratic heritage of our nation, we had best learn to do so in these new thick we's in our lives.
Among the most claimed aspects of that heritage are voice and dissent. From the late 18th to late 20th centuries, our traditions for voice and dissent happened in places where we lived with other people -- towns, neighborhoods and so forth. The prime context for this may have always been elections. Today, however, elections are market phenomena -- they are far more subject to the markets, networks, and organizations of electioneering -- including the distribution channel popularly called 'mainstream media' -- than the daily, persistent and intensive action of citizens in local places. As noted in Bowling Alone, such place-based citizen action - complete with reasonable percentages of participation -- still happen in very small towns as well as some places where the traditions are extremely strong. New Hampshire and Vermont fit both criteria and, as you'll see from a careful reading of Bowling Alone, these towns continue the traditions of a world of places as opposed to markets and so forth. Robert Putnam's 'warning signs' of the deterioration in civil society do not apply to these places -- they are the exceptions.
This is confirmed by other observations. For example, analysis of get out the vote efforts in the 2004 election indicated a much easier challenge in Vermont and New Hampshire than, say, New Mexico where that lack the two centuries old traditions or California where the world of markets, networks, and organizations is more firmly rooted.
Practicing voice and dissent within thick we's is essential to democracy. But, in our new world, that means doing so in our organizations. A 19th century American risked much in his or her town by having the courage to dissent from a popular view. For tens of millions of us, this is not the case in the 21st century. We can, of course, attend town meetings and raise our concerns. And, we should. But, the personal risk and exposure in doing so bears no relationship to taking the same action in our organizations. In our towns, most of us most of the time -- if we act or speak at all -- do so in the role of 'customer' and are treated accordingly. In our organizations, by contrast, if we have the courage to act and speak out and dissent, we do so as employees and we risk making a lasting impression -- especially if our voice extends beyond the water cooler.
Go ahead, Try this out. Even if only as a thought experiment. Imagine going to a town council meeting and voicing your concern about some current topic in a manner opposed to popular opinion. Say, for example, you would like to encourage the town council to raise property taxes or give teachers more benefits -- or, the reverse if that's counter to prevailing winds. Or, to test this more precisely in an emotional context, speak in favor or against teaching evolution or intelligent design. If you live in a town or city of greater than 10,000 people (let alone ten times that), the absolute worst reaction you might imagine is getting shouted at that evening and, perhaps, attracting the attention of some press person who hopes to get some attention by writing about you. If you have friends and family who seriously disagree with you, they probably already know about, and have formed their responses, to your position. Again, worst, worst case, you might risk some 'nut job' from the other side screaming at you in the blogosphere or a letter to the editor.
In contrast, imagine for a moment that you choose to voice dissent -- real, challenging dissent -- about matters of real importance to the organization where you work. Ah. What a difference! In this case you must consider beforehand the risks to your job, to your friendships and acquaintances, to your relationship with your boss, to your career prospects and more. Unlike the town context, here you are far more likely to risk some persistent and enduring response. Some memory -- near as well as medium and even long term -- of your action.
Acting as an employee takes far more courage than acting as a citizen. In saying this, I do not mean to trivialize in any way the efforts of citizens who actively participate in local, regional and national affairs. Clearly, the more who participate -- and vote -- the better. But I do mean to point out that courage itself is best tested in the actual thick we's of our lives.
Consider, then, this comment:
Stand Up
As treason charges against the New York Times (but not, oddly, the Wall Street Journal) are getting thrown around on various "respectable" news outlets by people working in "journalism" I think it's probably time for the serious reporters at those outlets to inform management that their resignations will be forthcoming if it doesn't stop.
Silly people like me have been trying to warn you for years - you created, cultivated, nourished, and promoted these people. They're one of you. Take a stand, because pretty soon it's going to be too late.
The mainstream media are a crucial distribution channel that determine the nature, content and opinion bias upon which folks in our new world of markets, networks, organizations, friends and family depend. If you or anyone wishes to dissent from how the mainstream media handle their responsibility, you can do so as a consumer (purchase or not purchase; provide feedback positive or negative), as a competitor (offer a different or the same product), as a litigant (sue them), as a family member and friend (speak up at the dinner table) -- or as an employee of mainstream media corporations.
Of these, there is simply no question that the most courageous -- and the most pragmatic, near term and impactful -- choice belongs to employees who ask and answer the question, "What do we, the people of this enterprise, really stand for?
If you want to 'make a difference' -- if you want to pass along to your children and their children -- a world that is safer, saner and more sustainable, then you must act as an employee in the thick we of your organization because organizations are the driving crucible for the markets and networks that determine the fate of the planet.
Posted by Doug Smith at 12:31 PM | PermalinkJune 05, 2006
Value Madness
The fixed and seemingly inviolate obsession with shareholder value might -- might -- now deny government agencies the information needed to prepare for hurricanes. Again, I say might. According to this article, a supercomputer's forecasting methodology created by government funded scientists at Florida State University (I repeat: State university - as in a government entity) has been licensed by that State university to a private company, Weather Predict. According to the licensing agreement, Florida State scientists are not permitted -- yet -- to provide forecasts to any agency without permission from Weather Predict.
The article points out that the supercomputer has among the best track records in accurately forecasting hurricanes.
The article also mentions that Weather Predict's CEO assures one and all that, of course, nothing will get in the way of helping out government agencies during the hurricane season; and, that his company is currently working on making sure such arrangements are in place.
So, let's recount:
Government money funds employees of a government institution (Florida State) to create a supercomputer that accurately forecasts hurricanes.
The institution sells this know how to a private sector company.
The private sector company now sits between the use of the computer and the well being of folks who live in the United States of America.
Those folks are citizens and taxpayers -- whose money funded the invention.
Weather Predict's CEO promises 'to work it all out".
One can imagine a State University licensing technology to the private sector - both to take advantage of it's own advancements as well as to encourage market-based uses of weather prediction. No problem.
But, it's absurd that the licensing agreement fails to limit the license itself to a range of uses that are free and clear of any need of the forecasts for the public good.
And, having failed at incorporating such language in the contract, it is absurd that the issue of protecting the public use of forecasts made by a supercomputer created out of public money is still up for negotiation.
Weather Predict is now endangering millions of lives as it tinkers with how best to make a profit.
This all might work out. Let us hope so. But it is absurd -- it is immoral -- that the situation even exists.
Posted by Doug Smith at 12:30 PM | PermalinkJune 04, 2006
Not One Ounce Of Prevention
Today's LA Times has a well written article about the shortage of doctors in the US, including succinct explanations of why the shortage has happened, some of the consequences we can expect and what it will take to remedy.
As I say, it is a well written and concise article. And, because of that, it illustrates a profound problem: The incredible difficulty folks have in thinking comprehensively and out-of-the-box.
Read the article and you will come away with this conclusion: Medical difficulties stemming from too few doctors are best and (only) cured through more doctors.
Quickly now: We need more doctors (and nurses and other health care providers).
But, the arithmetic in this is stultifying. It's all about solving problems of quantity with quantity. Not one word about 'thinking differently" about how to approach health care.
Not one word, for example, about what medical schools teach doctors about the challenges of health care in a world of markets, networks and organizations. For example: What about epidemiology, public health and prevention?
How can doctors, nurses and other health care providers change the ratio of inputs and resources from 'too heavily weighted toward curing those who are sick" to a better blend of 'prevention and cure'?
In a world of markets, productivity is critical to sustainability. Input/output relationships matter a lot. But if our public discourse is limited to arithmetic relationships -- that is, to increase outputs, limit your solutions to increasing the same amount of inputs -- we are left only with the same rate of productivity. Want more cures? Get more doctors!!
If we are to shift the ratio of productivity, we must find better uses and approaches to the inputs. And that means we should be focusing tremendous effort and creativity on what medical schools and others teach and think about prevention, early detection, low-tech interventions and an incredible variety of other means toward building a healthier society.
Posted by Doug Smith at 12:09 PM | PermalinkMay 28, 2006
Government Secrecy Gone Wild: The SEC
Among the most cherished and powerful market principles is the direct relationship between the free flow of information and market efficiency. In our networked economy, of course, this is even more pertinent. The more information that flows, the more powerfully and quickly the markets can adjust. If one or more organizations gain control over information flow, trouble follows (e.g. see today's earlier post of about the flow of information around the widely shared but false idea of 'authenticity' in our political markets).
Those who favor openness and free flow of information also believe the same is the best possible policy for countering the ill effects of dis-information. That is, when one 'let's it all flow" the odds improve that markets will more quickly and effectively adjust to bad or false information.
But, of course, those who currently rule instead of govern our nation have a strong, predictable set of beliefs and behaviours -- strong shared values -- that opt for secrecy over openness, and controlled/trumped up misinformation over the free flow of information.
It now looks like their diseased values have spread to the SEC.
Earlier this week, a jury returned guilty verdicts against two of the architects of the Enron scandals. In a subsequent letter, Chris Cox, the current head of the SEC congratulated the agency for their hard work and persistence in helping with the prosecution. Too bad that Cox's new secrecy policy at the SEC -- the policy of nondisclosure by that federal agency most iconically associated with the idea of disclosure -- is but one more brick in a growing wall separating our government from competence and sanity.
Have Chris Cox and his lawyers lost their minds? The basic point of disclosure laws and practices is to help the markets react and adjust as quickly and as efficiently as possible to 'news' -- especially news of possible wrongdoing. Had Cox's wrong-end-of-the-telescope policy been in place in late 2001, the SEC would have blocked -- not disclosed -- information about the Enron investigations Cox now so proudly celebrates -- and, in doing so, would have left tens of thousands of investors in the dark about what was emerging as a major scandal.
Yes. That's right. The financial markets would not have been given the earliest possible moment to begin adjusting for the Enron malfeasance -- and those same tens of thousands of investors would have held on longer -- only to have been burned worse before the word came out.
Your job Chris is to help faciliate large, effective, and efficient capital markets. That's job No. 1.
Your job is not primarily to 'get scalps', build your resume of successful prosecutions, and along the way harm investors.
Start doing your job.
Posted by Doug Smith at 04:25 PM | PermalinkMay 23, 2006
War on Manners
The Wall Street Journal has responded to a college student's candid criticism of Journal-supported policy by declaring a strong preference for actual failure over any acknowledgement that might be perceived as failure. In their image-dominated world, any whiff of even the possibility of failure is, well, bad manners. Instead, the Journal stands four-square behind sycophantish applause and back slapping. They are a "heckuva job" outfit -- at least when it comes to jingoism in support of a John Wayne kind of image. (One seriously doubts, for example, that the same yawning gap between image and substance would be tolerated in their company or in their investments.)
After scolding the young woman -- or more accurately her family - for ill manners, the editors go on to equate calls for changing our current disastrous path with 'precipitous surrender" in the war on terror. In doing so, the Journal casts it's values with those who prefer image to substance.
For against the yardstick of actual substance -- actual performance -- how else can we describe the current state of affairs with anything other than the word 'failure'? Were the nation a corporation, it would be bankrupt (far more debts than assets -- literally), have virtually no market share (see polls both inside and beyond the US), suffer from spent and aging infrastructure (see state of US military and lack of preparedness for natural or human disasters), and entirely bereft of core competencies -- or, better put, it's executive ranks are the very picture of core incompetencies.
But, hey, the editors at the Wall St. Journal are still promoting the 'buy' side. Or, would it be more accurate to say they cannot bring themselves to acknowledge the 'sell' side's arguments and wisdom. It's all hat, no cattle at the Journal. A war on manners instead of a war on incompetence and bankruptcy.
Their screed appears as an editorial. But, it's actually an advertisement for the Journal's disloyal, anti-American attack on democracy. More than five years of staged Bush speeches in front of folks who either work in the military or sign loyalty oaths, of rules against showing the coffins coming home, of Gestapo-like tactics to tamper with voting, of the utter incompetence that always flows from the absence of open and real problem-solving, have left the Journal editors bereft of ideas or suggestions.
No wonder they use what little imagination they have to rage against manners instead of acknowledging responsibility for the disaster their own Constitution-hating, preemptive war-starting, and drown-the-government-in-a-bathtub fantasizing has fostered. The Journal applauds Rovian character assassination of folks who actually risked their own lives for their country -- but gets sniffy about a young woman's respectful disagreement with a man whose personal war record stands out as an isolated exception among the cabal of draft-and-duty dodging men who had 'something better to do' when their country called.
A friend has a wonderful expression: gradual suddenness. It applies to the precipitous defeat we experience every day under the atrocious, morally bankrupt and incompetent officials whose manners are so loved by the editors of the Wall St. Journal.
Gradual suddenness. That is what the 'larger electorate' is now experiencing. The gradual suddenness of precipitous failure and defeat.
Mirror, mirror on the wall, who's the bravest of them all? In the mahogany, tax-cut lined executive suites at the Wall St. Journal, the mirrors continue to lie on command. And, sadly, the editors themselves remain blind to the ugliness in their souls and, consequently, bereft of any chance to move beyond their adolescence to full adult maturity -- the kind that demands acknowledgement of error in one's self and sincere, heart felt apology and repentence for the harm done to others, to the nation, and to the planet.
Posted by Doug Smith at 11:53 AM | Permalink
May 19, 2006
Exploding Mortgages, III
Recently, the National Association of Realtors has run a series of TV ads promoting their brokers' ethics. The ads portray a series of sociodemographically diverse folks giving heart felt testimonials describing how lucky and fortunate and, well, down right life saving was the help and assistance they received from their real estate brokers whose -- well, golly, -- whose ethics saved the homeowners from any number of traps, illusions and pitfalls.
The brand promise here, of course, bears only a random relationship to the brand delivery, at least as experienced by millions of folks who now have exploding mortgages and homes they cannot and never could afford. Are there ethical real estate brokers to be found in the United States? Of course there are. But, have this nation's housing markets experienced the depradations of 'make a buck for me' real estate brokers, mortgage borkers, housing developers, predatory lenders and -- even so-called non-profit financial counselors?
Yes. For example, see this, this and this. And, for the latest update see this.
Beyond the contexts of friends and family, we live our lives in markets, networks and organizations. The organizations in those markets -- like the National Association of Realtors, the local realtor down the block, the bank, the mortgage company, the credit card company, the US Congress (see Bankruptcy Act), Fannie Mae, Freddie Mac, Citigroup, Ameriquest and on and on and on and on -- choose how to position what they really stand for in terms of brand promise as well as the extent to which the products and services they deliver match those promises.
That our life experiences with the gap between brand promise and brand delivery have taught us to be skeptical is not a surprise. Some exaggeration is a built-in corollary of the constraints posed by 30 second ads, billboards and banners. Of course there is exaggeration because companies must choose what to emphasize.
But, exaggeration need not be immoral, unethical and damaging to others. Exaggeration -- even the need to competitively exaggerate in markets -- need not be a mandated corollary of societal suicide.
The horse of unethical, sharp practices has long since left the barn of the last half decade in the housing markets. Tens of millions of folks -- of families with children, of the elderly, of young individuals and couples struggling to live what used to pass in reality not just commercials as the American Dream -- confront serious housing affordability problems -- and far too many realtors who are members of the National Association of Realtors responded to the real, human needs of these people by pushing them into higher priced homes with exploding mortgages so that the realtors could make more and higher commisions. Me. Not both me and we.
It's a sickness. A sickness infecting souls that have lost the capacity to blend concern for money and profits with concern for other values -- and to do so in real time, not hindsight; in today's real estate transaction, not on TV in some commercial.
Hey, the pursuit of profits in markets has showered humanity with untold benefits. Let us rightly celebrate the power of markets to make lives better. But, let's stop killing the life enhancing, life giving power of markets by deluding ourselves that self-interest starts and stops with profits. It does not. Adam Smith's famous butcher, baker and candlesttick maker were also interested in -- and guided by -- the values they shared with other folks with whom they were fated to live their lives. Were there butchers who sold rotten meat? Yes. But, did a majority, even a plurality, of butchers as a matter of policy and routine harm their customers -- their neighbors -- by selling hurtful products at unaffordable prices? No. And there's nothing in The Wealth of Nations -- or any economic theory or practice since then -- that suggests this is a desirable characteristic if it dominates and dictates the course and conduct of commerce. This sort of unethical conduct is meant to be a regrettable, if predictable, by product. An exception. Not the rule.
Over the past five to ten years, sharp practices in the over heated housing markets, though, have become more than exceptions. And, no amount of after-the-fact horse pucky from the National Association of Realtors waxing on about the wonderfulness of their members can hide the consequences of financial rape perpetrated by realtors who, in turn, have been abetted by other 'thick we's' known as financial service institutions, law firms, Congress, housing devleopers and so on.
The widespread habit of showing up to work from 9-to-5 and allowing our legitimate concern for value to trump our equally legitmate concern for other values (e.g. shared prosperity, family, liberty and justice for all) has infected not only the body economic -- but also the body politic. It must stop. Not by turning our backs on profits, money, wealth building and winning. But, rather, by each and every one of our thick we's -- especially the thick we's of organizations where we work -- asking and answering how the organization's particular vision, strategy and common good contributes to the greater good of our society and our planet. And, then translating the answers into performance -- into a blended, ethical scorecard that converts promise into results.
Yes, we must turn away from those, like Grover Norquist, Karl Rove and their cabal, who -- in their own maniacal pursuit of winning and value -- have fostered a popular culture that hates government and, thereby puts folks in charge of governmental organizations -- governmental thick we's -- who, it logically follows, cause those thick we's to be self-hating.
We must restore a proper and legitimate role for governmental thick we's. And that means we must learn all over again that there are situations and contexts in which government regulation -- yes regulation -- is proper and needed.
But, in a world of markets, networks, organizations, friends and families, law and regulation are necessary but not sufficient. We cannot foster a safe, sane and sustainable planet for our children and their children if we don't take shared responsibility for doing so. And, yes, that means acting individually as friends, family members, customers and investors in ways that account for more than 'me'. But, again, such is necessary, not sufficient.
The critical crucible in our new world in which we can and must take shared responsibility is the organization. Unless and until we act there to ensure a sustainable blend of value and values -- unless and until we act to ensure that our brand promise as well as our brand delivery -- honor all that is right and just including but not limited to profits, we will continue to march in darkness toward the precipice.
And, our shame will mount and we will occasionally be so shocked when we look back over our shoulders at the wreckage of human lives in our wake that, in mock preservation of our souls, we'll hire writers, directors, camera folks and actors to create the image of what can only be best described as nostalgia for our better selves.
The time has arrived for before-the-fact vision, strategies, products and services that blend all values.
And those who must -- indeed, the only ones who can -- make this happen are ourselves in our shared roles as employees and executives in the thick we's we call companies, agencies, firms and organizations that have the whip hand of the planet.
If you think for one second that what you and your colleagues at work do is "just business", then you are continuing to sleep walk toward the destruction of the planet by missing the opportunity every single day of your working lives to make a difference with others by creating and implementing businesses that are just.
And, you can start today.
May 16, 2006
Incompetence Of The Hands
Incompetence can take on as many forms and flavors as competence. Still, surely one of the hallmark characteristics of utter incompetence occurs when, as the saying goes, 'the right hand doesn't know what the left hand is doing." This metaphor conveys a basic failure of coordination -- whether in vision or policy/strategy or, especially, implementation. The lack of coordination between the two hands of the same body result in those hands pointing toward only one thing: confusion.
Last night, we learned from the incompetent, uncoordinated and confused elected officials of our nation about plans to deploy up to 6,000 members of an already overstretched national gaurd along the border to assist the border patrol whose numbers the same administration cut significantly a year ago because of budget pressures resulting from the Iraq adventure being waged, in major part, by a national gaurd who were unprepared and underfunded for the duration of that conflict but whose stretched numbers were needed because the same administration couldn't find in the regular armed forces the number of soldiers required because they believe actually in cutting the number of on the ground armed personnnel in favor of quick strike technology and strategy to win conflicts that they define in terms of battles won instead of enduring peace achieved so that the full cost of the initiative is never actually accounted for, thereby yielding unsupportable budget deficits that can only be met by cutting things like the border patrol so that those other needed services fail to deliver when needed and create squeeky wheels that can then be greased by temporary measures such as moving in the national gaurd to do back office and other clerical/admiinstrative support work during the two weeks each year the guard are supposed to be training in things like, say, armed conflict that they might be called on to deliver if ever deployed in a war situation -- but only for so long as it takes for the administration to build up the border partrol to the numbers that were rejected a year ago.
So many right hands. So many left hands. So little knowledge or awareness by the ones of what the others are up to.
Incompetence.
Posted by Doug Smith at 12:07 PM | PermalinkMay 13, 2006
Letter To Billmon About Leviathan
Dear Billmon,
Thank you for Leviathan. The picture painted of an already-happening police state is a dark one -- yet one I fear millions of us might sleep walk to and through unless we wake up to the new realities and responsibilities of living in the world of markets, networks, organizations, friends and families described in On Value and Values: Thinking Differently About We In An Age Of Me.
We can save our nation and the world from the nightmare of Leviathan. But, first, we need to identify who 'we' are -- or, rather, when we are a 'thick we' versus a 'thin we'. The fate of our nation lies with choices made by 'thick we's' as well as 'thin we's". But right now, the choices discussed in popular culture's democracy topic lie mainly with the 'thin we's' -- the we's such as NASCAR dads et al shaped by common interests expressed in markets as opposed to thick we's shaped by actual shared fates and shared purposes for which those in the 'thick we' must hold themselves mutually accountable for implementation. "Thin we's" elect folks (e.g. Bush v. Kerry); 'thin we's' consume things (e.g. hybrids v. Hummers); 'thin we's' -- in roles as consumers and voters and investors -- are courted by thick we's competing in markets and networks.
'Thin we's' matter -- a lot. We cannot shift and evolve without shifts and evolution in thin we's. But, thin we's are not in some sense real we's. Unlike organizations, friends and families, thin we's are more like collectivities of me's. Thin we's never hold themselves accountable as we's for choices. Rather, and this is key, thin we's look to thick we's -- to organizations -- to implement the choices for them and to deal with the consequences of those choices. Thin we's elect officials; thin we's buy cars or computers or cereal; thin we's invest in companies. But it's thick we's who must implement the full range of implications of those choices.
Today, our most powerful thick we's are organizations, not towns or neighborhoods. That is different from the time of Hobbes, from the time of Jefferson.... indeed, from the time of Eisenhower when he warned of the military-industrial complex -- when he foreshadowed a powerful and scary upshot of the transition from a world of place-based thick we's (towns, neighborhoods) to organization-based thick we's in a world of markets, networks, organizations, friends and families.
Even Ike could not have had more than a foreshadowing about what happens when networks are thrown into the mix with markets and organizations -- when the strategies of organizations seeking to grow/thrive in the context of markets (including, what Schumpeter described as our political markets) get wired up in networks. Perhaps, the picture you paint in Leviathan would not have surprised Ike -- but he would not have conceived that the reality might have happened in quite this way or with what a friend describes as quite this 'gradual suddenness'.
Today, the most powerful and dangerous thick we's in our nation -- those private sector corporations led by shareholder value fundamentalists, government organizations led by Bush Administration power fundamentalists, and those fundamentalist Christian churches being led by satanists instead of Christians -- are indeed making choices that can lead to the Leviathan nightmare. But, note that such choices are being made far more hierarchically then democratically within the thick we's themselves. The choices jeopardizing our society are coming from the top of such thick we's and they are being made in secret.
That, however, is neither fated nor required by how organizations should or must work. All organizations -- just like all societies -- even Hobbesian ones -- blend hierarchy and democracy. Always. Hobbes' blend was 99.9 parts hierarchy and .1 democracy. But, let's remember that even the fearful Hobbes permitted people to undo the government through revolt.
If you look at choices that matter where you work -- where ever that may be -- the blend is not 99.9 hieararchy to .1 democracy. It may, in your view balance more toward hierarchy. However, having advised/consulted to hundreds of organizations in close to fifty different industries over more than a quarter of century, I observe that the blend has shifted toward more democracy. The challenges of competition demand it. Indeed, the challenges of implementation and performance demand it.
One of the great failures of the Bush Administration comes from the shared beliefs and behaviors of Bush, Rumsfeld, Cheney and others who simply and stunningly have not had executive experience in this new world where organizations cannot succeed with 99H/1D approaches. While I personally believe far too many critical choices in organizations are still made far too hierarchically and secretly, I cannot from personal experience or observation point to a single top management group of a successful company on the planet who continue to use 1970s H/D mixes to meet the needs of 21st century performance. Not one. Instead, what I read/observe daily about the Bush administration and, consequently, what we all read daily about the trail of failure and incompetence that follows in the wake of their outdated 99H/1D bet on hierarchy. (Indeed, I believe we can bet that the only effective part of the Bush Administration -- the part run by Rove for the past many years -- uses a different blend of H and D. Why? Because that Rovian part is focused on actually solving real problems against which they have to hold themselves accountable for actual -- not made-up -- performance.)
The shift in corporations, non-profits and the hinterlands of government enterprises not yet infected with the Bush approach has not gone to .1 H/99.9D. I'm not saying that. Nor do I believe such an extreme imbalance in the direction of democracy is more promising than Hobbes. Not even the Athenians had 99.9D/.1H. But, the shift is on -- especially with regard to issues such as quality, customer orientation, front-line problem solving and so forth. What has not happened, however, is a shift toward a more blended approach on issues that cut to the heart of what a corporation stands for and how the vision/mission/strategy of the corporation -- the common good of that particular thick we - contributes to the greater good of the planet. There we continue to see hierarchy and secrecy -- we see after the fact attempts at 'buy in' instead of before the fact inclusiveness and shared problem solving. One can be dead certain, for example, that the phone companies did not widely discuss and debate within their respective thick we's the choice about whether to hand over the phone records to NSA. (And, no surprise, we may now see that those executives have condemned their employees, their investors and their customers in ways that a more open, better blended democratic and hierarchical process would have avoided.)
You rightly worry in Leviathan about the profound effects of habits formed in organizations where, in our roles as executives and employees, we make assumptions about the values and purposes associated with nanny networks, security cameras, political speech and so forth. OnVVS points out that our most predictable beliefs and behaviors (which I equate with our actual values as opposed to just abstract ones) derive from a blend of relationships, roles and ideas. All these sources of shared values most powerfully reinforce each other when we are part of a thick we who share meaningful parts of fates and purposes together -- friends and family to be sure -- but, in our 21st century, the context beyond friend and family most present in our lives is that of organization.
Organizations -- again, not limited to work organizations and not limited to private sector either -- are where we interact persistently with other folks beyond friends and family. The habits of belief and behavior we form in organizations are reinforced by relationships there, roles there (e.g. boss/subordinate; marketing v. engineering; team problem solving vs boss/subordinate problem solving) and ideas there (vision, mission, strategy, brand... things like 'shareholder value' and 'the customer is always right' .... indeed, the entire concept of 'corporate values'). What you note as your greatest worry -- point five in Leviathan at the bottom of the section 'Mining Disaster' about the replication of behavior and values found in corporate America -- is one of the core pivot points and generative experience bases in our lives in markets, networks, organizations, friends and families. DeTocqueville reported on the power and potential of replication of behavior and values found in small towns. OnVVs argues that, for tens upon tens of millions of us, small towns are not our thick we's. Organizations are. And, only when we learn to take responsibility together for the choices of our organizations and how those choices contribute to the greater good, will we move and evolve forward. Only then will we revitalize how best to use the inheritance and legacy of the Founders in our dramatically differently structured lives and world. Only then will we migrate and revitalize our democracy where we actually live together with other folks (organizations) instead of only where we make consumption choices (markets).
Yes, we might stumble forward. We might continue our deep seated beliefs and behaviors that have us act as if what happens at work is 'only business' and that somehow we can offset the consequences we cause in pursuit of profits and shareholder value as the obsessive, singular trump card concern by somehow acting righteously as consumers or investors .... that we can somehow in our individual roles oppose our actions as 'me's' and thin we's in ways that effectively counter the unbelievably stronger array of resources and power of our thick we's.
But, we cannot leave a safe, sane and sustainable planet for our kids and their kids if we continue to travel down this path and confuse the pursuit of happiness with the pursuit of value over values. We cannot solve the problems of, say, rampant obesity, unaffordable housing, predatory lending, gasoline/oil addictions, environmental depredation, the attack on science -- or government spying -- unless we take a stand inside the organizations where we work that have something to say and do on these matters.
Nor can we sustainably respond to these challenges if we abandon value. Value matters. But, until our brands, strategies, missions, products and services bake equivalent concern for all values, including value, into the common good of our thick we's, we will continue to walk the dark path forward. If we fail to take responsibility for the thick we's in our lives and mindlessly perpetuate allowing secretive, overly hierarchical approaches to reinforce a path we seemingly are on today, then surely the Leviathan follows.
But there's nothing written by Hobbes or anyone else for that matter that says or mandates, "This must be so."
We can act differently. We must. As Gandhi said, 'We must be the change we wish to bring about." In part, that means let's do what we can as "me's" and "thin we's" to elect a president -- and a Senator and a Congressperson and a Governor and a state, county or local legislator -- who have the vision and courage to see this new world we live in and lead us to a more promising future for our children and grandchildren. But, as per Gandhi, we cannot hope to find that path through merely replacing Bush and friends with different and competent leaders who, while benevolent, continue to bet on unsustainable blends of hierarchy and democracy -- or on a concern for value that remains dis-integrated from a concern for values. I can imagine a president who is the leader needed. When I do, I also imagine that she or he reminds us that we are responsible for the future of this planet -- and that our responsibility exists both in choices we make as consumers, voters, investors and other "me or I" roles -- but, especially in and as part of our thick we's. For it's in those we's that the resources, knowledge, information and motivation is most powerful. A president or any leader can show us this path forward. But, we -- as thick we's -- must walk it -- must make and implement and take full responsibility for choices together. It is in our real, every day thick we's -- the thick we's of where we work, learn, play and pray - that we face the choices that will determine the fate of the planet.
And, it's there we can turn things around. The thick we's of auto companies can drop Hummers in favor of hybrids -- if they have the courage to blend concern for value with concern for values. The thick we's of food companies can reverse how their products and advertising and marketing contribute to obesity and other eating disorders. The thick we's of Homeland Security, the FBI, the IRS and others can stand up and say, "Our job is to govern, not to rule with the iron grip demanded to reelect Bush and the ideologues of Bush forever more."
All this is possible -- if thick we's learn and even demand healthier blends of hierarchy and democracy in how they govern themselves.
But, that is most likely to happen when we learn first to 'think differently about we' and about our responsibility to blend our legitimate concern for value with our equally legitimate concern for values.
Posted by Doug Smith at 04:36 PM | Permalink