Archive for the ‘Financial’ Category

Is your company heartless?

October 5, 2011 by Bruce Kasanoff

Free enterprise works beautifully when leaders feel rooted in their communities, beholden to their employees and answerable to their customers. But when these connections fray, the free market slides out of balance and the result is dangerously heartless behavior.

Heartless is laying off thousands of employees when your company has record amounts of cash on hand. American firms are holding $2 trillion in cash, up from $1.39 trillion in 2008. Since 2008, Siemens has fired 12,000 workers and increased its cash holdings from $9.4 billion to $16.4 billion.

Heartless is caring more about a concentrated group of investors than you do your customers.

Heartless is running a company with no loyalty whatsoever, without regard for longstanding, hardworking and effective employees.

Heartless is being willing to abandon a community because one 30 miles down the road offers better tax breaks.

To the degree they have a defined focus, Occupy Wall Street is addressing banks, but the problem is far more widespread than that. Large companies in numerous industries are hoarding cash while they fire workers. It is heartless to have record profits and record layoffs at the same time.

Me first, you last

Many politicians have become heartless, too. They care first about getting re-elected, and second about paying back the party and supporters that keep them in power. Most do not care nearly as much about the citizens they represent or about our country as a whole. I say this because unprecedented numbers of Americans are disenchanted with their politicians.

Heartless politicians are willing to shut down our government and default on our obligations, just because the party line says don’t compromise. Meanwhile, millions of Americans are suffering. That’s heartless.

Globalization has lessened the value of community. Instead of local merchants, we have chain stores that hire sales help for minimum wage. Instead of business leaders rooted in our communities, we have leaders who live far away and who often have never even seen the store that serves your area.

Occupy Wall Street, and then?

Instead of local community, we now have social media communities that have given rise to the Tea Party and now Occupy Wall Street. But for all the media coverage these new communities attract, they fail to root our business and political leaders in anything that touches their hearts. Social media can react to heartless behavior, but does not prevent it.

The only solution I can see to heartless behavior is selfishness.

Yes, selfishness.

Be selfish. Be very selfish

Despite the disappearance of real communities, despite globalization, our leaders need to realize that purely on a selfish level, acting heartless is a deadly and dangerous strategy. Vast numbers of people are suffering, scared and suspicious. They are ready to go out into the streets, to make everyone feel their pain. Occupy Wall Street is a Sunday church social compared to what’s brewing.

I pray that our leaders recognize the desperation that is building, before it explodes. It is in our leaders’ selfish interests to do so. It is in their selfish interests to stop acting heartless, because the alternative is something close to anarchy.

If this sounds extreme, you probably still have your job.

Stocks dive. Europe’s banks weaken. (Time to be optimistic.)

September 22, 2011 by Bruce Kasanoff

Banks have record amounts of cash, but they won’t lend.

Companies have record amounts of cash, but they won’t hire.

Both have circled their wagons, and are protecting… whom? Certainly not employees, many of whom are now on the streets after years of loyal service. Certainly not customers, with whom these institutions play a zero-sum game in which only one side can win.

I hate the suffering that so many people are experiencing, but I am thrilled to witness the last moments of an economic system that has outlived its usefulness.

Our mass production economy is all but dead. We just haven’t buried it yet. What’s worse, our politicians and bankers haven’t yet realized the system will never come back. Propping it up is like endorsing as policy a goofy movie in which teenagers carry around a dead body to parties and classes.

What we need is an economy based on information, a personal economy in which people value most highly the solutions and services that are tailored to their needs. In such an economy, we don’t endlessly need to consume physical goods; people will pay for information, for customized services, and for special experiences.

Once you realize that our whole economic system is being replaced with a new one, things don’t look so bad. Don’t get me wrong – my stomach lurches when the market plunges 400 points – but it doesn’t feel like the end of the world. It feels like a new, better beginning.

I’m hopeful that we are headed towards an economy built on a foundation of common sense, logic, compassion and loyalty.

Common sense, for reasons I have explained previously in my Common Sensor post.

Logic, because we will have much better access to actual data about our world and how it works.

Compassion, because when companies and governments recognize that they add value by addressing the unique needs of individuals, they must learn to accomodate what each person needs.

Loyalty, because throwing employees and customers overboard in a crisis is not a sound long-term strategy. Contrary to what some think, people remember the institutions that forced them to spend 18, 24 or more months without income.

It’s understandable to be worried. But there’s also good reason to be optimistic.

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Common sense about the Milky Way, iPad and second recession

September 21, 2011 by Bruce Kasanoff 1 Comment

This photo of the Milky Way as seen from Nepal stopped me in my tracks, making me forget about the iPad I was holding. I looked right through the device to the world that exists far beyond the reach of Apple, Google, or any other human creation.

We live in a strange time. If you focus on technology, science and innovation, it can seem like we are on the verge of knowing all the answers. If you focus on business, finance, politics or the human condition, it can seem like we are on the edge of a very bleak future.

Reality lies somewhere in the middle.

The world is filled with amazing possibilities, but our system for seeing the world is nearing the end of its useful life. That system is a mass production, sell-more-each-year, zero-sum mindset. It requires that some folks win, and others lose. It churns out massive amounts of waste, and it encourages us to pay more attention to stuff than to each other, or to the vast universe in which we live. The last vestiges of this system are pushing us towards a second, more devastating recession.

I say this as a suburban-dwelling capitalist. Much as I love all this stuff, there’s a persistent gnawing feeling in my gut that says: something is really broken here.

Since it’s hard to change the world based on gut instinct, I am pushing an idea called Common Sensor. It’s the notion that by deploying trillions of sensors into the world, we will begin to understand what is actually happening around us – and we will be able to make better decisions.

This wave of smaller and smaller sensors is already sweeping across the planet. You find them in phones, cars, office buildings, streets, bridges, exercise equipment, appliances, games, and even the ocean.

But it’s not the sensors that capture my attention, it’s the potential for common sense decisions that follow them. Most companies still make decisions based on the biases and gut feelings of their top managers. Most governments set policies based on insanely simplified public discussions (soundbites rule.)

The better we understand what is really happening in the world around us, the better decisions we can make.

The Milky Way photo was taken from the Annapurna Sanctuary, in the Modi Khola Valley, one of the most remote and beautiful places on Earth. I found it thanks to Zite, Flickr, my iPad, Discover Magazine, and wireless technology.

If we use technology to make us smarter, calmer, and more focused… life will be good.

If we use technology to distract us from the pain and suffering around us… life will be bad.

That’s just common sense.

Bridgewater Associates and radical truth

July 6, 2011 by Bruce Kasanoff

We live in a world of lies.

For example, how often do you openly criticize your boss, or your CEO? Most people almost never tell the unvarnished truth, simply because doing so is considered rude or socially unwise.

But technology is pushing us hard in the direction of confronting the truth. The more we use digital devices, the faster our shift from a world of hunches to one of hard facts. In the northeastern United States, we pay tolls through E-ZPass, which has the capability to reveal that in your trip from New York to Boston, you averaged seven miles per hour over the speed limit. It’s just a matter of time before some revenue-hungry government decides to automatically send you a speeding ticket.

Security badges, smartphones, GPS units, computer logs, collaborative software, CRM systems, credit and debit cards all collect vast reams of data. But this is just the tip of the iceberg.

Ray Dalio knows where this is headed

Social networks will increasingly rank companies and the services they offer. Why? Because companies routinely manipulate the truth about their offerings. We have a word for this; it’s called marketing.

Social influence shifts the balance of power. It provides a mechanism for vast numbers of people to work together to help each other save money, time and effort. Think this won’t happen? My bet is the economy won’t get better for years to come, and that pretty much everyone will be willing to trade a little time for much better deals.

And so in every corner of our world, data will reveal the truth. It will show who works hard, and who doesn’t. It will show which companies can be trusted, and which cannot. It will paint an unvarnished picture of how you spend your life.

At the moment, almost no companies operate with a relentless dedication to seek out the truth. One exception – which happens to be in my own town of Westport, Connecticut – is Bridgewater Associates, an investment manager overseeing more than $90 billion in assets for its clients.

Founder Ray Dalio believes in radical truth. To work at Bridgewater, you must learn to be comfortable with the truth. In his lengthy and highly detailed Principles document, Dalio says, “At Bridgewater I want people who, above all else, value the intense pursuit of truth and excellence, and through it, the rapid improvement of themselves and Bridgewater.”

Dalio also believes that companies need to evolve and adapt in order to succeed. Radical truth makes this possible, while anything that obscures the truth hinders necessary adaptations.

He continues, “Since I believe that radical truth and radical openness are essential for this rapid evolutionary process to occur, I also believe that these need to be essential elements of our culture. I believe that radical openness enhances truthfulness (which is essential in getting at the best answers) because it prevents the secretiveness that breeds hidden agendas and stands in the way of open debate.”

Eighteen months to get used to the truth?

Dalio has observed that new employees take about eighteen months to get used to a culture that relentlessly seeks out the truth. At Bridgewater, it is a duty to point out when your superior is wrong, and it is utterly unacceptable to speak about a person behind his or her back. This means that when you see someone do something wrong or misguided, you need to tell them.

Many new hires bounce right out of the company. They aren’t comfortable with sentiments like this one, included in Dalio’s Principles, “At Bridgewater people have to value getting at truth so badly that they are willing to humiliate themselves to get it.”

Dalio continues, “It is more heroic than humiliating to objectively explore one’s own mistakes and weaknesses, so doing so should engender admiration – not humiliation. We need and admire people who can suspend their egos to get at truth and evolve toward excellence, so we ignore ego-based impediments to truth.”

Think about this. You’ve spent your career as a professional investor. After a long recruitment process, you start to work at Bridgewater. A few months in, your colleagues start openly questioning your judgment. They say you are not particularly perceptive, that you use outdated logic to form your opinions and that even junior members of your group are currently adding more value.

You might think: how about a little respect? I’ve been in this business for twenty years. Doesn’t that give me a little breathing room, a little respect?

Nope.

Dalio says, “I regularly get pressure to let great people avoid exploring their mistakes and weaknesses because they find it painful… we can’t compromise on this because that process of exploration is healthy for Bridgewater, healthy for them and key to our culture. I also believe that to allow opt-outs would legitimize two sets of rules and put our radically honest way of being in jeopardy. I want great people who embrace even harsh truths.”

Radical truth requires vast cultural changes

You don’t need me to tell you that most people aren’t ready to humiliate themselves to reveal the truth. I can’t name many executives who care more about the truth than their own egos, income or lifestyle. Few of my friends or relatives wish to confront the truth about their eating habits, fitness practices, or work ethic.

But radical truth is an inevitable consequence of technological innovation, and we need to start taking a harder look at corporate cultures like Bridgewater Associates. Like it or not, we are all headed in that direction.