Belling the Cat Part 2: Greece’s “Innovation”

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Interesting commentary from Yanis Varoufakis, Finance Minister of Greece, published in the NYT a few days ago.

YOUR LINK

In the midst of a highly academic treatise on why his motives are really not to engage in any games, but rather to do “the right thing,” Varoufakis meets the strain a writer always does when he is forced to come up with the “SO WHAT?” to his argument.

What is his “so what” to the question of what Greece must do?

Well… Let’s let him tell you:

“Against such cynicism [about Greek motives] the new Greek government will innovate.”

Innovate.

In the midst of a house afire, the Greek finance minister proposes to pull a rabbit out of his hat.

In corporate environments, innovation has become a sort of conjured savior within strategic plans.

All that is left is to define what innovations, where, and when.

The Greeks are suffering from the same delusion, it seems.

This is another great example of high-minded rhetoric being used to avoid discussion of tough choices.

It’s belling the cat, all over again.

All that is left is to find the mouse who will bell the cat.

 

Belling the Cat Part 1: ISIS Root Causes

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If you follow anything around U.S. foreign policy, you have probably seen the highly publicized comments from Marie Harf on how the root causes of the U.S. State Department cannot “kill our way” to victory over proponents of an Islamic state.

Here’s the video:

https://youtu.be/sSHbv0_O01k

 

Steering clear of the politics that tend to bloom around comments of this type, Harf’s talking points are a striking instance of strategic leapfrogging.

First off, Ms. Harf is in all likelihood “right” about needing to address the root causes of ISIS’ ease of recruiting.

Second off, Ms. Harf is probably right about what the root causes may be.

However, her talking points ignore the reality of today, where ISIS is already marauding.  She leapfrogs to high concept and ignores low reality.

This happens often when unsavory or necessary tactics get in the way of high minded strategic nirvana.

Don’t want to talk about the ugly business of killing people who are, themselves, killing at will?

Start talking about how the root causes of the killing are in the socioeconomic dynamics in the free world and in the communities the killers reside within; and how it’s important to solve those…

This is a classic example of a speaker spouting high minded (and probably “right”) strategic principles to skirt the need for low-minded (and probably “necessary”) tactics.

Ms. Harf has been beaten up in the media plenty for her talking points, and in my opinion rightly so…  She is propagating a narrative that is essentially a redux of the old “belling the cat” fable.

To wit, from Wikipedia:

“The fable concerns a group of mice who debate plans to nullify the threat of a marauding cat. One of them proposes placing a bell around its neck, so that they are warned of its approach. The plan is applauded by the others, until one mouse asks who will volunteer to place the bell on the cat. All of them make excuses. The story is used to teach the wisdom of evaluating a plan not only on how desirable the outcome would be, but also on how it can be executed. It provides a moral lesson about the fundamental difference between ideas and their feasibility, and how this affects the value of a given plan.”

Strategists have to keep practicality in mind

Or else, even when they are right, they can be wrong.

 

 

 

#Likeagirl, Evidence, and Leadership

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Always asks us what it means to do things like a girl, and in the process illustrates a fascinating leadership concept.

If you watched the NFL’s Super Bowl tonight, you may have caught a glimpse of a commercial advertisement that doubtless cost millions of dollars to produce and present during the time of the world’s most expensive ad buy.

The ad is by Always, the maker of feminine products and a member of Procter & Gamble’s stable of brands. I learned within the last few minutes that the video is not new; but I just saw it.

If you’ve seen it, forgive my late-to-the-game reaction and thoughts; but I hope you’ll read on.

I can’t do the commercial justice, so I’m just going to link it here and hope you’ll take a few minutes to watch it.

The operative phrase in this spot is

A girl’s confidence plummets during puberty.

It is a call to action to support girls’ confidence and fight the “like a girl” stereotype.

The ad challenges us to understand that girls, prior to 10 years of age, have no idea that to be told they throw, run, or fight “like a girl” is an insult of the most dangerous kind–a socially acceptable one.

No, I don’t fit the mold of someone who opines on commercials by makers of feminine products. Nor do I represent the most likely demographic to jot down a post related to important women’s issues.

But I have a young daughter.

And this spot got me thinking.

If girls the world over–like my daughter–can go from thinking that they run, throw, and fight strong at age 10 to partaking in the general ethos that their actions are not only inferior, but comedic by age 12…

…what is happening to people’s confidence in so many other arenas due to similar social pressures?

It’s probable that we chase a significant proportion of young women out of arenas they may excel within because they “don’t fit the mold.” This has been studied repeatedly.

It’s a real failure of leadership.

And that’s not just a failure when it comes to leading young women…It’s a failure when it comes to people of all types.

I’ve written plenty on the need for evidence-based leadership.

This one is no different.

Show me how you throw. Show me how fast you run. Show me how you lead. Show me your ideas. Don’t succumb to stereotypes and prejudice.

Speak up.

Show up.

How many professionals, men and women, live with the lack of confidence that comes from these types of dismissals and this type of derision?

As someone in the “degreed” class who has been around a few organizations over time, I’ve witnessed countless dismissals of highly valid points of view due to educational background, national background, or lack of facility with a second language. I’ve seen it because of the way someone looks or dresses. I’ve even seen it because a person grew up in the wrong corporate function or attended the wrong college.

And, sadly, yes, I’ve seen it because of gender.

Such prejudice shuts people up…quickly. It stifles sharing of talents and in its worst guise amputates aspirations that could benefit most any enterprise.

What I’m saying is that in the professional arena, #likeagirl could also be #likeahighschoolgrad or #likeamanufacturingmanager or #likeanonenglishspeaker or #liketheydidntattendharvard.

In other words, they are insults that really shouldn’t be–choices and mindsets that divide and dismiss vs. listen and consider.

Always, with a very interesting ad, is just saying “watch it, because its insulting to imply that girls can’t accomplish these things.”

I’m saying the same thing.

As leaders, we could learn a lot from this video.

Look for evidence.

The One About Performance

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Performance is the prerequisite for any professional or organization.  It is the heartbeat of the body.

In December I posted an article on the lights of leadership. In the midst of a lot of feedback I receive on the writing I’ve done, one bit of feedback stood out on that particular piece.

It came from a gentleman who has been both a corporate leader and entrepreneur. In referring to the ways I listed to “light the lights of leadership” he said simply: “I’m glad you started with performance.”

It’s not clear to me that performance “sells” on LinkedIn or your average blog quite like a list of 5 things that will bring you wild success.

But, people who know, know.

I’ve had the privilege to write about a broad set of topics. I enjoy thinking through and sharing on strategy, leadership, entrepreneurship, innovation, and ethics. I view those topics as worthwhile to anyone looking to advance their careers and organizations.

However, there’s a point of fact that sometimes gets muddied up in all the organizational development, touchy/feely, and “strategic” thinking.

Performance is the prerequisite.

No matter what the collective business and organizational intelligentsia write and speak on, it all must relate back to performance–short term and/or long term.

That’s not to say that it does.

That’s to say that it should.

A leader with the best ideas on and reputation for people leadership, organizational development, and customer care but without a track record of performance might as well change careers.

To borrow a turn of phrase from the apostle Paul: If I have leadership ability that can move mountains, but do not have performance, I am nothing.

That may sound harsh and cold, but that’s reality.

It’s true whether you are a concert pianist or an investment banker. It’s true for athletes, doctors, and police officers.

It’s true whether you are trying to carry a football across a goal line, or seeking 20 basis points of alpha.

How often we forget this simple reality.

Performance is the currency of our careers and the building block of our professional names.

But, performance itself may be insufficient

If you look at the body of any leader’s work, the heartbeat is performance.  Results delivered by that person matter that much!

But, even a comatose patient has a heartbeat, so there’s much more to leading a than simply meeting objectives. The heartbeat is a critical necessity, though it may not be sufficient for a thriving, vibrant organization.

In my experience only very rare business cultures can hang their hats on performance alone. They look like professional sports teams and trading desks. I’ve been a part of both; and I’ve been around dozens of other corporate and organizational cultures.  I’ll just assert this:  It’s unlikely that your organization can rise (or fall) to this level of Darwinian objectivity.

Thus, we discuss results and leadership and vision and integrity all within the realm of the performance ethic.

The Performance Ethic

Show me a person who has a strong performance ethic, and I’ll show you someone who will likely contribute every day.

Show me someone with a strong performance ethic layered over with people skills and “other-oriented” values, and I’ll predict career success.

Performance ethic.

That is a concept that his highly distinct from work ethic.

Lots of people work hard and don’t perform.

It’s also highly distinct from smarts, intelligence, savvy, and the like.

Perhaps shockingly, it’s also highly distinct from a desire to “win.”

Winning matters, but it’s the definition of the contest that matters more.

As anyone who has participated in high stakes negotiations can tell you: Some of the best “win-preventers” are people who focus on winning the minutiae and lose sight of directional victory.

In American football, a lot of 15-yard penalties come from guys trying to win the little things (like that fight with the guy across from them) while losing sight of the bigger things.

The same thing happens in professional life.

A short win is just as easily part of a long defeat as a long victory. Ask any endurance athlete what constitutes effective performance, and the answer is most certainly not going to be “run every moment as fast as your body will go.” It just isn’t possible. You run the race so that you will win; but that does NOT mean winning every lap, stage, or heat.

None of us wants to be a part of a long defeat.

So what?

Let me outline a few ideas for what constitutes a performance ethic for leaders. This list will be incomplete. Trust me. Please help me round it out if you like.

  • A strong concept of performance: In short: What is the race? Is it quarterly financial performance or an enterprise positioned for success 3 years from now? How do you manage some of the tensions inherent to the two? What’s true north and do executives, rank, and file align on it?
  • A superior understanding of others’ concepts of performance: Do you understand what “winning” is to those around you and those who are instrumental to the race? One person’s concept of “performance” is earning the highest bonus possible. Another’s is building for the future. Yet a third person’s concept is simply staying employed or protecting position. Another wants only to advance her career. A person with a solid performance ethic assesses these things and determines whether he or she can “win” with the team they have or are a part of.
  • Daily delivery and ownership: Strong delivery today against the vision for tomorrow is a hallmark of a person with a performance ethic. Performers know that daily improvement underpins performance. Procrastination doesn’t.
  • An expansive view: Making performance an expansive thing shared by more vs. a contractive thing shared by fewer is an indication of a strong performance ethic. People who know business performance know that the pie grows with performance. The stereotypical bureaucrat only looks to divide the pie as it exists today.
  • Ability to attract others to a performance vision: The more senior you are, the more you must inspire others. Being able to attract talented people, inspire them, and have them deliver on a performance vision aligned with your own is certainly an aspect of performance ethic.
  • Transparent performance contracts: Allow others to get on or off the boat with real informed consent and high integrity risk sharing. An underlying theme to “Enlightened Strategic Leadership” in my practice is that social contracts within a firm should be transparent, particularly when they are in conflict. If you have a policy, follow it. Most (not all) organizations start this with their employee handbook.

Let’s talk performance.

Without performance, all the focus we see on LinkedIn about people, personalities, and career is just noise.

Performance is the prerequisite.

Author’s note:  Just as in most things, there is more than one way to “success.”  I hold out performance as the prerequisite. Many, many people hang their hat on patronage and politics for “success.”  I suggest we peer through those things and look at performance. 

How to Punch Through Adversity

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A renewed focus on individual and organizational entrepreneurship provides a “puncher’s chance” when dealing with ambiguity and adversity.

On November 5, 1994, an object lesson in responding to adversity occurred.

On that date, 45-year old boxer George Foreman–known as much at that time for being the spokesmodel for his eponymous grill as for his boxing–knocked out Michael Moorer, who was up to that point the undefeated reigning World Heavyweight Boxing Champion…and 19 years Foreman’s junior.

Moorer outboxed Foreman for nine rounds, turning Foreman’s face into a fleshy swollen mess. During those nine rounds, Foreman struggled to throw punches and certainly didn’t evade many thrown at him.

And then, in the tenth round… Boom.

Foreman, well known for his punching power, slipped in a short right hand that crushed Moorer’s chin, knocked him to the canvas, and won Foreman the championship for the second time after a 20 year hiatus.

Here’s that classic 10th round on video:

Note the comment from Foreman’s corner man at the beginning of the video:

We gotta put this guy down…we’re behind, baby!

They knew they were losing. Foreman had eaten a steady meal of Michael Moorer’s right jab.  He was way behind and beaten badly.

Foreman was old, heavy, slow, and beaten up going into that 10th round. Moorer was young, fast, strong, fit, and ahead in the bout.

But, Foreman had a chance. His chance was embodied in his wrecking ball of a right hand.

That “chance” put Moorer’s lights out at 2:12 of the video.

The Lesson…

There’s this thing in boxing. It’s called the “puncher’s chance.” It means that a boxer with a strong punch–a go-to skill that can turn a bout on a dime–always has a chance to win. The puncher’s chance applies to those who have it even when they are the lowliest underdogs facing the most superior of opponents.

It doesn’t guarantee a win, but it offers the light of hope to those who have it, even in the midst of a beating. It is literally a means of punching through adversity.

So What?

We all should aspire–individually and in the teams and organizations we lead–to have a foundational capability that helps us punch our way out of adversity. In the most dire of circumstances, having a core capability to call on can mean the difference between having a chance and having none.

We should aspire, in other words, to cultivate a puncher’s chance.

In simple terms, the puncher’s chance in a business environment is a valued capability that, regardless of environment, allows an individual or an enterprise to endure, grow, and prosper.

Be careful, though: For every true cultivated go-to capability, there’s an mountain of pablum about “competitive advantage” and “core competencies” to wade through.

There’s also that catch about “valued” capability–be careful not to claim the ability to spin and confabulate as constituting a valued capability. It isn’t. It’s a delaying tactic just waiting to be exposed.

So, what gives you a puncher’s chance?

What foundational capability gives you your best chance to overcome adversity, individually or as the leader of an entire enterprise?

Is it superior operations? Sales? Marketing? Product development and innovation? Design? Supply chain expertise? Executive talent? Cost control? Effort and work ethic?

In reality, that’s for you to answer. It might be different for you.

In my estimation, the best analogy to the puncher’s chance in business is a deep seated appreciation for and cultivation of

ENTREPRENEURSHIP

It’s the crushing right hand just looking for a chin to demolish. It’s the single latent capability that can save an organization time and time again, regardless of market context.

Unfortunately, it’s also the capability that gets quashed most quickly by risk-averse and resilience-starved corporate hierarchies.

Still, in the most staid corporate contexts you’ll encounter, where cost control and small thinking rules the day, it is on the shoulders of a few enterprising individuals and teams that success tends to ride. Those individuals drive activities like:

  • Development of profitable new products and markets that nobody in the corporate hierarchy wanted.
  • Development of new customer accounts that others viewed as too hard, too distant, or too far off strategy.
  • Growth of key leaders who renew the organization in tough times
  • Response to muted customer inquiries that turn into significant opportunities
  • Establishment of entire new businesses that feed off the capabilities of the organization in entirely new ways.
  • Constant focus on competitive activity and required responses, acting as the few sentinels for the health of the organization.

In the process, the individuals and teams who do these things create possibilities where none existed…

…and that, my friends, is what the puncher’s chance is all about–a very real something from an apparent nothing.

But, how do you cultivate it?

On some level, it’s fair to debate whether entrepreneurship as a capability is a nature or nurture proposition. I’d argue that entrepreneurial capability can not only be taught, but that it is also contagious.

The flip side is that it is also easily extinguished.

In any event, if you are looking to cultivate this particular punch, here are 5 ways to start:

  • Establish clarity on boundaries – Ensure that you achieve clarity on what values apply (i.e., what you won’t do) and what boundaries exist (i.e., where you won’t do it). This applies to you and to your organization.
  • Relentlessly encourage resourcefulness – The most ossified of organizations fall into the trap of top down management. People in the organization become so used to being second guessed that they never even bother with the first guess and therefore lose whatever entrepreneurial spirit they had. Encouraging resourcefulness means asking for, listening to, and developing novel perspectives on markets and solutions to pressing issues vs. telling the answer. It also means holding yourself to a standard of generating options vs. finding problems.
  • Generate risk awareness – Ensure that leaders in the organization have a sense of ownership and understanding of the price of risk. This can be done through incentives, but also through mere transparency around how capital of all sorts is allocated within the enterprise. Such transparency shows smart people the types of risks a company is willing to underwrite and reward. For you individually, establish thresholds for risks you are willing to take with your career, your income, and your wealth.
  • Role model resilience – In an odd and ironic point of fact, senior executives in large organizations tend not to be all that tolerant of ambiguity or error. That reality is a driver of the great divide between the mindset of an entrepreneur and the mindset of a solid corporate manager or executive. Corporate managers look at a project and see all the risks, the reasons not to do it, and how to effectively hedge the budget. Entrepreneurs tend to look at a project and wonder why it can’t be done faster and better; all the while disregarding any need for hedging because “you win some and lose some.” Execs need to role model a resilient mindset more often.
  • Reward entrepreneurship asymmetrically – Though such an assertion flies in the face of the world of compensation hierarchies, benchmarks, job classes and bands, and workplace equity; find ways to recognize and compensate intelligent risk takers asymmetrically. Too often, the perceived cost of entrepreneurship exceeds the potential recognition or upside. It tends to look more like executives and shareholders providing a “heads I win, tails you lose” proposition when viewed from the lower end of the hierarchy. Share the wealth…Loudly.

No matter how beaten up your organization is in its markets, how many product launch failures you’ve endured, how much market share you’ve seen erode; the ability to constantly redefine and attack markets and problems with an entrepreneurial edge gives you and your organization a puncher’s chance.

These tips work for enterprises large and small, and certainly work for individual professionals. History is rife with examples. Apple Computer emerged from being a PC maker to being a dominant player in mobile and media markets. Texas Instruments was once an oil and gas exploration services company. GE was Thomas Edison’s hobby shop. IBM made mainframes.

But, watch out!

Perspective matters. Many of you reading this think you know your core ability…”I have it, it’s my competitive advantage and it’s X” (fill in the X with your known strength). Keep in mind that while you might be the fit, strong champ in control of the bout, the other guy just might have a stone cold right fist to throw your way.

The other guy might have a puncher’s chance. Watch out for it.

Today, executives believe that 46% of global strategies fail to deliver. So many companies are trying to develop agility top-down in order to respond to a rapidly changing environment.

We simply can’t rely on top-down thinking driven by corporate savants to save the day.

So, cultivate a tight focus on entrepreneurial mindsets alongside loose control over skilled people.

Do it to drive wins, even while choking on the modern world’s heavy dose of volatility, uncertainty, complexity, and ambiguity.

Cultivate your own puncher’s chance.

Find a way to win.

What’s Your White Whale?

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The types of goals we set, and the manner in which we pursue them, have consequences for us and for the people around us.

“…to the last I grapple with thee; from hell’s heart I stab at thee; for hate’s sake I spit my last breath at thee…”

– Captain Ahab, in Moby Dick by Herman Melville

And like that, a captain lost his life, a ship, and all men aboard save one left to tell the tale.

Call him Ishmael.

Focus, intensity, and drive are all fantastic things. Identifying a goal and driving toward it can differentiate a professional in the earliest stages of their career. Such drive and focus is valuable for teams, organizations, and yes, families.

But it is in how we define our goals that we establish our course and set sail.

Sometimes…sometimes we choose goals that–when played out–are destructive to us and to those around us. They are outwardly worthy, and inwardly virulent.

The more senior we are, the more influence we have, the more damage we can do.

Ahab did this when he let a blinding, to-the-marrow hatred of a monstrous white whale cause him to lead his men to the edge of the earth and ultimately to death. He took his ship off its profitable whaling mission to pursue an obsession, a blood vendetta against a big mammal that took his leg.

Of course, you or I would never do that, right? Ahab is fiction.

Well, not really.

The way we define our goals–or help execute the goals others define for us–defines us; and the more driven we are in achieving misguided goals, the more destructive we can be. We might not kill our crew, but we could very well kill an organization, a partnership, or a marriage.

Take a moment and think: Do you harbor a goal like Ahab’s lust for killing the white whale?

Worse yet, have you, as a board member, senior executive, or manager, provided people with incentives to pursue a white whale goal?

A white whale goal is one of two things: In its first and simplest guise it’s an obsession. It is a goal that is so deeply held and so exclusively pursued that its pursuit alone is destructive to relationships, damaging to professionalism, and ultimately distracting from real performance. A foolish, simpleminded pursuit of money, power, position, prestige, image, “winning,” or–wait for it–the moral or intellectual high ground are all examples.

Yes, that last one is a doozy that we too often forget or forgive. Self-righteousness blows up as many relationships as most any other thing listed.

In its second guise, a white whale goal can be a misguided goal propagated by proxy, where boards and senior leaders provide a framework of thinking (for example “grow profits”) without guidance on and transparency in boundaries, value, or values; or with specious accounting and accountability.

This second version of the white whale can lead both to brutal decisions by middle managers “just doing their jobs” and to baffling decisions in the ranks where people struggle for clarity. All the while the board and senior managers maintain the real innocence of propagating “good” goals. Or, at least, they maintain plausible deniability.

The epitome of these two types of white whales playing out–an obsession that leads to a vicious goal by proxy–is the assassination of St. Thomas Beckett of Canterbury.

King Henry II, obsessed with the church as an interference, is reported to have said “will no one rid me of this turbulent priest?”

After which, of course, somebody did; to the ignorance of the historical significance of the act.

But, the King didn’t order the martyrdom of a future saint…Did he?

You as a senior executive didn’t really order the curtailing of investment in pursuit of current earnings…Did you?

You didn’t handicap the sales team by introducing turgid administrative tasks in the name of greater openness and transparency…Did you?

You didn’t order leaders to take unacceptable safety and fire risk by curtailing costly planned outages and maintenance…Did you?

Surely, there are honest-to-goodness unintended consequences; and then there are white whales.  Sometimes they are hard to tell apart. Foolish or obsessive pursuit and propagation is the sin qua non of the white whale.

Remember Enron?

Consider the Enron scandal. The tragedy of Enron was equal parts a criminal lack of professionalism (which has been well publicized and rises to the level of obsession for some people involved) and a broad based propagation of and adherence to financial frameworks and incentives that many people in the ranks knew made no sense–misguided goals.

This second part gets missed and dismissed, especially as the Enron case recedes into memory as a quaint blip preceding the global financial crisis of 2007-’08.

The second aspect–the misguided goal set–is actually the most important aspect of the Enron case for professionals to consider these days.

A good example of the incentive issue was where “mark to market” thinking led leaders to be paid handsomely on the modeled Net Present Value of development projects, but not on the actual fulfillment of the projects themselves. Baffling? Yes. Still, senior management–operating within a framework endorsed by auditors, consultants, and board members–defined the goals. Those goals played a big part in destroying the company.

Sure, a few Enron employees went to jail and many professionals were sullied forever; but the true “crime” that gets missed is how top down incentives drove otherwise professional people toward behaviors that they wouldn’t have even paid themselves for.  They were white whale goals acted on by proxy.

That is perhaps the best test of a white whale by proxy. Would you pay yourself to fulfill the incentive set you have?

White whale goals by proxy are usually present when you hear people lament that they are “just doing their job,” or “doing what they are told,” or “doing what they get paid to do,” or in the worst of the worst cases “protecting the company.”

Massive autocracies and ignominious genocides stand on the shoulders of white whale goals by proxy, particularly when they are proxy to an obsessed leader. Let’s not participate in or propagate them.

What do some simpler ones look like?

To keep this closer to home, here are a few modern goals that can become white whales in our professional lives, and a brief explanation of why:

1. A superlative image and “personal brand” – The phony focus on image in the mold of “fake it ’til you make it.” If pursued as an end in itself, vs. an outcome of a life of substance, then…well, it’s a deleterious focus on a goal that is ultimately not merely self interested, but selfish in a harmful sense.

2. Great pains for small wins – The dominance of the clean desk, starched shirts, pursuit of dominance on every point in the negotiation. Basically, this is idealizing stuff that doesn’t matter. In WWII U.S. Army slang, foolish adherence to critical standards on things that didn’t matter to the mission was known as chickenshit. I’m not sure what it is called now, but whatever it is it’s damaging to the mission and morale.

3. Rent-seeking – Seeking wealth without the creation of wealth. Placing defense of title, position, and income ahead of principle and value. Jerry Pournelle’s Iron Law of Bureaucracy puts in pithy words this white whale; and provides an explanation for countless managers’ sometimes oddball behaviors: They defend the bureaucracy at the expense of the mission. It’s a classic white whale. Similarly, acting purely on incentives without regard to the value they create (or destroy) can be a white whale goal as outlined in the Enron case. This is often the case when incentives are based on individual drivers (like revenue growth or headcount or output) in isolation that systemically create no value.

4. Temporal goal misalignment – Addressing the “now” without a focus on the “later” or vice versa. How often do we see short term decisions made that have a readily measurable, net negative long term impact; but that are characterized and lauded as magnificent wins. So, you closed the deal and got paid. Was it a good deal for shareholders and employees–the people who live with the longer term decisions? Interestingly, the opposite is the case as well: Many bankrupt companies lie foundered on the rocks of “long term investment.” How often do we see 5-year plans that lack a 1 or 2-year plan component?  The white whale lies in the lack of explicit balance.

5. Vengeance – I’m just going to go ahead and list it because, well, I started with Captain Ahab; and this was his issue. Pursuing personal vendettas, particularly those that drag your organization, family, or friends along with you; is the ultimate in white whale thinking. 9 times out of 10, the bitter pursuit of revenge against other people or other organizations only serves to take your eye off the ball. To be clear, this doesn’t mean simply the pursuit of crushing vengeance a la Ahab. It can also be as simple as an overweening need for one-upmanship or the constant need to be seen as ahead of the object of your bitterness. All this is wasted motion when it comes to life and performance.

So what?

Knowing whether you are pursuing a white whale is tough. Generally, the white whale looks like a worthy goal to the person obsessed with it.People who are genuinely obsessed can’t generally be reasoned with. But, they can be removed from their position…and, that’s worth pondering.

The best way to spot a white whale is to lay out the “True North” that everyone agrees to–what winning really looks like from a fiduciary, professional, and values standpoint; and then to identify how far off that azimuth your immediate goals are.

White whales pop out easily at that point as twisted and torqued visions of winning. They link to True North via paragraphs of logical backflips instead of a sentence fragment of concise clarity.

Like any other blind spot, these goals require reflection on your own part to spot. They also require willingness to tolerate a person or two in your midst who will challenge your view, your goals, your passions, and your obsessions. That person might be a trusted friend, a mentor, a pastor, or–if you are lucky–a spouse. In a really functional team, it can also be a subordinate or a peer.

In any event, you have to listen to them.

The gist of Melville’s story about Ahab and his hatred of the whale was that Ahab destroyed everything and everyone around him in pursuit of a definitively odd goal: Revenge against the single whale that took his leg.

There were many other whales in the ocean.

But, the white whale did him and his crew in. No–strike that–Ahab’s obsession with a white whale goal did it.

Don’t let a white whale–yours or somebody else’s–do you in.

What are some examples of white whales from your own professional, political, or personal lives?

Bill Gross: Debt Binge Worthy of Future Scorn

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Bill Gross says future generations will view the global debt run-up of the past 6 years like we now view smoking on airplanes…misguided or just plain stupid.

Janus’ Bill Gross released an investment outlook today that is a painfully good read.

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His thesis:  That future generations are going to look at this one and say “How could they do that?” when it comes to running up debts the way we have in the past several years.

For those scoring at home, the U.S. National Debt stands above $18 Trillion as of today.  That, of course, looks trifling in the face of the U.S.’s $115 Trillion in unfunded liabilities.  Regardless of what you call them, they are promises to pay; and they are big ones.

An always interesting link is the U.S. Debt Clock.  Try it out; but keep a bucket handy.

The U.S., of course, isn’t alone; and that is what makes Gross’ read so interesting.  There may be no place left to hide soon.

In his outlook, Gross lodges multiple protests.  He states that while debt fueled recoveries from debt caused recessions are possible, they must have three preconditions to be so…

1. A non-fatal structural starting point (that is, countries can’t be insolvent at the start…)

2. Alignment of monetary and fiscal policies (especially that fiscal policy should take advantage of loose money to invest in accretive infrastructure)

3. Willing participation by private investors (they have to stay in the market even as yields are driven down and asset prices up beyond any realistic point of further appreciation).

It’s clear that all preconditions are/were not present in all countries pursuing the “borrow or monetize your way to freedom” strategy.  At the end of the day, fiscal, monetary, and investment indicators have to point toward kickstarting consumption and investment in the real economy.  It’s not clear to Gross (or me) that this has happened. If anything, Gross points to massive inconsistencies in political and market sentiments.

This is a fantastic read.  One that is well worth your time.

The implication?  Well, I posted last week about lower energy prices being a wake up call for business leaders to re-set scenarios for the future.  In this case, Gross is essentially saying that financial investors might do well to get out of markets sooner rather than later.  His quote:

Markets are reaching the point of low return and diminishing liquidity. Investors may want to begin to take some chips off the table: raise asset quality, reduce duration, and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, QE and the trickling down of faux wealth to the working class.

Ouch.  That’s the implication.  Bursting of high valuations by investors fleeing to quality and going short could very much signal a period of deflation; then who knows what…?

Photo credit: Lendingmemo

Activist Investors and How to Handle Them

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Activist investors may become more active–spurring management to focus and accelerate.

 

Fortune’s Paul Hodgson filed this article yesterday about how activist investors are becoming even more active.

It’s a good read that summarizes the influence of activist hedge funds and the like; and how that influence is growing into the Fortune 500-sized company space.

Hodgson’s point of view is that we should look for more activism because, well, it works.  Success breeds success.

His defining quote is at the end of the article:

Boards are crumbling in front of the [activists] because the value released by changes they are forcing through is making it more likely that other shareholders will support them.

It really is that simple. If an activist like Carl Icahn can campaign for eBay to sell PayPal, and subsequently “unlock” trapped value, then so be it.

Recently, there has been a spate of debate and discussion about how activists can create incentive misalignment.  In a letter to the editor of the Wall Street Journal yesterday, reader Jonathan Kaufelt laments the lack of incentive alignment in the Dow Chemical Board of Directors case.  You may recall that there has been an ongoing discussion of whether activist investor Daniel Loeb’s scheme to pay his director nominees for near term stock appreciation is conducive to good governance.

A reasonable person could say that such incentive structures are problematic more for their mis-allocation (not all directors hold the incentives) than for their mis-alignment. There might be a temporal conflict with fiduciary duty, but it’s not clear that the conflict is one that other shareholders would mind (which would be the point of Hodgson’s Fortune article).

In other words, the activists may be amplifying existing incentives to boost near term stock performance; but might not be an issue to those who own the company.  This gets into a more existential view of value creation and “long term” investing where the question is whether a shareholder’s objective ought to be to maximize value of holdings today (the “activist” vision) or to create an investment vehicle for all time (the “investor” vision).

On those things, reasonable people can disagree.  In the case of a public company, it’s reasonable to say that all shareholders ought to be ready to vote with their feet–or sell orders as the case may be.

Another view–my view–is that activists, by stirring the pot, actually serve a purpose that should normally be served by right functioning boards in the first place:  They sharpen management’s focus on value creation vs. sleepy backslapping boondoggles.

For CEOs and boards, the best prevention program for the pains of activism is–wait for it–to act like an activist.  Ironically, activists often create the pressure of scrutiny where it should have already been.

I welcome your thoughts…