If so, how?

In his April 1, 2009 Wall Street Journal article, Preventing ‘Too Big To Fail’ Isn’t Easy, Sudeep Reddy noted that Gary Stern, the president of the Federal Reserve Bank of Minneapolis, had repeatedly warned regulators of allowing banks to get too large.  He also quoted Former Fed Chairman, Alan Greenspan, who said “Knowing when the crisis will happen is not possible for human beings.”  

While I agree that we may not be able to predict the exact time that a crisis will occur, we can certainly get early warning signals that we’re creating one.  Certainly Mr. Stern had that ability.  The key is that the earlier we can identify that an effort is going to fail, the smaller the crisis we’ll face when it does occur.  How can we avoid the “too big to fail” mistake in the future?  There are two questions that I find particularly helpful in discerning whether or not a merger or acquisition will fail.  

The first comes from Juli Niemann, Smith Moore & Co.’s resident economist who asks “Are they investing cash?”  Juli says that managements make more prudent investments when they’re using their company’s cash than when they’re borrowing the money from others.  We need only recall our youth to validate her statement.  Who among us wasn’t more frivolous in our spending when our parents were footing the bill than when we had to cough up the money ourselves?

• The second question is one that has served me well both in my personal investments and my client work.  The question is “What’s in it for the customer?”  An industry leader acquiring a relative newcomer to the industry can significantly increase customer value if:
• the newcomer has offerings that the industry leader does not
• those offerings are valued by the industry leader’s customers
• it would take years for the industry leader to develop comparable offerings
• it would take the newcomer years to build the name recognition and gain the level of customer confidence the industry leader possesses
• there are markets in which the industry leader has a presence that the newcomer doesn’t serve

Had these questions had been asked prior to the Bank of America/Merrill Lynch and Wachovia/A.G. Edwards mergers would the regulators have approved them?  We’ll never know for sure, but three things that are obvious is that all four companies had:

•  stellar reputations with strong brand recognition
• wide distribution channels which made them readily accessible to customers and prospects
• a wide array of offerings designed to satisfy virtually any customer need

From that vantage point, was there really any reason for those mergers to occur?  

It’s counter-intuitive, but these two simple questions:

•  Are they investing cash?
• What’s in it for the customer?

can provide regulators with the insights they need prevent a recurrence of the “too big too fail” fiasco we’re currently suffering.

The 7 Steps to Becoming INVALUABLE program I offer is designed to help you see more effective ways of doing business – ways that dramatically improve your bottom line while making your life easier.  In today’s blog I used Step 1, Contributory Negligence, to demonstrate how simple, inexpensive and easy to implement solutions can be when we break problems down and begin to look at them from the standpoint of what we did to contribute to them.

I also used Step 5, Contrarian Mindset, to look beneath the level of complexity most people see to the lowest common denominator(s) that drive the challenges we face.  In this instance, two fairly simple questions serve as powerful indicators of how to avoid “Too Big To Fail.”  For more information on the 7 Steps to Becoming INVALUABLE visit www.furtwengler.com/7steps.htm. 

Please share your experiences and wisdom with Invaluable Leader readers by posting your comments.  If you’d like to receive a weekly email reminder for The Invaluable Leader blog or if there’s a topic you’d like me to address, please send me an email at dale@furtwengler.com.

How to choose more effectively!

Nobel-prize winning neuroscientist, Dr. Gerald Edelman, says “we must look at all acts of perception as acts of creativity.”  In other words, we create the reality we’re facing by the way we choose to perceive what’s happening.

Neurobiologist William Calvin, in his book, The Cerebral Symphony says “We create the world we see: We surely modify it with experience, but it’s an invented world.  How we emotionally react to something may, in turn, affect how we see it in the future.” 

World-class athletes echo these themes when they say that their greatest asset is a “short memory.”  These athletes quickly forget both their successes and failures.  They realize that flawless performances and failed attempts are both merely fleeting moments in time.  Dwelling on either their successes or failures can only accomplish one thing – limiting their future success. 

How do these athletes develop a short-memory?  The answer lies in William Calvin’s quote above; it’s the word “emotionally.”  It’s not that these athletes are devoid of emotion.  Indeed, anyone who has watched a sporting event knows how high emotions run before, during and immediately after the game.  The key to these athletes’ success is that they are able to quickly set aside those emotions and focus their attention on the next shot, the next play or the next game. 

Conversely, many of us behave as if we are bipolar when it comes to dealing with our emotions.  We’re reluctant to let go of the emotional highs we experience when things go well.  We find it equally difficult to pull ourselves out of the throes of disappointment when our attempts fail.  In essence, we create realities of incredible joy or staggering disappointment.

Now imagine what your reality would be if you chose to view your successes as affirmation that you’re on the right path and your failures as guideposts directing you back onto the path.  Wouldn’t life be a lot more enjoyable if you could consistently maintain these mindsets?  Isn’t that a reality you’d choose for yourself if you simply knew how?

It’s counter-intuitive that, while we can’t avoid emotional reactions, we can limit the amount of time we spend in any given emotional state.  How?  By first recognizing that we are being emotional, then choosing to set that emotion aside so that we can focus our attention on the next thing we need to do to enjoy even greater success.  This simple two-step process helps you choose a reality that minimizes the periods of self-doubt, fear and anxiety all of us experience and replaces them with a “can do” mindset that makes life a lot more fun and exciting.  The choice is yours.

The 7 Steps to Becoming INVALUABLE program I offer is designed to help you see more effective ways of doing business – ways that dramatically improve your bottom line while making your life easier.  In today’s blog I used Step 3, Suspend Judgment, to demonstrate how emotions form judgments which, in turn, determine the reality you experience.   I also employed Step 6, Eclectic Education, to offer insights from two different disciplines, neuroscience and sports, to support my point.  Finally, I used Step 4, Seeing Similarities, to show how two different disciplines reach the same conclusion.

You can learn more about the 7 Steps to Becoming INVALUABLE program and how it can help you deal with the business challenges you face by clicking on http://www.furtwengler.com/7steps.htm

Please share your thoughts, whether you agree or not, by posting a comment.  If there are topics you’d like me to address, send me an email at dale@furtwengler.com.

Not likely.

Charlotte and I came back from vacation just in time to hear of yet another bailout.  Neither of us reads a newspaper or listens to the news while on vacation.  Quirky? Maybe, but vacation is a lot more fun that way.

Upon hearing the news, the Charles Dickens quote “It was the best of times, it was the worst of times…” came to mind.  The second thought was – how prophetic!  Was Dickens a prophet?  Not really; he’s simply a student of human nature.

We always live in the best of times and the worst of times.  Life is beset with both great joy and great challenge.  This time is no different.  Yet, one thing remains the same – the indomitable human spirit. 

It’s counter-intuitive, but during these trying times we’ll find people:

• helping one another weather the challenges they face
• returning to values overlooked because we’ve been moving too fast
• enjoying simpler pleasures of days past
• dealing with today’s economic challenges as we have in the past – effectively

Yes, we’re going to experience some pain with these economic challenges.  We’re also going to discover ways to deal with them that will allow us to recover more quickly than the press might lead us to believe.  It’s our nature to thrive in the face of adversity. 

As we look ahead, let’s look with the eyes of belief – belief that we will not only survive, we will thrive.  We will thrive because we possess the will, knowledge, intelligence and creativity to overcome any challenge life presents.  We will thrive, because we have an indomitable human spirit.

If there are topics you’d like me to address, send me an email at dale@furtwengler.com.

Or simply different consumers?

With all the price pressures we are experiencing, the inevitable question is “Will we become more intelligent consumers?” 

Of course, this presumes that we were not making good buying decisions before.  Is that the case?  You decide.  During periods when we were enjoying our highest income levels, we viewed time as our most valuable asset.  When the things we bought broke, we disposed of them.  It wasn’t worth our time to fix them.  Similarly, we didn’t “waste” our time carpooling, we were already losing huge chunks of time to the commute.  We chose suburbia, in lieu of city dwelling.

With the outsourcing of work, both nationally and internationally, many of us (including the best educated among us) have experienced a diminution in income levels.  The result is that we’re taking a harder look at how we spend money.  Does this make us more intelligent consumers?  Not really.  It’s simply a reflection of changing conditions.

Our failure as consumers comes from our inability to recognize and adapt to trends before they become crises.  It’s easy to point to Washington – to our elected officials, the lobbyists, the big money contributors – and say it’s their fault that we’re in this mess.  The reality is that they are merely reflecting our wishes.  If you are looking for evidence that proves my point, we need simply look at Hillary Clinton’s and John McCain’s earlier willingness to temporarily lower gas taxes for the summer travel months.  

I’m not willing to let politicians skate on their contribution to the problems we face.  They should have the personal strength to tell us that we’re misinformed when we ask for things that aren’t in our best interests.  Having said that I am not willing to lay these problems solely at their feet.  We, as consumers, need to put more pressure on our elected officials to make wise choices, even though it may cost us more in the short run. 

My Dad was an automotive mechanic.  He impressed upon me that maintenance is always less expensive than repair.  If we had pressured our elected officials to be more aggressive in establishing fuel efficiency standards, in setting and enforcing lower speed limits, in using fuel taxes to increase the price of gasoline for the express purpose of making alternative sources more attractive, we wouldn’t be experiencing gasoline prices as high as they are today.  Our roads wouldn’t be in such a constant state of disrepair.  We wouldn’t be suffering the commute times we do today.

We can see similar results from the subprime mortgage fiasco.  The American dream of owning our own homes prompted our elected officials to embark upon a program designed to make homeownership more affordable.  The Fed jumped on board with some of the lowest interest rates in 40 years.  The result has been devastating for millions of us. 

Health care is another arena in which our poor consumerism has resulted in many people not being able to afford health insurance.  I know that I contributed to this problem, more so in the past than I do today.  When my wife and I had healthcare coverage through her employer, we never questioned the tests the doctor suggested.  When she left that employment and we replaced that coverage with our own, we suddenly began to question the doctor.  The first time I explained to the doctor that I had a high deductible and would be paying for these tests myself, he eliminated half the tests without batting an eye.  I could have helped keep healthcare costs lower by being a more intelligent consumer earlier.

It’s counter-intuitive, but it’s our short-term view that makes us poor consumers.  If we want to become more intelligent consumers we need to take a longer-term view of how are our actions today contributing to the potential for higher prices in the future. 

We need to act on that view by putting pressure on our elected officials to make better decisions.  Our lack of activism contributes to our lack of intelligent choices. We live in the one country in the world that is established to allow its people to control their own destinies, yet we do nothing with this power.  Let’s become more intelligent consumers, let’s pay attention the long-term trends and put pressure on our elected officials to act wisely on those trends.

If there are topics you’d like me to address, send me an email at dale@furtwengler.com.