Archives: November 2008

Condolences

My heart goes out to our brothers and sisters in Mumbai. Personally, I feel like the guy who had a flat tire on the way to the airport and missed flight XXX, which was subsequently hijacked; I was due to have landed in Mumbai next Wednesday and proceeded to the Oberoi hotel, radioactive American passport in hand, prior to a Thursday seminar. It's a messy world; this was my third near-miss this year. Earlier in Johannesburg a trio of gunman hit my hotel at 6:30 a.m., 20 minutes after I'd left for my seminar that day. And in Mexico City last month, a small jet crashed and burned 5 or 10 blocks from my hotel; the crash was suspicious (still unresolved), as it carried the young Federal Interior Minister who was having some success against the powerful drug cartels.

I am shaken by the three near-misses, as any sane person would be, but will not curtail my International travels in any way. (Give me a couple of weeks re Mumbai, please.) I am a keen believer in the immense benefits of globalization and a charter member of the flat-earth society, circa 2008. It is my pleasure to be of some tiny service to my friends from Kuwait, Saudi, Dubai (week before last), to Kiev, to my beloved South Africa (may Mr Mandela live to 100+), Ukraine, Romania, etc. And India! Re the latter, I am "one of those"—a true blue India lover!

(As a matter of professional interest, I'd suggest Philip Bobbitt's Terror and Consent: The Wars for the Twenty-first Century. I had just started it; it's a tough slog, but truly an original work.)

And Now for Something Completely the Same

"And now for something completely different," the Monty Python gang used to promise. (I went to Spamalot this past weekend.) Forget that, I want to honor this Thanksgiving with something "completely the same."

Dwight David Eisenhower, or Ike, is certainly one of the ten greatest Americans of the 20th century—and surely ranks in the top 50 for the world as a whole. As president from 1953–1960, he got us out of Korea more or less with honor, kept the Cold War from getting entirely out of hand, had the perfect demeanor for overseeing our post-war wound-licking and rejuvenation, was an unsung civil rights hero, and this great general ended his second term by warning us of the financial and political costs of a "military-industrial complex" with too much power—talk about prescience. And all this, of course, was preceded by D-Day and the campaign that ended World War II in Europe, in which Ike, make no mistake, was the prime mover.

I'm fascinated anew by DDE, and it all stemmed from a single and simple quote from General Eisenhower, which appeared in the May 2008 issue of Armchair General, a magazine I almost inadvertently grabbed at Logan Airport: "Allied commands depend on mutual confidence [and this confidence] is gained, above all through the development of friendships." The magazine's writer reinforced Ike's self-assertion by adding, "Perhaps his most outstanding ability [at West Point] was the ease with which he made friends and earned the trust of fellow cadets who came from widely varied backgrounds; it was a quality that would pay great dividends during his future coalition command."

The quotes above are borne out in Michael Korda's extraordinary, new-ish 800-page prize-winning biography in which I am currently immersed, Ike: An American Hero. I selected a more or less random couple of chapters, covering DDE's arrival in England in 1942 and his subsequent and surprising assignment to command of Torch, the Allies first offensive action of the war and the biggest and most ungainly offensive of its kind in history to that point. (The North African landing took place on my day of birth—07 November 1942.) In the space of just 43 pages (pp. 268–311) we find these phrases describing Eisenhower:

"infectious grin and great charm" ... "nice face" ... "grin that was to become so famous" ... "got along famously" ... "goodwill was spontaneous and easily recognizable" ... "good impression that Ike had made in six weeks" [newcomer junior general to Supreme Commander, Torch, agreed upon by Roosevelt and Churchill—in, yes, just six weeks] ... "least rank-conscious of generals" ... "Men were happy to serve under Ike, even British admirals and generals who might easily have raised objections; his sincerity and lack of ceremony made it difficult, even impossible, to refuse him, and enabled him very rapidly to pull a team together." ... "Ike was gregarious, rarely had anything bad to say about anyone, and, on the surface at least, was relaxed and good natured." ... "Whereas Ike's good humor was genuine, unaffected, and affectionate, Monty's [Field Marshall Sir Bernard Montgomery] was cruel and mocking and always carried a sting."

Following successes in North Africa and Italy, Eisenhower, still a rather "fresh face" and less than two years past arriving in London as a Lieutenant Colonel, was selected as Supreme Commander, Allied Expeditionary Force Europe, tasked to invade the European continent and procure Germany's unconditional surrender. Korda explains the somewhat surprising decision:

"The Allies had generals with, perhaps, a sharper strategic vision than Ike. ... There were also generals who were more experienced at 'fighting a battle' ... But there was nobody who had anything like Ike's record of leading an alliance—always the most difficult feat in warfare. ... What is more, Ike somehow inspired people: civilians and ordinary soldiers of both nations, even cynical political figures and the always troublesome French. Something about his big grin; his long-limbed, loose American way of walking (the Kansas farm boy grown to a man); his easy, familiar way of speaking to everybody from King George VI down to privates in both armies; his lack of pretension; his evident sincerity ... They were willing to be led by him. They were willing to have him command their sons and husbands in battle. They trusted him. They were willing to die for him. ..."

(NB: Precisely these same things could be said about the two military figures I have studied most assiduously, Lord Horatio Nelson and General Ulysses S. Grant.)

(NB: When DDE subsequently ran for President of the United States in 1952, his campaign slogan was the simple "I like Ike.")

So?

So: Why must we constantly pursue "breakthrough thinking," why must we leap "out of the box," when the secrets to success and, conversely, the causes of failure—in the sense of persuading or failing to persuade groups of all sizes to pursue and achieve excellence in any and all endeavors—are almost wholly dependent upon character traits and personal characteristics that are, in fact, more or less eternal and which unequivocally transcend cultures of every flavor?

Benjamin Franklin's Parisian charm offensive of 1776–77 gained France as an American ally and changed the course of history in our Revolutionary War against England.

Nelson Mandela's extraordinary smile disarmed one and all. ("One of the greatest charm offensives in history" was one biographer's description of Mandela's amazing feat of disarming enemies and allies alike and transforming South Africa without civil war.)

Eisenhower's grin ("something about his big grin," "grin that was to become so famous") united fractious Allies and insured the effective conclusion of World War II in the European theater.

We are confronted at the moment with an economic crisis of epic proportion. There is no better time to heed the eternal lessons of Eisenhower (Franklin, Mandela, etc). Make no mistake, the keys to surviving and thriving, as individuals and organizations, will not primarily be the "out of the box" cleverness of our "strategic response," but instead individual and organizational character as expressed by the depth and breadth of relationships throughout our individual or organizational networks. Current case in point, Mr Pandit of Citigroup is as smart as they come and then some, but, unlike Ike, when he said, "Follow me"—nobody moved, except to cut and run.

American Thanksgiving is our quintessential "family holiday." Giftgiving—for once!—is not the norm, except as it is reflected in exchanges of pumpkin pies and 7-generation-old recipes for turkey stuffing. It is a day in which we even put the likes of sibling sniping on hold and simply rejoice in each other's presence. It is a day, one hopes, when we also reflect on those, numbering in the hundreds of millions, or even billions, who go to bed on less than a full stomach.

The economic crisis? Not much fun. And less fun to come. But this, too, will pass, especially if we can assiduously translate the good will around the Thanksgiving Table and the character lessons of Eisenhower and Franklin and Mandela into our minute-to-minute, hour-to-hour, day-to-day affairs.

Happy Thanksgiving.

"Socialism" Versus "Capitalism" In Modern America

The Socialists are going berserk!
(The Republicans, of course.)
The Capitalists are in retreat!
(The Democrats, of course.)

Bill Clinton deregulated financial services!
Bill Clinton didn't bat an eye when the dotcom bubble was pricked!
Bill Clinton gave us "welfare to workfare"!
Bill Clinton got NAFTA passed over fierce resistance from both parties!
[To be sure, Mr Clinton had a little help on the ground from Newt Gingrich & Co, and the intellectual support of Alan "Ayn" Greenspan.]

George W. Bush, to the conservative rag, the New York Times, this morning's edition, has through yesterday unwound the Clinton radical pro-capitalist legacy via $7,800,000,000,000 [$7.8 trillion] in government assistance and guarantees.

(1) To quote Margaret Thatcher, it's a funny old world.
(2) In all seriousness, to those blinded by partisanship who say Mr Bush is sitting out the financial crisis, I say, Baloney! [And thank God.]
(3) Now what?

Note to the Appalled on Bear Scat

My neighbor brought me the bear scat. (See immediately below.) He had it in his hand—and handed it to me. Basically, it's modestly digested bark and nuts. (Period.) I surely wouldn't take a knife and fork to it, but it's a long, long way from what city folk might imagine. Particularly when the world goes wobbly, it is pure joy to be imbedded in the land, listening to bear calls at night (they sound like owls), waking up to farm sounds and having an oasis a long way from Citicorp HQ. I'm one of the old fashioned types—I guess it's the new fashion, in point of fact—who think we were designed to be in touch with the land in one way or another. (I say all this, while I claim with equal sincerity that I left my heart in San Francisco. Lucky me.)

Hold Your Nose!
Bail We Must!
Scrooge Not!
Spend As If Your Life Depends On It! (It does!)

What follows is an economic primer from a non-economist:

Warts and all, America is the lynchpin of the global economy.
(And probably will be for next 25 years.)
Citi is a, maybe the, lynchpin of the lynchpin.
In fact, probably.
Psychologically, beyond doubt.
More than ever in a connected, hyper-tangled, wholly mangled world.
Financial system outcomes and movements are a "pure expectations play."
1% math.
99% individual and group and herd psychology.
(Basis of entire system is pure "psych": You deposit a little, they lend a lot, we both pray to any and all gods that the depositors don't all knock on the door at the same time. Hint: they did-are-will pound & wail for the foreseeable future.)
Hence, system precarious 100.00% of the time.
Vicious and virtuous circles are always in play.
Always.
There is no normal.
Never.
Ever.
(Wish there were a psychologist on Mr Obama's top econ team.)
(Or at least someone with a normal IQ.)
("One who knows" reports that Citi CEO Pandit has an EQ of approximately zero.)
(Sorta like L. Summers.)
Soooooo ...
Citi fails.
Depression follows.
(Or at least the odds go up not imperceptibly—and, hence, unacceptably.)
Therefore bailout justified, at almost any cost.
Pump Citi up with a few tens of billions.
Save not improbable downside of as much as tens of trillions.
Globalization threatened if Citi tanks.
25-year setback.
Bailout awful, unconscionable.
Bailout bodyblow to pure capitalism.
No bailout, possible capitalism knockout—or at least a wretched decade or two.
Fact—nobody has a clue.
Systemic interdependencies of this order are truly novel.
And psychological irrationality and the utter madness of crowds—of smart people as well as not-so-smart people—is a perpetual "given."
In a clueless world, one must assiduously attend to lowish probability outcomes with catastrophic consequences.
"Catastrophic" is not a hyperbolic word these days.
"Catastrophe" is an ever-present "plausible" outcome.
"Net net": Bailout "least worst" solution.
Welcome to the real world!
Happy Thanksgiving!
Happy Friday-After-Thanksgiving!!!!!!!!!!!!!!!
Consumption rules!
Buy presents!
Give to the homeless!
Make those Salvation Army buckets sag with Susan B. Anthony coins!
Pray that every sumbitch makes this Friday "Open Wallet Day"!
Got a Great Aunt Maude?
Haven’t seen her for 20 years?
Buy her a 60-inch flat-screen TV!
Better yet, a Ford hybrid!
Better yet, a house at list price!

(Photo below, bear shit from a beast estimated to be 250 pounds—from my farm, up the hill a couple of hundred yards from the main house, exhibited on a wall outside my working studio. Great symbol for a Bear Market, eh? Deposited on Citi Bailout Day. Ah, all is not lost—there are deposits out there!)

Scat_112408_sm.jpg

True Loyalty in Tough Times

The first notice most of us got of the current economic crisis came from TV and newspapers. Now, as the ripple effects of softening business move through the marketplace, just about everyone I talk to is seeing some sort of softening effect on their business. We are all vulnerable.

We can't afford to be sloppy right now, in anything we do. We can't waste resources. We can't let customers, in whose acquisition we have invested considerable sales and marketing resources, slip away, believing that new customers will show up to take their places.

In this economy, customer loyalty is one of the most important variables that will affect our success. It will be increasingly difficult to find new customers who can become big customers, so we have to get the most benefit out of what we already have. But ... we also can't afford to be sloppy with our concept of customer loyalty.

In so many cases, companies mistake promotional bribes for loyalty. But the kind of loyalty created by this type of approach is fleeting, and defenseless against a better offer from your competitor. (And you can bet that your competitors will be offering richer deals in the near future.) This type of loyalty, which I call transactional loyalty, can temporarily steer transactions in your direction, but keeps you very vulnerable in tough times.

The kind of loyalty you want to create in these times is what I call True Loyalty. When a customer is truly loyal, she is not loyal to your latest promotional offer, or to filling out her punch card to get her 10th smoothie for free. When True Loyalty happens, the customer is loyal to you. More specifically, she is loyal to her relationship with you.

This is a big difference. If a customer believes she is in a "We" relationship with you, her frame of reference is not the latest transaction, but the entire history of her relationship with you.

Soon, here at tompeters.com and at yastrow.com, I will share my thoughts on how to create True Loyalty. For now, what do you think? How do you avoid transactional loyalty, and create True Loyalty? Is True Loyalty a key to thriving in a tough economic climate?

Service?
Sacrifice?
Equity?
Honor?

The Washington Post reports that Representative Peter Roskam (R-IL), during last week's hearings, asked automaker CEOs if they'd work for a dollar a year. Chrysler's Nardelli said yes, GM's Wagoner said "I don't have a position on that today," and Ford's Alan Mulally, who made $21,700,000 last year, said, "I think I'm okay where I am."

In the immortal words of Dave Barry, "I'm not making this up."

Meanwhile CNN's Kyung Lah reported that the CEO of JAL rides public transit to work, eats in the company cafeteria, and cut his salary below that of his pilots as a personal response to layoffs and forced early retirements that JAL felt necessary to make.

A Financial Times headline on Citicorp reads: "Bank loses over half its value in past three days" "[CEO] Pandit moves to shore up his position as chief."

As disgusting [DIS-GUST-ING] as Mulally's "I'm okay" comment was-is, the Pandit headline in its own fashion affected me even more. Citi's performance is awful—and there's little or no doubt that Pandit is a major part of the problem. And hence his primary response, following an announced 50,000 plus layoff, is to try and save his own skin? (TP's considered response: "You miserable, ego-maniacal S.O.B.")

Have these guys (and they're almost all guys) no sense of shame? No sense of service? No sense of honor? No sense of sacrifice? No sense of equity?

A little online research Cathy and I did shows that none of the Big Three CEOs had any military service. I do not believe that such service is a generic answer to any particular problem. But I do believe that the uniform absence thereof is perhaps indicative of a lack of a life-as-service, servant leader ethos in general among these three? (The "no military service" piece is almost amusing, in a perverse way, in the case of Nardelli, who is a fanatic believer in some twisted notion of the "military model" of doing business—his willy nilly application of his abominable interpretation of military leadership was one of his many screwups at Home Depot. Part of Nardelli's, yes, admirable willingness to work for a buck at Chrysler may be the $200 million he took home as a prize for being fired from Home Depot.)

In summary:

Have they no shame?
Have they no sense of service?
Have they no conception of servant leadership?
Have they no soul?
Have they no honor?
Have they no ethos of sacrifice?
Have they no conception of-perception of equity?
(Did any of them go to Sunday School?)

Does it sound like I'm in a pissy mood, maybe still suffering from jetlag following my Middle East trip? Well, I am in a pissy mood, and part of it may indeed be 66-year-old-body-meets-jetlag. But part of it derives directly from Pandit and Mulally and the association of their flavor attitudes to our unfolding economic catastrophe. I've spent 40 plus years directly or indirectly on, effectively, one topic: profit through people-centered, people-obsessed leadership. Mulally and Pandit and their not insignificant ilk make me wonder if I pissed away my life in pursuit of an improbable, or even impossible, ideal?

Media Sightings Alert

For our friends in the U.K. and anyone who subscribes to the Financial Times, it seems that Tom had 'lunch with the FT' a while back and the writeup of what transpired will appear in FT Weekend tomorrow, November 22. Previous lunches linked here.

N.B. Tom's Lunch with the FT is now available. (Thanks, Bruce, for the heads up.)

Gestures Matter!

Gestures do count. Lee Iacocca worked for a-dollar-a-year when the government gave Chrysler a life-saving loan. Wouldn't it have been great if Ford CEO Alan Mulally had driven a 2008 Ford Escape Hybrid the 520 miles from Detroit to D.C.? Hokey as hell—but he just might have gone home with a several-billion-dollar check in his pocket.

Fix Detroit Now!

Southwest founder Herb Kelleher comes out of retirement to take the reins at GM. Lee Scott leaves Wal*Mart soon to run Ford for five years. (If Lee won't do it, we'll bring his predecessor, David Glass, out of retirement.) Mickey Drexler makes the switch from J.Crew to Chrysler. All of them know retail! All of them know the mid- to low-end mass market! All of them know that pennies matter! All three are the salt of the earth!