The Secret Business Lesson of the U.S. Financial Meltdown & Other Crises
When the history books are written about the 2008 financial market meltdown, now that the government has taken extraordinarily aggressive action to bail out the victims, there will be "heroes" hailed for taking the unprecedented quick and boldly needed action at the moment of crisis. These "white knights", the history books will conclude, "kept a steady and firm hand on the wheel and 'saved' us all from what could have been."
The problem is that all of the "heroes," (Ben Bernanke, Henry Paulson, President Bush etc.) are not only not heroes of this story, they are more likely the biggest villians.
While I'll concede their quick action may have helped stanch the carnage. For them to truly be "heroes" in my book they would have had the vision to see the problem in advance and the temerity to implement the needed solution BEFORE it blew up on us. The way the history books work though, is that you get no credit from preventing a big problem. You need a crisis to have a hero. Prevention of a problem that hasn't yet arisen won't even get you a footnote.
Suppose that in 1972 some member of the International Olympic Committee mandated that security guards be stationed around the perimeter of the athletes quarters in the Olympic village. No doubt some would have viewed this directive as a nuissance. An unnecessary expense and intrusion on the camraderie and spirit of the Olympics. Yet, it would also have meant we'd never have known from the tragedy of eleven Israeli athletes being murdered at the Munich Olympics. In all likelihood this IOC member would have been villified, instead of being rightfully hailed for his insight and vision.
Who are the recognized heroes at your company. Is it the CEO who saved the day during a moment of crisis? Is it the sales rep who came through with some big deals to push the team over quota? Is it the customer service rep who went above and beyond to save a client who was dissatisfied?
Do you give any credit to the person who made certain the order went out correctly so there was no customers service crisis...or the woman in finance who got extended terms early on, so there was no cash flow crisis to avert?
Look beyond what is, to what could have been. In doing that you'll be able to find and recognize the individuals who are the true "heroes" of your organization.
The problem is that all of the "heroes," (Ben Bernanke, Henry Paulson, President Bush etc.) are not only not heroes of this story, they are more likely the biggest villians.While I'll concede their quick action may have helped stanch the carnage. For them to truly be "heroes" in my book they would have had the vision to see the problem in advance and the temerity to implement the needed solution BEFORE it blew up on us. The way the history books work though, is that you get no credit from preventing a big problem. You need a crisis to have a hero. Prevention of a problem that hasn't yet arisen won't even get you a footnote.
Suppose that in 1972 some member of the International Olympic Committee mandated that security guards be stationed around the perimeter of the athletes quarters in the Olympic village. No doubt some would have viewed this directive as a nuissance. An unnecessary expense and intrusion on the camraderie and spirit of the Olympics. Yet, it would also have meant we'd never have known from the tragedy of eleven Israeli athletes being murdered at the Munich Olympics. In all likelihood this IOC member would have been villified, instead of being rightfully hailed for his insight and vision.
Who are the recognized heroes at your company. Is it the CEO who saved the day during a moment of crisis? Is it the sales rep who came through with some big deals to push the team over quota? Is it the customer service rep who went above and beyond to save a client who was dissatisfied?
Do you give any credit to the person who made certain the order went out correctly so there was no customers service crisis...or the woman in finance who got extended terms early on, so there was no cash flow crisis to avert?
Look beyond what is, to what could have been. In doing that you'll be able to find and recognize the individuals who are the true "heroes" of your organization.
Larry -
De-regulating the insurance and banking industries was predicated on "self-policing" which did not occur and it assumed we would not have greed-driven scenarios like the home loans to the totally unqualified that just blew up.
There are no "heroes" on this, just janitors, those who have to clean up after the greedy ones.
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I've worked for a number of large companies over the years, one of those was Motorola. Motorola I learned of a perspective where philosophy of business that I've never heard of before. It was called hero syndrome.
In a culture where processes are tight and controlled, and things don't get out of order, it is rare that you need someone to step up and perform a heroic action. These types of cultures or even businesses can almost be downright boring. They are typically very safe in your most always know what you're going to get from this type of culture.
Some environments, cultures or businesses are anything but stable. They are often very chaotic and almost out of control. The only thing that keeps them glued together is a culture run on heroes.
When I worked at Motorola, from about 2002 Leonid 2003, I work for a company that existed solely on the backs of its heroes. Almost every day, they Motorolan, would have to step forward and save some aspect of company. We're not talking about processes and check, we're not talking about a culture that was in control, we're talking about a chaotic place, where it took a heroic action just to keep things going and keep the system from crashing altogether.
We literally kept the company out of bankruptcy in 2001 in this manner. there were many of us that were responsible for saving Motorola back then.
within the company, as heroes would be applauded lightly for failing to allow the company to be put out of its misery. We were not necessarily rewarded financially speaking, because at the end of the day we were just barely getting business done. We might be promoted to a new job or role at some point in the future based on our heroic actions, but we didn't get any bonuses or rewards for keeping the business alive for yet another day.
When I look at the actions taken by the federal government recently, I see a hero culture and action.
The US federal government is stepping in to correct problems that are chaotic and out of control with heroic steps that would not be needed if the culture was tighter and in control.
So as I read your article and consider your premise, I would tend to agree. Unlike in the situations I countered in Motorola where middle-management employees were routinely saving the day, in this circumstance. The heroes are the people at the top of the organization. They are the ones that should have worked to control and instill a sound process and a sound culture in a controlled system. They failed to do that, and the result is that they had to perform a heroic action just to keep the system alive.
the reality is that we are facing a national debt of at least $10 trillion, and likely a debt that will be much higher before, this is over. We are looking at spending 5% of our GDP. Just to save the system, we have to spend an insane amount of money to keep things in check and keep them from falling apart.
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Brilliant analogy Brett. I guess there are "hero" cultures, out of necessity, but I doubt they'll be published in the next sequel of "Good to Great."
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Heroes, villains, whatever! Call them what you will - what they did was saved our behinds from dropping into a worldwide economic collapse that nobody wants to see - trust me.
Sure, maybe people should have seen it coming - and many did.
However today, it is what it is. And I'd rather the bailout and then the windfall profits which will be made when the government starts liquidation assets than not being able to pull money out of my accounts to put food on the table and pay my mortgage.
We were saved by the skin of our teeth. Be thankful. Educate yourself and understand how tied together everything is.
We don't pull the strings but we have to learn to live in a world where we don't get hung by them.
Now go out and do something productive that makes a difference and an economic impact for yourself, your community, your state and your country.
Be worthwhile and you'll see the world will pay you back.
John
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You are right on the money.
There is only one "hero" in this situation. His name is Warren Buffett.
Buffett long ago recognized derivatives for what they are, a giant ponzi scheme dreamed up by lunatics. Those are my words, not Buffett's. But he said much the same, in 2003 specifically but also before then, calling derivatives something dreamed up by "madmen".
He said they were "time bombs", the "nuclear devices" of the global financial system that one day would blow up. He said they would take years to unwind.
Nobody paid heed.
That same year, Berkshire Hathaway bought an insurer that was involved in derivatives to some degree. He ordered them to get out of that business ASAP, which they did.
The true heroes of a situation are those who see the reality, speak up about it loud and clear, and do something about it.
Too bad Buffett was not running the Fed. Greenspan warned about irrational exuberance in the 1990s, but did nothing but jawbone. He spoke about derivatives with caution and wringing hands, but did nothing. He spoke of the housing bubble, with hand-wringing again, but did nothing.
I think Robert Rubin might be another hero. As Treasury Secretary, he cleaned up the first mess less by Reagan-Bush. And he seems to have kept Citi on the fairly straight and narrow. Time will tell. No matter, now there is another mess to clean up, and I would hire Rubin back again. Paulson has been a disaster, and he also is responsible for the mess at Goldman, which he now has quietly converted back to a Bank so that he can retire there, lol.
Let me add that it is gross negligence for those in responsible positions not to initiate change when it is needed, not at "one-minute-before-midnight".
The growing "house of cards" was well known years ago, even before the utterly reckless lending on mortgages. Then for regulators to watch the wizards of Wall Street bundle that crappy paper, and to watch them sell it umpteen times over, borders on criminal negligence.
Those who failed to initiate change should be held accountable: the bankers and regulators alike. Their carelessness, their mismanagement of change, has now robbed the taxpayer of at least one trillion dollars. The scandals at Enron, WorldCom, and others, all pale by comparison. Yet their executives are doing time.
It is amazing what the American taxpayer will tolerate. Bungling ineptitude by the government and its officials, elected and unelected, as well as by the so-called bankers who don't even know how to manage their own Balance Sheet. I find it disgusting and appalling. And I am astonished that the public is not calling fro heads to roll.
Consider this. There is concern for national security, and a global war on terrorism as a priority. Without diminishing that, this financial mess is an equal threat to national security. It weakens the economy, thus impeding the power that America projects abroad. It will recover, but will take time.
Frank Feather
(ex-Banker, Canada, wishing USA well)
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The world if filled with instances where the lack of controls or oversight has caused companies/governments to come tumbling down. On the other hand, the absence of controls has allowed many organizations to flourish through innovation that would not have occurred without the space to do so. This innovation and growth must then be accompanied by a set of management rules to keep the organization focused and moving in the right direction.
In the case of this Wall St. debacle, it appears that the innovators were rewarded in excess and the folks (Fed, SEC, Congress, etc.) driving the bus just plain fell asleep at the wheel. I'd wager there were many bus drivers who turned a blind eye because they were also part of the profiteers. They had incentive and motivation not to look too close.
I would love to see a chronology of events, after the dust has settled, and we start paying back the debt they have put on our personal balance sheets.
In the end, we will have a stronger financial system and optimistically it will make a difference for our children and grandchildren.
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Someone wrote in to me and said this debacle is going to cost every U.S. citizen $4,000. Sure puts our $600 tax rebate check into perspective.
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This begins to make the impact concrete...what IS the real impact of this for each of us?
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I heard $4000 per U.S. citizen.
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GREAT post! I do agree that credit does not always go to those toiling along daily to avoid the catastrophe, but clearly to the heroes that help us out of it. Kind of like not having a major terrorist attack on U.S. soil since 9/11/01. LOTS of credit to spread around on that count!
In the current financial sector crisis, the election season will leave us with so many fingers pointing at who is to blame, we may not really have a good analysis for quite some time. It does seem clear that this was brewing for a long, long time. Maybe there were heroes we should acknowledge that kept it from boiling over much sooner, but maybe they were the same ones who had some responsibility for the way it turned out. Looks like there could be a long list of folks who will get the blame. Even those with good initial intentions, like those promoting "community development" loan requirements required of banks going back some 10-15 years ago, the origins of sub-prime.
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It's premature to call anyone a hero as there will likely be far more carnage and we have no way, at this point, to measure these "hero's" actions have helped or excarbated the situation.
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