I ran into the following quote from Adam Smith and thought he’d be a good subject for today’s Quotable Quotes. It’s too bad that Smith, known as the godfather of free market capitalism, doesn’t carry more weight with our bankers and politicians, although Occupy Wall Street seems to get it.
“The disposition to admire and almost worship the rich and the powerful is the great and most universal cause of the corruption of our moral sentiments.”
All those bankers who have refused to provide the credit necessary for SMB to move forward might want to consider these wise words, “It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country.”
Sadly, the world has changed to the point where customer outrage has little to no effect, although Smith’s words still ring true for some, “The real and effectual discipline which is exercised over a workman is that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence.”
This struck me as a great truth considering the ideologues that pass for politicians these days, “I have never known much good done by those who affected to trade for the public good.”
It’s not fair to bash bankers and pols and let the corporate world off Smith’s hook, so here’s one just for them, “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”
Conspicuous consumption was out of style, or at least underground, after the 2008 crash, but is back in full force now proving that Smith understood exactly what drives them, “With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches.”
Finally, the so-called 1% would do well to remember this, “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”
A McKinsey study on the value of corporate social responsibility found “…highly innovative Fortune 1000 companies derive greater financial returns from their corporate-responsibility activities than their less innovative counterparts do,” and suggested three actions to improve CSR ROI,
“Upwards of 40 percent of industry’s energy efficiency improvement opportunities can be realized through low or no-cost projects rooted in corporate culture change”
They must know something since dollar savings to date are not millions, or even hundreds of millions, but billions.
“The key to this model is the formation of multi-disciplinary, cross-functional site teams, with insight from operators, maintenance, mechanics, core process experts, energy experts, engineers and management.”
Two of the biggest stumbling blocks on this path are Wall Street, with its short-term, i.e., quarterly, focus and the current definition of “stakeholder.”
Typically, stakeholders are viewed as investors, management, customers and workers; progressive companies have added the local communities where they do business and a few have tiptoed further.
Whereas Richard Branson points out in Screw Business As Usual every living thing and the planet itself are stakeholders.
Sadly, rather than being in the lead, the majority of US corporations are staying focused on short-term results and narrow definition of stakeholder.
But the winners in the future will be those companies, large or small, whose thinking is longest and definition is broadest.
I hope you are one of them.
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Kung Hei Fat Choy (Wishing you an abundance of wealth and prosperity!) Happy Year of the Dragon
With News Corp’s culture making headlines around the world (and links to plentiful to choose) I was reminded of something I read recently about a new ethics compliance study (free registration required).
The new outlook has permeated the boardroom. In fact, only 22% of ethics and compliance leaders worry about senior management’s ability and desire to demonstrate and promote ethical conduct. Sixty-eight percent of the respondents stated that promoting an ethical culture creates long-term value for the business.
In fact, 45% of respondents are concerned that middle managers are not as invested in ethics initiatives as their superiors.
Think about this; senior management is ethical, but the guys in the middle area are the problem.
Funny, in almost all the ethics cases over the last few decades it’s been senior management that was the driving force and found to be at fault.
Most people respond to the tone and example set by their leaders.
But too often the goals and the pressure to achieve them reflect an unwritten message from senior executives—use whatever means necessary, just get it done.
I’ve never seen any statistics, but I’ll bet that if middle managers are guilty of anything it’s going too far to produce the results demanded of them by their bosses who are, in turn, responding to Wall Street.
I hope you have some time today, because I have some great interviews with, and commentary on, some great CEOs.
However, I’m going to start at the opposite end of the spectrum. As you well know, there are plenty of CEOs that aren’t great or even mediocre, but are just plain lousy. Here is Forbes list of the 10 Biggest CEO Screw-ups Of 2010.
Enough of that, now on to the positive
First up is one of my favorite CEOs, GE’s Jeff Immelt, who took the hard road in taking the company back to its roots building real products based on creativity and innovation—as opposed to the financial engineering that drove the company under his predecessor, Jack Welch—and building people for the long term.
It’s a bottom-up approach that shuns hierarchy, and places most of the responsibility for continuous improvement on the teams. … Mr. Immelt also sees himself as the champion of what he calls “large-scale entrepreneurship” at G.E. By that, he means identifying long-term market shifts — “what’s next,” he says — and then marshaling the company’s research, manufacturing and marketing resources to capitalize on the opportunity.
Next is Kathy Savitt, C.E.O. of Lockerz, a social network and e-commerce site, who sees cynicism as the start of corporate cancer.
“Another cell of cynicism is when you feel a company is not actually living out its core values.”
Sometimes CEOs step out of the top role with the explanation that they want to focus on a more strategic role, but how many of them say publicly that they aren’t very good? Barry Diller did just that when he stepped down at IAC.
“I told them the company wasn’t being managed correctly,” Diller, 68, said. “I never thought I was a very good manager. I mean I am decent, but I want to go back to what I am good at, which is looking for opportunities to grow the business.”
Before I get to today’s lineup I need to respond to an email question from a reader. “Joan” first assured me that she didn’t mind, but was wondering why so many of my posts played off articles in the NY Times and Business Week when there were so many sources available.
Simply, there is only so much I can read in the time I have available; I’ve read BW for decades and although I don’t like it as much now as I did in years long past, it still offers varied overviews on a large variety of subjects. As to the NYT, I like newspapers and these days it offers as much veracity and breath as I’m going to find. Enough, in fact, that I plan to keep it when it goes to paid subscriptions next year. (I also get my local paper, but it’s highly focused locally and on the region.)
As I’ve said in the past, I like stories about people, especially when they do the unexpected or the unexpected does them; today we have both.
First up, two with a horticultural bent. One tells the story of twins who have been traveling the East Coast sleeping in trees, while the other gives you a look at a book store in Humboldt County, CA, a place known for Giant Sequoias and pot, whose address was hijacked by pot growers as a return when mailing their product. (Hat tip to Gen, owner of North Coast Gardening, for sending me the link.)
You know all those articles you keep seeing about how Americans new frugality is a sea change and not a temporary reaction to past layoffs and current insecurity? Don’t bet on it as this story about Wall Street spending shows.
This next article highlights the importance of dying on your own terms. It resonates with me, because it focuses on dying at home (which I plan to do). You may not appreciate the subject, but death is something with which we all end up dealing—usually multiple times during our lives. It’s one of those things that is best thought about long before it’s necessary.
Finally, have you looked in your attic lately? I never had one, which may be one reason I can’t pass up a garage sale. An English couple clearing out their parents’ attic found an old Chinese vase; it just sold at auction for 69.5 million dollars (plus the 20% VAT). That’s enough inspiration to make you want to clean out your elderly relatives’ attics.
How profitable can a company be that takes social responsibility to its extreme?
What kind of corporate social responsibility is possible if Wall Street isn’t breathing down your neck?
For answers you need look no further than India’s Tata and America’s SAS.
I’ve already written twice about SAS, its amazing culture and the lengths they go to to take care of their people.
And then there is Tata, where Ratan Tata, Chairman of Tata Group, built a culture of innovation after India dropped its trade barriers.
… for his companies to survive and thrive in a global economy he had to make innovation a priority—and build it into the DNA of the Tata group so that every employee at every company might think and act like an innovator.
Notice it says every employee, not just the stars, designers or engineers.
Obviously good culture and good business, but not really extreme.
Extreme social responsibility follows a different path. In 2000 Tata Tea Ltd. purchased Britain’s Tetley Tea Company and shortly after sold the vast plantations in an economically underdeveloped community where it had been the largest employer for a century.
But the transaction was anything but routine. Instead of working out a lucrative deal with eager investment bankers, bribing local politicians to mollify them, laying off workers, and selling to the highest bidder, as some other Indian companies shedding a moribund business might have done, Tata Tea sold 17 of the 25 plantations to its own former employees. Layoffs were generally limited to one per household, and Tata gave a group of voluntary retirees enough cash to buy equity in the new company that was formed. (That company, Kanan Devan Hills Plantation Company [KDHP], still operates as an employee-owned enterprise.)
Although Tata Tea would henceforth maintain only limited business interests in the area (including some equity in KDHP), the company continued its active social role there. It still subsidizes a range of social services and KDHP employee benefits, including free housing for plantation workers, a private school, an education center for disabled children and young adults, and the newly renovated Tata General Hospital in Munnar. Tata still remains a major customer of KDHP, which helps guarantee a stable supply of tea at competitive prices.
Tata’s extreme culture is simple.
Since its founding in 1868, Tata has operated on the premise that a company thrives on social capital (the value created from investing in good community and human relationships) in the same way that it relies on hard assets for sustainable growth.
And at $70 billion it certainly is thriving.
Extreme culture is long-term and looks well beyond the next quarter and short-term profits.
Extreme culture is successful, but not in the US—Wall Street would never allow it.
I ran across this comment by Joseph Mason, professor of finance at Louisiana State University in an article I was reading and I couldn’t resist sharing it with you.
“Wall Street will always have more lawyers and more accountants and more brains than the regulators.”
So I scavenged around and found a few more to make up today’s QQ list.
Let’s start with a Wall Street proverb that sounds as if it were written by Goldman.
“Buy on the rumor; sell on the news.”
Economist Paul A. Samuelson also seems to have a fairly jaundiced view of Wall Street;
“The stock market has forecast nine of the last five recessions”
I can’t imagine why, can you?
This next one is from everybody’s favorite crook, Bernard Madoff. Knowing what we know now makes this comment even more ironic.
“Whenever I go down to Washington and meet with the SEC and complain to them that the industry is either over regulated or the burdens are too great they all start to roll their eyes, just like all of our children do when we talk about the good old days.”
But it’s will Rogers who gets the last word today.
“Let Wall Street have a nightmare and the whole country has to help get them back in bed again”
I am a fan of Adrian Gostick and Chester Elton; I reviewed both The Carrot Principle and The Levity Effect and highly recommend them. The books feel like fast reads, but digesting and using the (unconventional to some) wisdom found in each takes a bit longer.
The Daily Carrot Principle is the size of a desk calendar and offers much of that wisdom in bite-sized pieces by addressing one idea each day of the year, explaining it and providing a short description of the action needed to implement it.
I highly recommend The Daily Carrot Principle for yourself and for a gift—unlike a desk calendar you won’t want to get rid of it any time soon.
Recommendations
Many articles and books have/are being written about the Madoff scandal and dozens of other Ponzi schemes born of loose money and a wholesale ignoring of the old adage, “if it seems too good to be true it probably is.”
The most compelling book I’ve come across regarding Madoff is the inside look from Harry Markopolos detailing the eight years he spent trying to expose him and how the SEC refused to listen. Read this excerpt from How I Got the Goods on Madoff, and Why No One Would Listen to decide if it’s your cup of tea.
The message was practically the same in every one of those 14 meetings: “We have a special relationship with Mr. Madoff. He’s closed to new investors and he takes money only from us.”
When I heard that said the first time I accepted it. When I heard it the second time I began to get suspicious. And when I heard it 14 times in less than two weeks, I knew it was a Ponzi scheme. I didn’t say anything about the fact that I heard the same claim of exclusivity from several other funds. If I had, or if I had tried to warn anyone, they would have responded by dumping on me. Who was I to attack their god?
Another excerpt served up by Bloomberg Business Week offers a fascinating peek into Roger Lowenstein’s new book The End of Wall Street. Not that it is going away, but that its laissez-faire attitude may be.
The crash of 2008 put to rest the intellectual model that inspired, and to a large degree facilitated, the bubble. It spelled the end of the immodest faith in Wall Street’s ability to forecast.
Whether we choose to or not, we learn from the day we are born to the day we die. Sometimes our learning is conscious and intentional, but not always. Sometimes it makes us better people, sometimes not.
I have two stories for you today that clearly illustrate my premise.
Let’s start with the unconscious/unintentional (so we can end on a happier note).
For years before the global meltdown the media shared stories about the opulent lifestyle led by the wealthy and ultra wealthy. And the last couple of years the stories have revolved around how, instead of shopping until you drop, to shop so no one knows.
Two professors, HBS’ Roy Y.J. Chua and Xi Zou, an assistant professor at London Business School wondered if the people who lived this life style are different from the rest of us. Specifically, they asked,
“Does the availability of luxury goods “prime” individuals to be less concerned about or considerate toward others?”
Surprise, surprise; the answer is ‘yes’.
Next is a look at how intentional learning can not only reverse your life, but take you to rarified heights—as it did Shon R. Hopwood.
Hopwood was a mediocre bank robber—five banks over two years yielded only $200K— who spent a decade in prison. Now, prison is boring and a lot of felons spend their time in the library, specifically the law library, and Hopwood was one of them, but unlike most of them.
Mr. Hopwood spent much of that time in the prison law library, and it turned out he was better at understanding the law than breaking it. He transformed himself into something rare at the top levels of the American bar, and unheard of behind bars: an accomplished Supreme Court practitioner.
As you can see, unintentional learning can make you a jerk, whereas intentional learning can change your status from jerk to highly respected.
I ran into the following quote from Adam Smith and thought he’d be a good subject for today’s Quotable Quotes. It’s too bad that Smith, known as the godfather of free market capitalism, doesn’t carry more weight with our bankers and politicians, although Occupy Wall Street seems to get it.
A McKinsey study on the 
With News Corp’s culture making headlines around the world (and links to plentiful to choose) I was reminded of something I read recently about a 
I hope you have some time today, because I have some great interviews with, and commentary on, some great CEOs.
The Daily Carrot Principle is the size of a desk calendar and offers much of that wisdom in bite-sized pieces by addressing one idea each day of the year, explaining it and providing a short description of the action needed to implement it.
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