Are you a legend? Do you admire people who went the distance? Have you celebrated organizations that succeeded? I hope that you are and will continue to be distinctive.
This essay is to give insights into those who leave legacies. The secret to long-term success lies in mapping out the vision and building a body of work that supports it. The art with which we build our careers and our legacy is a journey that benefits many others along the way.
These are the ingredients that make a legend:
Significant business contributions.
Mature confidence and informed judgment.
Courage and leadership.
High performance standards.
Professional innovation.
Public responsibility.
Ethics and integrity.
Cultural contributions.
Giving to community and charity.
Visionary abilities.
Commitment to persons affected (stakeholders).
I have been blessed by receiving several Legend honors. What I remember the most are the ceremonies and the nuggets of wisdom that flowed. The commonality was the zest of giving back the honors to others.
The first was a Rising Star Award, presented to me in 1967 by Governor John Connally. That was the first time that I was called Visionary, and that experience told me to live up to the accolades later. The governor whispered to me, “Get used to wearing a tuxedo. Live up to the honor by saluting others.”
That same year (1967), I met singers Sonny and Cher, little knowing that 26 years later, I would be inducted into the Rock N’ Roll Hall of Fame and that they would hand me the award. I remarked to Sonny that I often quoted his song “The Beat Goes On” as analogous to change management, and he was pleased. Cher recalled the 1971 occasion where she and I visited at a jewelry store on Rodeo Drive in Beverly Hills, California. I remembered that we drank champagne in a pewter cup. Her quote: “There are new ways to approach familiar experiences,” and I have applied that to corporate turnarounds.
It was by being inducted into the U.S. Business Hall of Fame that I met Peter Drucker. We subsequently worked together, doing corporate retreats. You’ll note his endorsement on the back cover of my signature book, The Business Tree™.
One year, I received several awards. I got a Savvy Award, for the top three community leaders. I was a Dewar’s profile subject. I had gotten a standing ovation at the United Nations for volunteer work that was my honor to do (especially since it enabled me to work with my favorite actress, Audrey Hepburn).
Subsequently, I was judging a community stewardship awards program. I quizzed, “Why is it that the same old names keep popping up? There are great people to honor other that those of us from business, high society or other top-of-the-mind awareness. What this community needs is an awards program that people like us cannot win.”
I was then challenged to come up with such a program, the result being the Leadership in Action Awards. At the banquet, the swell of pride from the winning organizations was heartening to see. These unsung heroes were finally getting their just recognition for community work well done.
One cannot seek awards just for glorification reasons. However, recognition programs are a balanced scorecard that involves the scrutiny of the company and its leaders by credible outside sources.
Awards inspire companies of all sizes to work harder and try more creative things. Good deeds in the community are not done for the awards; they just represent good business. Receiving recognition after the fact for works that were attempted for right and noble reasons is the icing on the cake that employees need. Good people aspire to higher goals. Every business leader needs to be groomed as a community leader.
Recognition for a track record of contributions represents more than ‘tooting one’s own horn.’ It is indicative of the kind of organizations with whom you are honored to do business. The more that one is recognized and honored, the harder that one works to keep the luster and its integrity shiny. Always reframe the recognition back to the customers, as a recommitment toward serving them better and further.
Characteristics of a Legend
Understands that careers evolve.
Prepares for change, rather than becoming the victim of it.
Realizes there are no quick fixes in life and business.
Finds a blend of perception and reality, with emphasis upon substance.
Has grown as a person and professional… and quests for more enlightenment.
Has succeeded and failed… and has learned from both.
Was a good ‘will be,’ steadily blossoming.
Knows that one’s dues paying accelerates, rather than decreases.
Best Advice to Future Legends
Fascinate yourself with the things you are passionate about. Be fascinated that you can still be fascinated. Be glad for people who mentored you. Be grateful for the opportunities that you have had. Be proud of yourself and your accomplishments. Do not let the fire burn out of your soul.
There comes a point when the pieces fit. One becomes fully actualized and is able to approach their life’s Body of Work. That moment comes after years of trial and error, experiences, insights, successes and failures.
As one matures, survives, life becomes a giant reflection. We appreciate the journey because we understand it much better. We know where we’ve gone because we know the twists and turns in the road there. Nobody, including ourselves, could have predicted every curve along the way.
However, some basic tenets charted our course. To understand those tenets is to make full value out of the years ahead. The best is usually yet to come. Your output should be greater than the sum of your inputs. This is accomplished by reviewing the lessons of life, their contexts, their significance, their accountabilities, their shortcomings and their path toward charting your future.
Whatever measure you give will be the measure that you get back.
There are no free lunches in life.
The joy is in the journey, not in the final destination.
The best destinations are not pre-determined in the beginning, but they evolve out of circumstances.
You’ve got to give in order to get.
Getting and having power are not the same thing.
One cannot live entirely through work.
One doesn’t just work to live.
As an integrated process of life skills, career has its place.
A body of work doesn’t just happen. It is the culmination of a thoughtful, dedicated process, carefully strategized from some point forward.
About the Author
Power Stars to Light the Business Flame, by Hank Moore, encompasses a full-scope business perspective, invaluable for the corporate and small business markets. It is a compendium book, containing quotes and extrapolations into business culture, arranged in 76 business categories.
Hank’s latest book functions as a ‘PDR of business,’ a view of Big Picture strategies, methodologies and recommendations. This is a creative way of re-treading old knowledge to enable executives to master change rather than feel as they’re victims of it.
Power Stars to Light the Business Flameis now out in all three e-book formats: iTunes, Kindle, and Nook.
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They say the road to hell is paved with good intentions. In 1825, to deal with the “Indian Problem,” the US Congress formed a region known as “Indian Country,” lands West of the Mississippi (today Oklahoma). Their intentions were good.
“The removal of the tribes from the territory which they now inhabit would not only shield them from impending ruin, but promote their welfare and happiness,” President James Monroe told Congress on January 27. He went so far as to say that without a defined Indian country “their degradation and extermination will be inevitable.”
It’s heartening to know that at least some of the President’s contemporaries could see through his good intentions. New York County District Attorney Hugh Maxwell and twelve other prominent New Yorkers wrote in a pamphlet published in1825 that “the American Indians, now living upon lands derived from their ancestors and never alienated or surrendered, have a perfect right to the continued and undisturbed possession of these lands,” and the “removal of any nation of Indians from their country by force would be an instance of gross and cruel oppression.”
History was not on Mr. Maxwell’s side, nor with his attempts to reform the financial industry a few years later. His prosecution of the Life & Fire Insurance Company, whose owners Jacob Barker, et al perpetuated a fraud that led to the Panic of 1826, resulted in a hung jury. (Eventually, Mr. Maxwell’s efforts did lead to comprehensive reform, including: financial reporting requirements, accounting standards, and defined roles & responsibilities for directors, according to Professor Eric Hilt in a paper about the Panic of 1826.)
Mr. Maxwell’s rationality was no match for his era’s good intentions. For what lead Life & Fire’s directors to commit fraud in the first place was in part driven by a desire (so they claimed) to extend credit to high-risk borrowers being ignored by traditional banks. When those borrowers started to default en masse, fraud appeared to be the only way to repay their investors, but unfortunately, even that didn’t work.
Why was an insurance company doing a bank’s work? In the 19th century, banking was the most profitably industry in America, and incumbent banks fought hard to protect their profits. To open a new one involved special-act charters and bitter legislative battles. Would-be owners required both political and financial capital, which few had in equal measure.
Enterprising merchants like Mr. Barker started circumventing these laws by forming insurance companies whose charter empowered them to lend their capital. In so doing, they created a new financial product called a post note. A typical post note transaction went as follows: a borrower approached an insurance company and requested a six-month IOU of $1000, minus a discount of say 3%. The borrower would then sell the discounted $970 post note on the money market, also paying a discount to the post note purchaser of say $30, receiving $940 in cash.
After six months, the borrower would repay the insurance company’s IOU of $1000. The insurance company would repay the money market investor’s post note of $970, yielding a $30 profit for both the insurance company and the investor.
While rates and terms varied, it was not unusual for post notes to trade at yields of 2 percent per month or more, compared to banks that were lending at yields of five percent per year, Professor Hilt’s research found. Needless to say, these products were very profitable as long as default rates were low.
But higher yield meant higher risk, since borrowers who sought out post notes did so because they did not qualify for the less expensive credit from traditional banks. Despite their dubious quality, the corporate guaranty by the insurance company created a sense that the investments were safe. This combination of high yield and seemingly low risk sparked a credit boom.
“The judge the lawyer the doctor the clergy the widow the trustee of orphans all fell into the common vortex of investing in these bonds,” Life and Fire Insurance Company director Jacob Barker wrote in a letter in 1827.
Like post notes, what made sub-prime mortgage-backed securities (MBS) so attractive to investors during the boom years was their high yield and perceived low risk. Unlike 1826, where the secondary market was created by the private sector, our government in many ways created the secondary market that gave sub-prime loans both the cash and perceived safety they needed to expand.
This was all done with good intentions. Looking to increase the homeownership rate and “foster affordable housing,” the Housing and Urban Development (HUD) department issued regulations that required 55% of all government sponsored entities (GSEs) to purchase “affordable” loans from banks, either directly or through packaged MBS.
Most of these “affordable” loans were in fact sub-prime, “for persons with blemished or limited credit histories,” and “carry a higher rate of interest than prime loans to compensate for increased credit risk,” according to HUD.gov. In 2009, forty percent of mortgages were sub-prime according to Forbes.com.
By 2007, Fannie Mae and Freddie Max held $227 billion (one in six loans) in nonprime (aka subprime) pools, and approximately $1.6 trillion in low-quality loans altogether, according to Forbes.com and the Congressional Budget Office (CBO).
“That was a huge, huge mistake,” said Patricia McCoy, who teaches securities law at the University of Connecticut. “That just pumped more capital into a very unregulated market that has turned out to be a disaster.”
Nonetheless, when the crisis hit in the Fall 2008, the financial world seemed to be blind-sided. “It’s a new financial world on the verge of a complete reorganization,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
But was it a new financial world? In many ways, looking back to the Panic of 1826, we see ourselves looking back at us. Both were defined by financial innovations that seemed to defy the natural law of risk and reward, by promising a high yield and low risk. Both crises fooled investors into believing that transferring risk is the same thing as removing it. Both crises were made worse by the good intention that lending money to people who can’t pay it back is good for society. Both crises proved it’s not.
In our time, the implosion of the subprime lending market “has left a scar on the finances of black Americans,” the Washington Post reported in 2012, “that not only wiped out a generation of economic progress but could leave them at a financial disadvantage for decades.” (HUD.gov studies reveal that African-Americans are one-and-a-half times more likely to have a subprime loan than persons in white neighborhoods.)
Like the comprehensive financial reforms made after the 1826 panic, we can be reasonably sure that the numerous reforms issued after our own will fail to avert another crisis. This is because financial regulation cannot address the cause of financial crises that lives in our mirror. As long as there are borrowers who can’t see through good intentions, and take on more debt then they can repay, there will be financial crises.
Real financial reform means living within our means, and abiding by the natural law of risk and reward. With the rising default rate on student loans, the increasing popularity of sub-prime auto loans, I fear that we have not yet learned our lesson. I’m confident we will eventually, but like our predecessors, it may have to be the hard way.
About the Author
Cara Wick writes about American financial and political history at www.bankersnotes.com. She holds a BA from Williams College and an MBA from the University of Iowa. Cara can be reached at [email protected].
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Here’s a scenario: as you’re just leaving the house one morning your spouse says to you:
“I think we need to move.”
Huh! How interesting! You tell her you’ll continue the conversation when you get home, and go out the door. On your way home, you see a terrific house with a ‘For Sale’ sign on it, and you buy it. You arrive home with great news:
“Honey! I just bought us a new house! We can move next week!”
What’s wrong with this story? The problem isn’t the house. In fact, it might even be the best solution. But that’s not the point. And in fact you have no idea if it might be the best solution or not. You haven’t discussed or agreed on how, if, when, why you would move, or how to factor in all of the elements that must be included in any decision to make a change.
Do you know your spouse’s criteria around a move? Do you need to be in agreement to move forward with any decisions or action? Is there some piece of information your spouse needs to share that you are unaware of that is driving the need to make a change and has been hidden from you until now?
What is the commensurate level of involvement for everyone on the Decision Team (i.e. family members in this case)? How will their level of involvement bias the outcome/need or where/if/when a move is necessary? What if there are several competing factors – i.e. is nearness to a school vs closeness to a job?
What issues would need to be agreed upon for a solution to get group consensus and buy-in?
What does the housing market look like for the sale of your house? How much is it worth and how much could you spend on a new one? What would be the time factor?
In sales, coaching, change implementations, or negotiating, the focus has been on ‘the house’. And you end up with resistance, delayed sales cycles, implementations studded with costly errors and insufficient data, regardless of the efficacy of your solution. A description of the house is the very last thing you need.
To have greater success, you’d need to begin your initiative – whether it’s sales, change management, leadership, or negotiation – by facilitating the components of systemic change first. Here’s a rule:
Until or unless everyone and everything that will touch the final solution agrees to a change, knows how to adapt congruently, and adds their two cents, they cannot buy/change.
The solution is the very last thing to take into account. Until the above happens, you might end up with the wrong house, in the wrong neighborhood, at the wrong price, with the wrong number of bedrooms. It’s not about the house.
There is no need for long sales cycles, resistance, or faulty implementations so long as you add a facilitation capability to your initiatives. Let’s start a conversation and discuss your failed initiatives, and between us, figure out new ways to have greater success.
Want to enhance your or your team’s listening skills? Contact Sharon Drew at [email protected]. Learn about her training programs and speaking topics at www.buyingfacilitation.com.
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No one knows what will happen in the future. There are, however, observable behaviors and interim results that serve as precursor markers signaling probable organizational outcomes. Performance indicators monitoring these precursors therefore provide early insight to likely outcomes; enabling leaders to proactively take those actions necessary to capitalize on opportunities and avoid undesired events. Thus, precursor indicators, particularly those focused on critical performance attributes, are of great value to the organization.
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Nathan Ives is a StrategyDriven Principal and Host of the StrategyDriven Podcast. For over twenty years, he has served as trusted advisor to executives and managers at dozens of Fortune 500 and smaller companies in the areas of management effectiveness, organizational development, and process improvement. To read Nathan’s complete biography, click here.
Online publications are the rage and the future. They offer amazing value for the publisher, for the advertiser, and for the reader. They also offer more than significant cost reduction for all three players.
BACKGROUND: I moved to Charlotte in 1988. I brought as much of the Northeast with me as I possibly could. That included my subscription to The New Yorker magazine. The magazine doesn’t just have the best articles in the world; it also has the best cartoons in the universe.
The magazine comes out 47 times a year. As you can imagine, oftentimes, for one reason or another (as with your subscriptions), the magazine did not get read. Sometimes there would be an unread pile of five or six. Guilt would set in.
Finally after about eight or nine years, I stopped my subscription. Occasionally I would pick up one in the airport gift shop and read it on the plane and I continued to subscribe to the cartoon newsletter. It came to my email inbox with all the cartoons once a week. Then they changed it, and made you click onto their website in order to see the cartoons, so I quit reading it.
TODAY: This morning I got a random email listing the contents of this week’s New Yorker magazine. I guess they had my address and decided to quasi-spam me. I bit.
I clicked on the link and found out that for $59.95 a year, I could get a digital subscription that included the current issue, a one-year subscription, and access to EVERY back issue since 1925. Plus they throw in The New Yorker cartoon calendar. I couldn’t resist.
I bought the online version, and from now on I will only buy the online version of anything I want to subscribe to or read. Here’s why: I go on the airplane, I click The New Yorker magazine icon on my iPad. Then I read this week’s issue, I look at this week’s cartoons, and I can go back and look at nearly 5,000 other back issues that are searchable by content. Holy magazine, Batman!
REALITY QUESTIONS: Are they trying to discourage me from buying their printed issues? If you have an e-reader, why would you buy any printed magazine?
REALITY FACTS; Newsweek, which had more than 100 years of printed issues, STOPPED PRINTING their magazine. Now you can only get the magazine online.
TODAY: I used to subscribe to Selling Power magazine. It’s the voice of salespeople, sales tips, sales techniques, sales lists, and sales products.
THE FUTURE IS TODAY: They stopped printing the magazine a few months ago, and only offer an online version. Brilliant. Gerhard Gschwandtner, the founder, publisher, and visionary saw that print versions were declining in revenue, and it was time to decide on the future rather than lament the present.
REALITY: Online cuts costs. DRASTICALLY. Online makes advertising more affordable. Online offers more options for the reader to connect with the advertiser. With print ads, the reader has to make a call or go online and search. With online ads, the reader is already online and only has to click the ad to find out more, subscribe to a blog, get a video, go to the advertisers website, or buy something.
I’M ALL IN: Am I missing something here? Value, versatility, and instant access. Look for my ad in Selling Power magazine in April. It’s an ad I would have NEVER placed in the print version; an ad that is 50% less expensive than it was in their printed version; an ad that gives their reader (my prospective customer) instant access to my offer to buy.
FOOLS GOLD: Five years ago I had a talk with some Yellow Pages executives. I asked them how much longer the Yellow Pages would be printed, and when they would be switching to an online version. They smiled and proclaimed, “We’re not going to stop printing. The book is our cash cow.” And they changed the subject. In the last five years, the book has gone from a cash cow, to a cash calf, to a cash rump roast. And YP.com is more than ten years late to the dance.
Please don’t read this the wrong way. Print is not dead. In fact, it will always be alive. Many people still don’t have the ability to get online publications. But the market is making a HUGE shift. There are “only” a few hundred million e-readers and tablets, and a few hundred million more smart phones. The print impact felt by online availability is undeniable.
THINK ABOUT YOU: How much of an impact has your e-reader or tablet made on your reading habits? What are you subscribing to? Has online reading brought you greater convenience and availability? Easier access and more incentive to stay current?
And finally, what are your plans to make your products and services ‘online available?’
THINK ABOUT THIS: Every time you see someone reading on a tablet, they could be reading about you!
Reprinted with permission from Jeffrey H. Gitomer and Buy Gitomer.
About the Author
Jeffrey Gitomer is the author of The Sales Bible, Customer Satisfaction is Worthless Customer Loyalty is Priceless, The Little Red Book of Selling, The Little Red Book of Sales Answers, The Little Black Book of Connections, The Little Gold Book of YES! Attitude, The Little Green Book of Getting Your Way, The Little Platinum Book of Cha-Ching, The Little Teal Book of Trust, The Little Book of Leadership, and Social BOOM! His website, www.gitomer.com, will lead you to more information about training and seminars, or email him personally at [email protected].
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Business Programs
The Big Picture of Business – Becoming a Legend
/in Practices for Professionals/by Hank MooreAre you a legend? Do you admire people who went the distance? Have you celebrated organizations that succeeded? I hope that you are and will continue to be distinctive.
This essay is to give insights into those who leave legacies. The secret to long-term success lies in mapping out the vision and building a body of work that supports it. The art with which we build our careers and our legacy is a journey that benefits many others along the way.
These are the ingredients that make a legend:
I have been blessed by receiving several Legend honors. What I remember the most are the ceremonies and the nuggets of wisdom that flowed. The commonality was the zest of giving back the honors to others.
The first was a Rising Star Award, presented to me in 1967 by Governor John Connally. That was the first time that I was called Visionary, and that experience told me to live up to the accolades later. The governor whispered to me, “Get used to wearing a tuxedo. Live up to the honor by saluting others.”
That same year (1967), I met singers Sonny and Cher, little knowing that 26 years later, I would be inducted into the Rock N’ Roll Hall of Fame and that they would hand me the award. I remarked to Sonny that I often quoted his song “The Beat Goes On” as analogous to change management, and he was pleased. Cher recalled the 1971 occasion where she and I visited at a jewelry store on Rodeo Drive in Beverly Hills, California. I remembered that we drank champagne in a pewter cup. Her quote: “There are new ways to approach familiar experiences,” and I have applied that to corporate turnarounds.
It was by being inducted into the U.S. Business Hall of Fame that I met Peter Drucker. We subsequently worked together, doing corporate retreats. You’ll note his endorsement on the back cover of my signature book, The Business Tree™.
One year, I received several awards. I got a Savvy Award, for the top three community leaders. I was a Dewar’s profile subject. I had gotten a standing ovation at the United Nations for volunteer work that was my honor to do (especially since it enabled me to work with my favorite actress, Audrey Hepburn).
Subsequently, I was judging a community stewardship awards program. I quizzed, “Why is it that the same old names keep popping up? There are great people to honor other that those of us from business, high society or other top-of-the-mind awareness. What this community needs is an awards program that people like us cannot win.”
I was then challenged to come up with such a program, the result being the Leadership in Action Awards. At the banquet, the swell of pride from the winning organizations was heartening to see. These unsung heroes were finally getting their just recognition for community work well done.
One cannot seek awards just for glorification reasons. However, recognition programs are a balanced scorecard that involves the scrutiny of the company and its leaders by credible outside sources.
Awards inspire companies of all sizes to work harder and try more creative things. Good deeds in the community are not done for the awards; they just represent good business. Receiving recognition after the fact for works that were attempted for right and noble reasons is the icing on the cake that employees need. Good people aspire to higher goals. Every business leader needs to be groomed as a community leader.
Recognition for a track record of contributions represents more than ‘tooting one’s own horn.’ It is indicative of the kind of organizations with whom you are honored to do business. The more that one is recognized and honored, the harder that one works to keep the luster and its integrity shiny. Always reframe the recognition back to the customers, as a recommitment toward serving them better and further.
Characteristics of a Legend
Best Advice to Future Legends
Fascinate yourself with the things you are passionate about. Be fascinated that you can still be fascinated. Be glad for people who mentored you. Be grateful for the opportunities that you have had. Be proud of yourself and your accomplishments. Do not let the fire burn out of your soul.
There comes a point when the pieces fit. One becomes fully actualized and is able to approach their life’s Body of Work. That moment comes after years of trial and error, experiences, insights, successes and failures.
As one matures, survives, life becomes a giant reflection. We appreciate the journey because we understand it much better. We know where we’ve gone because we know the twists and turns in the road there. Nobody, including ourselves, could have predicted every curve along the way.
However, some basic tenets charted our course. To understand those tenets is to make full value out of the years ahead. The best is usually yet to come. Your output should be greater than the sum of your inputs. This is accomplished by reviewing the lessons of life, their contexts, their significance, their accountabilities, their shortcomings and their path toward charting your future.
About the Author
Hank’s latest book functions as a ‘PDR of business,’ a view of Big Picture strategies, methodologies and recommendations. This is a creative way of re-treading old knowledge to enable executives to master change rather than feel as they’re victims of it.
Power Stars to Light the Business Flameis now out in all three e-book formats: iTunes, Kindle, and Nook.
StrategyDriven Editorial Perspective – Good Intentions, Bad Results: Learning from the Panic of 1826
/in StrategyDriven Editorial Perspective/by Cara Wick“The removal of the tribes from the territory which they now inhabit would not only shield them from impending ruin, but promote their welfare and happiness,” President James Monroe told Congress on January 27. He went so far as to say that without a defined Indian country “their degradation and extermination will be inevitable.”
It’s heartening to know that at least some of the President’s contemporaries could see through his good intentions. New York County District Attorney Hugh Maxwell and twelve other prominent New Yorkers wrote in a pamphlet published in1825 that “the American Indians, now living upon lands derived from their ancestors and never alienated or surrendered, have a perfect right to the continued and undisturbed possession of these lands,” and the “removal of any nation of Indians from their country by force would be an instance of gross and cruel oppression.”
History was not on Mr. Maxwell’s side, nor with his attempts to reform the financial industry a few years later. His prosecution of the Life & Fire Insurance Company, whose owners Jacob Barker, et al perpetuated a fraud that led to the Panic of 1826, resulted in a hung jury. (Eventually, Mr. Maxwell’s efforts did lead to comprehensive reform, including: financial reporting requirements, accounting standards, and defined roles & responsibilities for directors, according to Professor Eric Hilt in a paper about the Panic of 1826.)
Mr. Maxwell’s rationality was no match for his era’s good intentions. For what lead Life & Fire’s directors to commit fraud in the first place was in part driven by a desire (so they claimed) to extend credit to high-risk borrowers being ignored by traditional banks. When those borrowers started to default en masse, fraud appeared to be the only way to repay their investors, but unfortunately, even that didn’t work.
Why was an insurance company doing a bank’s work? In the 19th century, banking was the most profitably industry in America, and incumbent banks fought hard to protect their profits. To open a new one involved special-act charters and bitter legislative battles. Would-be owners required both political and financial capital, which few had in equal measure.
Enterprising merchants like Mr. Barker started circumventing these laws by forming insurance companies whose charter empowered them to lend their capital. In so doing, they created a new financial product called a post note. A typical post note transaction went as follows: a borrower approached an insurance company and requested a six-month IOU of $1000, minus a discount of say 3%. The borrower would then sell the discounted $970 post note on the money market, also paying a discount to the post note purchaser of say $30, receiving $940 in cash.
After six months, the borrower would repay the insurance company’s IOU of $1000. The insurance company would repay the money market investor’s post note of $970, yielding a $30 profit for both the insurance company and the investor.
While rates and terms varied, it was not unusual for post notes to trade at yields of 2 percent per month or more, compared to banks that were lending at yields of five percent per year, Professor Hilt’s research found. Needless to say, these products were very profitable as long as default rates were low.
But higher yield meant higher risk, since borrowers who sought out post notes did so because they did not qualify for the less expensive credit from traditional banks. Despite their dubious quality, the corporate guaranty by the insurance company created a sense that the investments were safe. This combination of high yield and seemingly low risk sparked a credit boom.
“The judge the lawyer the doctor the clergy the widow the trustee of orphans all fell into the common vortex of investing in these bonds,” Life and Fire Insurance Company director Jacob Barker wrote in a letter in 1827.
Like post notes, what made sub-prime mortgage-backed securities (MBS) so attractive to investors during the boom years was their high yield and perceived low risk. Unlike 1826, where the secondary market was created by the private sector, our government in many ways created the secondary market that gave sub-prime loans both the cash and perceived safety they needed to expand.
This was all done with good intentions. Looking to increase the homeownership rate and “foster affordable housing,” the Housing and Urban Development (HUD) department issued regulations that required 55% of all government sponsored entities (GSEs) to purchase “affordable” loans from banks, either directly or through packaged MBS.
Most of these “affordable” loans were in fact sub-prime, “for persons with blemished or limited credit histories,” and “carry a higher rate of interest than prime loans to compensate for increased credit risk,” according to HUD.gov. In 2009, forty percent of mortgages were sub-prime according to Forbes.com.
By 2007, Fannie Mae and Freddie Max held $227 billion (one in six loans) in nonprime (aka subprime) pools, and approximately $1.6 trillion in low-quality loans altogether, according to Forbes.com and the Congressional Budget Office (CBO).
“That was a huge, huge mistake,” said Patricia McCoy, who teaches securities law at the University of Connecticut. “That just pumped more capital into a very unregulated market that has turned out to be a disaster.”
Nonetheless, when the crisis hit in the Fall 2008, the financial world seemed to be blind-sided. “It’s a new financial world on the verge of a complete reorganization,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
But was it a new financial world? In many ways, looking back to the Panic of 1826, we see ourselves looking back at us. Both were defined by financial innovations that seemed to defy the natural law of risk and reward, by promising a high yield and low risk. Both crises fooled investors into believing that transferring risk is the same thing as removing it. Both crises were made worse by the good intention that lending money to people who can’t pay it back is good for society. Both crises proved it’s not.
In our time, the implosion of the subprime lending market “has left a scar on the finances of black Americans,” the Washington Post reported in 2012, “that not only wiped out a generation of economic progress but could leave them at a financial disadvantage for decades.” (HUD.gov studies reveal that African-Americans are one-and-a-half times more likely to have a subprime loan than persons in white neighborhoods.)
Like the comprehensive financial reforms made after the 1826 panic, we can be reasonably sure that the numerous reforms issued after our own will fail to avert another crisis. This is because financial regulation cannot address the cause of financial crises that lives in our mirror. As long as there are borrowers who can’t see through good intentions, and take on more debt then they can repay, there will be financial crises.
Real financial reform means living within our means, and abiding by the natural law of risk and reward. With the rising default rate on student loans, the increasing popularity of sub-prime auto loans, I fear that we have not yet learned our lesson. I’m confident we will eventually, but like our predecessors, it may have to be the hard way.
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Do you want to push your solution? Or implement creative, collaborative change?
/in Business Communications, Change Management/by Sharon Drew Morgan“I think we need to move.”
Huh! How interesting! You tell her you’ll continue the conversation when you get home, and go out the door. On your way home, you see a terrific house with a ‘For Sale’ sign on it, and you buy it. You arrive home with great news:
“Honey! I just bought us a new house! We can move next week!”
What’s wrong with this story? The problem isn’t the house. In fact, it might even be the best solution. But that’s not the point. And in fact you have no idea if it might be the best solution or not. You haven’t discussed or agreed on how, if, when, why you would move, or how to factor in all of the elements that must be included in any decision to make a change.
In sales, coaching, change implementations, or negotiating, the focus has been on ‘the house’. And you end up with resistance, delayed sales cycles, implementations studded with costly errors and insufficient data, regardless of the efficacy of your solution. A description of the house is the very last thing you need.
To have greater success, you’d need to begin your initiative – whether it’s sales, change management, leadership, or negotiation – by facilitating the components of systemic change first. Here’s a rule:
Until or unless everyone and everything that will touch the final solution agrees to a change, knows how to adapt congruently, and adds their two cents, they cannot buy/change.
The solution is the very last thing to take into account. Until the above happens, you might end up with the wrong house, in the wrong neighborhood, at the wrong price, with the wrong number of bedrooms. It’s not about the house.
There is no need for long sales cycles, resistance, or faulty implementations so long as you add a facilitation capability to your initiatives. Let’s start a conversation and discuss your failed initiatives, and between us, figure out new ways to have greater success.
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Want to enhance your or your team’s listening skills? Contact Sharon Drew at [email protected]. Learn about her training programs and speaking topics at www.buyingfacilitation.com.
Predictive Performance Indicators
/in Organizational Performance Measures, Premium/by Nathan IvesHi there! Gain access to this article with a StrategyDriven Insights Library – Total Access subscription or buy access to the article itself.
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Online subscriptions offer amazing perks and value
/in Marketing & Sales/by Jeffrey GitomerOnline publications are the rage and the future. They offer amazing value for the publisher, for the advertiser, and for the reader. They also offer more than significant cost reduction for all three players.
BACKGROUND: I moved to Charlotte in 1988. I brought as much of the Northeast with me as I possibly could. That included my subscription to The New Yorker magazine. The magazine doesn’t just have the best articles in the world; it also has the best cartoons in the universe.
The magazine comes out 47 times a year. As you can imagine, oftentimes, for one reason or another (as with your subscriptions), the magazine did not get read. Sometimes there would be an unread pile of five or six. Guilt would set in.
Finally after about eight or nine years, I stopped my subscription. Occasionally I would pick up one in the airport gift shop and read it on the plane and I continued to subscribe to the cartoon newsletter. It came to my email inbox with all the cartoons once a week. Then they changed it, and made you click onto their website in order to see the cartoons, so I quit reading it.
TODAY: This morning I got a random email listing the contents of this week’s New Yorker magazine. I guess they had my address and decided to quasi-spam me. I bit.
I clicked on the link and found out that for $59.95 a year, I could get a digital subscription that included the current issue, a one-year subscription, and access to EVERY back issue since 1925. Plus they throw in The New Yorker cartoon calendar. I couldn’t resist.
I bought the online version, and from now on I will only buy the online version of anything I want to subscribe to or read. Here’s why: I go on the airplane, I click The New Yorker magazine icon on my iPad. Then I read this week’s issue, I look at this week’s cartoons, and I can go back and look at nearly 5,000 other back issues that are searchable by content. Holy magazine, Batman!
REALITY QUESTIONS: Are they trying to discourage me from buying their printed issues? If you have an e-reader, why would you buy any printed magazine?
REALITY FACTS; Newsweek, which had more than 100 years of printed issues, STOPPED PRINTING their magazine. Now you can only get the magazine online.
TODAY: I used to subscribe to Selling Power magazine. It’s the voice of salespeople, sales tips, sales techniques, sales lists, and sales products.
THE FUTURE IS TODAY: They stopped printing the magazine a few months ago, and only offer an online version. Brilliant. Gerhard Gschwandtner, the founder, publisher, and visionary saw that print versions were declining in revenue, and it was time to decide on the future rather than lament the present.
REALITY: Online cuts costs. DRASTICALLY. Online makes advertising more affordable. Online offers more options for the reader to connect with the advertiser. With print ads, the reader has to make a call or go online and search. With online ads, the reader is already online and only has to click the ad to find out more, subscribe to a blog, get a video, go to the advertisers website, or buy something.
I’M ALL IN: Am I missing something here? Value, versatility, and instant access. Look for my ad in Selling Power magazine in April. It’s an ad I would have NEVER placed in the print version; an ad that is 50% less expensive than it was in their printed version; an ad that gives their reader (my prospective customer) instant access to my offer to buy.
FOOLS GOLD: Five years ago I had a talk with some Yellow Pages executives. I asked them how much longer the Yellow Pages would be printed, and when they would be switching to an online version. They smiled and proclaimed, “We’re not going to stop printing. The book is our cash cow.” And they changed the subject. In the last five years, the book has gone from a cash cow, to a cash calf, to a cash rump roast. And YP.com is more than ten years late to the dance.
Please don’t read this the wrong way. Print is not dead. In fact, it will always be alive. Many people still don’t have the ability to get online publications. But the market is making a HUGE shift. There are “only” a few hundred million e-readers and tablets, and a few hundred million more smart phones. The print impact felt by online availability is undeniable.
THINK ABOUT YOU: How much of an impact has your e-reader or tablet made on your reading habits? What are you subscribing to? Has online reading brought you greater convenience and availability? Easier access and more incentive to stay current?
And finally, what are your plans to make your products and services ‘online available?’
THINK ABOUT THIS: Every time you see someone reading on a tablet, they could be reading about you!
Reprinted with permission from Jeffrey H. Gitomer and Buy Gitomer.
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