Tuesday, June 30, 2009

The Death Of Buy And Hold....Only Idiots, Salesmen, and/or Idiot Salesmen Need Apply

I read a very good post on My Money Blog the other day regarding the death of the buy and hold strategy. You can see the article complete with spreadsheets and graphs here. This is a must read for beginning investors.

A regular reader Don sent me a post entitled Long Term Buy And Hold Is Still Bad Advice. Okay, fine, everyone and their mom has been telling me this recently. But I read it, and it was such a bad analysis that I had to rebut it here. I think Mish writes a lot of useful and thought-provoking stuff on his popular blog, but he really missed a big error here.

The sky is falling! Oh wait, there’s a little fine print.

TC is ignoring dividends

Let’s bold that. The analysis and data above completely ignores the dividend return of the S&P 500. This is like buying an investment property and ignoring the rent payments coming in. What? There are checks coming in every month from the tenants? Nah, let’s not cash those.

The post goes into a lot more depth and explanation but the example above is one that you will likely hear again in one form or another. I have been hearing that the buy and hold strategy is a poor strategy a lot lately as well. I think it is an idiotic argument at best, especially for the everyday average Joe investor. Even if our traditional view of the market has changed or is now ‘wrong’, taxes and the fees associated with the markets have not changed. If you consistently buy and sell, fees and taxes will eat you alive. Unless you either have the skill (questionable at best) or through blind statistical luck end up being a rock star fund manager/investor it is nearly impossible to overcome taxes and fees over time let alone beat a low cost index fund. If you want to take those odds be my guest, just send a copy of your W-2 to me as to remind me what not to do while your at it. The way I see it, I have no choice but to be a buy and hold investor. I have accepted that I cannot time the market, I cant predict the future and I don’t have increased skill or access to information. The only logical thing for me to do is to control what I can control, like how much I invest and into what asset allocation I put that money into, and to keep on trucking. Anybody who tells you differently is either selling you something, is dumb, or unfortunately is both selling you something and dumb.

High Frequency Traders

Interesting article on high frequency traders.

It is now generally understood that high frequency traders (HFTs) are dominating the equity market, generating as much as 70% of the volume.

HFTs are computerized trading programs that make money two ways, in general. They offer bids in such a way so as to make tiny amounts of money from per share liquidity rebates provided by the exchanges. Or they make tiny per share long or short profits. While this might sound like small change, HFTs collectively execute millions of trades a day, making it an extremely profitable business.

I have had a theory that part of the reason we have so much volatility in the markets these days is the increased use of electronic trading programs. Hedge funds electronically buy and sell once the market hits their set point. I haven’t been following the market all that long and to be honest I don’t even watch it that closely but it does seem like every other day the market is drastically shifting up or down. I think it might be because many of these HFT’s aren’t really acting with any logical thought behind them, they are merely just milestones that are being met that trigger a predetermined action. Couple the high frequency traders with the market information overload that is shoved down every investor's throat everyday and I am amazed the market isn't more volatile! Some of the points in this article are scary to say the least.

There’s a lot to worry about:

1. HFTs provide low-quality liquidity

In the old days, when NYSE specialists or NASDAQ market makers added liquidity, they were required to maintain a fair and orderly market, and to post a quote that was part of the National Best Bid and Offer a minimum percentage of time. HFTs have no such requirements. They have no minimum shares to provide nor do they have a minimum quote time. And they could turn off their liquidity at any time. When an HFT computer spots a real order, the HFT is not likely to go against it and take the other side. The institution is then faced with a very tough stock to trade.

2. HFT volume can generate false trading signals

This can cause other investors to buy at a higher price, or sell at a lower price, than they would otherwise. A spike in HFT volume can cause an institutional algorithm order based on a percentage of volume to be too aggressive. A spike can attract momentum investors, further exaggerating price moves. Seeing such a spike, options traders can start to build positions, which, in turn, can attract risk arbitrage traders who believe there’s potential news that could affect the stock.

3. HFT computer servers are faster than other trading systems

Because most HFT servers are co-located at exchanges, they can beat out institutional or retail orders, causing them to pay more or sell for less than they should have for a stock.

Then there are the “what if” problems that could be created by HFTs:

1. What if a regulation like the uptick rule were enacted?

Volumes could implode and stocks that appeared highly liquid could become extremely difficult to trade with wide spreads and no depth in the quote.

2. What if a “rogue” algorithm entered the market?

Many HFTs are hedge funds that enter their orders into the market through a “sponsored access” arrangement with a broker. Many of these arrangements do not have any pre-trade risk controls since these clients demand the fastest speed. Due to the fully electronic nature of the equity markets today, one keypunch error could wreak havoc. Nothing would be able to stop a market destroying order once the button was pressed.

Gives new meaning to the term “mutually assured destruction”?

Monday, June 29, 2009

Paradox Post

I found this post on Andrew Sullivan's blog. The post is pretty funny but really telling of some of the craziness in our world. I will make an effort to post more paradox posts In the future but hopefully you enjoy this one.

CNN reports:
A Tennessee man is facing charges of aggravated sexual exploitation of a minor for what authorities say are three pictures...featur[ing] the faces of three young girls placed on the nude bodies of adult females... The third face appears to be Miley Cyrus, 16, star of Disney's popular television series "Hannah Montana".

A harmless pervert could go to prison for the crime of photoshopping, but Miley, at age 15, was allowed to date a 20-year-old in public for almost a year?

Saturday, June 27, 2009

Investing Lesson - A Case Study

This article was featured on ESPN the other day, and although it is a sports article it teaches a valuable lesson about investing. The article talks about some current/former NHL players that are suing a developer for blowing their investment pool on lavish parties to entice higher profile and higher paid MLB players. Although the set up reeks of a classic Ponzi scheme, that's not why I chose to post this article. I chose to post this article not only because hockey is near and dear to my heart, but also to serve as an illustration of what happens when you violate one of the principle laws of investing basics.

A golf resort developer duped nearly two dozen NHL players out of $25 million, blowing the money on gratuitous parties that were attended by former Yankees players Roger Clemens and Reggie Jackson, according to a lawsuit filed Thursday.

The New York Post reported in Friday's edition that 19 former and current NHL players filed suit against Ken Jowdy, alleging they invested the money with the Las Vegas-based golf-course mogul to develop two luxury resorts in Mexico -- a project they say is seven years behind schedule.

One of Warren Buffett's favorite quotes is "Never invest in a business you cannot understand." I always try to remember that. I think that, in true Buffett fashion, his simplistic mantra is so insightful and all encompassing. In this scenario I would expand it to say don't invest in people you don't understand. If you aren't quite sure of someone's character or your gut is telling you don't invest, then don't. I am sure it is easier said than done and if it was me who made the mistake I'd be on BadskiBlog writing what I learned from the negative experience but simply put don't get blinded by the money or the prospect of making money.

Instead, according to the players, Jowdy squandered the money on "lavish parties" to impress the likes of Clemens, Jackson and banned hits king Pete Rose, among others, who Jowdy hoped would eventually buy real estate in the planned resorts.

The lawsuit seeks the return of the $25 million they invested and $15 million in damages.

Former New York Rangers and Islanders defensman Bryan Berard and one-time Islanders captain Michael Peca were hit the hardest, each losing $700,000 in the deal, according to the filing in Los Angeles County Superior Court.

"It's particularly uncomfortable for all," Berard told the Post. "He's taken our money without telling us, and it's supposedly all gone."

Other players involved in the alleged scam include: Chris Simon, who played for both the Rangers and Islanders; former Rangers Greg deVries, Steve Rucchin and Rem Murray; former New Jersey Devil Turner Stevenson; and Sergei Gonchar of the Stanley Cup champion Pittsburgh Penguins.

Sadly I don't think these guys will ever get a dime back. Everyone has the 'right' to enter into a poor agreement and it looks like that's what these guys did. The funny part is that if the $25M had been put in even a modestly aggressive asset allocation of low cost index and mutual funds they likely would have made, by all conventional definitions, a ton of money. When the majority of these guys were playing and in their money making primes was when the S&P was putting up a 10 year annualized return of roughly 19%. Instead of making money incredibly complicated they should have kept it simple and used the advantage they had, which was large amounts of money to invest with. A sad story but a great learning experience for the rest of us.

Thursday, June 25, 2009

The Waiting Game: The Government and Youth of Iran

I came across this article on CNN today. The article does a good job showing how an Iranian government truly does business. I thought it was an odd play to call out President Obama who is not only extremely popular, but serves as the world's most famous figure as well. A famous figure that to this point has remained fairly restrained in his involvement in the Iran election crisis.

Also Thursday, Mahmoud Ahmadinejad, the declared winner in the disputed June 12 election, told President Obama to stop "interfering" in Iran's affairs, the semi-official Fars news agency reported.

"Do you think that this kind of behavior is going to solve any of your problems? It will only make people think you are someone like Bush," Fars reported Ahmadinejad as saying.

Obama is walking a diplomatic tightrope in finding the right response to the crisis. Since taking office, the U.S. leader has sought rapprochement with Iran, but this week he said he was "appalled and outraged" by the post-election violence.

I think that Ahmadinejad couldn’t be more wrong in his statement. I think this will bring more and more of the conservative Iranian population towards the middle. Ahmadinejad has continued his antagonistic behavior through two presidents that the majority of the world likely views as polar opposites. What is the common denominator in this situation?

My time in the Air Force has taught me a valuable lesson that I think is very applicable in this scenario. When a squadron is stuck with a horrible commander there is some pain and maybe even a few martyrs along the way. Yet on the outside it looks as though people are just mindlessly following orders and carrying on with business as usual. However the underlings have something on their side that the poor leader will never have, and that is time. The subordinates will basically wait out their time under the current regime and look forward to better days ahead. I see a very similar pattern emerging in Iran. I have watched numerous discussions on MSNBC and other outlets about whether or not Iran is ready for freedom, and the ever-present conservative population that supports Ahmadinejad. But that is not the point. The point is that the majority of Iran’s youth are not supportive of the Ayatollah and the current regime. As the youth continues to grow older and continues to be inundated with new information and connections with the world (unless the government continues to limit information rich technologies such as the internet) they will, in essence wait out their poor leader. Whether that time frame is a two year tour in the Air Force or the lifespan of a radical regime the concept is the same.

Wednesday, June 24, 2009

Stocks: The Lost Decade

The article from BusinessWeek below is very interesting. I have included the entire article below. I would love to hear some dialogue in the comments about what all you BadskiBlog readers think about this article.

There are still six months left in this decade, but it is not too soon to start drafting its obituary. Howard Silverblatt, senior index analyst at Standard & Poor’s, is already looking at the decade’s stock market legacy. It’s ugly. The S&P 500 is down 39.22% from Dec. 31, 1999 through Monday’s close.

“We need a 63.79% advance just to break-even for the decade,” Silverblatt says. That’s not going to happen by Dec. 31. “The last negative decade was the 1930s, -41.77%,” according to Silverblatt. Annualized, stocks lost 5.12% so far this decade; in the 1930s decade of the Great Depression they lost 5.26%.

When this decade started, the talk was about sure-thing tech stocks and worries that the Y2K software bug would set the world back to 1900. The computer clocks entered the new millennium. The tech stocks broke down within 90 days.

Some people said we should call this decade the oughts, for the two zeroes. The term didn’t catch on. Looking back, it is clear that the real oughts of the 2000s were that we ought not to have paid so much for internet stocks and that we ought not to have paid so much for big houses with granite counter-tops.

Now we know that it was a lot easier, and cheaper, to fix the Y2K bug before a calamity than to fix the stock, housing and credit markets after. To our regret, we were more skeptical of computer programs than the “efficient” markets we wanted to make us rich. Nerds win. Pigs lose.

When I read this article a part of me wants to cringe. I have done all of my investing during this decade, so to read the sobering statistics above is troubling to say the least. Hopefully you can tell from my posts that I am an optimist. Continuing with the optimist mentality, I have saved what I consider a significant amount in the second half of this decade considering my first two years of investing were during college and the last three have been starting out living on my own. Even with all those losses I still feel as though I have been successful in accumulating wealth. If you keep more than you spend and invest for the long term it doesn’t matter what your return is. Sure it sucks that stocks are down but it is only a matter of time until you reach your goals, even if you are taking a paper loss. Who knows the next decade could be a 10% annualized gain decade. You cannot time the market and you cannot control the return that the overall market bears. So control how much you save and let time value of money work its magic while you accumulate wealth.

Tuesday, June 23, 2009

Banks and Balance

Not sure I agree with everything in this article in Forbes, but there are some good points made. I think when it comes to banks it is a little trickier because people don’t act rationally when banks start failing. Banks are only required by law to maintain but a portion of the cash on hand that is managed within their institution. When people start pulling money out en masse banks don’t have the ability to get all the people their money. That reason alone makes it a little trickier to say that banks should be allowed to fail. However, I love how he illustrates the slippery slope of the 'too big to fail' mentality that I have blogged about numerous times.

For the institutions supposedly lucky enough to be tapped by our federal minders as too big to fail, the much remarked upon "optimistic" scenario is one in which their cost of capital will drop for them being protected by Washington. This ensures that the many financial institutions not important enough to fit under the Fed's umbrella will be weakened for having to lend in an environment distorted by larger institutions profiting from their tight relationship with Uncle Sam.

I also like how he spoke about profit and loss being the real regulators. Legislation is flawed and people will always find the most profitable approach given new guidelines, and undoubtedly new problems will arise from new legislation. What remains unchanged though is the desire to make a profit and avoid a loss.

For banking institutions more broadly, the Obama plan involves raising their capital requirements while putting rules in place to make sure they're got more exposure to the loans they securitize and sell. What's forgotten here is that without investor capital there are no banks, so while it may be comforting to think that the federal government can rearrange the path to banking profits, if investors don't agree, they can surely take their money elsewhere.

Along those lines, the beauty of finance is that it is fungible. If the stringent capital requirements make it difficult for stateside banks to operate profitably, the dollars that fill their coffers will move offshore along with myriad financial jobs. Almost to a man politicians worship at the altar of "job creation," but if the new capital requirements prove problematic, the creation of financial jobs will occur in London, Frankfurt and Tokyo--not on Wall Street. "Systemic risk" will simply find a new address.

A truly free market economy does not and will never exist, so to state simply that total free market policy will be a cure all is a little unreasonable. However, I feel that when the choice is the free market or government legislation and intervention I believe we should always err on the side of the free market. People look to blame the free market and capitalism for the mess we are in today, but the free market was only free within the boundaries that were set by legislation. Lobbying and legislation have contributed as much as, if not more than, greed has to fueling the build up and eventual downturn we are facing today. I guess like most things in life it is about balance. What is the lesser of two evils? Letting banks fail unconditionally or going down the dangerous road of the too big to fail mantra?

Monday, June 22, 2009

New Blog Addition - Schaefer's Blog

I am adding a new blog to the list that I follow consistently. Disclaimer: I know this fellow blogger. I am adding Schaefer's Blog to the list. We both graduated the same year from Air Force Academy and I just recently began sampling his blog. He also writes for The Art of Manliness so he is the first to make my list twice. We didn't know each other all that well at school but I remember him being a good dude, and I have really been enjoying his posts lately. I hope you enjoy his blog. Here is a sampling of some of his work.

When I first created this blog, I was just coming out of a season of intense and enriching mentorship. I had recently graduated from the Air Force Academy where I had been surrounded by great teachers and officers, and through my local church I had made relationships with several quality individuals that poured their lives into me. So, it was only natural that most of my content would be focused on the various lessons I had learned throughout that time.

Since then, I’ve moved into a new season of my life. And though I’ve still maintained close contact with many mentors, my interests and passions have taken new, unexpected twists. That’s life. As many of you have noticed, I’ve posted very little content over the past several months. Though much of this has had to do with my crazy schedule as a C-17 pilot, the other has to do with a lack of passion for the subject matter I’d originally built my blog around.

Lessons in Skilled Living implies just that - each blog post imparting a life lesson. Well, for now I’m out of lessons, at least, I am not that interested in writing about them.

What am I interested in writing about? War, coffee, books, strategy, Christianity, technology, philosophy, the Middle East, John Boyd, education, movies, the outdoors, flying, Africa, being a dad/husband, music, wine, entrepreneurship, economics, foreign policy….just to name a few.

Sunday, June 21, 2009

I Kissed A Girl And I Liked It....And It Was Metal!!

I found this over at Metal Injection, the best metal site ever. I don't know if Katy Perry would be proud but metalheads across the web are pretty happy. Classic!

Thank you to our hetero-lifemates over at MetalSucks for alerting us of this amazing power metal remix (not a cover if it uses the same vocal track kiddies) Katy Perry's smash hit "I Kissed A Girl". It's like a million times more epic. The remix was done by composer Andy Xiong who played all the backing instruments himself. Kudos to you, sir!


Saturday, June 20, 2009

Toyota Throughput

Although Toyota has not been immune to the global slowdown this article illustrates why they will continue to outperform GM. In my last post about GM I talked about how cost cutting can only get you so far. What happens to you when you are cutting costs as your strategy and global demand actually rises? Well that is exactly what just happened to Toyota, and I guarantee that they will be able to meet demand based on their strategy of increasing throughput and not just cutting costs and laying people off.

Toyota Motor Corp. got 180,000 orders for the new Prius hybrid in Japan in just a month, far surpassing its target of 10,000 vehicles in monthly sales, the automaker said Friday.

Leaders Develop Leaders

I found this post on Tom Peters blog. Tom has contributed much to the study of management and leadership alongside Peter Drucker. I really like this post. It is a great reminder to all leaders that it is not all about you. If you are focused only on you, you are missing what being a leader is all about. I started thinking back to all the leaders I have dealt with both good and bad, and this simple habit was a clear differentiators between the two. The good leaders ensured that those below them were becoming better people and they contributed all they could to that practice. The poor leaders were more concerned with what their subordinates or players could do for them. What kind of leader do you want to be?

In New Delhi a couple of weeks ago, I had a general in the Indian Army in the front row. I don't recall the details, but evaluating senior officers for promotion came up. I ventured, boldly, that there "was one issue that stood head and shoulders above the rest."

Namely: What is this candidate's track record—in exacting detail—in developing people. Though hardly locked in concrete, I posited that "the ONE question" might go something like this:

"In the last year [3 years, current job], name the three people whose growth you've most contributed to. Please explain in some significant detail where each was at the beginning of the year, where he or she is today, and where each is heading in the next 12 and 24 and 60 months. Please explain your development strategy in each case. Please tell me your biggest development disappointment this past year—looking back, could you or would you have done anything differently? Please tell me about your greatest development triumph—and disaster—in the last ten years. What are the 'three big things' you've learned about 'people development' along the way."

As I see it, it's not the boss' role, for instance, to make strategy. It's the boss's role to develop the best strategist—and the boss's role to ensure that the process thereof is moving along rapidly and imaginatively. And so on.

Finally, as I see it, this in some form applies to pretty much every promotion. And it even has a bearing on evaluating a non-manager on a 3-month project. That rather junior person will, for example, in several instances be responsible for accomplishing a milestone—and to do so, she must engage her team members, and engage them in a way that they go away with some learnings—that contribute a bit to their development.

What do you think about this riff?

Thursday, June 18, 2009

Iran 101 - Found By A Layman For My Fellow Laymen

With all that is going on in Iran in the last week or so I felt the need to try and get up to speed on the history behind it all. Luckily I came across this article today that did it all for me. I normally don't post entire articles but I think this one is justified. Great article from CNN.

For almost a week, tens of thousands of Iranians have taken to the streets in daily protests -- handkerchiefs shielding their faces from the pungency of tear gas, fists punching the air, and chants of "Down with the dictator" echoing against buildings.

The massive outpouring is a result of a disputed presidential election that the protesters think coronated the incumbent hard-liner, President Mahmoud Ahmadinejad, over their candidate, Mir Hossain Moussavi.

Context can help put their grievances into perspective:

Q. The Iran that we know today is the result of the Islamic Revolution. What is it?

A. The Islamic Revolution is the name given to the Iranian revolution of 1979, when the ruling U.S.-supported monarchy was overthrown and Shah Mohammad Reza Pahlavi was forced into exile. See timeline of recent Iranian history »

The country held a national referendum to become an Islamic republic and approve a new constitution.

The constitution was a hybrid of democracy and unelected religious leadership. It appointed Ayatollah Ruhollah Khomeini -- the leader of the revolution -- the supreme leader of the country.

Before he died in 1989, he made it known that he wanted Ayatollah Ali Khamenei to succeed him.

Q. Is it true that the ultimate power in Iran lies with Khamenei?

A. Yes. The supreme leader has the final say in all important matters of the country, such as ties with foreign nations or Iran's nuclear aspirations.

He appoints the Guardian Council -- the country's election authority. He also appoints key posts in the intelligence services and the armed forces, including the powerful Revolutionary Guard. Additionally, he confirms the president's election.

In theory, the supreme leader is appointed by a body of clerics whom voters elect. But in practice, this body -- the Assembly of Experts -- has answered to the supreme leader.

Khamenei, 70, was appointed supreme leader for life in 1989.

Q. What is the Guardian Council, which has been in the news, saying it will recount some of the votes in the disputed election?

A. The unelected Guardian Council is the second-most influential body in Iran politics. It consists of six theologians whom the supreme leader picks and six jurists nominated by the judiciary and approved by parliament.

The council approves all candidates running for office in the country, and verifies election results.

It vetoes bills passed by the parliament if they do not conform to the constitution and Islamic law.

In the present crisis, opposition leader Moussavi has had to take his grievance to the Guardian Council. It has agreed to some vote recounts.

Q. So, how much power does the president wield?

A. It depends on how nicely he plays with the Guardian Council.

The president is elected by direct vote to a four-year term, for a maximum of two terms.

He is responsible for economic policy and social programs, but most of the larger decisions are made by the supreme leader.

In theory, his powers are second to the supreme leader's. But in practice, he is often hamstrung by the Guardian Council.

The Guardian Council has worked with hard-liner Ahmadinejad, a 53-year-old former mayor of Tehran who was elected in 2005. But it thwarted reform attempts by his predecessor, Mohammad Khatami.

Q. What is the Revolutionary Guard, who said they will take legal action against pro-Moussavi Web sites?

A. The guard was initially created to protect the leaders of the revolution. But over the years, it has broadened its scope. Today, it is directly under the control of the supreme leader and enforces the governments' Islamic codes and morality

With more than 200,000 members, it is tasked with overseeing the country's crucial interests, including guarding its oil fields and missile arsenals.

Q. What is the Basij, who are said to be behind most of the violence against opposition supporters?

A. The Basij is a volunteer paramilitary force that takes orders from the Revolutionary Guard. It plays the role of de facto morality police and is often summoned to crack down on protests.

It is unknown how large the force is, though estimates are in the millions.

Q. What evidence is there of ballot fraud?

A. There are no concrete examples of fraud, because independent monitors did not oversee polling in Iran, but the circumstantial evidence is persuasive.

The government had initially said it would take three days to verify the ballots after Election Day on June 12. But the election authority proclaimed Ahmadinejad the winner two hours after the polls closed. At the same time, the interior ministry said that 85 percent of the country's 46 million eligible voters had cast ballots -- a record turnout.

To many, so many ballots could not have been hand-counted in such a short time.

Also, the published results showed that Ahmadinejad won even in his opponents' strongholds, including Moussavi's hometown of ethnic Azeri Turks.

"This is the equivalent of Barack Obama losing the African-American vote to John McCain in 2008," said Karim Sajadpour of the Carnegie Endowment for International Peace.

Furthermore, Moussavi went into the election with massive support from the country's youth, who were unhappy with the faltering economy and an unemployment rate that tops 30 percent by some accounts. The youth make up 60 percent of Iran's population of 70 million.

Q. Is it true that Ahmadinejad still enjoys widespread support?

A. Yes. Ahmadinejad is popular across Iran's rural areas and among the Basij militia.

He presents himself as a populist and a fighter. He has paid attention to the families of the bloody Iran-Iraq war, offering special preferences to veterans' children in university admissions.

Q. Why, then, do some analysts think the vote was manipulated?

A. Some experts say that even if it is likely that Ahmadinejad won the election, it is unlikely he could have won by the margin the government is claiming -- 62.63 percent of the vote.

Time magazine's Joe Klein explains it this way: "It is entirely possible that Ahmadinejad would have won anyway, but narrowly, perhaps with less than 50 percent of the vote, setting up a runoff election he might have lost as the other candidates united against him. It is possible that his government, perhaps acting in concert with supreme leader Ayatullah Ali Khamenei, decided to take no chances."

Q. Why is Iran's population so young?

A. After the revolution, the leaders encouraged early marriage and large families, rewarding families with cars and television sets for each additional child. During the country's devastating eight-year war with Iraq, which began in 1980, the regime continued encouraging population growth, because more children meant more future soldiers.

It is those children who are now coming of age.

Q. Why did Iran summon Switzerland's ambassador to complain about perceived U.S. involvement in Iran's election process?

A. The United States cut diplomatic ties with Iran following the hostage crisis in 1979, when students in support of the Islamic Revolution took 52 Americans hostage and held them for 444 days.

Q. Is this movement a challenge to the Islamic republic?

A. The demonstrators say their demand is simple: Hold fresh elections. They say they are not out to challenge the Islamic regime.

Furthermore, Moussavi is an unlikely man for the job.

Though the 67-year-old former prime minister is credited for successfully navigating the Iranian economy as prime minister during the Iran-Iraq war, he also was a hard-liner whom the Economist described as a "firm radical."

He, like most Iranians in power, does not believe in the existence of Israel. He defended the taking of the American hostages in 1979. He was part of a regime that regularly executed dissidents. And as late as April, he opposed suspending the country's nuclear-enrichment program but said it would not be diverted to weapons use.

The protests have exposed a fissure in the country, however, with tens of thousands of Ahmadinejad backers taking to the streets in a show of force of their own.

Q. Are the current protests likely to continue?

A. For now, the government seems to be allowing the populace to vent pent-up frustrations. But it also is gradually cracking down, such as blocking Web sites and banning international journalists from filming the rallies.

The demonstrations have so far been focused on urban areas. Should the populace in rural areas take up the call for reform, the government might step in quickly to quash the protests, analysts say.

Q. Is this the first time Iranians have risen up in mass protests against the regime?

A. No. Iran has twice seen public calls for reform in recent years: in 1999, after the closing of a reformist newspaper, and after parliamentary elections in 2000.

On both occasions, the Revolutionary Guard descended on the streets after a few days and crushed the movements.

Q. So, can true reform come to Iran?

A. It is possible. Ahmadinejad's predecessor, Khatami, was elected president in 1997 by a landslide, despite being a reformer. During his two terms, he championed freedom of expression, tried to mend diplomatic relations, and supported a free market. He was, however, hamstrung at every step by stiff resistance from the supreme leader and the Guardian Council.

General Motors, Bankruptcy, And Lean

This is a very interesting article at the new challenges at GM. During my two weeks at the University of Tennessee Center For Executive Education we spent a lot of time talking about many of these issues and how continuous process improvement and developing a lean strategy can counteract many of these issues.

The article talks about how there is a culture of fear and bureaucracy. I can relate as I see many of the same issues in the bureaucracy known as the US Air Force. Lean can help to break the culture of fear as it empowers teams to make rapid change and engage in a culture that is focused on creative problem solving instead of the ‘status quo’ approach.

In the meantime, Henderson is tackling GM's glacial decision-making process. A couple of four-hour meetings have been cut in half. Gone are the "premeetings," when the agenda for the real meeting was set. "I don't have time for that," Henderson says. Delegation, never GM's strong suit, is now an imperative. In early April, just after Treasury made him CEO, Henderson and several executives were discussing whether to add some pricey features to a future Buick model. Some wanted to save a few bucks while others figured they needed to step out and show consumers that the brand is truly upscale. After some debate, Henderson turned to Buick-GMC boss Susan Docherty. "You're the vice-president of Buick," Docherty recalls him saying. "Make the call." She opted to spend the money, and that was fine with the CEO. "Fritz is creating a culture where we don't need 17 meetings," Docherty says. "In the old GM, we would have to hear from everybody."

In the AF we have meeting after meeting to prepare for a meeting that is a month away. It gets pretty ridiculous. Part of our class at U of T was centered around applying lean to business and administrative processes. Many companies and organizations disconnect their administrative inefficiencies from their company’s bottom line and in this case manufacturing throughput. They are inextricably linked in all cases. It is easy to point to labor and other cost cutting techniques as a solution to your problems but where does that lead. You can only cut costs a finite amount. Read my lean as a growth strategy rant here for more on cost cutting versus a throughput strategy.

Henderson has been careful not to criticize Wagoner. But he has begun dismantling some of his mentor's initiatives. Wagoner was a data geek who used nearly 10 metrics to measure his executives' performance. Not all were particularly relevant. Henderson says he has boiled those down to the five most vital for each department, with a much bigger emphasis on sales and profits. Under Wagoner, people were focused on minute details that meant more to their own departments than the overall company. "We got a little crazy with metrics," says Chris Oster, GM's organizational czar.

This paragraph is encouraging. So many times we optimize functional silos at the expense of the whole organization. If GM is looking at steering wheel metrics and sees that the steering wheel department is manufacturing wheels at 95% utilization and is pumping out 1000 a day what does that mean? Well I can tell you what it doesn’t mean. It doesn’t mean that the company has the capability to produce any more cars. It is that fractioned way of thinking that leads so many large companies down a path that opens the door for creative destruction. The different departments must be aligned to the company’s strategy.

The feds want Henderson and Whitacre to lure the kind of talent that will help GM reach consumers the way it did when legendary Chairman Alfred P. Sloan Jr. turned the company into one of the best carmakers in the world.

I think this quote illustrates a fundamental flaw in the government way of thinking. They want GM to make cars that people want and to do so profitably. However Sloan was famous for his quote "A car for every purse and purpose". A quote that is less applicable now to GM than it has ever been. Given the problems discussed above and their lack of a problem solving lean culture, trying to be everything to everyone is a strategy that is doomed to fail. I am not trying to infer that there is an easy answer all of GM's problems because there is not, and there will likely be many job casualties along the way regardless of how many people/interest groups try to fight it. I am just saying that there is an obvious culture shift that must take place and thinking that bankruptcy is going to solve all that is crazy. Toyota has been going down a journey of continuous improvement and lean problem solving techniques for half a century or more and they are the best in the world at doing it, and they still struggle with it every day. A bankruptcy, a new CEO, and a few years are not likely to turn GM around very quickly, although they do have one hell of a burning platform.

Wednesday, June 17, 2009

Living The Dream - Old Time Hockey

These guys are awesome! Check out this article I found on CNN and watch the video below. I used to dream of playing in the Stanley Cup finals but since my competitive career has ended my new dream is to ‘grow up’ to be one of these guys. Who knows, with me moving up to Boston I could be playing with these guys sooner than I'd like. You gotta love all the great one liners these guys throw around. I think it just shows that most hockey guys are the same everywhere or at every age for that matter. I also love that they actually admit to having some geriatric fisticuffs on the ice….classic!

In the 16 years of the Bald Eagles' existence, Lyons says, there may have been one or two skirmishes. "We can't hit very hard," he adds.

I think these old timers sum up what the game is really all about. Hockey is all about being surrounded by great human beings. I really miss playing the game competitively and all the things that come with playing at a high level, but what I miss the most is being surrounded by 25 of my best friends traveling the world and experiencing things not many people get to experience. To this day I still have more fun hanging out with the guys than I do playing in the men's league games. Not to mention its a great network to be a part of. It's always a good thing to be part of group of great people that come from and do a variety of things.

Besides staying in shape, there are other reasons they show up. Says Dick Lyons: "Most of us miss the social dimensions of work, and this kind of compensates in a small way for that kind of camaraderie."

This is why I love sports and am such a huge proponent of what they represent. You can learn everything you need to learn in life through your experience in sports. Sports maintain that childlike idealism in us and we are whisked away for a quick glimpse of the world and what it is capable of being. To the world where things just feel right. Beauty story....

Monday, June 15, 2009

Driven - Myron Rolle

“You’re not talking about somebody who is just driven. You’re talking about somebody who is truly special, the kind of person who becomes a president or a world leader … he’s different.”

I think this quote sums up what this article is all about. Myron Rolle is a student athlete that needs to be talked about. He is an athlete that is going about things the 'right way.' He is a guy that young kids need to be exposed to. If you read this article I am pretty sure you will be impressed. Its not often that you come across a potential NFL draft pick that is simultaneously trying to become a neurosurgeon. Then throw in the fact that he is a motivational speaker and works on multinational healthcare programs and you really do have someone who is special.

But where Holmes will eventually head back to Pittsburgh to resume his football career, Rolle is putting that part of his life on hold. He’s heading to Oxford University as a Rhodes Scholar in September as he takes a year away from the game to chase the neurosurgeon gig. Even as Rolle keeps himself in shape these days, hoping to maintain his status as a first- or second-round pick in the 2010 NFL draft, he has made the medical gig a high priority as well. After a day of training, Rolle has spent afternoons shadowing orthopedic surgeon Dr. Brad Homan at nearby Celebration Hospital. He has gone on rounds and even observed Homan in the operating room.

“I didn’t set that up for Myron,” said Shaw, one of the best-known trainers with a client list featuring the likes of Deion Sanders and Michael Vick(notes). “He did that on his own because he wanted to. Most of the guys I have here, they want to go test drive a car at Richard Petty’s track or go fishing or get on the golf course when they’re done working out. Myron spends his afternoon thinking about what he’s going to do next with his life.

I think that Rolle possesses a quality that we can all learn from. He taking advantage of the time he has on this earth. Although he may be at the extreme end of the spectrum, we all look back at times and think that we could have made better use of the time we had during a given chapter of our lives. Not many people look back and wish they did less with their life. Its good to read a feel good story like this once in a while.

Life Lessons - The Importance of the Safety Fund

I have written quite a bit lately about the different influences the economic downturn has had on the world. I have yet to really talk about how it has influenced me. I first started to realize we were in a recession when I was looking to buy an investment property with a friend. When we started talking about putting in the required amount for a down payment I realized that I had little to no cash on hand. I had plenty in investments and retirement but didn't maintain a safety fund with liquid cash. I try to optimize all my money right when it comes in so that my checking is as close to zero as possible at all times. However, without cash equivalents on hand I was assuming (dangerously) that nothing unexpected would arise. That assumption is a good way to start down the path of excessive credit card debt. In this case it also limited my opportunities to purchase an investment property.

When the market took a dive I watched like everyone else as my investments plummeted. Now I have a personal rule that I do not cash out any investments. I have yet to do so since I started investing. That will likely change when my wife and I purchase our next home. But what would have happened during this time frame if I had an unexpected life emergency and needed some cash? I would have cost myself literally thousands of dollars by locking in my losses in the market instead of riding out the paper losses and taking advantage of stocks on sale. That realization plus my desire to have some cash on hand in the event of a real estate investment opportunity caused me to start stashing cash, in a money market of course.

I have built up enough in cash reserves that I am now investing almost all of my money in the market again. But the other day I benefited from the life lesson that the recession taught me. I came back from being out of town for two weeks and my car had a flat. The tires were pretty old so I was already in the mindset that I was out about $500 for new tires. However, I got the classic call from the mechanic later that day that there were some other things wrong with my car. After going in and seeing for myself I negotiated a 10% discount and figured out what was necessary and what was 'preventive maintenance.' I got the bill knocked down from a whopping $2200 plus down to a slightly less painful $1600. Was I upset? Yeah I was pissed. But as the shock of the bill wore off I realized that I had put myself in a spot that I could recover from this setback. $1600 is a lot of money for me and for most people I know, especially when you don't get much tangible value out of it. But it had to be done and I was prepared. I put it on the US Air credit card to rack up some miles, I negotiated a discount on a big ticket item, and I had given myself the ability to pay it all off and replenish the portion of my safety fund in upcoming months. Adversity is learning and there isn't a purchase in your life that will put you through more adversity than a car.

Sunday, June 14, 2009

New Video Teaser - Killswitch Engage

I tracked down this video from the guys over at Metal Injection (which happens to be THE best metal site on the web). The band is Killswitch Engage and this is the new song off their forthcoming album. It is definitely a different song but it stays true to their sound. They are heavy but have the uncanny ability to write huge epic choruses and clean singing parts which is often imitated but rarely matched in this era of metal. What I like best about the band, besides the fact that guitarist Adam D. wears short jean shorts and viking hats on stage, is the fact that they scream and write heavy breakdowns and stuff yet still are great songwriters. Megadeth had that ability when they were writing really technical thrash back in the 80's and 90's and I think KSE is following up despite the obvious differences in styles. I hope you enjoy this song and the video is pretty cool too.

Friday, June 12, 2009

The Stanley Cup

The Pittsburgh Penguins are the Stanley Cup Champions. No matter how many times I see the Stanley Cup presented I am amazed at how special it is. Having worked my entire life to reach the level of hockey that I did, I can only imagine the feeling of accomplishment at having won the world's most coveted trophy. The trophy is the embodiment of what our great game is all about; hard work, dedication, adversity, and passion. Even if you do not watch the game of hockey you have to see a Stanley Cup presentation. It truly is a sight to see watching the joy and camaraderie of the players who carry it above their heads as they take a victory lap around the ice. It is that pure moment of joy that is what hockey, sports, and life in general is all about.

Tuesday, June 9, 2009

The Recession, Retirement, and America's Debt

I found this article on Yahoo Finance last week regarding Americans retiring saddled with debt. Americans used to retire relatively debt free, however in the last few decades more and more Americans are retiring with significant amounts of debt. It is not a coincidence that more and more Americans are also relying more and more on Uncle Sam to fund some, if not all of their retirement.

"Important measures of financial vulnerability suggest that the growth of debt might not be that worrisome," Mauricio Soto wrote in a 2005 Center for Retirement Research at Boston College report. "The combination of extraordinary asset growth and historically low interest rates allowed households to increase their debt relatively painlessly: their net worth grew significantly, and the portion of income used to pay for debt did not increase."

"This is not to say that baby boomers might not encounter a few bumps in the road or that some groups might not be vulnerable. But baby boomers as a group do not appear to have an immediate debt crisis," he wrote.

That was then and this is now. And now it's not just a bump in the road; the road has seemingly disappeared. The debt load of would-be retirees and retirees is worrisome. Consider: One in five (22%) boomers owe at least $50,000 in non-mortgage debt in 2009, up from 12% in 2007, according to the just-released "Debt: The Detour on America's Road to Retirement," Securian's 2009 Survey of Financial Values and Debt.

And nearly four in 10 baby boomers had non-mortgage debt of $25,000 in 2009, 29% in 2007. Equally troubling, the percent of those in the so-called "silent generation," the boomers' parents, with debt of $25,000 or more was 22% in 2009, the same as in 2007.

This is not a good trend given the skyrocketing of our national debt in recent years. I can't see the future but I imagine that as more and more boomers enter retirement in the next few years, our national debt will be burdened significantly more than even most projections detail given that many of the boomers have significant debt and will require more government assistance. Couple that with an ever increasing life span and we have some issues to sort out with entitlements.

But tackling entitlements is only a symptom of the underlying behavior of living beyond our means. The recession has provided some tough love for many Americans and although it is painful now it will surely get the dangers of debt back on the radar screen for many people.

The great recession of 2008-09 has changed the behavior of many boomers, according to Kerry Geurkink from Securian. Americans, in general, are less likely to view debt as a way to fuel their lifestyle, are saving more for emergencies and looking for ways to save on groceries, transportation and the like. They are paying off car loans, credit-card bills, mortgages, home-equity loans, overdue bills, money owed to family or friends, and other debts.

But boomers are not. "Few are actively paying down their debt," according to Securian's report. Yet "most expect to have fully eliminated all non-mortgage debt within the next five years." And while that might seem a pipe dream, boomers aren't smoking dope when it comes to understanding that their debt will affect their ability to have a comfortable retirement.

By the way, Geurkink says your non-mortgage debt is an indication of just how much beyond your means you might be living.

So what's the takeaway here? In short, boomers must and should make retiring debt-free, even mortgage-free, a priority. And they must do that while making sure they have saved enough for retirement. "Retiring debt-free should be the goal for more Americans," said Geurkink.

The author Robert Powell then goes on to give specifics on ridding yourself of debt around the following four themes. There is some good advice that is worth a read.

1. Set Up a Plan
2. Paying Down Debt Versus Saving for Retirement
3. Don't Borrow From Your 401(k) to Pay Down Your Debt
4. Work Longer

Sunday, June 7, 2009

Too Big To Fail

I read this article in Forbes about a week ago but am just getting around to posting it. Thomas Cooley writes about the inherent dangers in accepting the 'too big to fail' rationale. The article addresses some of the same issues I have been exploring here at BadskiBlog but obviously with a lot more data.

First, the very notion of "too big to fail" is dangerous. It suggests that there is an insurance policy that says, no matter how risky your behavior, we will make sure you stay in business. It encourages banks to get bigger (or more interconnected), and it subsidizes risky behavior.

Second, it leaves ambiguous the important issue of who gets protected in the event of insolvency--the equity holders, creditors, subordinated debt holders, etc. It seems fair to say that the solutions that have developed on the fly have done severe damage to the notion that there is a well-ordered capital structure that means something.

The most crucial element of the government and free market dynamic is trust. Bailouts and the government deciding who is saved and who perishes is a slippery slope that completely undermines that confidence and trust.

Friday, June 5, 2009

Are We Rewarding Innovation?

I came across this article in Forbes and I thought it was extremely well written and insightful. With the economy the way it is we as a nation have a greater need than ever for innovation. However, there are many factors stifling innovation in our nation.

While we know that many innovations are accidents, I'm not sure if they are necessarily random. The Internet, for example, came out of a sustained R&D effort over a long period of time. Various pieces of the puzzle fell into place in the mid-1990s, giving us a great discontinuity--an innovation of the scale unknown in decades--upon which markets, industries, jobs and the development strategies of entire nations such as India, could be created.

We need a few more Internets.

Easy to say, extraordinarily hard to do. Especially within a system that has created a fundamental problem compensating speculators way above creators. Besides that, we have systemic challenges of risk-aversion rampant at the moment, with venture capitalists behaving like bankers, and Wall Street's obsession with quarterly results that discourages long term R&D.

In my studies at the University of Tennessee Center for Executive Education during the last week, we have discussed the short term results oriented mindset at length. I hinted around this very topic on my lean is a growth strategy post. Innovation is an accelerated growth strategy, and the fact that short term thinking is holding investment in innovation back in a time of great need is troubling.

"A willingness to take intelligent risks and try something new is critical to both innovation and entrepreneurship. But the last decade has seen an increasing focus on short-term returns through risk taking without questioning or transparency to even understand the real level of risk. As a result, we replaced the foundation for real economic growth with the illusion of prosperity," writes Judy Estrin, a long-time entrepreneur and author of Closing the Innovation Gap.

Not only is funding for specific projects few and far between, but there is a lack in compensation for innovators relative to their peers.

There's good reason for the brain drain that has gone on from technology into finance. We have set up a system that does not compensate creators adequately and, instead, compensates speculators with outlandish amounts of money.

Perhaps the tough times in the economy will bring some balance back to the system with regard to compensation, but the short sighted challenge doesn't seem to be going away anytime soon.

Seeing as Atlas Shrugged is probably my favorite book of all time, this article really got me interested as it put a new twist on Ayn Rand's views of wealth redistribution.

Much has been written recently about Ayn Rand's classic, Atlas Shrugged. In Rand's book, the captains of industry went on strike when the government decided to practice wealth redistribution on an unacceptable scale. In our modern society, the problem we are facing is substantially more complex. It is no longer a government versus private sector issue. There's a terrible triangle of competing interests: the creators (those who add value) versus the speculators versus the government.

This passage reminded me of a topic discussed in the Meeting of the Minds video I posted a while back. Dr. El-Erian, CEO and co-CIO of PIMCO spoke in the clip about the extreme importance of maintaining trust between private industry and the government. The trust that private entities will play by the rules set forth, and the trust that the government will maintain those rules and uphold private industry's right to prosper. Obviously our current economic state illustrates that this trust has been breached, and this does not bode well for innovators who rely on that trust more than most.

Capitalism 2.0 must fundamentally be rooted in justice--justice for the entrepreneurs--or else we may see the value creators go on strike, leaving the speculators with nothing to speculate on, and the government with no wealth to redistribute.

I would argue that the power to change this dynamic lies within the hands of the American people. As we become more educated in personal finance the need for speculators inherently decreases. Choose index funds, invest for the long haul, take personal responsibility for your finances. As for the innovators, they have always risen to the challenge before in this country and I feel they will continue to do so. However, it might be about time we take a look at what exactly we are incentivizing as a nation.

Anvil! The Story of Anvil

I have been wanting to see this movie for a few months now and it's clips like this that make me want to even more. My parents and brother saw the movie and said it was awesome. They described it as funny and borderline sad how delusional the band is, yet they said it truly was an inspiring movie to see someone who is so passionate, optimistic, and dedicated to their craft. Not only does the film touch on topics explored on BadskiBlog such as optimism, a passion for living, and friendship the movie is all about a metal band.

For those who haven't heard Anvil was at the forefront of the 80's thrash movement and got a touch of spotlight on the Monster's of Rock tour alongside bands like the Scorpions and ACDC. Since then they have toured endlessly in relative obscurity until they ran into an old fan and friend who happened to be a movie maker. The old fan/movie maker was so inspired that they had carried on their childhood promise to live the 'metal life' that he convinced them to do a documentary. And that is how the film came to be.

Here is portion of an interview done on CNN which can be viewed in its entirety here.
CNN: What was the reaction when Sacha came to you and said he wanted to do a documentary on Anvil?

Steve "Lips" Kudlow: I started crying, because it seemed like kismet, as if it was all meant to be this way. And quite honestly, it is. My internal optimism told me this is going to be the most successful thing that's ever happened to me, and perhaps one of the greatest things that's happened to rock music -- the greatest rock documentary that's ever happened.

CNN: Robb?

Robb Reiner: My initial reaction was that this was going to be cool, but I wasn't really sure if anybody would care. After Sundance, I knew that this thing was going to be very successful. ... [It got] standing ovations. At that point, I knew something was coming.

CNN: The film, fairly or unfairly, has been presented as a real-life "Spinal Tap." Is that fair?

Kudlow: It was purposely done.

Reiner: It's fair. What can you say? We're a heavy metal band. My name is Robb Reiner. [The director] is the other Rob Reiner, and Spinal Tap is the fake Anvil.

But, outside of that ... it was a Trojan horse to lead people into this. Realistically, we're not like Spinal Tap, and the movie's nothing like it either. It's a spin that's been created by the media, and we've just been having fun with it.

Hopefully I can see the film soon and write a follow up review for all the metalheads and Badskiblog readers out there.

Thursday, June 4, 2009


CheckingForCharity.com is now up and running. For those who don't know what the Checking For Charity Corporation is you can check out my previous posts here or join our Facebook movement here. The website will serve as our vehicle to spread information regarding the tournament as well as the donation center for the charity. If you are interested in donating or in putting in a team please visit the site.

The whole experience of forming the charity has been very frustrating at times but very rewarding as well. As more teams get locked in to play and represent their various charities I think it will be all the more rewarding. If more and more people join the Checking For Charity movement and spread the word to friends and local businesses the whole experience could morph into something that is truly special. If you are interested in joining the Checking For Charity street team dedicated to spreading our mission please continue to check the website and Facebook page. Thanks to all who have contributed so much so far.

Wednesday, June 3, 2009

Metal Video Game - Brutal Legend

Ok so I haven't really been into video games since NHL '93 for Super Nintendo, but this game might just get me back into the action. Not only does the game feature and star Jack Black, it has metal legends playing themselves as video game versions of themselves. Here is the description from Metal Injection:

BrĂ¼tal Legend tells the tale of Eddie Riggs, played by Jack Black. The ultimate roadie, Eddie is the first person anyone calls when they need guitars tuned or stages rigged, and has a love for hot rods and a photographic memory for every heavy metal album cover, and the lyrics those albums contained. One night, a stage accident knocks Eddie unconscious, and he awakens in a world that looks very strange yet oddly familiar, a world where every heavy metal album cover and lyric Eddie knows has come to life, and where the evil emperor Doviculus and his demon army, The Tainted Coil, have enslaved the last remaining humans. When an oppressed people request Eddie's knowledge of modern warfare, he pulls from his own experience in the only occupation he's ever had, a roadie for a heavy metal band, and under his command, this barbaric force of hot-rods, Marshall stacks, leather, and chrome will bring this ancient world into the age of metal.

Besides being a cool concept the game is being marketed pretty creatively as well. This trailer plays like a feature film. It's different and its worth talking about. Video gamers aren't just young pimple faced nerds anymore. I think the average gamer is probably more likely to be in their late 20's to mid 30's than a kid these days. Throw in a style of music that is inherently underground and boy's clubbish and you have a tribe of individuals who are very likely to spread the word on this game.

Lessons In Lean - Lean Is A Growth Strategy

I am currently attending the University of Tennessee's Center of Executive Education to obtain my Air Force Smart Operations for the 21st Century (AFSO 21) level II certification which is the equivalent of a Lean Six Sigma Black Belt. The course is two weeks long and although I have only been in the class for a few days it has been a great experience.

Although I have been involved in lean for a few years now, I had an a-ha moment today which is the point of the class I guess. The topic today was surrounding Theory of Constraints and Lean and how they are utilized as a growth strategy. It might sound anticlimactic but its actually a very important concept that many people don't seem to grasp. Most people view lean as cutting positions or reducing resources. Or doing more with less type mentality. I had a mentor that referred to that as 'fake' lean.

The instructor divided business strategies into two realities. He said that there are cost cutting strategies and there are throughput strategies. Cost cutting strategies never beat a throughput strategy in the long term. Cost cutting can often provide short term 'results' for a balance sheet, but running through the various mathematical scenarios and second and third order consequences they cannot be a viable strategy. This is not to say that cutting costs is a bad practice; it is merely an extremely ineffective strategy. A throughput strategy seeks to decrease the time from the customer order to cash in hand. By decreasing this time you are in essence freeing up space for additional capacity. When you are providing a product or service at a faster speed, not only are you beating your competition you are able to charge a premium for it. This avoids the price war dilemma and allows you to grow existing market share or even grow the overall pie of market share by creating new markets and exploiting new opportunities.

Intuitively we all know this. "If you aren't growing you're dying" is a quote that many people cite. Yet when it comes to business many leaders and executives lie to themselves and believe that a cost cutting strategy is viable for the long term. Lean is a growth strategy, and the only successful strategy is a growth strategy.

Tuesday, June 2, 2009

Sales Vs. Marketing - Checking For Charity

As the Checking For Charity Movement begins to stand up it's website it is articles like this one that get me thinking of the best way to strategically roll out our marketing push. I got this post of Seth Godin's blog and it really hit home to me when I read it.
The difference between marketing and sales
Marketing tells a story that spreads.
Sales overcomes the natural resistance to say yes.

If you don't pay the sales force (because you go direct, or you go free), then who is going to do that for you? The only answer that occurs to me is, "your users/fans/customers."

This means that a critical element of any strategy that ditches the sales force is to figure out how you will empower and encourage your customers to take their place. Easier said than done.

Hopefully the nature of Checking for Charity doesn't require our movement to persuade others to say yes. Hopefully people are inspired by the inherently good nature of our corporations existence so much so that they truly want to make a difference whether that difference is donating monetarily or spreading our story to others who are empowered to grow our movement. If you are at all interested in the Checking for Charity movement leave a comment below or email me at truecore27@aol.com.

Monday, June 1, 2009

Manliness And The Decline Of The Blue Collar Male

I found this little post on Andrew Sullivan's blog a few days back and I think he (and the other blogger he references) explore an interesting topic that will become more relevant as we move into the future. Apologies in advance for the awkward citing of a blogger citing a blogger.

Decline of Blue-Collar Man, Ctd
by Richard Florida

A blogger says the issue is more class than gender:

Men have worked as essentially shop keepers and store clerks for a lot longer than they have worked on assembly lines. There have been waiters forever. Lawyers are the world's second oldest profession. Teaching was a male-only profession for centuries. The idea that men are and ought to be unreflective, grunting, two-fisted louts is a class thing not a gender thing and it is imposed upon working class men by a system that needs them to be beasts of burden.

Men who reject certain values and behaviors as "sissy" or "girlie" are rejecting success, and don't think their bosses aren't grateful.

His point hit home with me.

When I was a young boy, my father would often take me with him to Newark on Saturday's to buy "Italian Bread." We would inevitably pass by a neighborhood "beauty parlor" where my father would stop for just a minute. "Richard," he would say, "I was dumb. When your aunt (his older sister) moved to California, she wanted to give me this place. I could have made it work. I enjoy cutting your hair and coloring your mother's. But when I was young, beauticians were considered 'sissies.' So I let my pride take over. Instead of having my own place, being my own boss and doing something enjoy, I stayed in the damned factory."

I have always thought that self confidence and assurance are the real traits that define it means to be a man (or a woman for that matter). We are all influenced by others and their view of us but your worth as a human, and ultimately your happiness as well, are both tied to how comfortable you are with who you are and what you are willing to do to become who you ultimately want to be.