Business

Let’s Suck Less

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In business literature risk-taking is often celebrated, and the battling against long odds in the hope of redemption. Many business case studies have dramatic story arcs where someone made a bet on an unproven technology that eventually saved their company (like Steve Jobs with Pixar and Apple). The implied story arc of companies in decline (like Montgomery Ward, which felt that the great depression was going to return after WW2 and missed out on the postwar boom) is that companies that miss chances to take risks are often punished in the end with failure or takeover.

Jamie Dimon is the CEO of JP Morgan Chase. The bank that he runs has mostly escaped the recent credit crisis and CDO issues without major damage. His story, which was well told in the Fortune September 15, 2008 issue, is that by avoiding risk, he saved his bank to become much stronger than its competitors. His bank pulled out of underwriting dodgy mortgages and issuing CDO’s when they felt that the returns weren’t worth the implied risks (which they measured in the credit default market, among other places). At the time, JP Morgan Chase had a market cap far below their peers and were being punished by stock analysts for not leading in these high growth (and ultimately disastrous) categories.

If you look at the graph above, JP Morgan Chase now has a market cap bigger than its competitors, which didn’t happen by raising their stock value but by avoiding a catastrophic hit that their peers faced. While “Losing Less Means Winning” is a polite way to say it, I’d prefer “Let’s Suck Less” which is a more accurate term (since JP Morgan Chase did take multi-billion write downs, after all).

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Michael Hammer

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Michael Hammer, consultant and author of “Re-engineering the Corporation”, died recently at the age of 60. Mr. Hammer’s methods often involved mass downsizing as companies re-focused on efficiency and removing layers of management. If this were “The Onion” we’d probably make a snarky remark that Michael Hammer determined that he was no longer a productive asset and decided to re-engineer himself out of existence rather than being a financial burden on the corporations that he served.

All joking aside, Michael Hammer was an important man. At the time that his star was rising in the early 90’s, the US was in recession, and corporations were looking for new ways to restore profitability. His book, “Re-engineering the Corporation”, provided a methodology and a set of buzzwords for corporations and consultants to use as they reviewed operations with an eye towards increasing efficiency.

If you ever saw “Office Space”, then you saw a tongue-in-cheek but not too far off the mark view of the type of work that actually was bred by Mr. Hammer’s thinking. The consultants (The “Two Bobs”) bring in staff and ask them what they actually do all day, focusing on processes that don’t add any value (such as the engineer who describes his day-to-day activities which are clearly of little use, who then gets all flustered and shouts that he is “good with people”) or that are unnecessary management overhead (such as the “hero” of the film who says he has a dozen (?) bosses who each call him out over his failure to complete his TPA report).

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Energy, Productivity, and the Middle Class

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It being Labor Day, there will doubtless be many political speeches and newspaper articles touching on the rise of the American middle class and crediting this rise to labor unions and perhaps also to FDR’s New Deal.

I don’t mind giving some of the credit to unions. But the primary driver of middle class affluence has been the availability of plentiful and low-cost energy…especially in the form of electricity…coupled with a whole array of productivity-increasing tools and methods, ranging from the horse-drawn harvester to the assembly line to the automated check sorting machine.

The middle class affluence enabled by these factors is gravely threatened is gravely threatened by the Democratic-“progressive” hostility toward energy production and distribution in all practical forms, and by the endless set of productivity-sapping policies advocated by the same group of people.

Over the long term, or even the medium term, a nation cannot consume more than it produces. It doesn’t matter how aggressive the unions are, or what tax policies are in place, or how much Oprah-like sympathy for the unfortunate is exuded by politicians–if you harm the productive power of a nation, its average standard of living is going to go down.

Low-energy, low-productivity societies can support a very wealthy elite, and have historically often done so, but they cannot support a broadly affluent middle class.

My Turn For Thoughts On Service

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It seems Carl las opened up quite the can of worms talking about the shoddy service he receives on a regular basis in Chicago.   First off, Carl needs to move to Racine or Valparaiso and start commuting every day so he can begin to enjoy the fruits of living rural.   Jokes aside, I do have some relevant thoughts.

I agree with Ginny in her post on the subject on the red/blue states.

I tend to agree with the comments about red state/blue state divisions, though clearly it is  often a matter of rural/urban and mompop/corporate.

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Further Thoughts on Service

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On Service:   I tend to agree with the comments about red state/blue state divisions, though clearly it is  often a matter of rural/urban and mompop/corporate.   Engagement takes energy and minimal intelligence, but most of all it takes an attitude.   Tailoring service to customers is generally best done by widely distributed responsibility and encouragement of innovation.   Shannon’s observations are good.  Establishing a relationship requires some time a large turnover of either customers or workers means that the relationship can’t grow.   Knowing customers, we soon expect that customer to add the extra change that keeps his pockets cleared though such an exchange was surprising the first time it happened.    After a while, a customer knows what the business can do and a business knows what the customer is likely to like.   In the old days, clerks at stores would put aside certain dresses they knew their customers would like; clerks would step into the dressing room and discuss exactly how a bra should fit.    But the temporary nature of workers, the shifting clientele  – all these make such interactions impossible.  

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