SKINNING THE CAT

As much as everyone dislikes growing old, there are some advantages to advanced age for people who go through life with their eyes wide open and who are determined to learn from their experiences. David Brooks, of the Brookings Institute, who’s normally perceptive articles I like to read, pointed this out when he wrote in an April 1, 2014 column in the New York Times: “Some virtues only ripen over time: other-centeredness, having a sense for how events will flow, being able to discern what’s right in the absence of external affirmation. These virtues usually come with experience, after a person has taken time off to raise children, been fired or learned to cope with having a cruel boss.”

I can identify with all of that, except taking time off. In my final address to the annual meeting of the company (PrimeraTurf, Inc.) from which I retired as CEO, I offered my audience the following rules for success in business (all of which I had filtered out after a lifetime in business at both sides of the Atlantic):

·         Don’t burn any bridges

·         Control the things you can control and don’t waste any time worrying about things you can’t control, including your competition

·         Know what you’re in business for (your mission) and make sure everyone around you knows it as well

·         Make sure your organization runs on all cylinders

·         Know who your stakeholders are and never deceive them

·         You can’t save your way to prosperity; entrepreneurship is all about putting capital at risk

·         Know at all times if, when, and where you are making money (or not)

·         Judge people by what they bring to the table, not by the hours they spend on the job

·         There is always more than one way to skin the cat

·         When in doubt say no before you say yes; you can always reverse a decision but you can’t renege on a promise

·         Simplify your life and your business; cut through the clutter and get rid of distractions.

I like to zoom in on the skinning of the cat. What I mean with that is that I have found that there is almost always more than one way out of a predicament, more than one way to build and grow a business and more than one way to lead a purposeful life. That may sound self-evident, but in reality I have found that many people with a leadership position in business are so convinced that they are on the right track and that they have all the right answers that they are impervious to outside counsel and blind to the quickly changing external environment that should cause them to pause from time to time and reconsider their options and alternatives. 

Awareness that there is always more than one way to skin the cat is an aspect of a positive corporate culture. Without it, there is not much room for meaningful input from team members, other stakeholders or outside counsel. If the message is: “I know what I’m doing and you just do what I tell you”; or, “I know what you’re saying, but this is the way we do business”, you will quickly find yourself surrounded by “yes-men” and discourage your customers, your suppliers and other stakeholders to engage with you in an effort to build a strong and durable supply chain.

The mindset that comes with or from this awareness causes a business leader to always think in terms of options and alternatives, which, in turn, invites input and scrutiny from third parties who may be affected by the ultimate decision about how to skin the cat. No single person ever has all the right answers. And the prospects for a thriving and sustainable business are slim if the person in charge claims to already know how to skin the cat before he or she has heard from stakeholders in the decision and solicited the presentation of alternative courses of action.

The rule that there is always more than one way… also applies to the business model you chose. Don’t be misled by the fact that in a certain field of business or industry things are typically done in a certain way. A contrarian approach can pay off big dividends, particularly when the old business model is getting a little old and tired. Customers may be ready for an innovative approach. Can you imagine how successful a company could be if it finds a way to break through the awful practice of bundling cable communication services? I can’t wait to see it happen now that the proposed merger between Comcast and Time-Warner is putting the screws on. It is tough to go against the grain, as Tesla is finding out in its quest for a new distribution model for its cars. But for the truly innovative entrepreneurs who find a way to break the mold, the pay-out is likely to be huge. 

The bottom line is that the cat does not want to be skinned at all, but if it has to be done, then there is always more than one way to do it and do it with the desired outcome in mind.

BOOK ANNOUNCEMENT

Coming in July of 2014:

NEITHER HERE NOR THERE, Reflections of a First Generation Immigrant

By Frans H. Jager.

                                                  SUMMARY

A first generation immigrant comes to the United States with an expectation that he is making a good deal. That by coming to the USA he will shape a better future for himself and his family than he could expect to have by staying put. But we are living in a fast moving age where circumstances change frequently and fundamentally.

The purpose of NEITHER HERE NOR THERE is to give an honest account of one personal journey from the old country (the Netherlands) to America. It looks back at how the author perceived the choice he had to make and how he perceived the future for America versus the Netherlands. It looks back at the conditions under which the author grew up in post war Europe and it compares the expectations he had of a future in America with how it turned out. In the process, the book aims to contribute to an urgently needed discourse on what is going right and wrong in America and what might be done to make good on the quest for American Exceptionalism.

A LAND OF IMMIGRANTS

For those of you who know me, this comes as no surprise, but I have a confession to make: I am a first generation immigrant (from the Netherlands) to this country and I have good reasons to be more than superficially interested in the immigration debate that has occupied the airwaves from time to time.

Immigration is a hot and contentious topic in America today. That is somewhat surprising if you consider that virtually all American citizens are descendants of immigrants who arrived in this country less than 500 years ago and this country would not be what it is today if that migration had not taken place.The United States is therefore often and rightly referred to as a “Nation of Immigrants”. There is not another country in the world where immigration has as much contributed to population growth and economic success as it has in the USA. According to the U.S. Census Bureau about 60 million Americans – or one in every five people – are immigrants or the children of immigrants. These are the people that have propelled the USA to its superpower status. What is there to suggest that continuing immigration would suddenly become a negative rather than the positive it has been ever since the arrival on our shores of the first settlers? As Paul Taylor points out in his recently released book “The Next America”, “No nation has been better served than ours by immigration, and judging by the tens of millions of people from all over the world still clambering to come here, there’s every reason to expect our long winning streak to continue.”

Alvaro Vargas Llosa has also written eloquently and convincingly about immigration. He explains in detail why immigration is as important today to America as it ever was in its still relatively short history of modern migration. I subscribe fully to all of his arguments for a smart and liberal immigration policy, which is unfortunately missing right now. In his excellent book “Global Crossings”, Alvaro Vargas Llosa also convincingly dispels the myth that immigrants come here exclusively for economic reasons.

I have asked myself numerous times what my primary motivations were for trading my expatriate status in the USA for permanent resident status. I had a good job as an executive for one of the largest energy companies in Europe and working as an ex-patriate in the U.S. By all appearances, I had a bright future ahead of me when, in 1984, I chose not to go back to Europe but build a future for my family in the USA. My decision was based on the evaluation, at that time, of the positioning for the future by America on one hand and the European Union on the other. And I chose for the USA.

As I write this, I am finishing up on writing a book about these considerations, titled NEITHER HERE NOR THERE, Reflections of a First Generation Immigrant. It will likely be released in June/July.

But, staying with the topic that is near and dear to my heart, let me try my hand on convincing you of the importance of continuing immigration for the future of the nation:

Immigration by children and working age people will have to offset a graying indigenous population and provide a much needed improvement of the current growing imbalance between the working population and the army of retirees. Migrant labor has become (whether we like it or not) the backbone of the farm economy, which is in turn one of the most globally competitive sectors of business in the USA.

With immigrants there is no lack of motivation and they will be actively engaged in and with society if only we allow them. America is a nation of immigrants. It is in our DNA and you have to believe that the constant influx – over many centuries - of people willing to risk everything for a chance to build a new life in America has had an impact on the gene pool available in America today. Controlling the immigration process is one thing. Trying to stop or hinder immigration has proven futile in the long run; it is counterproductive and a refutation of the American heritage. Immigration will only stop if America no longer offers the promise of a better future. We should all hope that it never gets to that point!

SUPREME DISSERVICE

The widely publicized ruling by the Supreme Court on April 2, 2014 in the McClutcheon v. Federal Election Commission is really only an incremental relaxation of the controls on money allowed in the financing of election campaigns. Its importance is not so much in the outcome it will produce (how can the campaign money wreck be more distorted than it already is?) as it is in the language used in the interpretation of the venerable First Amendment of the Constitution to arrive at the majority opinion of the Court in this case.

One has to read the text of this important part of our Constitution to realize how far we, or, rather, the Supreme Court, has strayed from what was written into our Constitution in 1791:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or the press, or the right of people peaceably to assemble, and to petition the Government for a redress of grievances.”

Can anyone in good conscience believe that the framers of the Constitution wanted to enshrine, with this First Amendment, the right of wealthy citizens to throw whatever money they chose behind their favorite candidates for public office? Of course not. Chief Justice John Roberts Jr. is right when he writes in his majority opinion that, “There is no right more basic in our democracy than the right to participate in electing our political leaders.” We do that by voting and campaigning for our favorite candidates. But should that include the right to throw money at the candidate(s) of our choice?

We only got to where we are by a long creep of wider and wider interpretation, by successive High Courts, of what the right to free speech means for the freedom of individual citizens. In many instances, and certainly in the case of campaign financing rulings, the Supreme Court has protected the right of individuals at the expense of a compelling and very legitimate public interest.

Our democracy would work much better and be in full compliance with the principles laid down in the Constitution if we had a system of public financing of election campaigns – like most all other Western democracies have – that banned all other sources of campaign financing.

Former Senator Alan Simpson said it best when he testified in an earlier campaign-finance case: “Who, after all, can seriously contend that a $100,000 donation does not alter the way one thinks about – and quite possibly votes on – an issue?”

How much more effective would our politicians be if they did not have to run around all the time to collect campaign contributions? Without campaign contributions from private citizens, corporations, interest groups and Political Action Committees, how much less beholden would our representatives in public office be to anyone but their true constituency and the public interest?

Justice Beyer, in his dissenting opinion in the McClutcheon case, hit the nail on the head when he wrote that, “The anti-corruption interest that drives Congress to regulate campaign contributions is a far broader, more important interest than the plurality [of the Court] acknowledges. It is an interest in maintaining the integrity of our public governmental institutions.” And then he wrote: “Where enough money calls the tune, the general public will not be heard.” In his dissent he accuses the deciding majority of the Supreme Court of failing to recognize the difference between influence resting upon public opinion and influence bought by money alone.

As a public we can complain forever about how dysfunctional our political system has become, but we have to realize that one of the root causes of this breakdown in our democracy is that the money-men have come between the citizens (voters) and their representatives. What counts is not what you and I think that needs to get done, what counts is what the large campaign donors want our representatives in Congress to say and do. No one gets elected to Congress anymore unless the candidate is rich enough to finance the election campaign entirely on his own or unless the candidate is willing to cater and pander to the whims of the campaign donors.

Only Congress can lift us out of this morass. By changing the election laws to only permit public financing of election campaigns. But that would require pulling itself out by its own bootstraps. The hurdles for the members of Congress are phenomenal. First it would have the courage and moral fortitude to ignore what the money-men want them to do. And, if they can pull that off, they would have the courage of conviction that cutting the money-men out of the election process can be done without infringing upon citizens’ rights under the First Amendment.

The Supreme Court, in its rulings about the constitutionality of campaign finance laws, has done us a supreme disservice, that now only Congress can undo.

COMMERCIAL BREAK

Few things are more despicable, annoying and damaging than TV advertising in three categories:

1.       Pharmaceuticals

2.       Law Firms (ambulance chasers)

3.       Election Candidates

I have not tried to track this, but I’m convinced that these three categories represent at least 50% of the advertising time on the TV channels I watch at the times that I watch television. I understand that we will probably not get rid of them, unless we all stop watching television (which would not be such a bad thing), but that is too high a price for me who loves to watch sports, news channels, Discovery, National Geographic and HGTV.

I hope and suspect that you are with me: who can possibly not gag as we get bombarded with commercials for Viagra, Cialis, T-gel or Monistat? Do we really want to become even more litigious as a society with only the ambulance chasers as beneficiaries? And why would we permit candidates for public office to advertise anything but the plans they have for addressing our societal challenges?

First the case of pharmaceuticals, specifically prescription drugs. I will contend that the manufacturers and marketers of these drugs have no business advertising them directly to consumers who lack even the basic knowledge and understanding of the pros and cons of a drug and can’t buy them anyway without a prescription. Advertising is heavily weighted towards new, patented and therefore expensive and somewhat risky drugs. You will know the risky side because of the frightening litany of possible adverse side-effects that has to be included in the advertisement (which makes you wonder why anyone would even want to go on any of these medications).

My objection is that pharmaceuticals should only be advertised to the professionals who can prescribe and sell them, physicians and pharmacists. Only these professionals can make the judgment, from the plethora of available options, what particular medication to prescribe for a particular patient at a particular time. They should not be pressured by their patients demanding a specific drug they saw advertised on TV. Advertising of pharmaceuticals works against the use of generic drugs, which need to be promoted in the public interest if we ever are getting serious about bringing down the cost of healthcare in America. Commercials for prescription drugs are not only tasteless, inappropriate for young audiences who are nevertheless submitted to them, but outright dangerous and damaging to public health.

TV advertisements for pharmaceuticals, if they cannot be banned completely, should carry a mandatory caution statement: “If your gag reflection lasts more than four hours you should immediately see a doctor.”

The case of personal injury lawyers is no different. We can only ruefully long back for the time, not too long ago, that the profession itself, represented by the American Bar Association, deemed advertising its services to the public unprofessional. The Chicago Bar Association held that "the most worthy and effective advertisement possible...is the establishment of a well-merited reputation for professional capacity and fidelity to trust".  But it was the Supreme Court that, in a 1977 ruling in the case of Bates vs the State of Arizona, decided that banning advertising infringed on the First Amendment right of free speech.

My objection here is that we don’t need more but less litigation in our society (no developed country is more litigious than ours) and that TV advertising lures the injured to the loudest and cheapest advertised law firms rather than the most reputable and professional. The Chicago Bar Association had it just right, but was overruled by the highest court of the land.

The case of election candidates is only different in the sense that it is a seasonal phenomenon that occurs when national elections are on the horizon. But boy, once it starts – and it starts way too early - there seems to be no end to it. Here too we have the First Amendment to the Constitution to thank for the blessing of abundant, mind numbing, misleading and repetitive advertising. As far as I can see the only beneficiaries of this interpretation of the First Amendment are the owners of the TV stations and the cable companies who have a bonanza every couple of years because of the frequency and breadth of our national elections. You have to wonder how many of them would cease to exist if this gravy train did not come along with predictable regularity.

The most serious objection I have in this case is that there is no requirement of informative content. On the contrary in political advertising it is “anything goes”. We call it negative advertising for a reason. There is a cottage industry built on tracking the veracity of political advertisements and the “truth meter” hardly ever hits the top. As distasteful it is to be putting down your opponent with half-truths, out-of context references or even complete lies, the real damage to the public is done by the fact that candidates have no obligation whatsoever to explain in their advertisements what they will and will not do once they are elected. In fact, they work very hard at keeping the voters guessing, knowing full well that they would not be elected if they disclosed their agenda beforehand. How can a candidate, once chosen, ever declare that he has a mandate when he never declared up front what he stands for?

Will the time ever come that we will rid ourselves of TV commercials for things that should not be advertised at all to the public at large? Don’t hold your breath, but if that time comes: “You want to be ready when the time is right”, if you know what I mean!

We Can't Afford.....

We can’t afford………When you hear these words what do you think?

If you are an employee who has asked for a raise, you think: “Oh well, it was worth trying.” Or, maybe, “That’s the last time I asked, I’m going somewhere else.”

If you are a business owner listening to the CFO, you think: “Maybe he is right, we can’t overextend ourselves.” Or, maybe, “Who is the boss here, it’s my money.”

If you are a vendor trying to sell an upgrade of an existing software system to a CIO, you think: “Is he just playing hardball or is he just too cheap?” Or, maybe, “Is he going somewhere else with his business?”

If you are a CEO asking his Board for approval of a capital investment project, you think: “Oh boy, I did not make my case clear enough.” Or, maybe, “I think I need a new Board.”

Either way, these are dreaded and fateful words. And, while there are instances where these words reflect the reality, more often than not the opposite is true. This is particularly the case in hiring situations. It comes up when, in the interview process for the filling of a key position, one candidate stands out head and shoulders above the rest of the pack, but is already making more than the salary offered for the job and seeking to improve. To illustrate: you have budgeted $60,000 in total annual compensation for this position, but the stand-out candidate is already making $65,000 and wants to make at least the same in base compensation plus some incentive compensation. You may be short $15,000 to $20,000.

I submit that, in this situation, the question is not if you can afford to hire this candidate, but, rather, if you can afford not to. I realize this is only true if the position needs to be filled for the business to be running on all cylinders and if the pool of candidates has been properly vetted. But if these basics have not been addressed, the company can probably not afford to be in business!

What you can afford is not a function of the room you have in your budget, nor a function of the disposable income earned in the past. What you can afford is a function of the value added, in this case by the hiring of the individual. The hiring of key people for an organization is not a zero sum game. 

If the owner reasons: “Everything I pay this candidate is coming out of my pocket” he/she makes a critical mistake. In staffing the company, the owner needs to hire the people with the competencies required to drive the business, not the people that fit within the pay-scales that may have been set in different times under different circumstances. The owner should not hire at all if cash flow does not permit it or if the hiring cannot be projected to support and enhance profits down the road.

The same holds good for investment in assets other than personnel.

Changes in markets, in popular preferences and in technology dictate the investment in new tools, technologies and systems, whether the existing assets that need to be replaced have been fully amortized or not and whether the capital investment budget contains funds allocated for these investments or not. The force behind this is called “creative destruction”. It is one of the most powerful keys to success in American business: the practice of destroying the economic viability of a product or service by replacing it with a new and improved one before the existing product or service is completely obsolete.

Dave Sullivan, who for a long time was the Executive in Residence at Aileron (www.Aileron.org) the Dayton, OH based training institute for small business owners, will tell you that one of the primary causes for business failure is the fear of investing. This fear causes a business owner to hold on to sub-par talent or outdated technology for too long. If you want to be an entrepreneur, then you can’t save your way to prosperity; entrepreneurship is all about putting capital at risk.

When you hear the words “we can’t afford”, or when these words cross your mind while you are pondering a new hiring or a significant capital investment, seriously ask yourself the question “Can I afford not to be spending this money?”

UKRAINE

The one thing a Presidential candidate never addresses, at least not publicly, are the external, unforeseen circumstances that suddenly arise (coming out of the blue) and were not scripted in an otherwise carefully choreographed playbook. These are the “Black Swans” that Nassim Nicholas Taleb writes about in his book under the same title. These are the events, which, if they were foreseeable, might have changed a Presidential contender’s mind about running for the most powerful – and challenging – job in the world. These are the events that throw a Presidency off course and call for a complete review and reboot of policy and priorities. Just ask George W. Bush about 9/11 or the crash of 2008. Black Swans have a disproportionate influence over political agendas, including foreign policy agendas, compared with other events that were somewhat foreseeable if not predictable.

The inescapable fact is that Presidents, once elected, will get to deal with world events that neither they nor their staff have considered and prepared for.

For President Obama the developments in the Ukraine may constitute just one of such events. As if, from a foreign policy perspective, he does not already have his hands full with Iran, Syria, Egypt, North Korea and Palestine! (If you seriously consider all this, why would Hilary Clinton, who, better than most, will understand the vagaries of foreign policy, even want to run in 2016?).

Now Obama has to establish a measured response to the events in the Ukraine and Putin’s interference with what is happening there. He has to find the right response in a highly charged political atmosphere where Republicans are looking for new ground to attack him on (there was a time that Republicans and Democrats alike united behind the President in case of a foreign policy crisis) and where the public is firmly on the side of the underdog and loves to teach Putin a lesson. Even though the Cold War has been over for 22 years and the Soviet Union has fallen apart, we still tend to see Russia as the latent enemy (a sentiment stoked and kept alive by Putin’s words and deeds). The public sentiment, which is loudly echoed in Congress, limits Obama’s options and pushes him to over react.

An objective observer of the Ukrainian situation would base his analysis on the following considerations:

·         The Ukraine has been an independent nation only since December 1991 when the Soviet Union, to which it belonged, dissolved. It was an undisputed part of Russia since 1783. Prior to 1783 most of the current Ukrainian territory was split between a Cossack dominated Hetmanate and a Tatar dominated Khanate (which included Crimea).

·         The current boundaries of the Ukraine were established in 1921 following the Russian Revolution.

·         Crimea was annexed by the Russian Empire in 1783. At the time of the Russian revolution it was a stronghold for the anti-Bolshevik White Russian Army until the end of 1920. It became the Crimean Autonomous Soviet Socialist Republic in October of 1921 as part of the Russian Soviet Federated Socialist Republic.

·         In 1954, at the leadership of Nikita Khrushchev, who was of Ukrainian origin, Crimea was transferred from the Russian to the Ukrainian Soviet Socialist Republic.

·         Crimea is an autonomous republic within the Ukraine and is governed by the Constitution of Crimea in accordance with the laws of Ukraine. On March 11, 2014, the Crimean Parliament declared Crimea a sovereign state.

·         The legitimacy of the current interim government of Ukraine is questionable as it was put in power by the Ukrainian Parliament following the overthrow of the democratically elected former President Yanukovych. The fact that he grossly abused his power and that his election may have been rigged, does not, by itself, lend legitimacy to his overthrow and the new regime.

By Western standards, Ukrainian democracy has been plagued by corruption and mismanagement under every elected leadership since the birth of the nation in 1991. It is a showcase for the realization that elections alone do not create a democracy, which requires a modern constitution, strong democratic institutions and a leadership that is solely devoted to the prosperity of the nation and its people. It remains to be seen if the Presidential elections scheduled for May 25 will signal a new beginning.

None of this whitewashes the behavior of Vladimir Putin in the Ukrainian crisis that is still unfolding. But, let’s face it, Putin can read the tealeaves and he holds all the cards in his poorly disguised takeover of the Crimea. He could go a lot further than that without anyone seriously standing in his way, at least militarily. The Ukrainian crisis is dangerous, not so much because of what happens next in the Crimea or other parts of the country, but because of the signals it sends of how much of a paper tiger we are in that part of the world. We may be paying a price sometime soon for expanding NATO right up to the Russian border and with countries like the Baltic States which, like the Ukraine, have significant Russian speaking population segments. I believe that history will consider the whole aggressive, post-Soviet, NATO expansion with countries like Poland, Slovakia, the Czech Republic, Hungary, Rumania and Bulgaria a major strategic mistake for the West. This was just rubbing it in to the Russians that they had lost the Cold War and it deprived Russia of a cordon of militarily neutral countries. We should have left it at economic integration with the West while leaving the military balance of powers unchanged. If Putin, God forbid, decides that he also needs to “protect” the Russian speaking population of Latvia, Lithuania or Estonia, NATO will be obliged to go to war with Russia or lose any and all credibility as a military alliance. That would be an unmitigated disaster, either way.

Obama, as the leader of the West, should discipline his troops, including members of Congress and the press, to stop elevating the rhetoric on the Ukrainian crisis and dispense with uttering empty threats. We need to stop grandstanding in front of the cameras and wagging our finger at Putin for public consumption. We certainly don’t need another red line, like we drew in Syria, and then erase it when it gets crossed because we don’t have the means or the will to do anything about it. A demonstration of powerlessness is the last thing we need and thus we should let actions speak louder than words. And our actions should be measured, targeted and strategic rather than tactical. They should be like winning moves in chess play.

Thomas Friedman, in a column in the NYT on March 4 titled “Why Putin Doesn’t Respect Us”, told us exactly what we need to do instead: refrain from emotional spontaneous reactions but put a long term strategy in place that reduces Europe’s dependence on Russian oil and gas. In other words, hit Putin where it hurts most, in his dependence on oil and gas revenues. None of this means that we should not apply diplomatic pressure where we can, but we should do that quietly, away from the spotlights, where we can leave face saving openings for the Russians who will not be intimidated by empty threats anyway.

At the same time we should do what we can, together with the European Union and the IMF to strengthen the democracies and the economies of the countries, like the Ukraine, that want to lessen their dependence on the Russian sphere of influence. We need to realize that, as powerful a country Russia is, its GDP is smaller than Brazil’s and barely larger than Italy’s and that it is severely oil and gas export dependent. The markets seem to realize that vulnerability better than the loudmouths in the media do, having taken big chunks of value out of the Russian stock market and the Ruble since Putin started throwing his weight around in the Ukraine. Above all we need to realize that the Ukrainian crisis is developing in a part of the world where the U.S. sphere of influence is very limited. Our ideas and ideals can take a hold there but only if the Ukrainian people aspire to them. Our military might is powerless there under any scenario other than all-out war, which we should avoid at any price.

Putin is bullying his own people as much as the Ukrainians, the Moldovans, the Georgians and the Belarus. We should allow him to defeat himself by quietly undermining his economy and by exporting the principles and power of good democratic governance based on free and entrepreneurial economies.