Neither a Borrower nor a Lender Be

Yes the economy is now a great mess, but why? Excessive use of debt for social engineering put people in houses they could not afford in the first place. Owning a home is a noble goal. Under the Community Reinvestment Act, government and mortgage lenders, however, created mechanisms over the last 25 years for people to purchase homes without having the fundamental ability to pay for them in the first place. Here is a map from the Federal Reserve that shows the severity of the problem mortgage debt that has accumulated over time.

Then, as housing prices started to decline, and with slow long term wage growth combined with recent higher interest rates and oil prices, these mechanisms collapsed – more and more people could not afford their mortgage payments, the value of securities supported by the homes and mortgage debt payments could no longer be determined, and as a result, capital stopped flowing in the financial system as lenders suffered from debt write-downs and unpredictable high losses. It should be no surprise that a system that put people into debt that they could not primarily afford would eventually collapse. On October 7, Ben Bernanke said:

“The losses suffered by many banks and nonbank financial firms have both constrained their ability to lend and reduced the willingness of other market participants to deal with them. Great uncertainty about the values of financial assets, particularly more complex and opaque assets, has made investors extremely reluctant to bear credit risk, resulting in further declines in asset prices and a drying up of liquidity in a number of funding markets.”

And what is the answer we are given by the government and both political candidates – more and bigger government with increased regulation and more debt. Isn’t that what fundamentally got us into this problem? We need to ask, however, how much more debt can the US government really take on before it becomes a problem to future economic growth? After all, though the government has been able to issue increasing debt to fund deficits for 50 years, it also eventually needs to pay back its debt. So, should we go into more debt to pay for debt that people themselves could not afford? Will they (we) be able to pay off the US debt that continues to accumulate over 50 years to pay for more and bigger government?

The United States government is now $11 trillion in debt, growing to 80% of GDP. How? It is a result of running deficits for over 50 years that averaged -12% of government receipts per year and also expecting the government to bailout failed businesses/consumers. This debt level is equivalent to $36,500 for every man, woman and child in the US today. And is equivalent to $71,100 per person working today. Think about it, these are the amounts we would have had to pay in higher taxes in the past to achieve balanced federal government budgets. And it represents the amount of cumulative tax increases in the future to pay off past debts. Can you, or even just the wealthy, afford to pay this plus pay-off your own current debts? If just the wealthy (top 5%) paid the taxes for the current debt, they would have to pay an added $720,000[i] per person in their family. Of course such payments cannot be made in either case, but that effectively is what deficit spending is all about – borrowing money now to be repaid with future tax increases. Raising taxes to solve past deficit spending simply cannot be achieved as it is not affordable by any group of taxpayers.

In addition, according to the National Conference of State Legislatures report “State Budget Update: June 2008”:

· 31 states and Puerto Rico are reporting a budget deficit for FY2009 for a cumulative $40.3 billion. California alone is $15 billion.

· Seventeen states had FY 2009 budget gaps of 5% or more of their general fund budgets. In six of these the imbalance exceeded 10%.

Federal and State solutions, however, continue to be to borrow more money and increase the debt. It is getting so bad, that the state of California effectively asked the Federal government for a bailout.

If a household or a business were overspent 12% per year, what would they have to do? Either find a way to increase income or reduce spending. Governments, however, have not reduced their spending and have consistently sought to raise taxes or fees. Isn’t it time that the Federal and State governments truly reduce their spending to live within their means so that we can live within our means? Are we really willing to add even greater Federal and State debts in order to pay for their existing levels of spending (let alone add new spending programs)? The problem with government debt is that we consumers and employees do not incur the pain of excessive debt until it is too late. Is that pain starting to happen to us now in this economic mess? The sudden, enormous stock market fall could be a signal that there is now a concern about too much debt in our society. We need to STOP continuing to pile on more debt – government or consumer.

“Fair Taxes”

Our Founding Fathers created this country on the basis of people having both personal and economic freedom from government. It was patriotic to rebel against taxes. Now we are told that it is patriotic to pay more in taxes. If it is patriotic for the wealthy to pay more in taxes, why isn’t it patriotic for all to pay more in taxes due to the massive debt levels that have accumulated?

Despite this economic mess, Barack Obama continues to say that he will increase taxes on the wealthy and businesses. But these are the people and institutions that create the jobs for everyone else. The Wall Street Journal points out that Obama’s proposed tax changes on the wealthy would increase their combined tax rates from 44% to 62%. Would you invest more money and take risk if you could only keep 38% of your earnings? This tax rate change will affect the small business owners who are the ones that have created most of the new jobs in the past as they are often the ones with incomes greater than $250,000.

The fact is that there is no such thing as a “fair tax”. Even Obama said he personally does not like to pay taxes. The question is about what tax and spending policy encourages investment to create better jobs not what is a fair or patriotic tax. By continually increasing jobs and investment, there is a larger tax base for government revenues, but they too have to keep spending within their means.

Over the last 50 years, pursuing a low tax policy for all people has increased the economic incentive to invest and create jobs. The growth rate in the size of the labor force accelerated in the 1960s when Kennedy reduced taxes and was then sustained in the 1980s and 2000s when Reagan and Bush also lowered taxes. Here’s the labor force chart. The size of the labor force has grown faster than the population for 50 years from business investment and lower relative taxes. Now other countries have also figured these phenomena out. Formerly socialist countries are now pursuing low taxes and investment (Ireland, Brazil, etc.). Unfortunately, government has not lived within its means.

If it is now considered patriotic to pay higher taxes to increase spending, how soon will there be a tax increase on everyone to pay for the past excessive government spending or to increase spending? After all, this is the Democratic track record. Bush lowered taxes but, unfortunately he and the Democrats did not lower spending. There is only one candidate with a policy of low taxes and reduced government spending to create economic growth and jobs – John McCain – but he is not communicating it very well and it is not enough. STOP disincentives to investment and job growth.

Love Thy Neighbor

Remember when we were taught to “Love our neighbors as ourselves”? Well this principle is still a good one. Yet what do we have from government leaders who also serve as role models for society? Just the opposite - both Presidential candidates called for a civil campaign. Yet we have had nothing but uncivil behavior from both because they believe we are swayed by the negatives. Think about these things we hear from our leaders to understand why government does not work and how we accept such negative comments.

· Obama claims self righteousness and indignation after being attacked for his “pigs” remark. Yet he attacked McCain for being either unable or unwilling to identify the number of homes owned.

· McCain says we should (and that he does) “respect” Obama. Yet McCain also calls Obama an elitist and even dangerous (are we really to believe that Obama intends to cause harm, of course not).

· Bush is stupid according to Nancy Pelosi. Yet we depend on them working together for the sake of the American people regardless of the perceived IQ for either one.

· Harry Reid demanded that Bush admit his “mistakes” in the Iraq war in order to gain political advantage. Now that we are winning the war, is Reid willing to admit his mistake about the surge? Apparently not.

· AIG gets bailed out and then the executives go on a $440,000 retreat. While immoral, everyone lambasts them as greedy and accuses them of wasting taxpayer money. Yet all of us greedily seek similar things (e.g., higher pay and security without deriving a benefit to our employer). Are any of us really any better?

· Chris Dodd and Barney Frank angrily defend themselves as having done nothing wrong in the cause of the economic mess. But they certainly did not even listen to the warnings about Fannie Mae and Freddie Mac.

· At Republican campaign events a few people are calling Obama racist comments that McCain denounced. And John Lewis accuses McCain of promoting racist comments. Both sides demand an apology from the other instead of simply accepting it as wrong. Hateful comments by anyone serve no good purpose.

The real problem is all of us and our sinful human nature – we hurl insults at each other, will only accept our own point of view, and we express opinions without having researched information to form an opinion. Just because we have a right to our opinion does not make our opinion right. There is always other information and experts to consider than just our own understanding. Yelling at each other is not a healthy debate and will not bring about solutions. Compromise can advance multiple objectives but can only be achieved by working together as our government and social systems are designed to achieve. The design only works with civil, loving behavior to each other. Each of us needs to STOP our own bad behavior. It shouldn’t take a crisis for Democrats and Republicans to finally work together (or any of us for that matter).

We in America need to remember that a house divided cannot stand. Let’s all START living within our means, make sound investment based only on appropriate economic principles, serve others along with ourselves, behave with civility, and seek/create compromises in order to advance social not political objectives.

[i] $11 trillion divided by 5% of the US population (305 million people)

Oil Price Increases, Globalization, and Global Warming

5 years ago, a barrel of oil was $26, today it closed at $132. What happened during the last 5 years? It is the consequence of 30 years of demand growth that exceeded supply growth. In the last 10 years, China and India have added 350+ million people to their middle class, driving more cars and buying new homes. At the same time, the rest of the developed world’s population has continued to grow. The supply of oil, however, has simply not kept up. Oil producing countries seek to preserve the long term value of their resources, the North Sea and other major producing fields have significantly declined in production, and the US is restricting where exploration can be conducted for appropriate environmental concerns. Everyone is screaming “Why don’t we have alternative energies?” in our desire to lower oil prices and reduce climate change threats. They won’t get implemented into society until the economics are favorable, and that is now happening. Nissan has announced plans for an all-electric battery powered car in the US by 2010 and for all major auto markets by 2012. Hybrid car sales are up 16% compared to last year at this time. According to Eric Martinot (2/2008) of the Renewable Energy Policy Network, “Today, there is unprecedented policy leadership at national, state/provincial, and local levels in many places around the world. That policy leadership, coupled with high levels of investment and industry growth, means that renewables are more central to our global energy future than ever before. While researching and writing the Renewables Global Status Report, I continue to be amazed at the trends and staggering developments that now appear virtually daily. (And it is impossible to capture all of them!).” But here are a few examples of renewable and improving energy efficiency:

• The energy use per unit of GDP throughout the world has been in decline since 1995 from 9500 BTUs/$ of GDP to 8000 BTUs/$. The US has decreased from 11000 BTUs/$ to 7000 BTUs/$. China, however, is now increasing its energy usage becoming less efficient.

• Since 1978, the size of refrigerators has increased by one-third, while their energy usage has decreased by two-thirds.

• In Germany, renewable energy now accounts for 6.7% of consumption (up from 3.5% just 5 years ago).

• Free-standing underwater electric turbines (in rivers and the ocean) will soon be generating electricity reducing the need for more hydroelectric dams.

• Energy technology management companies, like Genea Energy, are reducing energy consumption by up to 60% in existing buildings – “Building automation services streamline energy utilization for building owners, property owners and tenants. Systems and programs are designed to eliminate unnecessary or excess expenditures for utilities through the efficient control and management of energy costs. We accomplish this through accurate optimization and maintenance of all building automation, mechanical and electrical systems.”

Recession 2008 and the Housing Credit Crisis

Bank write-down of bad housing loans since the credit market bubble burst in August 2007 now equal $335 billion. 1.5 million households went into foreclosure in 2007 (+50%) and 9 million households now owe more in their mortgage than the house is worth. Certainly this is not good for these people or the economy. But the subprime market lending was not good finance practice to begin with and the market is now correcting. Hundreds of unregulated lenders are now gone. No longer do we assume that housing prices cannot go down (a bad assumption as any asset price can and does go down dependent on supply/demand conditions). Banks have increased liquidity and are reducing the amount of leverage in-place. The stock markets appear to be stabilizing. Corporate credit spreads have declined significantly indicating the market is pricing interest rates with a view of reduced risk levels. The Bank of England’s Financial Stability Report expressed a cautious optimism and the US Federal Reserve has stopped lowering interest rates believing the worst may be in the past. While no one can know for certain where things stand today in the economy, the question now appears to be how long, not how deep a recession or economic slowdown we will have. The US GDP was a +0.5% in 1Q2008 and the world GDP was +3.7% in 1Q2008. While these are not good rates, we are still experiencing economic growth with positive signals such as booming emerging economies (Brazil, Russia, India and China), excluding oil the US trade deficit is shrinking significantly, and we have a booming microfinance industry in the world providing capital to the poor to start new businesses. This is not to say things are great, but that we may have weathered the storm and there are bright spots. Instead of a broad-based recession, we are experiencing segments that are in deep recession; perhaps government economic regulators have adequately responded and prevented a larger problem. While the US is having economic challenges, it is important to note that world GDP per person (a better measure of economic activity) has grown at 4.5% per year since 2002 – the fastest in more than 3 decades. The world is changing. Is now the time to implement pro-growth US economic policies?

Competition Continues to be Fierce, Always Will Be

Globalization has made the business world much more competitive, contributing to economic and job anxiety as well. But competition is a good thing for consumers and requires businesses to continually change and improve. Some examples of emerging competitive changes include:

• China has launched the Commercial Aircraft Corporation of China (CACC) to design and manufacture airplanes. They will compete with Boeing and Airbus. While one can debate the wisdom of this strategy, the forecast is that China alone will require 2,800 new passenger and freight aircraft in the next 20 years. Boeing projects a worldwide market for new aircraft during this time of 28,600 aircraft.

• The Boston Consulting Group has identified 50 “local dynamos” that are prospering and competing effectively against multi-national businesses. According to BCG, they are “representative of a broader phenomenon: the rise of successful local companies in rapidly developing economies around the world”, such as:

1. Gol – a Brazilian budget airline who understand consumers’ trade-off of convenience for price, thus flying at non-traditional hours.
2. Titan Industries – an Indian wristwatch company that understands people with low incomes do not want to sacrifice quality and style, so they have figured out how to do both at low prices.
3. Focus Media – in China provides “out of home” flat panel advertising using workers on bikes to replace content with discs and flash cards instead of an expensive electronic network
4. MegaFon – is the first all Russian mobile phone network providers. They have a pretty cool YouTube video.
5. Ford Motor is making the Fiesta car as the first in its strategy to “create vehicles that with small adjustments can be sold in Europe, Asia and the US.”

Internet and Technology Continue Long March Upward

Remember that it is only since 1994 that the Internet and web browsers first came into existence for mass market usage. Google is only a nine-year old company. Today there are 3.3 billion mobile phone users and 1.3 billion internet users who conducted 113 billion searches last year (with a world population of 6.7 billion people). Web 2.0, of course, is about the ability for people to create, share information, and collaborate directly between internet users. We see this routinely now (and developed rapidly) in businesses like the social network sites (Facebook and MySpace) and in Wikipedia (9 million articles and 250 languages). Emerging next is the concept of mini-social networks such as Ning, a startup headed by Marc Andreesen, for people to establish their own social network. Who knows what Web 3.0 will be, but people talk about it as “applications pieced together”, or full video with 10 megabit bandwidth for all, more artificial intelligence software, and the web as a truer database structure. With the emergence of the web and its future, we are seeing the newspaper industry shrink. The 530 biggest newspapers have experienced a 3.6% further reduction in subscriptions since December 2007 and are losing advertising revenue. They simply need to find new ways to be relevant. The Economist points out that with the development of faster cellular networks, more wi-fi, and more mobile devices to communicate with, we as a society are becoming more “nomadic”. We can work from anywhere and will be able to connect with local information real time as the phones will know where we are, at what time, and where we are going next. Imagine the services that can be created. For example, INRIX compiles traffic pattern data using satellite navigation systems, vehicles that relay real time traffic data, installed road sensors, and tracking mobile phone connections. They then report on a real time basis the traffic patterns to phones, web and auto navigation systems to help us avoid traffic jams (which cost businesses billions of dollars annually in lost productivity and consumers wasted fuel usage).

Leadership and Jobs

Who is leading the positive changes in society? People and businesses are leading change. In his book “The Powers to Lead”, Joseph Nye concludes that leaders need to practice both hard and soft power, or what he calls smart power. As circumstances change, different leadership styles and skills are needed. Knowledge workers will not respond to hierarchies and strict instruction. Persuasion, participation, creativity, and influence are becoming more important in leadership. According to SCORE, the nature of jobs is that they are becoming more flexible, independent and have a greater diversity of responsibility. Small businesses continue to grow and develop (<20 people) with over 40 million Small Office, Home Office US companies, and more than a million people joining their ranks annually.

There are lots of positive things happening in society that will lead us to an improved life. We have to recognize and grasp the opportunities. But they will take time to develop; in the meantime, we want lower oil prices now.

International Business Awards 2007

Swarovski Museum in Innsbruck Austria

New Terminal 5 (T5) in London’s Heathrow Airport for British Airways

BMW Headquarters and (auto development ideas) in Munich Germany

International Business Awards

While traveling, I came across the Stevie Awards for Business – “The Stevie Awards were created to honor and generate public recognition of the efforts, accomplishments, and positive contributions of companies and business people worldwide.” Business and business people are often viewed in negative terms. Yet, like any other segment of society, businesses and business people often do many great things that don’t get recognized in the press or broadly across society. More importantly, businesses and business people create the environment for innovation and social improvements. So I was happy to discover the Stevie Award process while in Europe. Go to their website and see the innovative and creative businesses they recognized in 2007 including categories for social responsibility, best multi-nationals, most innovative, best communications campaigns, best customer service, best marketing, best new products, best websites, etc. There are a lot of really interesting ideas that one can learn from these “best companies”. Then see who and what they recognize for 2008.

Swarovski Museum

This museum provides a display of modern art using crystals from the Swarovski jewelry business. The works of 26 artists (including Warhol, Dali, Chagall and Picasso) are on display via crystals. There are 14 stations to wander thru including a crystal forest, dome, calligraphy, theater, a kaleidoscope of crystal, etc. The innovation is in how the art uses crystals in multiple, different ways, and then is integrated with modern technology, sound, light, and movement. Each area captures the imagination and leaves you feeling in awe of what was created. It is all truly beautiful. Their website includes a virtual tour, but it is much better to see this modern art in person. Innovation is an integrative process of different ideas and ways of thinking, as demonstrated by how Swarovski runs its business.

T5

British Airways experienced a lot of trouble in the opening of T5 (the new terminal at London’s Heathrow). A lot of negative things have been written and said about these problems. I happen to have gone through the terminal on its fourth day. In speaking to a British Airways employee about the situation, you could hear the frustration and embarrassment, but she reassured me that they were working to solve things. That was encouraging to hear as a customer (versus some US airline employees I’ve heard who do nothing but criticize their company and end up driving away customers).

British Airways objectives included trying to create a traveler experience that is “peaceful and relaxed”. They spent 10 years rethinking what an airport terminal is and how it should function. Despite the opening troubles, they’ve succeeded. Often times, we think innovation occurs because of some grand, big, unique invention. Innovation, however, begins with the definition of the objective, thinking about how the whole system as it is today could change, and then thinking differently in all the individual details. Here is my list of what stood out in the details of T5 that created a peaceful and relaxed experience:

• The terminal has lots of natural light with a light green shade in the interior. They limit the number of bright glaring lights or headlines calling out for attention. The whole environment felt calming.

• There were only a few advertising locations, but plenty of ads via electronic screens rotating the ads through them. The visitor is not being “screamed at” for attention as they walk thru the terminal.

• There were lots of customer service desks and people available to help, and they asked to help.

• British Airways flight information boards highlighted first the “critical flight connections”. As I didn’t have one of those flights, it was relaxing to easily confirm that I had time.

• While waiting at the gate, the sign also said “Please take a seat, we will display further information soon”. This doesn’t actually help anything other than to calm the mind.

• Going through security, the trays were under the conveyor belt, readily available, creating more space. It felt faster.

• The stores were well organized and not packed in everywhere.

• The bathrooms were very spacious.

• When the call came for the flight to begin loading, I went to the end of the line to test how long it would take for a full flight. It took 10 minutes to get into the seat. I don’t know what the typical measures are, but it felt quicker compared to prior international flight experiences.

• And finally, here is a simple thing again. At check-in, they used my first name. It was comforting and personal.

The only problem I encountered was upon arrival. It took 10 minutes to get the jet way to the door of the plane for us to exit. And it was frustrating. But the whole experience was pleasant as there clearly was not a feeling of being overwhelmed with information or rushed. I felt like a valued customer. T5 is a successful innovation as it “simplified” things in the design and details for the personal experience. Check out a virtual tour here.

BMW Headquarters

This Munich landmark of modern architecture is constructed as four buildings in the shape of four cylinders in a car’s engine. The “cylinders” are suspended on a central tower instead of supported from the ground – they “hang in place”. During construction, each floor was assembled on the ground and then elevated to its suspended position on the central tower – in 1972.

This building remains unique today in its technique, construction process, and architecture. BMW has their museum next to its headquarters. The building and museum highlight BMW’s commitment to innovation over the long term. To see what is coming in car design, check out the innovations they are developing at their website. Cars of the future increasingly are integrating online services and information, clean energy, and intelligent driving systems.

Innovation is a goal and process to develop by business leaders, but we have to deliberately seek it out and encourage it in people.

I thank you for the speech you made on race in America. I thought it was excellent and what America needed to hear. Clearly not all the wounds have healed in Black America and we all need to support achieving change and the opportunity for “pursuit of happiness” for all people, regardless of race. As an American (who happens to be white), I accept your call to work together to do my part in continuing to keep this country strong based on the values expressed in the Constitution.

You stated: “ I have asserted a firm conviction - a conviction rooted in my faith in God and my faith in the American people - that working together we can move beyond some of our old racial wounds, and that in fact we have no choice if we are to continue on the path of a more perfect union.”

I share this faith in God and the American people with you. Only by working together, understanding the different points of view, stopping the blame game, and sticking to the values of our Constitution and our God can this country solve its problems, while still enabling our basic freedoms.

There are significant problems that have been building up over many decades that have been left unresolved by administration after administration, Congress after Congress, regardless of political party in power. Yet at the same time, this country has advanced positively in many ways. On one hand, we have social issues like racism, but also government spending beyond its means for decades leaving debt to future generations to pay, a social security system that is clearly headed for bankruptcy with resolution stalled by political greed, a widening income gap due as much to a failing education system as other things, and a health care system that lacks real competition making it increasingly out of reach to many people. While there are other problems too, not solving these five I believe will doom our society to mediocrity.

On the other hand, there are many positive things occurring to make this country the best place to live in the world and give us great hope. We have excellent products and technology, a great university system to educate people to reach the highest levels of their God-given abilities, we’ve had improving long term stability in our economic system since World War II (even if you compare the current environment to the past), we have enormously talented people in all walks of life making significant contributions, we have the freedoms to enable people to aspire to their dreams, we have a God who loves us, we have an enormous ability to innovate and create, and as a country we are a giving caring people.

Unfortunately, with all this, we also have a radical religious group who want to destroy our lives for their gain. History continues to repeat itself as the only thing in common over the ages is man’s sinful nature.

But Mr. Obama, you then turned a great speech calling for unity into one placing blame on one of the very things that has created many of the positive elements of American society. You said: “Just as black anger often proved counterproductive, so have these white resentments distracted attention from the real culprits of the middle class squeeze - a corporate culture rife with inside dealing, questionable accounting practices, and short-term greed; a Washington dominated by lobbyists and special interests; economic policies that favor the few over the many.” At the root of your stated three causes is economics. Yet isn’t it our economic system that has produced this high standard of living that people today enjoy and creates opportunity for all people? The economic and political system in fact works, but it is not perfect as people are not perfect. If you examine the economic health of the three major institutions of our society, only one can claim to be economically healthy overall – businesses. Governments and consumers are showing signs of being in too much debt trying to live beyond their means.

And businesses are the only one of the three institutions that has an incentive to live within their means and use economic resources efficiently. You basically called all businesses corrupt. Is it the business or the people within that can be corrupt? Are all businesses and people corrupt? Has every business engaged in insider trading or had questionable accounting practices? There is no doubt that these things have occurred. But I believe that most businesses do not engage in illegal practices. The laws and government institutions to protect society against corrupt behavior in any type of institution in fact are working and will need to be continually developed. There are corrupt business people as there are corrupt politicians. They tend to get caught. If you look around at the best businesses (large or small), they are filled with people who are ethical and want to do well. The question we should ask is what is the social responsibility of a business? Both politicians and business people should be asking this question and developing their organizations to behave accordingly. Quite frankly, social responsibility is good business.

Mr. Obama, you also stated that Washington is dominated by lobbyists and special interests. But don’t they dominate because the politicians are accepting of their message and the money? Special interests can be a healthy input to the political process. Isn’t that part of how Washington should listen to all affected parties in order to craft good legislation? If you think all business people are corrupt, then aren’t all politicians just as corrupt? Yet if there are many good business people, then I’m sure there are many good politicians as well. Again, the only thing in common is the sinful nature of all people – including an excessive greed by both businesses and politicians.

Furthermore, I agree with you, both parties need to stop the name calling, personal attacks, and insults as a way to gain peoples favor. As a citizen, I find it insulting that politicians think they can get my vote by calling their opponent “stupid” or other such things. We simply are not going to solve anything if we position our ideas on the basis of how bad the other person is.

And Mr. Obama, I therefore ask you to stop blaming “corporate greed.” If you are truly a reconciler and want to engage all parties, then you should also respect the business world as a valued participant in solving social ills. I remind you that it is the businesses that create the jobs in the first place, not the government. Businesses develop the new technologies and products that provide a good lifestyle. Businesses pay a large part of the health care bill and half of social security.

Let’s examine this greed for a moment. Yes it does occur in businesses as it does in government. Another word for greed, though, is incentive. When there was no incentive in a government controlled economic system – communism in the Soviet Union – the society collapsed under its own inability to economically survive. The Soviet Union collapsed not with a rifle shot or missile being fired, but because of its own enormous inefficient use of its economic resources over 70 years, including peoples’ minds and talents. Studies showed that the Soviet Union had a 30% higher cost structure for the same economic goods as the US. This compares to the average 7% profit margin in businesses in the US, which is a much lower cost to gain efficient use of economic resources and keep a stable society. Because of a profit incentive, US businesses are more effective in their use of materials, people, and money. In addition, a profit incentive and competition also creates a motivation to change and improve the products and technologies for society. One of the other costs, though, is that jobs change, grow or disappear. If you examine the US economic history, however, you will see that the US has over the long term created more new jobs than have been lost. (By the way, ExxonMobil with the high oil prices is operating at a 10% net profit margin, still substantially better than the Soviet Union was able to perform.)

In conclusion Mr. Obama, my request is that you also understand the business world for what it is, the same as you call all citizens to understand and support Black America in its “pursuit of happiness”. If we are going to truly unite, then we cannot see any institution of our society to be at blame, but instead see people in all parts of society as having an important and legitimate role in solving our social problems, as well as creating the economic environment for success. As a leader, the President’s job is to not only unite all people, but then also make the tough tradeoff decisions. I hope that we simply do not go the way of the Soviet Union believing the US government is the solution when it has not historically managed to live within its own economic means. Instead, let’s also have the dialogue of “what is the social responsibility of a business?” If you look at many businesses today, you will see that they too are learning how to be more socially responsible in a business-like way. There is a great dialogue that business leaders are in fact having on this topic. Please engage with them and listen as well.

Your fellow citizen,

Alan K. Rudi

Wisdom is knowledge of what is true or right coupled with just judgment as to action. It is also said in business and life that knowledge is power. We all have, however, different experiences and backgrounds, strengths and weaknesses, meaning none of us have all the knowledge (or wisdom) for the best use of power. Mahatma Gandhi said “It is unwise to be too sure of one’s own wisdom. It is healthy to be reminded that the strongest might weaken and the wisest might err.”

People, in general, should seek to develop their wisdom and skills in three critical areas for any business model to operate effectively:

• Leadership

• Teamwork

• Communication

Everyone throughout an organization is a leader to some degree, needs to work collaboratively with others, and can only accomplish a job successfully with healthy communications between departments. On the other hand, not all employees have the same knowledge and understanding of a business, its markets, as well as what makes for effective leadership, teamwork and communication.

You see, none of us are perfect and possess all the knowledge or wisdom for organizations to succeed. But collectively, we have a much higher capability. Meanwhile, human behavior, being what it is, can prevent achieving different, sometimes conflicting objectives and motives. Otherwise, all business organizations would be more successful. There is information, understanding, and experience which can lead to knowledge. But it is wisdom that enables us to utilize our knowledge to achieve the diversity of objectives in an organization.

Proverbs 4: 7 says “Wisdom is supreme, therefore, get wisdom.” One wonders, though, is there a “business wisdom” for us to think about? Here are some ideas and thoughts:

Leadership

• A leader should trust in his/her own knowledge and experience, but also trust and depend on others for a full understanding (e.g., the salesperson is closest to the customer). You don’t know what you don’t know. Respect not only your expertise, but that of others.

• The leader’s behaviors and actions are in full view for all to see and sets the tone for the culture. There are five behaviors that leaders must not exhibit if a business is to succeed:
  
  • Excessive or false pride (a business should not delude itself of its position in the market, markets have a way of punishing those who do not see changing customer trends and needs)
  • Lying and gossiping (it stirs up dissension and distrust)
  • Shooting the messenger of bad news (otherwise, no one will ever bring up the tough issues that need to be solved)
  • Taking the credit for what others have done (otherwise people will stop producing and working to accomplish tough goals)
  • Seeking personal goals at the expense of the business goals (everyone then begins to look out for themselves instead of customers and employees.

• The nature of work is stressful and can create anxiety, leading to lower productivity and morale. The leader, and everyone, should take the time to express a kind word to lift up and encourage people, especially when things are tough. Stay in touch with people to know how they are doing and what they need help with.

• Examine people’s motives, not just their words or behaviors. Sometimes people can simply choose a poor word to use, or we misunderstand someone’s meaning because of our own bias. Motives tell us more about the desire, need or action that is being communicated.

Teamwork

• There is a time to lead and time to follow. The wise person can discern that time and accepts the role of a follower, when needed.

• Teams can consume a lot of time in meetings with endless talk. Be patient and listen. Let all participate as they likely have information or understanding that is valuable. The smart person knows they do not have an understanding of everything.
  

• Nevertheless, there is a time to stop talking and take action. After all, a team is there to achieve a purpose, usually to bring about some type of change for the better of the business. Obtain the advice, consider the options, know the risks, but take action. Consensus does not mean that all agree, but that the majority agree and the dissenters can live with the chosen action.

Communication

• Effective communication requires more than talent. It involves trust, respect, understanding, empathy and resolution.

• Share information openly, it builds trust and understanding.

• Listen first and fully. Look people in the eye. Don’t be trying to conduct other activities while in a conversation (it’s disrespectful). Then think and respond.

• Chose your words carefully. Once they are out of the mouth, they cannot be returned.

• Tell the truth (politely, tactfully to be heard).

• Smile a lot, people will engage with you more.

What is the source of this wisdom for the business world? I wish I could take credit, but I can’t. Click this page to find the source.