Management Secrets of the Grateful Dead

I was never a Deadhead but the MBA in me perked up at this article’s title in The Atlantic. Not one to tinker with perfection, I kept it for this blog post.

Who knew?

The Dead incorporated and pulled board members  from the band, its road crew and other members of their organization. They rotated the CEO position.

The ran a profitable merchandising division and “peace and love notwithstanding did not hesitate to sue those who violated their copyrights.”

They made the strategic decision to let fans tape their shows, which on one hand gave away recording revenues, but on the other, widened their audience. They figured (rightly) that “a ban would be unenforceable, and anyone inclined to tape a show would probably spend money elsewhere, such as on merchandise or tickets.”

A management professor quoted in the story called the Dead’s approach “strategic improvisation,” and observed that people are eager to attend his lectures on the band. “People are just so tired of hearing about GE and Southwest Airlines.”

It’s one of the most profitable bands of all time.

John Perry Barlow, the group’s lyricist cum-Fellow at Harvard Law School’s Berkman Center for Internet and Society, observed

What people today are beginning to realize is what became obvious to us back then — the important correlation is the one between familiarity and value, not scarcity and value…if I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced.

So perhaps it’s karma, not just deliciousness, that made Wavy Gravy and Cherry Garcia bestsellers for Ben & Jerry’s?

Prompts for Professionals

• If you’ve read this far, it probably has something to do with the novel nature of the subject. Try something refreshing for your next blog post or newsletter.
• The article said that the band pioneered ideas and practices that have been embraced by corporate America, most famously the Dead’s intense focus on its most loyal fans. Ask your blog or newsletter readers  what they would like you to do in addition to or instead of what you’re doing for them now. If you don’t, someone else will.
• The University of California at Santa Cruz is curating the band’s archive of commercial recordings, videos, press clippings, stage sets, business records and correspondence using a form of crowdsourcing. They’ll post as much as possible online and let Deadheads contribute what they know about the items. If you don’t have a blog, get one and start crowdsourcing best practices, war stories, whatever. If you work at it, your blog could become the go-to place for existing and prospective clients to search for answers and community.  I do this with my occasional posting of WORST communications practices by financial professionals — people inevitably chime in.

Nuke the Bullets!

Great advice in this video on SUPPORTING your talk with a presentation (Powerpoint, Keynote, etc), not leaning on it.

Brokers vs Advisors vs Clients’ Best Interests

Last week the NYT ran another story on the screwy financial regulatory landscape here in the States.  With so many financial professionals calling it quits with big firms and hanging out shingles as advisors,  the big money (brokerage firms) do their best to obfuscate their incentive to SELL, rather than ADVISE or MANAGE.

The story ably illustrates how some individual brokers provide advisor-like services while some advisors closely resemble brokers.

One advisor’s view

I interviewed Derek Hernquist, Chief Investment Officer at Integrative Capital, LLC in Charlotte, NC on this matter.

Derek: “It makes no sense to me that there are two standards, and I think the brokerage industry has blurred the lines by changing titles to “financial advisor” from broker or registered rep. Most people I speak with are unaware of the distinction between financial advisors and investment advisors.

“Seriously, how can anyone read this line from the article and not think there’s a problem “Congress is now considering a provision that could alleviate some of this confusion by requiring brokers to act in their clients’ best interest. ‘Requiring brokers?’ Shouldn’t a client be able to trust this is already the case?”

Derek’s a smart guy with principles. While I had his ear I asked a few more questions:

Q: Why did you launch your own advisory practice?

A: I found myself frustrated with my answer when friends asked “What do I do with my money? The growth of Wall St. left investors with an overwhelming array of underwhelming choices. It became harder and harder for the true risk managers to be noticed amidst the race to beat the benchmark. I felt compelled to step in and help filter the noise for those without the time to do so.

Q: Why did you choose Registered Investment Advisor (RIA) registration?

A: I needed complete independence of investment choices as well as fair pricing to give clients a shot at attractive risk-adjusted returns. This eliminates everything but the hedge fund and investment advisory models,and I felt that the demographic I wanted to help was outside the scope of hedge funds.

Q: Compensation is a big issue. How did you determine your fee structure?

A: I love the performance-driven aspect of hedge fund fees, but had to compromise in order to open my tent to individuals that don’t qualify as accredited investors.

In Warren Buffett’s early days, he charged nothing for the 1st 6% of return and asked for 25% of profits above that.  I’d love to do that, but that’s outlawed for non-accredited investors under the 1940 Act. To this point, I’ve settled for charging clients 1% of assets up to a max of $10,000 per year. Account size doesn’t dictate required workload, so this is my way of flattening the cost curve a little as clients grow into accredited investors.

Prompts for Professionals

I wrote about compensation and the need for some honest disclosure on how any professional is paid last June. One of the comments included this observation: “Funny – no one asks their doctor how they get paid either.  Might be worth asking. Most doctors I know have incentive to rush you through their office because they are paid by the HMOs based on how many patients they see per day.”

• If you own your firm, tell your clients why you decided to structure your compensation as you did.   If you work for a broker or agency, tell your clients why you believe the comp structure you work under is fair to you and to them.
• Explain how you balance the competing interests of your financial future and theirs.
• Have an up-front discussion about how they can challenge your ethics.
• Do you belong to a professional organization that requires credentialing?  Tell your clients about the credentialing process and how your preparation and credentialing benefit them.
• Publish your continuing education plans for the year.
• Solicit feedback from clients: what topics do they find most confusing?

How about it? Let’s have a hearty discussion in the comments section.

Home Office Design Tips — From a Financial Advisor?

In my occasional series of crappy newsletters, here’s another, sent by a financial planner.

The only professional I want to get office design tips from is an interior designer or furniture vendor.

With financial reform and the worldwide economic meltdown on most everyone’s mind, sending a newsletter with fluff like this makes me question whether this advisor is in the loop or out to lunch. C’mon, talk to me about something you’re a credentialed expert in!

Oh, the money saving tips? Crap I could get from Reader’s Digest like take your lunch to work instead of eating out and get DVDs free at the public library instead of renting them. You must be kidding.

This is another fine example of sending something for the sake of sending something. This advisor needs an editorial calendar. Big Time.

Oh, and the last straw? She actually PAID a vendor to give her a proverbial communications black eye.

If your boilerplate requires you to disclaim giving financial advice, at least print some material that verges on the topic!

Sheesh.

Pretty Jazzed About My New Moo Cards

My good friend Andy Ciordia is the closest thing I have to a coworker.  My clients think more highly of me when I bring him to a project — he’s a social media and design whiz and all-round nice guy.

Andy designed these two versions of a business card for me using tag clouds!  Ordered them from MOO and can’t wait to see them. The other side has my contact info (of course) and a mugshot. I went ahead and included my Twitter handle @TamelaRich while I was at it.

Tell me, are you using your Twitter handle on yours?

Anyone else noticing how few business cards you need these days compared to five years ago? And resumes? Heck, you wanna see mine, go to LinkedIn.

Gotta Love footnoted.org

Financial pros and self-directed investors alike appreciate the work that Michelle Leder at footnoted.org does speaking truth about powerful businesses and the people they overpay to run them. Good to know someone’s on the job ferreting out the things companies try to bury in their routine SEC filings.

Ms Leder found her calling as a forensic reader of company reports after losing part of her IRA on Qwest Communications. Conducting the post-mortem on that  transaction,Ms Leder realized that “instead of relying on happy talk from corporate executives and over-enthusiastic analysts, she should have spent her time reading the company’s SEC filings. In a little over an hour’s time, she found several red flags that pointed to overly aggressive accounting.”

A seasoned business journalist, she wrote Financial Fine Print: Uncovering a Company’s True Value and launched footnoted, which was acquired by Morningstar earlier this month. Proof positive that sometimes those who do good can also do well.

Be sure to bookmark or get a feed from footnoted’s blog.

Here’s a recent video of Ms Leder who, like me, works out of a home-based International Headquarters and is ably assisted by a canine.

February Book Lust

No, the Birthday Fairy didn’t bring me a Nook last month, but now I wonder if I should hold out for an iPad. Your suggestions?

BUT WAIT! This just in! Apparently I’m not the only one who didn’t know you could download the Kindle software to a PC and start reading. Hmmm…anyone tried this? Please comment.

Speaking of reading technology, Duke Magazine featured a recap of a panel discussion on the future of reading “The End of Civilization as We Know It? The  central question was technology’s impact on how, what, and why we read. I particularly enjoyed the back & forth on Google’s Booksearch and this quote from Andy Berndt ‘89, managing director of the Creative Lab at Google, “But we’re not interested at all in replacing books. A lot of people who talk about this haven’t even ever used Book Search. The hope is that if you can search for something about a topic, and you can find a book, even a snippet of a book, that exists somewhere else, you might continue to pursue that interest. If you can’t, you might not. And that seems hugely important.”

You Are Not A Gadget: A Manifesto

by Jaron Lanier

Amazon choose this as one of January’s best books, saying, “For the most part, Web 2.0–Internet technologies that encourage interactivity, customization, and participation–is hailed as an emerging Golden Age of information sharing and collaborative achievement, the strength of democratized wisdom. Jaron Lanier isn’t buying it. In You Are Not a Gadget, the longtime tech guru/visionary/dreadlocked genius (and progenitor of virtual reality) argues the opposite: that unfettered–and anonymous–ability to comment results in cynical mob behavior, the shouting-down of reasoned argument, and the devaluation of individual accomplishment. Lanier traces the roots of today’s Web 2.0 philosophies and architectures (e.g. he posits that Web anonymity is the result of ’60s paranoia), persuasively documents their shortcomings, and provides alternate paths to “locked-in” paradigms. Though its strongly-stated opinions run against the bias of popular assumptions, You Are Not a Gadget is a manifesto, not a screed; Lanier seeks a useful, respectful dialogue about how we can shape technology to fit culture’s needs, rather than the way technology currently shapes us.”

Here’s an excerpt from an interview with the author from Publishers Weekly

Q: As one of the first visionaries in Silicon Valley, you saw the initial promise the internet held. Two decades later, how has the internet transformed our lives for the better?

A: The answer is different in different parts of the world. In the industrialized world, the rise of the Web has happily demonstrated that vast numbers of people are interested in being expressive to each other and the world at large. This is something that I and my colleagues used to boldly predict, but we were often shouted down, as the mainstream opinion during the age of television’s dominance was that people were mostly passive consumers who could not be expected to express themselves. In the developing world, the Internet, along with mobile phones, has had an even more dramatic effect, empowering vast classes of people in new ways by allowing them to coordinate with each other. That has been a very good thing for the most part, though it has also enabled militants and other bad actors.

Q: Most authors have never made a living from selling their books. They’ve always had to teach or do something else on the side.

A: Sure, that’s also been true in music. But both music and publishing have always supported the creative middle class. So we’re speaking now at the Random House offices in New York. There’s a floor full of people here who are earning salaries and supporting families, who are not hit authors but are editors and publicists and all sorts of things, and they’re immensely valuable. This new world that many like Chris propose disenfranchises them completely.

In an earlier draft of the book I actually went through research on exactly what’s happened to the middle class in music, so if you go back to the start of the Web, there were hundreds of thousands of people filing taxes as musicians, only a tiny portion of whom did so on the basis of being known. But there were so many little jobs—session musicians, sound technicians—and that just fell off a cliff. I assert, and I think with good reason, that had we not screwed up in this way, we would not have had the recession. We have to be looking at results, and if the Internet was so great for wealth, then we should be getting wealthy. It has to be stated that simply.

IOU: Why Everyone Owes Everyone and No One Can Pay

by John Lanchester

I, like many, am suffering from meltdown forensics fatigue. But this book got my attention when I heard the author interviewed on NPR’s Marketplace.

Here’s an excerpt from NYT Review: Mr. Lanchester, who is British, isn’t an economist or a business journalist. He’s a novelist (and a talented one; try “The Debt to Pleasure”), a man with no special financial expertise whatsoever. A few years ago he began following the financial meltdown for research purposes, as background for a novel he was writing. He soon realized, he says, “that I had stumbled across the most interesting story I’ve ever found.”

Once upon a time in America and Britain, he observes, “the jet engine of capitalism was harnessed to the ox cart of social justice, to much bleating from the advocates of pure capitalism, but with the effect that the Western liberal democracies became the most admired societies that the world had ever seen.”

Then the Wall crumbled, and “the jet engine was unhooked from the ox cart and allowed to roar off at its own speed. The result was an unprecedented boom, which had two big things wrong with it: It wasn’t fair, and it wasn’t sustainable.”

“I.O.U.” crosses over into black satire when Mr. Lanchester describes how bankers used their new tools to make money from poor people, the worst credit risks, by prying their cash loose through predatory lending, then pooling this money and selling it off. Who cared if these people defaulted on their mortgages? The risk had already been passed along to others, and ultimately, when banks failed, to taxpayers. Mr. Lanchester calls this “a 100 percent pure form of socialism for the rich.”

With steam shooting from his ears, he summarizes: “So a huge, unregulated boom in which almost all the upside went directly into private hands, followed by a gigantic bust in which the losses were socialized. That is literally nobody’s idea of how the world is supposed to work.”

Mr. Lanchester’s history lesson is peppered with dead-on references to everything, including “Annie Hall,” “The Simpsons,” “The Wire,” Hemingway and Jacques Derrida. He is effortlessly epigrammatical. (“In a sense, credit isn’t just an aspect of the economy, it is the economy.”)

Before you begin to cry, pick up a copy of “I.O.U.” Good humor and good company will be the things that’ll get us through.

Exploiting Chaos: 150 Ways to Spark Innovation During Times of Change

by Jeremy Gutsche

I’m writing a business book for a general audience, and read this one because I find the visual approach so refreshing. I want to emulate the approach in my work.

This video will do a better job of explaining it than a written review:

The Relentless Revolution: A History of Capitalism

by Joyce Appleby

I excerpted from the NYT Sunday Book Review:

Appleby, a distinguished historian who has dedicated her career to studying the origins of capitalism in the Anglo-American world, here broadens her scope to take in the global history of capitalism in all its creative — and destructive — glory.

In viewing capitalism as an extension of a culture unique to a particular time and place, Appleby is understandably contemptuous of those who posit, in the spirit of Adam Smith, that capitalism was a natural outgrowth of human nature. She is equally scornful of those who believe that its emergence was in any way inevitable or inexorable.

Appleby believes that intimations of capitalism’s rise first surfaced in the Netherlands, where an otherwise unremarkable country with few resources of its own managed to catapult itself to wealth and prominence in the space of a century. While Appleby lingers on the Dutch — and even manages to make things like the herring trade sound interesting — her principal subject is Britain, which she considers the true cradle of capitalism.

Her focus on Britain has little to do with William Blake’s “dark satanic mills” and other symbols of the Industrial Revolution. Instead, Appleby sees in mundane changes in agriculture the beginnings of later, more dramatic, developments. In 16th-century Europe, she observes, about 80 percent of the population was engaged in agriculture — roughly the same proportion as at the time of the Roman Empire. By 1800, the British farming population had dropped by more than half, thanks to innovations that produced a new, commercial agriculture, like crop rotation and the private enclosure of public lands. These efficiencies created a huge pool of surplus labor, setting the stage for the more visible British capitalism in the coming centuries.

It is to Appleby’s credit that she spends time on a subject like this, which is too often slighted in popular histories. In a similar spirit, she captures how a new generation of now forgotten economic writers active long before Adam Smith built a case “that the elements in any economy were negotiable and fluid, the exact opposite of the stasis so long desired.” This was a revolution of the mind, not machines, and it ushered in profound changes in how people viewed everything from usury to joint stock companies. As she bluntly concludes, “there can be no capitalism . . . without a culture of capitalism.”

Other books I wish I could find the time to read (but know I won’t)

The Hidden Brain: How Our Unconscious Minds Elect Presidents, Control Markets, Wage Wars, and Save Our Lives by Shankar Vedantam, a science writer for The Washington Post and a Nieman Fellow at Harvard University.

Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone dives into the latest psychological findings to investigate how and why prices are allocated.

Next month brings several reader reviews. Please let me know if you’re reading anything interesting that you’d recommend or want to review for an upcoming Book Lust post.

BofA Taking one for Team USA?

In a banking town like Charlotte, you can’t swing a dead cat without hitting a VP of one bank or another. Well, these days make that “or a former VP.”

One of my friends works for Bank of America and another is a criminal defense lawyer. The banker persists that Ken Lewis and BofA are being singled out for bad treatment by the feds. Here’s what the lawyer says on the matter of Mr Lewis and the Merrill Lynch deal:

Q: Did Mr. Lewis breach his fiduciary duty to BOA shareholders when he did not terminate the deal noting a contractual clause that losses were way over what was projected?

Q: Did Merrill execs enter into a contract knowing of these losses, hiding them in some way and using “fraud in the enducement”? Charges coming against Merrill execs.?

Q: Would BOA’s stock price settled at a higher price when the market hit rock bottom? i.e. not as big a loss to shareholders.

A: If yes, to any of these, then he failed in his duty as CEO. Thus, a jury must decide if that is negligent (fired for that) or criminally negligent or culpable (go to jail for this).

Bottom line: Taking one for the USA team is not a defense, it is mitigating.

Oriental Rugs & Business Writing

True story: I was once written up for using college level vocabulary on the job. Yes, it was in a written performance evaluation. No, I was not writing for a living at the time; was running a line of business. You might not guess that my employer was a bank, where most workers had some college and many had MBAs. Go figure. Just one of the reasons I’m forever freelance.

There’s a place for arabesques in writing — that place is usually literature or narrative nonfiction. When I write for business I’ve learned to use them sparingly (or link to the definition!).

Business writers need to err on the side of spartan communications. Well-written, engaging and action-oriented, while spartan.

Trim the fat

Teaching by example, I edited the opening sentences of this WordPress blog post to rid it of verbal flourishes and the loathsome passive voice. I kept “nascent” for the paragraph’s arabesque.

It is with extremely great pleasure that I point you to the first post at the new I’m pleased to introduce you to the WordPress Foundation site. Not only am I excited about the things that will happen under the auspices of the Foundation, I’m proud of what the Foundation will do, and excited to see a site running the 3.0 development version and the nascent theme called 2010.

In the edited post above, “extremely great pleasure” and “under the auspices of” belong in a royal decree, not a business message.

Boilerplate blight

Since business communications are usually intended to sell something — an idea, product, feeling or investment — stick with the big picture or high concept.

I’ll make my point visually, with Oriental rugs (below). The closeup on the left shows intricate detail, but you can’t see the whole rug, whereas the photo on the right gives you the big picture at the cost of the individual motifs.

There’s an ideal use for each photo. If you were a rug merchant who had to choose between the two, you’d use the larger one to entice your prospective client into the store to examine the design and craftsmanship. Same with business communications, which are ultimately designed to sell anything from a product to a feeling to an investment. The goal of written communications is usually to get people to make the next step, which might be making the purchase or calling for more information.

Financial communications often require the equivalent of both photos (detail and big picture). If you’re writing something with boilerplate requirements, write less and use visuals like sidebars, graphics and headers to keep the reader’s attention on your pitch and off the fine print.

Visual perspective

When you look at the closeup of the rug to the left, you know you’re not looking at the entire rug because there are enough visual cues that it’s a part of the whole (no border, no symmetry of design, etc).

The photo to the right might be the rug’s border or the entire rug, but if I had to guess, I’d say it was a closeup of the border because if it were the entire rug the right and left ends wouldn’t be chopped off.

This photo clearly shows the entire rug, but you have no way to know if it’ll fit in your dining room. If it had been photographed with a dog, human or piece of furniture — better yet, a dining room table and chairs — you’d have a clue.

Whole-brain communications note: this post taught about writing but did so in a visual manner.

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An Effective Apology

I remember when my elder son was about four or five and learning to say all the wrong things. One day he stomped into my room, ranting a string of expletives about his brother. He stopped mid rant, clapped his hand to his mouth, looked me in the eye and said “I’m sorry, Mom, my mouth was on fire.”

It’s hard to keep a straight face in situations like that.

Today’s agitated world creates situations ripe for effective apologies — from public officials and CEOs, to neighbors and family members — yet we too often find ourselves at a loss for how to give apologies earnestly or accept them graciously. Next time you need to apologize, turn to John Kador’s book and blog.

I had the good fortune of talking to John last summer and have heard him interviewed on this topic. He’ll show you how and why leaders who willingly and skillfully apologize make more money, enjoy longer careers and create stronger relationships than those who don’t.

Until you get your hands on the book, remember the Five Rs of an apology: recognition, responsibility, remorse, restitution and repetition.

Prompts for professionals

• John Kador says that some kinds of apologies make the situation even worse. If you’ve ever perpetrated a harmful apology, how can you turn the situation around? For example, let’s say your client left a trade request on voicemail — something your message reminds them not to do — and their trade wasn’t executed. Did you say something like “I’m sorry you didn’t follow the directions on my voicemail to call my assistant instead of leaving the request on my phone”? I bet that didn’t go over very well because it was a criticism wrapped in the language of apology. Perhaps something like this would be more effective:  “I know you lost money because that trade wasn’t executed. I feel awful about it. If I had received your voicemail in time I would have called you back and perhaps been able to minimize your loss. While I can’t make you whole on this transaction, I can assure you that if you (take this action) in the future, we can get your trade executed on time.”

• Is there a chance you can break a stalemate with an apology? Something like “Ever since (the event) our relationship has been strained. Although there’s been a lot of water over the bridge since then, I want to acknowledge that if I had it to do over again I would have treated you better. I hope you’ll accept my apology for (ignoring your phone calls/blaming you/etc.). Although I can’t wipe away the past, I’d like to ask if you will give me another chance to work something out. If you do, I promise to (return your calls/refrain from blaming/etc.).”

• Is there a situation where your company has taken a stand you disagree with and you’re caught between it and a customer? Is there a way you can apologize and accept some of the blame instead of throwing your company under the bus?

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