THE ENTERPRISE--EXTREMES & EXCEPTIONS
EXTREMES?
As I read all the incredibly pessimistic articles and forecasts, I am reminded of something I learned in my many years of business experience. During good times, everyone is too optimistic, and during bad times everyone becomes too pessimistic. However, these are times in which acts of incredible stupidity created unforeseeable problems. In a recent issue of PORTFOLIO magazine Michael Lewis wrote a long article entitled THE END. in it he cited many frightening actions leading to the financial meltdown. The most amazing to me on a basic level was the Long Beach Financial subsidiary of Washington Mutual that was so hungry to make loans that it loaned money to Mexican, non-English speaking strawberry picker making $14,000/year, with a bad credit rating. How much and how? It loaned a no money down, interest only--and deferred the interest payments as long as possible. The loan (are you ready) was sufficient to completely pay for a $720,000 house. Is every "American" really entitled to be a homeowner. Not that way!
HOW BAD IS IT?
In a Conde' Nast PORTFOLIO survey, 90% think this is the worst they have ever seen the economy, and 86% agree on the financial sector. Similar numbers were the results of "high risk" transactions being approved and personal loan qualifications. 70% are working harder on the job and 79% feel more stress., yet 69% rate as Good or Excellent the job of their employers. A big one: 71% expect lower pay for the near future, and 44% fear losing their job during 2009. Ironically, the PORTFOLIO economics columnist John Cassidy, who has been one of the most negative, believes that there is a chance this downturn could end sooner than anyone things. Unfortunately, the best estimates are for a very weak upturn in the 4Q of 2009 (Christmas spending, I guess). FYI, Cassidy was the person who forecast in Sept. 2008 that oil prices would drop to $50/bbl or below within 2-3 years. His views were rewarded with a sooner-than-expected collapse in oil prices. That's what happens when the price run-up is driven more by speculation than by core demand.
I WANT THE "GEITHNER EXCEPTION"
Or will it be the Daschle-Geithner Exception? That is where you attempt to evade taxes and only when caught, plead misunderstanding, honest error, apologize and pay the back taxes and penalty. Of course Rep. Charlie Rangel (D, NY) is the past expert at this trick. He owns several rent controlled apartments in NYC (where the limit is supposed to be one per resident), he pays his son about 5X what normal Web staffers make in Congressional offices, and he somehow just "forgot" to pay a bunch of taxes on income from renting his luxury condo down in the Caribbean. Ho-Hum--it's just the political "good old boys club" at work again. NOTE: DO NOT TRY THESE TRICKS AT HOME OR YOU COULD SPEND SOME TIME IN A PUBLICLY FUNDED INSTITUTION (possibly with a very friendly roommate named "Big Bubba").
WHAT CAN BUSINESSES DO?
My friend Dan Perella of Ideastream Consumer Products sent me his list. It is a very good one.
#2) Spend your company’s money like it’s your own
#3) Find other ways to add value to your customer’s business – beyond great products at value prices
#4) Become an extension of your customer’s business – Provide them insights in their business, they don’t see, even outside of things you can do for them. Do things for them that have no immediate impact on your business.
#5) Make yourself irreplaceable – suppliers will be reduced across the board, don’t be one of them
#6) Become PRODUCT AGNOSTIC – it’s about customer service, innovation, and the methods by which you serve the market. If you sell CD Wallets, like we do, you can also sell innovations in sporting goods, housewares, and stationery products.
#7) Have a wide open funnel – entertain any and all product ideas that come across your desk.
#8) Tell your customers the truth about their business, even if it hurts yours
#9) Play offense – Now is the time while everyone else is retrenching.
#10) Hang on long enough to get lucky
The second list comes from FORTUNE'S Geoff Colvin in a very good article recently published:
- Reset priorities to face the new reality.
- Keep investing in the core.
- Communicate like crazy, balancing realism and optimism.
- Your customers face new problems, so give them new solutions.
- Don’t rush to cut prices.
- Focus on capital—how you’re getting it and where you’re using it.
- Reevaluate people—and steal some good ones.
- Reexamine compensation—what is it offering incentives for?
- Think twice about offshoring.
- Be smart about mergers and acquisitions.
OBAMA'S TESTS ARE COMING
The economy is the big one right now, but just behind it is the specter of terrorism, rogue regimes and Afghanistan (where no one has ever "won--ever). He also is hurting his reputation as an ethical and sensible, bipartisan guy right now. Ethically, how can you support a tax evader to head the Treasury Dept. and another one to head his Health Care Reform? Either you have ethics or you don't—Integrity is like virginity—non-negotiable. The one glimmer of good news is the announcement that a prominent "moderate" plans to run against Ahmadinejad in Iran this June.
WANT TO WORRY ABOUT IF WE ARE SAFE? OR ARE WE GUARDING AGAINST YESTERDAY'S ATTACK METHODS?
Many of you know that I read a lot of fiction, and have actually written a novel about cyberterrorism. If the ending of the following piece sounds like it came out of THE SILENCE (my novel--still available on amazon.com), it did not--but then again, I guess some of it did. I checked out the novel's premises with retired FBI and CIA professionals who confirmed its accuracy--and its likelihood. The following message resonated so much with me that I am sharing it with you. We are guarding our planes against "shoe bombers" and "liquid or gel attacks" which are the old, failed approaches to terrorism. If you were a terrorist, would you try those again? Hell, no. The Israelis are among the best at anticipating and thwarting attacks. Maybe our Homeland Security should be listening to them a bit more, and then I can leave my shoes on as I go through airport security.
Juval Aviv was the Israeli Agent upon whom the movie ' Munich ' was based. He was Golda Meir's bodyguard -- she appointed him to track down and bring to justice the Palestinian terrorists who took the Israeli athletes hostage and killed them during the Munich Olympic Games. In a lecture in New York City a few weeks ago, he shared information that EVERY American needs to know -- but that our government has not yet shared with us.
He predicted the London subway bombing on the Bill O'Reilly show on Fox News stating publicly that it would happen within a week. At the time, O'Reilly laughed and mocked him saying that in a week he wanted him back on the show. But, unfortunately, within a week the terrorist attack had occurred.
Juval Aviv gave intelligence (via what he had gathered in Israel and the Middle East ) to the Bush Administration about 9/11 a month before it occurred. His report specifically said they would use planes as bombs and target high profile buildings and monuments. Congress has since hired him as a security consultant.
Now for his future predictions. He predicts the next terrorist attack on the U.S. will occur within the next few months. Forget hijacking airplanes, because he says terrorists
will NEVER try and hijack a plane again as they know the people onboard will never go down quietly again. Aviv believes our airport security is a joke -- that we have been reactionary rather than proactive in developing strategies that are truly effective.
For example:
1) Our airport technology is outdated. We look for metal, and the new explosives are made of plastic.
2) He talked about how some idiot tried to light his shoe on fire. Because of that, now everyone has to take off their shoes. A group of idiots tried to bring aboard liquid explosives. Now we can't bring liquids on board. He says he's waiting for some suicidal maniac to pour liquid explosive on his underwear; at which point, security will
have us all traveling naked! Every strategy we have is 'reactionary.'
3) We only focus on security when people are heading to the gates.
Aviv says that if a terrorist attack targets airports in the future, they will target busy times on the front end of the airport when/where people are checking in. It would be easy for someone to take two suitcases of explosives, walk up to a busy check-in line, ask a person next to them to watch their bags for a minute while they run to the restroom or get a drink, and then detonate the bags BEFORE security even gets involved. In Israel , security checks bags BEFORE people can even ENTER the airport.
Aviv says the next terrorist attack here in America is imminent and will involve suicide bombers and non-suicide bombers in places where large groups of people congregate. (i. e., Disneyland , Las Vegas casinos, big cities ( New York , San Francisco , Chicago , etc.) and that it will also include shopping malls, subways in rush hour, train stations, etc., as well as rural America this time ( Wyoming , Montana , etc.).
The attack will be characterized by simultaneous detonations around the country (terrorists like big impact), involving at least 5-8 cities, including rural areas.
Aviv says terrorists won't need to use suicide bombers in many of the larger cities, because at places like the MGM Grand in Las Vegas, they can simply valet park a car loaded with explosives and walk away. Aviv says all of the above is well known in intelligence circles, but that our U. S. government does not want to 'alarm American citizens' with the facts.
The world is quickly going to become 'a different place', and issues like 'global warming' and political correctness will become totally irrelevant.
On an encouraging note, he says that Americans don't have to be concerned about being nuked. Aviv says the terrorists who want to destroy America will not use sophisticated weapons. They like to use suicide as a front-line approach. It's cheap, it's easy, it's effective; and they have an infinite abundance of young militants more than willing to 'meet their destiny'.
He also says the next level of terrorists, over which America should be most concerned, will not be coming from abroad. But will be, instead, 'homegrown' -- having attended and been educated in our own schools and universities right here in the U. S. He says to look for 'students' who frequently travel back and forth to the Middle East .
These young terrorists will be most dangerous because they will know our language and will fully understand the habits of Americans; but that we Americans won't know/understand a thing about them.
Aviv says that, as a people, Americans are unaware and uneducated about the terroristic threats we will, inevitably, face. America still has only have a handful of Arabic and Farsi speaking people in our intelligence networks, and Aviv says it is critical that we change that fact SOON.
So, what can America do to protect itself?
From an intelligence perspective, Aviv says the U.S. needs to stop relying on satellites and technology for intelligence. We need to, instead, follow Israel 's, Ireland 's and England 's hands-on examples of human intelligence, both from an infiltration perspective as well as to trust 'aware' citizens to help. We need to engage and educate ourselves as citizens; however, our U. S. government continues to treat us, its citizens, 'like babies'. Our government thinks we 'can't handle the truth' and are concerned that we'll panic if we understand the realities of terrorism. Aviv says this is a deadly mistake.
Aviv recently created/executed a security test for our Congress, by placing an empty briefcase in five well-traveled spots in five major cities. The results? Not one person called 911 or sought a policeman to check it out. In fact, in Chicago , someone tried to steal the briefcase!
In comparison, Aviv says that citizens of Israel are so well 'trained' that an unattended bag or package would be reported in seconds by citizen(s) who know to publicly shout, 'Unattended Bag!' The area would be quickly & calmly cleared by the citizens themselves. But, unfortunately, America hasn't been yet 'hurt enough' by terrorism for their government to fully understand the need to educate its citizens or for the government to understand that it's their citizens who are, inevitably, the best first-line of defense against terrorism.
Aviv also was concerned about the high number of children here in America who were in preschool and kindergarten after 9/11, who were 'lost' without parents being able to pick them up, and about ours schools that had no plan in place to best care for the students until parents could get there. (In New York City , this was days, in some cases!)
He stresses the importance of having a plan, that's agreed upon within your family, to respond to in the event of a terroristic emergency. He urges parents to contact their children's schools and demand that the schools, too, develop plans of actions, as they do in Israel. Does your family know what to do if you can't contact one another by phone? Where would you gather in an emergency? He says we should all have a plan that is easy enough for even our youngest children to remember and follow.
Aviv says that the U. S. government has in force a plan that, in the event of another terrorist attack, will immediately cut-off EVERYONE's ability to use cell phones, blackberries, etc., as this is the preferred communication source used by terrorists and is often the way that their bombs are detonated. How will you communicate with your loved ones in the event you cannot speak? You need to have a plan.
PLEASE PASS THIS ON. If you don't consider this serious enough to be concerned, merely delete.
THAT'S ALL FOR TODAY--A LITTLE LATE DUE TO R & R...
The good news is that Florida was very nice. Unfortunately the construction market down there is in the dumper--big time. Down about 90%! That presents a real challenge to those who want to survive this downturn. Sooner or later, people will start building again. Right now the prices of houses and condos are really low--and negotiable. With the retail downturn, building in that area is slowing fast, as store closings create vacant, distressed real estate.
NEXT WEEK--CATCH UP TIME.
Until then, if you are in the North, stay warm and spend sparingly and wisely. Sell hard. Innovate. Get your people around you and use all of their brains to come up with ideas. Everyone has the ability to help. Ask them, you'll see.
Best, JOHN
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