Inflation or Deflation, Pick Your Poison

Bad things happen when people don’t pay their credit card bill.

Here’s how the “logic” works: Charge-off’s increase and banks aren’t going to eat it all themselves.  They raise interest rates on cards they issued and increase merchant fees to cover the losses. Merchants respond by raising prices to cover their increased fees, and consumers see a loss in available credit as the additional interest eats into their available credit (for those that carry balances and fail to make payments that cover interest plus at least some principal, apparently a lot of people).   So we have price increases without corresponding demand increases = inflation.

BUT, inflation only happens if people keep buying in the wake of price increases.  With consumer confidence weak, people may just put off buying or be unable to buy because they are capped out on their credit cards.  So the buying stops, the prices go flat, and (good news) the charge-off rate declines simply because there is less activity.

By then it is November, and merchants are desperate to see shoppers in the store for holiday buying.  So they slash prices; but it doesn’t work, because the card issuers still have credit card interest rates pegged and haven’t unlocked larger credit limits.  Why should the credit card issuers expose themselves to more risk? They are making money on the high interest and have lowered expectations from Wall Street on their side.

There is a catch in this “logic”; the economic term ‘deflation’ only applies if the decrease occurs for at least a year (aka 0% inflation over 12 months).  More specifically:
“Deflation is caused by a shift in the supply and demand curve for goods and interest, particularly a fall in the aggregate level of demand. That is, there is a fall in how much the whole economy is willing to buy, and the going price for goods. Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity.” (Wikipedia)

So what happens next?  You ask a Scandinavian.

“If the nominal interest rate is initially low, which it is when inflation and expected future inflation are low, the central bank does not have much room to lower the interest rate further. But with deflation and expectations of deflation, even a nominal interest rate of zero percent can result in a substantially positive real interest rate that is higher than the level required to stimulate the economy out of recession and deflation.” (Svensson, 2003)

This in turn leads to the Liquidity Trap:
“When this liquidity trap occurs, expanding liquidity (the monetary base) beyond the satiation point has no effect. If a combination of a liquidity trap and deflation causes the real interest rate to remain too high, the economy may sink further into a prolonged recession and deflation.” (Svensson, 2003)

Sounds bad, but has it already happened, or is it in the future:
“Prolonged deflation can have severe negative consequences. The real value of nominal debt rises, which may cause bankruptcies for indebted firms and households and a fall in asset prices. Commercial banks’ balance sheets deteriorate when collateral loses value and loans turn bad, and financial instability may threaten. Unemployment may rise, and if nominal wages are rigid downwards, deflation means that real wages do not fall but increase, further increasing unemployment. All this may contribute to a further fall in aggregate demand, a further increase in deflation, a further increase in the real interest rate, and bring prices and the economy down in a deflationary spiral. Therefore, a liquidity trap with the associated risk of a prolonged recession or even a deflationary spiral is a central banker’s nightmare.”
(Svensson, 2003)

Reference:
Svensson, 2003 – http://www.princeton.edu/svensson/papers/jep2.pdf

Bad things happen when people don’t pay their credit card bill.

Here’s how the “logic” works: Charge-off’s increase and banks aren’t going to eat it all themselves. They raise interest rates on cards they issued and increase merchant fees to cover the losses. Merchants respond by raising prices to cover their increased fees, and consumers see a loss in available credit as the additional interest eats into their available credit (for those that carry balances and fail to make payments that cover interest plus at least some principal, apparently a lot of people). So we have price increases without corresponding demand increases = inflation.

BUT, inflation only happens if people keep buying in the wake of price increases. With consumer confidence weak, people may just put off buying or be unable to buy because they are capped out on their credit cards. So the buying stops, the prices go flat, and (good news) the charge-off rate declines simply because there is less activity.

By then it is November, and merchants are desperate to see shoppers in the store for holiday buying. So they slash prices; but it doesn’t work, because the card issuers still have credit card interest rates pegged and haven’t unlocked larger credit limits. Why should the credit card issuers expose themselves to more risk? They are making money on the high interest and have lowered expectations from Wall Street on their side.

There is a catch in this “logic”; the economic term ‘deflation’ only applies if the decrease occurs for at least a year (aka 0% inflation over 12 months). More specifically:

“Deflation is caused by a shift in the supply and demand curve for goods and interest, particularly a fall in the aggregate level of demand. That is, there is a fall in how much the whole economy is willing to buy, and the going price for goods. Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity.” (Wikipedia)

So what happens next? You ask a Scandinavian.

“If the nominal interest rate is initially low, which it is when inflation and expected future inflation are low, the central bank does not have much room to lower the interest rate further. But with deflation and expectations of deflation, even a nominal interest rate of zero percent can result in a substantially positive real interest rate that is higher than the level required to stimulate the economy out of recession and deflation.” (Svensson, 2003)

This in turn leads to the Liquidity Trap:

“When this liquidity trap occurs, expanding liquidity (the monetary base) beyond the satiation point has no effect. If a combination of a liquidity trap and deflation causes the real interest rate to remain too high, the economy may sink further into a prolonged recession and deflation.” (Svensson, 2003)

Sounds bad, but has it already happened, or is it in the future:

“Prolonged deflation can have severe negative consequences. The real value of nominal debt rises, which may cause bankruptcies for indebted firms and households and a fall in asset prices. Commercial banks’ balance sheets deteriorate when collateral loses value and loans turn bad, and financial instability may threaten. Unemployment may rise, and if nominal wages are rigid downwards, deflation means that real wages do not fall but increase, further increasing unemployment. All this may contribute to a further fall in aggregate demand, a further increase in deflation, a further increase in the real interest rate, and bring prices and the economy down in a deflationary spiral. Therefore, a liquidity trap with the associated risk of a prolonged recession or even a deflationary spiral is a central banker’s nightmare.”
(Svensson, 2003)

Reference:

Svensson, 2003 – http://www.princeton.edu/svensson/papers/jep2.pdf

Mortgages, Milk, and Cookies

There are a lot of different scenarios that find people in a position where they are unable to pay for their house.  Some lost their job and simply don’t have the money.  Some agreed to mortgages that had rate adjustments built in that they never thought would happen, but did.  Then there are those few who find they could pay, they have the money, but they don’t want to because the house isn’t worth it any more.  The attitude that created this last little niche of the mortgage meltdown can go away immediately.

Newsflash: The house is worth whatever you think it is worth until the moment is sold.  If you aren’t in the process of selling it, who cares if your neighbor got less for their house than your mortgage balance?  Your house is your house; your mortgage is your obligation.  The only thing in this scenario “worth nothing” is your word if you decide to not pay when you have the ability to do so but don’t feel like it.

Look at it this way.  Imagine you buy a gallon of milk at the gas station on the way home.  You leave the gas station and realize you need a couple more things and need to stop at the grocery store too.  You run inside and see milk is cheaper at the grocery.  All the sudden your gallon of milk isn’t worth what you paid at the gas station.  Are you going to call your bank and stop payment on the check you wrote to the gas station?  Maybe you’d try explaining to them that the milk you got just isn’t worth it any more and the bank can just take your jug of milk if they don’t agree.  I doubt anyone would seriously consider this an option.

So here’s a suggestion of what to do instead.  Go buy a gallon of milk.  Maybe get some cookies to go with it.  Go home to your nice little house, sit at the kitchen table with a glass of milk and some cookies and write the check to cover your mortgage.  Repeat this each month and you’ll start to feel better about your house in no time.

When Revenue is disconnected from Service

I wanted to write about the shutdown of newspapers weeks ago when the Rocky Mountain News published its last issue.  I held off because I didn’t know how to give the story the right gravitas.  In case you missed it, and you aren’t alone if you didn’t, there is a pretty big problem brewing.

Here’s the problem.  Newspapers got themselves in a pickle.  Their purpose in society was to provide information to the public so the rest of us could go out and do our daily work.  You and I have to do these jobs and don’t have time to check in on the police blotter or the capital or the latest tragedy; newspaper reporters do that for us and we pay a very small price to get access to the information they found. A long time ago, readers of newspapers realized that if they could get a little blurb thrown in the paper, say they had a chicken to sell, they’d have an easier time selling the chicken rather than just walking up to every person on the street and asking them if they want a chicken.  Some savvy business folks got on board and figured out if they bought some space in the newspaper, people would read that stuff too, and advertising was born.

So what’s the problem? The *money* newspapers make wasn’t connected with the *service* they were providing.  Many people viewed this as a good thing from the *service provided* side of the coin.  Proponents of a concept called “The Fourth Estate” were especially fond of the idea.  The “fourth estate” is the concept that news media form the fourth check-and-balance of government watching over the Executive, Legislative, and Judicial branches and informing us, the citizens, if any of them got out of line.  The theory was that as long as the reporters are free to work without being burdened with concerns for making money they’d be impartial.  Everyone let slide the fact that newspapers, like any other business, must take in money in order to continue operations.  It was easy to overlook the income needs because the newspapers were getting plenty of money from advertising.

But what if the advertising money went away?  Then who would pay the bills so the reporters could keep focused on being a watchdog or snoop on the government and anything else deemed newsworthy?  Why, the newspapers would have to shut down of course.  And that pretty much catches us up to today.

The Rocky Mountain News shut down. It was a participant in a protracted newspaper war in Denver that drove subscription and advertising rates so low they still haven’t recovered.  This happened years after a Joint Operating Agency agreement was put in place to call a truce between the Denver Post and the Rocky Mountain News.

The Seattle Post Intelligencer stopped printing a newspaper next, opting for an online only version.  FYI, the SeattlePI was also in a Joint Operating Agency agreement with the Seattle Times until that agreement was severed; but the SeattlePI never recovered.

News on the street is that over 100 newspapers have shut down since January 2008 (see the aptly named PaperCuts.com for details).  The current management operating procedure appears to be to (a) put business up for sale while (b) announcing you’ll board the joint up if nobody buys it in an arbitrary amount of time.

Now that the advertising has gone away and the newspapers that don’t just vanish are morphing into online editions.  The unspoken assumption is that the online world is a place where advertising is lucrative enough and the costs low enough that the business will make money.  Except no one is saying that out loud, perhaps because either (a) they realize they’d sound nuts if they did, and/or (b) they think its a big secret and want to keep the idea to themselves.  What they are saying aloud is that the print editions of newspapers were not sustainable.  At the SeattlePI, rough numbers indicate 160+ people made the paper go, and only 20 will remain to run the online only edition. What is missing from those numbers is how many people are involved in making the SeattlePI appear in a web browser?  There is a lot of work involved in making a newspaper website run, and most of those jobs don’t have to happen from within the walls of the newspaper office.  Server maintainers, network operators, advertising sales and click-stream analysts, database gurus, search engine optimizers, and (lest we forget why newspapers existed) content creators just to name a few.  The sneaky bit that makes this all seems feasible is that many of those folks can be ‘distributed’.  We used to call it “outsourced” but people became bored with that term and assumed it always had something to do with call centers overseas.  Guess what? The people who used to print the newspaper have been outsourced; the concept is not just for customer service anymore.

Here’s the next wave of this problem.  If advertising rates dried up in the print edition, what makes you think they won’t dry up in the online version too?  The equivalent of a “full page ad” doesn’t exist, and the banner ad version (be it in-page, pop-up, pop-under or whatever you like) only generates pennies on the dollar compared to a print ad for the business displaying the ad.  You can hear the execs now; “it’s OK, we’ll make it up on volume”.  But can they really?

The Cellular Sell out

Global Tower Partners.
Crown Castle.
American Tower.

Names you probably don’t know.  AT&T, Verizon, Sprint.  Names you probably do.

Would you be surprised to find out that the list of names you know, the cellular companies, have been selling off their cellular towers to the companies whose names you don’t recognize?  Those three names happen to be the top three tower companies in the United States.

At some point, you have to wonder if cellular companies have sold their own ability to do business.  Outsourcing is not new. Originally, the concept was applied to non-essential services.  Then it reached into services that were necessary to have done, but not necessarily done by the company.  Now outsourcing has moved into essential services; as in, we can’t do business without this being done and we are wholly dependent on someone else doing it.

Information technology is an easy target for outsourcing.  People get it.  As an example, say Red Wing Shoes was in the business of making, I don’t know, shoes. Just for arguments sake.  Wouldn’t it be reasonable for them to outsource their information technology to someone else?  Say, someone who does IT.  They, Red Wing, could then focus on shoes and the outsource vendor could focus on IT.  Then let’s say they outsource maintenance on their shoe making machinery. I mean, they are (presumably) in the business of making shoes, not in the business of maintaining shoe-making machines.  You hesitate, but then go along with the argument.  Then Red Wing decides they are not actually in the business of making shoes, they are in the business of designing and selling shoes.  The entire manufacturing process can then outsourced.  I’m not saying it happened that way; Last time I was in Red Wing, Minnesota (home of, yep, Red Wing Shoes) there were still several buildings that say Red Wing on the side and appear to be fine places for the making of footwear.

What I am saying is that outsourcing to the core is what is happening with your cellular service.  Cellular companies are trending towards not being in the business of providing the service, but rather in the business of marketing the service and, well, I’m sure they actually do something else but it escapes me at the moment.

The question is; how far can this be taken and still be considered a method of freeing up the company to focus on its core business?

Social Media in the media

While pondering an entry for Where’s Adam’s iPod an article in the Financial Times caught my eye.  I decided to take tangent with this entry focusing not on where Adam’s iPod (could have) gone, but on what I would’ve been thinking while there.

The article was inappropriately titled and not that important, the focus was on the corporate use of blogging and social media (the two being distinct from one another but blurred in the story).  The story started in an engaging manner relating a recent incident involving Motrin.  The short version of the Motrin case study goes like this; an advertisement for Motrin showed moms suffering pain from wearing baby-carriers, and of course advocated for the use of Motrin to relieve that pain.  According to the article, this angered some people who took the ad to imply babies were a pain.  Isn’t there a famous quote about nothing bringing people together like a common enemy?  Famous quote or not, it worked in this case.  Eventually someone in the marketing department of McNeil Consumer Healthcare e-mailed bloggers and the situation subsided; at least for the purposes of the financial times article.

Here’s where things get sketchy. The financial times article then made the leap that many editorials make, assert something as true then rally the rest of your story around it.  The assertion in this article was that the Motrin situation “…illustrates the power of social media”.  Presumably, they meant the power was something more than a force that could drive a marketing department to write an e-mail.

The article then got interesting again not for what it said but what it described.  It described companies creating vast war rooms of bloggers and social media surfers.  These folks need bosses, so companies were also described as creating high level positions with titles such as “…director of social media, head of communities and conversation, vice-president of experiential marketing, and digital communications manager”.

At this point, I’m going to make an assertion; there are probably three camps of people reading this:
-  Camp 1, those who think its cool someone could get a job where they are paid to browse Facebook, MySpace, and blogs looking for bad press.  Perhaps even becoming so good they eventually could get promoted to a job bossing other people around, telling them to browse Facebook.

- Camp 2, those who read the job titles in the previous paragraph then rolled their eyes and/or groaned.

- Camp 3, those who could not care less other than to wonder how people get away with this stuff.

To Camp 1, I say shouldn’t you be updating your Facebook status about now?

To Camp 2, I say nothing but we share a knowing glance that in 6 months the people with those titles will be out on the street and busy figuring out how to reword that phony title on their resume into something marketable.

To Camp 3, I say read on to find out how they can get away with this.

These made-up jobs exist at the intersection of media, marketing, and customer service.  All three of those areas are important to modern business, and share a lack of industry standards.  Put another way; everyone has to do it, and nobody has to do it the same way.  Why? Maybe because many in large corporations when it comes to PR, marketing and customer service, each company believes their situation is unique and not bound by what the other person is doing.  These areas also have in common a lack of measurability.  There simply is no way to calculate the actual dollar value of good or bad publicity.  However, everyone agrees that this publicity has some value and therefore it should not be ignored.

Ultimately, this train of thought leads to the idea that good publicity roughly equates to advertising and since advertising has a cost, free advertising though good publicity is a good deal.  Therefore, this logic asks, what the harm would be in hiring someone to manage the publicity effort.  As long as they are paid less than the equivalent expense in advertising dollars, it’d be fairly easy to persuade a marketing department to direct a group of people to manage this “free” advertising.

So the next time you are socializing in your social media of choice, rest assured that the person responding to your “friend” request at XYZ Corp. is probably sincere, informed, and willing to listen to your opinions.  After all, they are being paid to support their social network.

Time (mis)Management, the Personal Planning List

I keep a task list, items are crossed off as they are done and the whole list is refreshed weekly.  Actually, this is more than just a single list.  It has three sections; what was done last week, what I plans to do this week, and what is on hold for a future week.  I say ‘what I plan on doing’ rather than ‘what I want to do’ because the items on the list are not always things I want to do.  Some are things that have to be done and some are things that should be done but might get pushed off indefinitely if they didn’t appear on a task list.  The premise here is that eventually my desire to cross that undesirable item off the list will override my acceptance of just bumping it one more week.

The list started as an outgrowth of a weekly status report I do for work.  I figured if my work time is worth planning (with the intent of making it more efficient and accountable), my personal time must also be worth planning.  After all, there is less personal time in a workweek and it is precious, so why not make the most of it.  At the time, I also was very busy in the evenings and felt I didn’t have any time to do the ‘fun’ stuff, so why not schedule some fun? So the logic went, and that’s where it ended too.

The problem was that the list had become a slave driver.  The thought had been rolling around in my head for a while and really crystallized last week when I was walking through the lobby on my way home from work.  There was a young lady sitting in the lobby while waiting for her bus.  She was reading a book very intently while she waited and seemed to really enjoy it.  On that particular day she was smiling and almost giggling, then glancing up to check if her bus had arrived.  Noticing other people were around she quickly wiped the smirk off her face, embarrassed or just not wanting anyone to think she was crazy.  Regardless, she certainly didn’t seem concerned about her To Do list.  I was jealous.  We all know that Jealousy is one of the seven deadly sins.  What, it’s not?  OK, Envy but that’s not important right now.  What was important is that my To Do list was supposed to free me from a dreaded Not Getting Anything Done existence (Sloth for you deadly sin trackers).  However, in the process it had stealthily swapped my book reading smirks for crawl-space grimaces while doing whatever errand happened to be at the top of The List.

So where did it all go wrong?  The idea behind the personal task list was sound; reserve time for the important things and the important things will be done on time.  Declare personal stuff important and personal stuff will be done too. Put fun stuff on the list and fun will happen.  The idea broke down when the list got bigger than the time available.  The fun stuff kept getting pushed to next week.  The only thing worse than having your fun-list repeatedly bumped to next week is being constantly reminded by the monotone list-voice, “sorry, fun has been delayed, please try again next week– in the meantime, go fix the grout in the bathroom.”

Crying and complaining over unfinished list-business wasn’t on the list of things to do this week so I’ll switch gears to how I’ve started to fix the list.  Step 1 was adding to each item on the list a day for which the item was planned.  Step 2 was adding a time allocation.  Some items, such as “Update the family budget” could turn into hours and hours of number crunching, so slices were implemented.  The task was no longer “Update the budget”, the task was now “Spend a half-hour on budgeting”.  Step 3 was doing a reality check by placing the list items in a grid to see if everything could be done.  If the tasks didn’t fit (squeezing 8 hours of bill paying, home improvements, exercise, and fun time into 3 hours in evening just wasn’t realistic), tasks had to be shifted around.  Step 4 was cutting crap.  Things that were just not going to be done but still had merit got moved to the “On Hold” section, things that had no merit were set free from the list.  All of these steps were done before the list went to the printer.

That is right, the printer.  In this world of blogs, e-mail, PDAs, face-books and twitters (all of which I have), this list goes to the printer.  Why? I wrote in a previous post about base lining and re-base lining when a project was hopelessly off track.  The list doesn’t get re-base lined.  There’s no revising the list mid-week to feel better about the unfinishable business (yes, I know, unfinishable is not a word, but it should be).  If an item isn’t done, it isn’t “promoted” to the “finished last week” section.  It languishes on the To Do list until guilt goads me into doing it, or surrender scuttles it to the On-Hold section.  Re-base lining was about injecting optimism into a project, this approach is more like water-drip torture.  Drip, drip, drip- until you scream, “OK, I’ll fix the sink”!  After a few weeks of doing this I noticed this gunk appearing all over the list, like calcification on a leaky faucet.  Little clingy tasks that at one point seemed like things I should do, but ultimately didn’t get done because they were small, insignificant, and could wait.  Every once and a while I’d scrub the list, cleaning out the gunk and symbolically acknowledging that I don’t need all that crap cluttering up the list, and more importantly, my time.

I wish there was a happy ending to add at this point.  An ending about a nice shiny list, gunk free and fitting perfectly into the free time of the week.  There isn’t, not exactly.  The list has been radically de-gunked, but is still too long.  About 70% of last weeks list got done, a good number but not what was planned.  More fun stuff is getting mixed in, revealing a new problem– there are far too many ways to amuse oneself these days (movies, music, books, pets, games, TV, web surfing).  An interesting side-effect of the growing on-hold section has also appeared; sometimes it’s fun to cherry-pick things off that list and, gasp, get them done.  Funny how those ignored bastard stepchild tasks can be reborn as delicious alternatives to this weeks planned drudgery.

So instead of the aforementioned happy ending, the list continues to evolve.  At the end of a year, I’ll have 52 pages.  The top third of each page will show what actually was done in the previous week.  Then I can sit down and see what I really want to focus on for the next year.  Gradually, this list will tighten into tune like strings on a violin.  They screech a bit now, but I’m expecting a much sweeter sound in the future.  Gunk free.

NaNoWriMo’s Lessons in Project Success

It is looking like National Novel Writing Month (NaNoWriMo) will end not so much a failure as a success in unanticipated areas. NaNoWriMo is a contest; write a 50,000 word novel in on month. November to be exact. There’s a very active group of people who pursue this challenge, a considerably smaller number succeed. Success is referred to as “Winning”, so anything else is “Losing”, right? Not so fast.

Like many endeavors, failing at the primary goal can still leave the landscape littered with successes in other areas along the way. Take my experience as an example. At least three successes were spun-off from the NaNoWriMo project aside from the primary goal.

The first spin-off success came from one of the most common pieces of advice I read in preparing for NaNoWriMo. The advice boiled down to the idea that when faced with multiple tasks, people succeed at their number one priority. Of course, the NaNoWriMo wrote that ideas as “Make NaNoWriMo your number one priority”. In my case, and prior to NaNoWriMo starting- perhaps even prior to reading that advice (its all a bit fuzzy when viewed from here at day 23 of November), I had committed to a volunteer project. The project was writing some software that turned out to eat every waking moment between the first and 15th of November, as well as more than a few moments that were designated for sleeping. I say that not as an excuse, although it is a pretty good one, but to illustrate the point that I succeeded at the project I had placed as my true number one priority; getting that software done.

The second spin-off success has been the constant admonition by the creator of NaNoWriMo, Chris Baty, to embrace imperfection. Chris’s advice both in his book and in pep talk e-mails sent to the 116,000+ participants of NaNoWriMo on the topic of perfection and the lack thereof is to just go for it and keep moving forward. Endlessly rewriting and perfecting is not conducive to the true goal of a 50K draft. This bit of advice could easily be applied to many projects that start out with good intentions and get bogged down in beautification plans. Put another way, rough but done is much better that perfect incompletion.

The third spin-off success could be summed up as “Plan your work, work your plan, and re-baseline when you have to”. On day one of NaNoWriMo, the goal is 50,000 words in 30 days, or about 1,667 words per day. What happens when you get behind? Constantly beating yourself up over yesterday’s low production does not improve it. Base lining the project over again at your new place and target can provide a refreshing motivation to get things moving. Creating a base line that is realistic helps to. The goal here is to succeed, and lying to yourself rarely results in a resounding victory at project completion.

Transition Time

It is transition time!  From summer to fall weather, holiday decorations in the stores, and the executive branch of the federal government from republican to democratic control.

The summer to fall transition is reflected in our time change.  Maybe we should make that the “official” end of summer.  Once you start messing with daylight you may as well attach a season to it.

Yes, I was serious about the holiday decorations transition too.  The coffee shop I went into today was decked out for the holidays.  Granted, they were using a brownish color theme—maybe they’ll swap it out for traditional red/green later in the season—but still, isn’t this a bit early?  Only those in retail truly know.

Finally, about the government transition thing, well nobody is questioning that.  I debated picking up a newspaper for a keepsake but then thought, “Nah, that’s stilly of me.  People don’t do that anymore.”  I got home and heard the New York Times went back to the presses, producing an extra 75,000 copies in the wake of huge demand.  Guess I was wrong, maybe this is a sign the printed news press isn’t dead.  I’m OK with that.  I still like something about browsing a newspaper, the way news stories are laid out in a way that Internet surfing can’t replicate.  There is also the tactile sense of a folded newspaper in your hand and trying to hold the pages so they don’t fall apart or flop over just where you wanted to read something.  Reading a newspaper really is an acquired skill.  Nevertheless, I digress.  This was about transitions, not the fate of the printed press.

If you were to think of the federal government like a corporation, the CEO was just fired and the board of directors has been shaken up.  What’s a line worker supposed to think?  Probably not much since it is a big organization.  As long as the whole place isn’t going to fold over night there really isn’t much that will change quickly.  Big organizations (corporate or government) turn slowly.  Even with the PR about new management and change, the new organization has to operate with the same external constraints.  The money situation hasn’t changed and the works in progress are still there, and while the long range goals may be altered today’s work still has to be done.  Probably the biggest influence short term will be the addition of some entertaining (if your amused by such things) speculation about who will get what job in the new administration.  Just like a corporate takeover, the influential people will jockey for position and there will be a long list of rumors about who is going where and doing what.

So the transitions are on.  I’d suggest you find the good in them all and focus on that if you must.  One thing is certain about transitions; there will always be another one coming.  Seasons of the year, store decorations, and people who want to be boss.

A side note on the $700 Billion “bail-out”

Another post on the topic of applying an MBA.

One of the skills that gets tuned (or at least well exercised) in an MBA program is looking at an issue and combining it with other issues then developing a combined solution.  You may have heard of this widely used methodology outside of the MBA world and referenced with the phrase “two birds, one stone”.

I wrote the following when commenting in an e-mail thread about the proposed $700 Billion bail-out.  Keep in mind this is just called a ‘bail-out’.  That’s just a catchy name for the media, but maybe I’ll get into that another day.  For now we can move on to something completely different…

In the future we may look back at this bail out as the point at which we privatized social security.  We all know a couple things from events of a few years ago:

1) In over simplified terms Social Security is not “Funded”, there is no bank account or lock box.

2) The ability of the government to make Social Security payments in the future is based on the ability of the federal government to make either (a) payments from income (taxes in, social security checks out) or (b) to make payments from assets accumulated through the sale of treasury securities, securities that are backed by the good faith and credit of the United States Government.

But what if those treasury securities are backed not just by the good faith and credit of Uncle Sam, but also backed by actual shares of real mutual funds (constructed from traunches of various grades of mortgages) held by the federal reserve?  Isn’t that essentially the same as “privatizing” social security?  I know its not the individual accounts usually associated with privatization theories, but in essence the ability of fulfilling social security obligations in the future would rise and fall with the value of these government held assets.

Conspiracy theorists, start your engines.  Maybe this is all part of a Grand Scheme…

It’s the process, stupid (or stupid process?)

I thought it’d be good to write some entries on how I’m applying MBA knowledge at work.  Long pause.  Yeah, I too then thought that sounded boring.  So all I had to do was figure out a way to write about applying MBA knowledge *without* it being boring.  This of course also assumes this MBA knowledge can be and/or is applicable.

Let’s take care of that last issue first. It is applicable.  Pretty much any past life experience can be applied to things you do today (and will do tomorrow) so that isn’t saying much.  It may not be a direct “you learned X at b-school and apply X at work” type of applicability.  Sometimes the knowledge could be more subtle; like more naturally being patient, thinking through an issue then presenting a counter point (or support when appropriate) when an issue is raised.  The knowledge might be a side effect, like better writing skills.  In my case, you only need to read this post to think you can rule that one out, but my work-related writing has improved.  Think of this writing as just us chatting.

Then there is the process related knowledge.  In the MBA program I went through the school used a very formulaic approach that I’ve mentioned several times and referred to as problem based learning.  Call it what you want it’s a process, repeatable and applicable to many different topics and scenarios.  You probably use many different processes each day and yes, some are discussed in MBA programs.

Some of the processes used in business are not formalized in a document, like individual ‘getting into work and getting started’ process but are carried out in the same way every day.  Others are probably documented in a way that is needlessly complicated (everyone knows how to play Monopoly but probably wouldn’t describe it the way the official rules do, now go read your companies computer security or document retention policies and procedures then see if you do it but don’t describe it like that).  Others may seem made up (see human resources recruiting and candidate evaluation processes).  Sometimes the process itself, with or without documentation, can be complicated (go ask someone in IT how to approve a change to a capitalized software project).

Identifying processes at work and determining how to participate, manipulate or improve them has to be one of the most common MBA knowledge applications I’ve encountered.  It’s also a hybrid of the “subtle” and “side effect” types of knowledge.  There wasn’t a course in it; it came along with a couple years of going through an MBA program.

So for those still in a program (and judging from comments and web stats, there are quite a few of you here), take a moment to think about the process your classes are using.  You may be aggravated by it now, but examining it and working though may turn out to be one of the most useful things you get out of some classes.