Friday, April 14, 2017

What do Bill Lumbergh and Warren Buffett have in common?

I have always thought of fictional Bill Lumbergh as a middle management puppet.  As I reexamine I see him more as a Warren Buffett disciple.  Lumbergh was smart enough to bring in a pair of consultants to analyze his company, Initech.  As part of his introduction of the consultants(the Bobs) to his employees a banner is hung and the buzz phrase is established.

With every decision you make is this good for the company?  


I don’t think this cinematic excellence pushed me down that path but, now I am one of the Bobs.   My business partner and I have a strong distaste for Michael Bolton music.

As simple as the phrase is we often see making decisions that are good for the company isn’t easy.  Warren Buffett writes about a concept that he calls the “institutional imperative”. The premise is any institution's inherent propensity to do dumb things simply for the sake of doing them. In his 1989 shareholder letter to investors, Buffett opines:

“I thought then that decent, intelligent, and experienced managers would automatically make rational business decisions. But I learned over time that isn’t so. Instead, rationality frequently wilts when the institutional imperative comes into play.”



The institutional imperative can take many forms.  

Publicly traded companies who overly focus on the current stock price, often pressuring Wall Street analysts about their investment rating, are all part of the institutional imperative. Focusing on the stock price or caring about Wall Street’s investment rating is counterproductive. This behavior creates a major distraction for company management from focusing on what is important— running the business.

We see it with financial services companies and insurance agencies.  Their top priority is getting new clients.  It is #2 as well.  Is that new client going to be as profitable as an existing client?  Have you maximized your existing portfolio?  Have you as the owner improved your expertise and given the same mandate for your employees?  The focus is on the wrong thing.  It starts at the top.

This seems to be particularly true if the institution in question is a bank. Take, for instance, the industry's love affair with auto leasing back in the 1990s. For a while, the business generated solid returns. Then, as is to be expected, competition intensified and returns fell to unacceptably low levels. Did most banks curtail originations or exit the business when profits began to dry up? Nope. Most hung on doggedly until profits turned into losses that eventually proved ruinous. Board members should insist on being regularly briefed on the profitability levels of various product lines and market segments, and should encourage management to make any needed changes before profit levels become unacceptable.



Maybe this is a stretch but, I never would have pegged Bill Lumbergh as a forward thinker.  He clearly had to intuition to bring in a consultant group to better assess his company.  Was he too close to situation to truly gage company efficiency?  Perhaps.  Was he a Warren Buffett protege implementing Berkshire Hathaway’s approach to business?  Signs point to yes.

Tuesday, March 14, 2017

The Pleat of Your Jeans (Cut of Your Jib)

Hey, the 80’s called, they want their pleated stone washed dad jeans back.  


I thought about something today.  My mind wanders, you see.  It has been a lifelong condition.  What I thought about was this.  What would be the goofiest clothing you could wear in front of your client and still close the deal?  Really think about it.  And if you have the stones, test your theory or challenge a colleague to a contest of creativity and will.  


A lot of us really “dress for success” because we believe that it boosts credibility.  This builds confidence, lowers fear of rejection and puts the wearer of those fine duds (at least in his or her mind) in a better starting place.  We play dress up to go on dates for the same reason.  We want to look our best, right?  There’s nothing wrong with that.  We want our clients to have the best experience that we can create for them.  Sometimes a casual approach is best for the client.  Other times, a more serious look is better.
Image result for men's pleated jeans 80's


But, won’t some people always pull it off a bit better?  Someone is always going to be taller, have better shoes, nicer hair, a smaller belt size or more desirable bone structure.  Some people are born wealthy, or are naturally smart or talented.  Someone will always have the upper hand in some regards and there isn’t a damned thing you can do about it.


However.. In other ways, the ways that count the most, you can outclass your most worthy adversaries.  Think about the thing you do best or know most about.  This might not be work related, but I’d bet that it’s something you care about.  If you’re a great surfer because you love it so much that you’ve worked at it, spending every opportunity in the water, you don’t need the newest and greatest board.  You can outsurf the weekend warriors on a yard sale board that’s held together by duct tape.  If you’re a great golfer, you can play with borrowed clubs and still hit lasers.  You may be growing enough food in your backyard to eat for a year while your neighbors harvest weeds and clip coupons for 2 for 1's on creamed corn and succotash.  I’m sure you get the point.


There are some pretty good salespeople out there (By the way, we are all salespeople).  I define a great salesperson as not only great at getting the business, but doing it with perfect focus on the client’s need.  I consider myself to be in this class of people.  So, back to the pleated jeans.  I would look and feel pretty dumb in pleated jeans, but I can’t think of a situation in recent history where I wouldn’t have still made the sale wearing them.  I have a lot of experience with fashion faux pas according to my wife, so it wouldn’t be as much of  stretch for me as it would for most.  

You want to be in a position in your career where your expertise is in such demand that the quality of your work can always overcome the distraction of goofy looking pants.  This is because your clients and prospects probably have other distractions you’ll have to overcome  that you can’t see.  It could be a competitor of yours or a false preconception.  If you aren’t there, you have to spend time getting there.  If you don’t, no clothing budget, fancy watches, euro car leases or anything else done in an effort to make you look like you’re good at your job will help you.

Tuesday, February 14, 2017

The Improbability of Practicality

The Improbability of Practicality


I want to have a round table exchange with those few of you all who run across my internet leavings.  Since I was a kid, I’ve had a contempt for things that seemed impractical and irrational.  I’ve also desired to know why these things that seemed idiotic to me were in practice.  I asked often, but received a lot of those answers like… “Because it’s always been that way.” or .. “If it ain’t broke..”


Here are a few of the impractical things that bothered me as a kid.  Daylight Savings Time, Neckties, Itchy Sweaters, Standing in Lines….


Let’s talk about neckties for a second.  This article of clothing makes about as much sense as a powdered wig.  Maybe less.  You know what does make sense?  A bib.  Babies and lobster eaters wear those with some measure of success in keeping their shirts clean.  Ties take longer to get around your neck and only guard a small portion of your shirt.  They’re uncomfortable, and restrictive and they cut off oxygen to your brain, which makes you stupid.  I have no concrete proof of the stupidity but I have met many tie wearing dummies.  And anecdotal evidence counts for the purpose of this article.  


Let’s say it takes 2 minutes to tie one and you wear it to work for 50 weeks per year.  That means that you are wasting 500 minutes per year putting on a tie.  Seems pretty dumb to me.  Look up the origin of the neck tie if you don’t know it.  


Here are a few of the things that bother me now...some more than others.  Daylight Savings Time, Neckties, I can wear whatever I want so the sweaters don’t bother me, Standing in lines, Interactions with scripted worker bees, red and green on port-a-potties but not on bathroom stalls (my wife’s gripe), Cranberry Sauce, Car Speedometers, Banker’s hours, Settled science,  Double doors and one is locked, This page is intentionally left blank, Bad Grammar, Backing into parking spots, Irrational fears, vanity, The cable and internet bill creeping up while new customers pay half, talking to the scripted cable company worker bees.  There are many more.



I better say that there are lots of impractical things (by some measure) that have value, like art and sports, but we accept that because these things entertain and inspire.  And they are fun.  We need fun in our lives.


Daylight savings time.  What benefit could it possibly have nowadays?  Time is relative, so just pick a number that matches where the Earth is, in relation to the Sun and stick to it.


Cranberry sauce.  I have no problem with it at all, but why is it only served at holidays?  It actually makes a pretty good “poor man’s currant jelly.”  It’s good on venison and pork.



Speedometers.  I drive a ford explorer.  I doubt it can achieve 160 mph.


Banker’s hours.  Let the bankers have those.  Otherwise work should be performed at each individual’s most efficient time of day.  What’s so special about the hours of 9-5 that work must be performed then?  What if you want to get done early or start late so you can do something else in the same day?  Inflexibility stifles productivity. https://www.youtube.com/watch?v=LwDMFOLIHxU


Settled Science.  During 90% of our recorded history, the Earth was flat.  50 years ago, smoking cigarettes was good for you but cannabis would kill you and make you kill others, 40 years ago, Time and Newsweek printed articles on Global Cooling, yet many people still use the words “settled science.”


This page is intentionally left blank.  No it isn’t.  It has “This page is intentionally left blank.” written on it.  And why do you hate trees?


Double doors and one is locked.  Is this a candid camera trap or something?


Backing into Parking Spots.  How could this possibly make sense unless you are planning a quick getaway with your stolen merch?  These people are like the ones who are lurking around the parking lot for a better spot.  For what?  Are you planning on buying an anvil?  Because if you are trying to save time, well, you aren’t.


We don’t have to accept any of this “that’s just the way it is” bullshit.  We can eat ice cream for breakfast or have a beer at 4:49.  We can make changes to things that make no sense to us or just ignore them.  Every time I pull into my driveway, I wonder why the hell I bought a house that has 8 different roof lines.  I don’t recall having a few thousand extra dollars burning a hole in my pocket that I couldn’t wait to spend on impractical architecture, but here I sit.


Tell me about the things that make no sense to you.  And let’s talk about how to change them.

-Insurance Professor