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Saturday, May 4, 2013

Gilding the Dandelion: Management as Leadership

Wendy Lea, the CEO of a customer “experience” start-up, discusses her leadership approach in an interview with the New York Times. I contend that what she takes to be leadership is actually management. Put another way, she is gilding the leadership lily. Unfortunately, that practice is ubiquitous in the business world. 

Material from this essay has been incorporated in The Essence of Leadership, also available at Amazon in print and as an ebook.


Adam Bryant, “A Leader’s Test: Balancing Drive andCompassion,” The New York Times, May 3, 2013.

Tuesday, April 30, 2013

“No Loans” on Gun Sales: G.E. as Socially Responsible or Financially Savvy?

In the wake of the Sandy Hook school shooting in Newton, Connecticut that took place in late 2012, General Electric announced that the company would no longer finance consumers’ gun purchases. Russell Wilkerson, a G.E. spokesman, wrote in an email that the new policy was being adopted “in light of industry changes, new legislation and tragic events that have caused widespread re-examination of policies on fire-arms.”
                                                               Do business principles mandate treating this product like any other?  Source: NBC News
In other words, the policy shift was not simply a reaction to Sandy Hook. Rather, the company’s executives were adapting to changes in the organization’s environment, including the industry itself. This opens up the question of whether the new policy can be classified under the rubric of corporate social responsibility (CSR). Perhaps the adaptation was simply good business, with the appearance of “CSR” adding some reputational capital through a good public-relations campaign.
Well-meaning moralists in particular may have a tendency to project their own salient sense of obligation onto other people, and even pets. Rather than feeling a sense of loyalty, for example, your dog may simply be keeping close by because it is hungry and is accustomed to being fed by you. Once while I, a mere ten-year-old in the forest behind my house, was setting up what I optimistically thought could be a rabbit trap out of a waist-high old wire cage, my first dog walked up to me holding a rabbit in its mouth. I have no idea how to explain that—certainly not by positing any moral obligation. Perhaps my dog had merely been hungry. An organization can be similarly thought of as an economizing organism.
Generally speaking, an organization, like an organism, must adapt to its changing environment, or risk being replaced by a competitor that has achieved a better fit and thus can operate more efficiently in order to survive. Does such adaptation, which renders a company more fit by means of a sort of competitive natural-selection process, involve obligation manifested as responsibility to that environment?
After all, to do one’s duty is not typically said for what a person wants to do anyway. You would quickly see through my claim that it is my duty to eat the remaining chocolate sundae (so not to waste food). “Someone should eat the ice-cream before it melts; I suppose I’ll have to force myself.” People do not typically fall over themselves to do something out of a feeling of responsibility. For the sense of obligation or responsibility to be the primary motivator, the person (or persons, as in the case of a company) must not otherwise be inclined, as from the anticipation of a benefit, to act. When stimulated, self-interest tends to eclipse the felt-duty of responsibility. This thesis can be applied to GE’s policy on financing firearm purchases. Can the policy fall under the rubric of corporate social responsibility if the costs and nugatory next to the benefits? In other words, what if marketing the policy is simply good business?
As for the costs, GE Capital Finance had already stopped providing consumer financing for new gun-shop customers in 2008. The policy change in 2013 merely extended the ban to existing customers. It is not as though potentially new customers would be discouraged. Even if new and existing gun customers had been eligible for financing before the policy change in 2013, we would still be talking about a small fraction of GE’s revenue. It might simply be good business to end such a small revenue stream. Wells Fargo had stopped financing gun purchases in 2004 “for business reasons,” according to company spokeswoman Lisa Westermann. Perhaps it was just good business behind GE’s decision to extend its ban in such a way that the policy would be good publicity without much cost in the sense that the company could still make money lending to firearms purchasers in spite of the ban!
According to USA Today in 2013, GE’s “decision affects fewer than 75 retailers, which GE says is about 0.001% of all gun retailers.” This is because the policy “affects only retailers that sell firearms exclusively.” General merchandise stores, which sell other products as well as guns, are excluded from the company’s lending ban. Walmart is such a store. This represents a gaping loophole, making the policy as publicized misleading, and therefore suspicious as to the motive behind it. Put another way, GE would still be financing guns—just not through stores that sell only guns. Were the executives at GE really feeling a responsibility not to encourage gun sales after what had happened at Newtown, Connecticut, they would not have made the distinction unless they were legally obligated with retailers like Walmart to cover any big-ticket item. In that case, GE should have objected to storylines such as the one in USA Today, “GE Won’t Make Loans to Buy Guns.” Especially if the company was making this misleading claim, the gap between the publicized CSR and the actual policy could mean that the intent had been to use “marketed CSR” for reputational capital with little cost (i.e., good business).  
If most of GE’s lending on gun purchases was through multi-merchandise retail stores, GE could capitalize on sympathy from the school shooting without having to give up much financially. Interestingly, the shooter’s father, Peter Lanza, was a GE executive at the time—the company being based in Fairfield, Connecticut. If GE executives had felt obligated, being at such close range to the tragedy, to stop contributing to gun sales, why then the loophole and misleading storyline? Something is not quite right here. Taking rather than using a difficult decision on the basis of CSR would not involve manipulation. Were extant contracts a temporary obstacle, this would have been noted publically because the objective would have been to stop lending on gun purchases rather than to grab as much good public relations as possible without much cost.
If risk or cost is of concern, being socially responsible may not be the best option. As in the case of gun control, entering a controversial debate puts a company at risk for being negatively viewed by the “other side.” A USA Today poll taken at the time of the policy change in 2013 found public support for new gun-control legislation “slipping below” 50 percent. GE risked many people agreeing with John Meek, the owner of a gun store in Illinois, who called GE’s policy “an injustice” because the instrument rather than the user is being blamed. In other words, being socially responsible may not be as “politic,” and thus as good in terms of cost (i.e., lost non-gun-purchasing customers who disagree with the company’s position on gun control) and reputational capital as managers may suppose. Where to executives’ motive is based on a societal obligation, these hits are willingly taken, but where CSR is being used for image purposes, unanticipated costs are highly relevant.
Put another way, a company whose policy is forged out of CSR principles “puts its money where its mouth is,” whereas a company whose policy is good business including the marketing of CSR does not depart from business principles. There is reason to suppose that GE falls in with the latter rather than the former category, given the loophole, the “CSR marketing” benefits, and what little the company stood to give up. GE’s policy decision can be characterized as ethically misleading, likely not primarily motivated by a sense of social responsibility to curtail gun sales, and good business. I suspect that the vast majority of corporations are like this, rather than being truly socially responsible, and yet are viewed as such by good-meaning mortals who innocently project their own moral values on to what is actually effective, rather than “good,” marketing.


Paul Davidson, “GE Won’t Make Loans to Buy Guns,” USA Today, April 25, 2013.

Monday, April 29, 2013

Should Icelanders Push for E.U. Statehood Anyway?

In late April 2013, a slight majority of Icelanders who voted in the parliamentary election went for a return to the center-right Independence and Progressive parties even though they had been responsible for the banking crisis that bankrupted Iceland. The two parties promised to forgive or renegotiate the Icelanders’ personal debt and end the four years of austerity by lowering taxes, ending capital controls and stimulating foreign investment, according to the New York Times. The center-left governing parties, including the Social Democrats, had cut spending and raised taxes, making the carrots being offered by the center-right parties all that more alluring. Although not the main issue of the election, the prospects for Iceland becoming a state in the European Union lessened significantly with the ousting of the center-left government. Unlike that government, the center-right parties voiced skepticism and advocated a referendum before any the government would take any further steps. In the wake of the election, it might be helpful to reflect on whether Iceland should become a state. After going over some economic and political factors, I want to highlight subtler factors whose influence is typically understated in newspaper headlines.

The complete essay is at Essays on Two Federal Empires.

From this perspective, it can be said that Britain are Ireland are part of Europe, but what about Iceland? Source: luventicus

Sunday, April 28, 2013

Return of the Mortgage-Based Bonds: Another Bubble in the Making?

In case it has been a while since you have been entertained by going around in circles while sitting on a painted wooden horse, permit me to re-introduce you to the Merry-Go-Round, a staple at virtually any amusement park.

The world itself might just be such a ride, with us mere earthlings playing out our respective roles while spinning around and around as the world goes by once and then again, and again. Lest it seem monotonous to go around in circles, it is possible—at least in principle—to learn something new on each pass.  Weighing against a learning-curve that might thwart an eternal recurrence of past failures are other, less salubrious proclivities of the mind. These include (but are not limited to) avarice, power, and even the force of habit. More damning still may be the arrogance of pride—the hubris of presumption. 

The full essay is at Another Bubble.