Chapter 5: Avoiding Armageddon!

Yep, it’s the last chapter! Phew, I hope you are still with me after Chapter 4…hello, is there anyone out there???

I said that I would end with “…and we all lived happily ever after” but there’s a few people who stand in the way of this.

Let’s get personal – Hot Potato time

hot-potatoSo everything I’ve written so far may resonate with you…and yet you will likely reply that nothing will change because those in control have no interest in doing so…and so I need to write a couple of personal messages:

  • to existing free-floating shareholders; and
  • to ‘large corporate’ CEOs;

I totally accept that there will be no real change unless both of these parties understand, need and want it.

A personal message to all you existing free-floating shareholders out there:

Okay, so cast your mind back to the opening of Chapter 1.

I held out Henry Ford as someone with something important to say…but I also noted that he had a huge amount of luck – he was on the right side of a technological disruption.

This is the time to inform (or remind) you that there are loads of technological (and related business model) disruptions happening right now:

  • In transportation: autonomous vehicles that will disrupt taxis, haulage, public transport…
  • In power: electrical generation (such as solar) and storage (such as batteries) that will disrupt the incumbent fossil fuel industry and its distribution networks…
  • In finance: I’m only just feeling around the crypto-currency stuff (I confess to being a bit of a laggard!)…but I can see that the effect will likely be huge;
  • In production: such that people can 3D print their own products to their own specifications as and when they want;
  • ….and all the financial service knock-on effects of the above:
    • On banking (e.g. less cars on the road = less car loans)
    • On insurance (e.g. drastically less accidents = no need for car insurance)
    • On currencies and share trading
  • …and probably loads more game changers that I don’t know about and/ or don’t understand (I haven’t even mentioned the rather trendy ‘internet of things’!);
  • …and yet more that none of us yet know about but could be around the corner.

Now, for a nimble start-up with a true purpose, the above is exciting. Indeed, they are the ones driving it.

But for a traditional, large, shareholder-owned incumbent, this is the stuff of nightmares!!!!

Such an organisation finds it almost impossible to change even though (and this is the interesting bit) it can and does see it coming – it’s as if its feet are stuck in cement blocks at the start of a 100 metre race. Worse, they waste loads of time and money flailing around trying to move (perhaps via ‘innovation’ programmes1)…but don’t really get anywhere.

In short: If you are a shareholder in such a company, you’d better wake up soon…’cos Henry Ford’s modern day equivalents are coming at ya! Your horse doesn’t stand a chance.

If you think “nah, none of the disruptions affect my investments in companies” then remember that many periphery industries were also devastated when the horse carked it.

“Hang on – aren’t many of these technological disruptions coming from large corporations?!”

steve-jobsYes, they are…but what form do these typically take? And did they start off from such a ‘large corporate’ state?

Well, they are usually led by a seriously driven founder (and likely lead investor), who toiled for years, because their personal purpose was clear from the start…and it wasn’t to make millions – this was the result from their success.

We can name:

  • Steve Jobs2 at Apple (and previously NeXT and Pixar)
  • Jeff Bezo at Amazon
  • Larry Page at Google
  • Elon Musk at Tesla, SpaceX, SolarCity (and previously Zip2 and PayPal)
  • and, of course, Richard Branson3 and his Virgin Group
  • …and there are no doubt loads more ‘seriously driven founders’ you could put forward.

(Please note that I’m not holding any of them out as great leaders – that’s a totally different matter.)

“Quick – grab a seriously driven founder!”

Every traditional ‘large corporate’ would just LOVE to employ a seriously driven founder…but it doesn’t work like that – they are doing their own thing…and perhaps sold their company to you!

You can’t fake being a seriously driven founder – you either are or you aren’t.

But wait, the large corporates that you invest in employ thousands of really capable people who, whilst they may not have the desire to ‘go it alone’, would be really happy to give of their all for a really great company that they co-own with you, through sharing in its success.

This is to match the right model to the system type.

At the moment, Management may be:

  • giving lectures on “you need to be innovative or else we’ll die”; and
  • putting huge effort into attempts to kick-start this (such as by setting up worker clubs)

…but change the paradigm and they may be hugely surprised4 at who starts talking to who…about what…who then informally club together to take it further…who enlist the help of others to do a little experiment…and uncover/ solve/ create something no-one else had…and, wow, that result could just be amazing!

To close this shareholder message: Your Dead money is useful, important and appreciated but, for your own good, it needs suitably diluting with Live money. This is in your interest – do you want your investments to be worthless or priceless?

And to all you Investment Fund Managers out there: You spend your days passing around shares in such ‘large corporates’. If the above is even slightly close to what is happening out there in your world, then I present you with the following analogy:

You are essentially playing Russian roulette, passing the gun around with your fellow fund managers until it goes off in the hands of whoever happens to be holding it.

How about swapping to play games with companies that have a lot better odds!

A personal message to CEOs out there:

fat-catIf the common man might label you as a ‘fat-cat CEO’ and you are responsible for a floating shareholder-owned company then I’d like to ‘speak to you’ about your situation:

  • You’ve done well for yourself; you’ve risen to the top. You are financially secure, in fact ‘set up for life’;
  • You probably spend much of your time telling your employees about the importance of purpose, and about matching their personal purpose with the stated purpose of your organisation;
  • So, what about your personal purpose?5 Are you here on earth ‘just for the money’?
  • Or would you like to be known (and remembered) for creating and sustaining a truly awesome organisation, for the good of society?

If it’s no longer ‘for the money’ (because, frankly, you’ve got that box ticked) then I’d ask that you ponder this post, perhaps share it with your board, and have a discussion about how you could change (I mean ‘improve’) the ownership structure of your company for the good of all…and that includes your current shareholders.

Personally, I love what Handelsbanken has done. But I recognise that there are many ways to ‘skin a cat’ (there’s that cat again!)

I hear what you say but…

If you ‘get’ what’s written in this post but don’t want to change your world, then at least know that employees of floating shareholder-owned organisations distinguish that it is really about the profit…and many (most?) of them see the constant blowing of your ‘purpose trumpet’ as convenient propaganda i.e. not the rallying cry that you might imagine. Sad, but true.

A ‘half arsed’ attempt:

Now, it’s possible that you’ve taken this all in, can see some industry or societal ‘movement’ towards profit sharing, and feel pressure building to be seen to be doing something.

So to a warning: Don’t play profit sharing ‘dress up’ (i.e. pretending that you are doing it but then hiding behind complex scheme rules and playing accounting games). Your people will see right through it and you will be the same as, and likely worse off than, before (minus the costs of your failed propaganda exercise).

Only do it if you actually WANT to share the success of the organisation with the people who make it possible…and this will only be because you’ve truly understood the situation, the opportunity, and the immense and sustainable potential.

A thought to finish:

henry-ford-quote

…so, don’t think about the profit! Focus on the service…but change something with regards to your ownership structure so that you (and everyone else) can!

…and with that:

  • We all lived happily ever after (that’s nice 🙂 ); or
  • Armagedon!!! (bugger)

If you’ve got to the end…yes, this is it! – nice one, top banana, brilliant. Thanks for staying with me!

I don’t pretend that I’ve solved ANYTHING…but I’ve definitely ‘got a lot off my chest’ 🙂 . I also hope that I’ve helped you in some way. Perhaps not yet…but with what might come.

Normal ‘single issue’ blog posts will resume from next week….and now to go and lie down.

Footnotes:

1. On efforts to ‘get your people innovative’: You should know that incentives and innovation don’t go well together! Alfie Kohn writes eloquently to explain why research repeatedly shows that “Rewards discourage risk taking”:

“the risks we want people to take – being willing to explore new possibilities… – are minimised by the presence of rewards. An extrinsic orientation, for example, makes people less likely to challenge themselves. Instead, they are apt to choose the easiest possible tasks to do, since this maximises the chance of getting the reward and getting it quickly.”

And, just in case you think incentives and profit sharing are the same thing, here’s an earlier post that explains why they are polar opposites.

2. Steve Jobs:

“I was worth over a million dollars when I was 23. And over ten million dollars when I was 24, and over a hundred million dollars when I was 25. And you know, it wasn’t that important, because I never did it for the money. I think money is a wonderful thing, because it enables you to do things. It enables you to invest in ideas that don’t have a short-term payback. At that time in my life, it was not the most important thing. The most important thing was the company, the people, the products we were making. And what we were going to enable people to do with these products. So I didn’t think about the money a great deal. I never sold any stock [shares]. I just believed that the company would do very well over the long term.”

3. Richard Branson:

“My interest in life comes from setting myself huge, apparently unachievable challenges and trying to rise above them … from the perspective of wanting to live life to the full, I felt that I had to attempt it.”

4. Doing something about it: I find it really interesting that the talk around me in my workplace is all about the disruptions out there (i.e. people know about, and are interested in them)…but there’s little real passion to do something about it (i.e. actions rather than merely talking about it) because we’re all placed in our hierarchy with our cascaded objectives and incentive/merit mechanisms.

Take those crypto-currencies. I’m sure that there’s something really important within…but I’m not leaping about to DO SOMETHING. I’ve got ‘concrete feet’ just like many (most? all?) those around me.

Is this me being lazy? Is this me being some sort of organisational traitor? No, these are the behaviours that the current system creates.

5. Your personal purpose: Looking at Maslow’s hierarchy of needs (see nice piccie below), I’d ask you to reflect that you (as a highly paid executive) are in the wonderful position to choose whether you move up the scale – to esteem and, ultimately, self-actualisation.

More Money won’t get you there!

maslows-hierarchy-of-needs

Money is necessary for the bottom two levels of the scale (also referred to by Frederick Herzberg as ‘hygiene factors’), and might assist with the middle (though can you really buy friends?)…but, once these levels are in place, money has little (if anything) to do with the top.

Conversely, continuing to adopt a (potentially subconscious) position, and take actions, towards more ‘money’ will prevent you getting there…which can lead to unhappiness and (at the end) a sense of huge disappointment through wasted opportunities.

Reflect on how many seriously driven founders, not knowing what to do with their wealth and often becoming very unhappy, turn to philanthropy.

You can create an amazing organisation (and gain colossal satisfaction) by creating the necessary environment for all the people who work there…and this will require you to be courageous and think totally differently.

 

Social workers, Sociopaths and Politicians

silence of lambsI have written a few posts to date about money and one thing that constantly comes up in the mainstream media is pay. I break these ‘news’ stories into three categories:

  • Pay for social workers;
  • Pay for sociopaths; and
  • Pay for politicians

Warning: This post is a bit political…sorry about that. Normal service will resume once I’ve got this one out of my system.

Social workers:

I am using the ‘social worker’ label in a very broad way and deliberately so. I am referring to those workers who provide incredible value to our society yet do not get paid mega bucks for doing so.

You know who they (and perhaps ‘you’) are – just look for the perennial ‘offenders’ in the eyes of the establishment1 for complaining about their meagre pay. Yes, these are the health workers, teachers, emergency services (police, fire and ambulance) and so on.

Here’s the thing I find interesting about these social workers – we all recognise that:

  • we want ‘the best’ people in these roles: we have a vested interest since they nurture, develop and care for us!
  • (virtually2) all of them ‘bust a gut’ in their roles, doing far more than most of us should expect of them (or might do ourselves); and yet
  • for the value they provide to our society, the effort they put in and sacrifices they make, they aren’t paid well.

Classical economic doctrine would hold that, if you want the best, you have to pay for it. Further, if you don’t, then they will swap to complimentary careers that pay better.

But here’s the interesting thing: the vast majority of these social workers stay and soldier on in spite of the pay and conditions (i.e. the ideological policies handed down to them by politicians who have little real knowledge about what they are commanding).

This got me thinking: There is clearly an error in this supply/demand economic model. If I’m a social worker (using my wider definition), poorly paid, working long hours, and could get, say, an admin. job on similar money and far less stress…why do I stay and put up with this sh1t?!

Here’s my answer: Because they are paid in more than money – they are doing something that meets with their purpose (i.e. gives them great personal satisfaction). This, to them, is worth more than the monetary alternatives on offer.

And here’s the catch-22:

  • We want people like this to be doing social worker jobs! We don’t want people doing it ‘for the money’, we want people to be doing it because of the good that they do;
  • However, it would be very easy for society at large to take advantage of such people (in fact we do!), paying them poorly knowing that they can’t easily leave a job that they love.

I think society has to be thankful for, be respectful of, and do all it can to protect and support such people. This means:

  • providing them with a decent standard of living so that they can do as much good as possible, and not have to worry about the roof over their heads, the food in their bellies, the clothes on their backs and the bringing up of their families; and
  • listening to them, to use their undoubted passion and expertise to make our world a better place.

Sociopaths:

So, clearly, I put this group forward as a sort of opposite to the social worker. As usual, I want to get my terms right so here’s a definition:

“Sociopath: a person with a psychopathic personality whose behaviour is antisocial, often criminal, and who lacks a sense of moral responsibility or social conscience.“ (Dictionary.com)

I then turn my attention to executives and their pay. Here’s an illuminating graph:

PayGap

Bizarrely, rather than being ashamed of this graph, many an executive uses it as justification to lobby for more pay from their boards!

“Look at what he/she gets in comparison to me…it’s not fair – I need a pay rise!”

This is merely a never ending race-to-the-top argument.

Indeed, I know of one (Antipodean based) executive using it to argue that their high pay isn’t an issue because “look at the Americans!”. Yes, you poor thing – it’s all soooo unfair.

We are fed the line that they (the executives) are brilliant, that only they could do the job and as a result, their pay is totally rational and justifiable.

Even more weirdly, if a good candidate for leading an organisation told its board that they would do the job for far less pay than what the market was demanding, the board would likely think that they surely can’t be up to it!

Here’s a test for any board:

Test: Advertise the top jobs to people in the company for, say, 10 – 20x workers pay, see who applies and find the best one.

Likely outcome: The person selected may very well be someone with great passion, leadership and humility…where money wasn’t the driver…you know, where they truly believed in the organisation’s purpose and are willing to bust a gut to strive towards it.

Executives have conned us into believing that, unless they are being paid mega-bucks, then they clearly aren’t competent to hold the job…what a topsy-turvy way of thinking.

Worse still – the majority of executives preside over command-and-control management regimes as if this were a good thing. It is, for them…but not for their employees, customers and (as a result) their shareholders3.

Some daring thoughts:

  • if a job is so big that it really is so hard and complex that it is worth millions of dollars in pay…then the job is too big and needs breaking down into many roles.
  • just because a person happens to be brilliant at something doesn’t mean that we need to shower them with riches.
    • Who believes that the best teacher4 in this country (who shapes hundreds of lives daily over a dependably long and loyal career) should be paid many millions per year? Anyone?
  • the person who says that they need to be paid millions or else they won’t do it is likely not the best fit for an organisation – they aren’t really in it for the organisation’s true purpose, they are in it for themselves.
    • It’s no surprise that founders live and breathe their company – it is most likely about their passion rather than the money.

Cor, that’s all a bit controversial….I’ll be accused of being a socialist next….and then it’s not too far down the spiral to be branded a communist…I’ll get my coat!

Here’s a theory: If you are paid, say, 100+ times the amount of your workers and you think this is justified then you are a sociopath.

(Corollary: If you get paid this much and don’t think it’s justified then you are likely unhappy in yourself, with feelings of guilt, which isn’t very healthy for you)

Why do I put this theory forward?

  • you think that you are better than everyone else (with your sense of extreme entitlement); and/or
  • you have an unhealthy relationship with money (and are excellent at rationalising why you need it).

And, just to head you off from the ‘communist’ label you may be lovingly making for me right now, here’s where I turn sideways, go all Zen and pull out one of my favourite quotes:

“The meaning of life is just to be alive. It is so plain and so obvious and so simple.

And yet, everybody rushes around in a great panic as if it were necessary to achieve something beyond themselves.” (Alan Watts)

Or, put into this context: sure we need enough to cover our basic needs but, after that, money cannot buy happiness. I’m pretty sure there’s been a song or two written about that?

Politicians:

And finally, I’ve saved the best till last!

This post wasn’t really about sociopaths, and it doesn’t matter whether you agree with my logic above or not (my views, whilst reflecting what I currently think, are just a red herring)…but it was necessary to set executives up for comparison purposes because this is what is done for and by politicians.

Back in February of this year, we had the all too common comedy of MP’s being awarded a hefty pay rise by an ‘independent’ body and then the leaders of political parties desperately trying to distance themselves from said pay rise.

Setting the scene: MPs in democracies around the world realised a while back that they were on a sticky wicket when it comes to their pay…so they create an ‘independent pay authority’ to take pay rises out of their hands…and then they can say “erm, I’m not asking for it but they think I deserve it – what can I do?”

Then some MPs aim to look pious by being seen to be ‘turning down’ a portion of their pay rise.

The MPs independent pay authority becomes the scape goat but, with some justification, argues in reply that:

”it’s fulfilling its obligations, set by Parliament, that include relativity with comparable positions, recruiting and retaining competent individuals and any prevailing adverse economic conditions.”

The underlying scam: The ‘independent’ part of the pay authority sounds good in practise but what are its terms of reference? What is the job that it has been given to do? It has been set up on the same basis as boards considering executive pay.

  • To use money to ‘get the best’ (as in “if we don’t pay them well, they won’t come”); and
  • To compare, which includes against the corporate world (as in “look what a private sector CEO gets – MPs are at least as important as them!”);

The comedy:

“I think there are two sorts of MP: those who see being an MP as a public service and know what they are there to stand up for, and those who see it as a conveyor belt to a private-sector job after two terms and a spell in government. There seem to be many more of the latter these days” (Quote from a backbench British MP, Source: Owen Jones’ book ‘The Establishment’)

Sure, have pay set independently, but with what objectives? …which points directly to THE question to be answered:

Who do we want our Politicians to be compared with? Social workers or sociopaths?

…and whatever your answer is, will be what you will get.

Good luck to all of us with that!

 Footnotes:

1. Regarding complaining: as in “their Unions are being unreasonable again and are threatening to strike!”

2. Regarding ‘busting a gut’ for us: sure, you’ll find the odd incompetent or bad egg but this is surely so in every walk of life. This can be an issue of selection but, more likely, of what ‘the system’ has done to them/ turned them into.

3. If you want to know why this is so then this is the subject of virtually all the other posts on this blog. In particular, please read “Your money or your life!”

4. The best teacher: If (as unlikely as it seems) you are a politician reading this, I’m only theorising – PLEASE don’t think you should now rush off and hire some consultants to supposedly come up with a measure for this!!!

5. Addendum (written in 2015!!): As I look ‘in’ at the current wonder that is the American electoral process, I see the following candidates for President: a gaggle of smooth politicians, 1 social worker and 1 sociopath. It sure is an interesting one – Go America, see what you can do…but (for the sake of the rest of the world) please consider what I write above. No pressure! Thanks in advance 🙂