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Greetings!

We’ve been asked by many of our customers for periodic, no-nonsense emails with just-in-time information for managers and knowledge workers on how organizations work. This is our 41st issue and we hope you enjoy it. Past editions are available on our website.

What We're Reading

The Big Short, by Michael Lewis. Norton, 2010.

When we wrote The Thin Book of Naming Elephants in 2004, we used examples such as Enron and WorldCom. Since that time, I've kept up on the more recent corporate flameouts. I've given serious thought and effort to updating Naming Elephants but in the end only the examples would change, and that isn't really enough substance to justify a new edition. The message remains the same:

Organizations need to encourage open and courageous dialogue, question their underlying assumptions and to reward, not punish the contrarian.

Michael Lewis has written a riveting story about why contrarians are so important. If you only read one book on the subject of the financial mess, this is it. I've reviewed several others (here and here) already and have more in reserve but this one tells the story of various people who in essence made a bet that housing prices would not continue their climb and that the people who were only able to pay their mortgage if prices went up would then default. This bet in Wall Street language is called a 'short' and Lewis takes us through the story of these fascinating folks who shorted the operating assumptions of most of the financial world.

Three things are striking about these people.

• First, they all may be considered a bit anti-social because they are so frank. One story in particular is about a guy with Asperger's who is also a medical doctor. He doesn't communicate well with people but boy, can he understand the details of the prospectus of these debt securities. He made a lot of money for his clients but only if they were patient and waited for his bet to pay off. They were not patient and as his strategy takes some losses in the short term, they hound him. When the big payday comes, he doesn't even get a thank you. He ultimately closes down his fund because he can't take the way people treated him. That's a shame for all of us because his talent should be celebrated, not disparaged. It takes courage to short anything and is often done because someone sees 'reality' through a different lens. They don't get caught up in the hype and they are truly swimming upstream with boulders in their way.

• The second striking thing about these folks is that they have a conscience about making money off tragedy. They feel angst at their bet because they realize it is people who ultimately are going to get hurt by losing their house/American dream. Maybe many people in the subprime market should never have been given loans but who can blame them for taking 'free money'? However, it is not just those who lost their homes that have been hurt, you have been too. Not only have you lost money in your investments, you may have lost your job. Or you're doing the work of the other people who have been laid off. And you as a US taxpayer have paid (it's been put on a credit card so that should read 'are paying) for this mess. And you may or may not ever see that money again because those who 'earned' all of those fees paid for those subprime mortgages and securities don't have to pay any of that back.
  

• The third striking characteristic of these contrarians is that they continued to try to prove themselves wrong. They kept asking questions to see if they had missed something. What they found was groupthink and once they recognized it, most doubled their bets by beginning to short the stock of the banks and Wall Street firms. Here is a quote from one of the characters in the book that summarizes why I believe it is so essential for all of us to understand what has happened in the past 30 years on Wall Street: "I think there is something fundamentally scary about our democracy {said this character}, because I think people have a sense that the system is rigged and it's hard to argue that it isn't." (pg. 242.)
  

In the last chapter Michael Lewis takes us back to review the 1980's Wall Street when the major Wall Street firms went from partnerships to stock corporations. He ties in those changes to the compensation incentives to over-leverage those corporations and for top management to pay less attention to the actual risk of the trades. It wasn't 'their money' like it is in a partnership. In the end, it was the stockholders who were wiped out, not the decision-makers. Here's how Lewis puts it: "The CEOs of every major Wall Street firm were also on the wrong end of the gamble. All of them, without exception, either ran their public corporations into bankruptcy or were saved from bankruptcy by the United States government. They all got rich too. What are the odds that people will make smart decisions about money if they don't need to make smart decisions- if they can get rich making dumb decisions?" (pg. 257)

This is a dark book. Actually all of the books I've read so far on this topic are dark. I can easily get lost in despair. So the way out of despair is to follow the contrarians and see what I can learn when I think the world is upside down. Here are the lessons for organizational life:

• Listen to the contrarians.
  
• Look with doubt not certitude; keep asking for information that might lead you to reconsider your current working assumptions.
  
• Admit you're wrong when you are.
  
• Don't ignore someone whose personal style is 'odd' or rubs you the wrong way; they are often gifted in very different ways than you.
  
• Exhibit courage.
  
• Do the next right thing but understand how you define what is right.
  
• Learn the skills and techniques of good decision-making.
  

You might not be the decision maker now, but you will be someday, even if it means you decide to keep your job but short the stock of the company you work for...

Personal Coaching Sessions For Leaders

I'm trying to do the next right thing by offering Personal Coaching Sessions For Leaders. These are debriefs on assessments of your Listening and Team Dimension style. I believe that understanding one's own style is the key to then appreciating and seeking out those with other styles.

Listening is the first defense against groupthink and the first skill needed to create open dialogue. The Team Dimension assessment provides you with a model of how teams work and where your talent fits within the team.

Learning more about your talents within a team process can only help teams produce better decisions. Different team talents are also needed to check the thinking of the team. Having the one-on-one conversations in these coaching calls is extremely beneficial as I can give you specific ideas of what to do.

Skip your lattes for a month and invest in yourself. I'll show you how to increase your effectiveness in these two key areas. Maybe I can't change the actions of Wall Street, I can help you learn how to listen and work with others in a more constructive way. Change starts with one person at a time ...

Coming Soon ... Smart Coach iPhone App

Coming soon ... The Smart Coach iPhone app will increase your people skills in real time! From Katina Cremona, the author of The Thin Book of Smart People Skills; 8 Tools For The Savvy Leader. We'll let you know when Smart Coach becomes available on www.thinbook.com.

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Thanks for your interest and support!

Sue Annis Hammond
email: news@thinbook.com
phone: 888.316.9544
web: http://www.thinbook.com