Please bear with me. This is a financial blog, but I reserve the
right to occasionally discuss leadership skills and traits. It's not enough to
*know* the inner workings of finance & lending, but you also must be able to
instill in others a passion and drive to effect the same change you wish to
effect.
Three Traits of Leadership in
Booker T. Washington
As seen in Chapters 9-13 of Up From Slavery
He began with his students to work on building a kiln, which would burn clay into bricks. With these bricks, he would eventually construct what we know as Tuskegee University. Yet do we know how close these grand buildings came to not being built?
Just imagine for yourselves. You’ve never built a kiln before and have no experience in it. Even before making a kiln, you had to spend hours of back-breaking work, up to your knees in Southern mud, gathering the clay that would be used to produce the bricks that would eventually come to be known as the halls of Tuskegee.
Your first kiln fails. What do you do? Some would leave, but a good majority would probably try it again, we would hope.
Your second kiln ultimately fails as well. Ok, this is where most of us here would likely give up, maybe 1 or 2 diehards would continue on…maybe.
Third time’s that charm, right? This kiln, the third one, is built and ready for burning the clay into bricks. It’s only a 7 day process. Somewhere on the 5th or 6th day, the kiln fails. To add insult to injury, it’s in the middle of the night as well. This is where all of us close up shop, change careers, and move to a different country…guaranteed.
But for those who believe otherwise, would you put up one of your prized possessions as collateral for trying another kiln? Washington pawns his watch for $15 (remember, it’s around 1875), builds another kiln, this one works, and years later he reports that the Tuskegee students manufactured 1.2MM bricks just ‘last season’.
This, friends, is what we call persistence; dogged, rough, masculine, back-breaking, sweat-dripping, bone-crushing persistence. He did not believe in failure.
Try this one. You now have a building. The kiln worked. Congratulations. Now you must furnish it. You have students, but no kitchen, no stoves to cook with, no dining room for them to eat in, and the only place for a “dining room” is the room you made by excavating a large amount of dirt from underneath the building.
On top of that, there is no furniture for the students’ boarding department: no bowls, spoons, or plates for them to eat with. There even was an argument one morning between two young students on whose turn it was to have the coffee cup.
Not every student is even guaranteed a meal, since there may not be enough food to go around that day. You never know. In fact, Mr. Washington noticed that one, young girl didn’t get anything to eat that morning for breakfast. Dejected, she ambled over to the well, hoping to find just one cup of water to quench her thirst and maybe calm her hungry stomach. Seeing that the rope for the well bucket was broken, and that there was no way to get any water, she dismayedly said, “We can’t even get water to drink at this school.”.
Booker T. Washington says, “I think no one remark ever came so near discouraging me as that one.”
I ask you this. How do you think our current business leaders would treat this? What would our spiritual leaders say? What would our motivational speakers offer up as an answer to comfort the little girl who couldn’t even fill her hunger that morning?
I warrant that we wouldn’t even know how to answer her, because we aren’t familiar with difficulty to that degree. But, what did Washington do?
He says, “As I look back now over that part of our struggle, I am glad to see that we had it. I am glad that we endured all those discomforts and inconveniences. I am glad that our students had to dig out the place for their kitchen and dining room…had we started in a fine, attractive, convenient room, I fear we would have ‘lost our heads’ and become ‘stuck up’. It means a great deal, I think, to start off on a foundation which one has made for one’s self.”
This, friends, is what we know as vision. This is the vision that sees a harvest in place of rocky, barren ground. This is the vision needed to make anything get off the ground and soar.
Lastly, imagine this. You are the leader of a fast-performing business. Your profits are soaring, and your earning are up 24% year-to-date, and it’s nearing the end of the 4th quarter. Your bonus looks like your annual salary, which should make a good present for this solid year of growth. Your board of executives look up to your for advice, wisdom, and direction. People invest in what you say and there is copious buy-in to your beliefs.
How did you get there?
Well, how did Booker T. Washington get there? After all, he is one of the most remarkable men of the turn of the century, and will be memorialized among the hearts of any people trying to better their situation.
He got there by getting buy-in. He asked for other people’s thoughts, regardless of how high or low they were. He valued others so much, that he would ask the student body two or three times during the year what they thought the college could do better. He actually asked for criticism.
When was the last time you saw a Wall Street Journal article with the heading, “CEO breaks ground by asking for criticism”? You won’t see it in our culture. We’re much to attuned to ourselves. However, Washington was attuned to others and the welfare of their particular situation…so much so, that he mentions meeting students in the chapel for conversations and discussions about how they can better the school. He says, “These meetings, it seems to me, enable me to get at the very heart of all that concerns the school.”
Why did he do this? Just because he was humble, meek, and mild? Maybe a cursory synopsis would determine this, but not really. He did this to instill in others a sense of ownership. After all, are not students the marrow of the school?
If you wanted your Board of Executives to instill vision and passion in their managers, all the way down to each and every individual person in your company, wouldn’t you want to cultivate a sense of responsibility in your executives? Wouldn’t you want to place upon him the burden of always thinking ways of doing it better next time with less cost or more efficiency?
Washington says, “I have often thought that many strikes and similar disturbances might be avoided if the employers would cultivate the habit of getting nearer to their employees, of consulting and advising with them, and letting them feel that the interests of the two are the same.”
And, he’s right.
This, friends, is a teachable spirit.
Booker T. Washington has exhibited three strong traits of a good leader, destined to effect change. Persistence, Vision, and a Teachable Spirit. Employing just one of these will get you success. Employing two will grant you and others around you success. But, to grasp all three in Trinitarian utility will break the ground for unparalleled achievements.
*Quotations taken from Washington’s autobiography, Up From Slavery (Chapters 9-13)
Thursday, November 29, 2007
Wednesday, November 28, 2007
Another Fed Rate Cut on the Horizon...
Do you remember the economic releases back in July 2007? This was when several lenders went bust, and Fannie Mae tightened their lending standards significantly (It definitely affected the ability to get a home loan). Well, do you remember what happened afterwards?
August, 2007 -- The Fed Reserve lowers the discount rate 0.5%. What's a discount rate? Well, this is the money that the Federal Reserve Bank, a quasi-government institution, charges banks. In other words, if a bank needs quick money (they usually have to repay the money in 24 hours) to meet their reserve requirements, then they can borrow the money. This is pretty much the equivalent of me borrowing my mortgage payment for next month, but this is the normal system we live in. Everything is leveraged.
Why have money sitting around? Inflation is eating at it 3.5% per annum! Lend it, so you can get return on that investment! The only problem is that, in the ensuing credit crises (back in August), many banks had non-performing assets on their books. What's this? This means that the mortgages they held, well, the homeowners weren't making their payments on time. So, if a homeowner doesn't pay their mortgage on time, then the bank can't pay the people they owe money too, and so they have to get it elsewhere....which is where the Fed jumps in.
So, the Fed lowered the discount rate in 8/2007...old news. So what! Right? Well...they then proceeded to lower the Funds rate from 5.25% to where it currently lies at 4.5%. What's this mean? Well, this is the rate that banks charge each other for short-term, overnight loans (just like the Discount Rate, but it's a bank-to-bank loan instead of a bank-to-Fed loan). Those of you who have Home Equity Lines of Credit mortgages probably have just seen your interest rate decrease 0.75% (I would call your local bank and lock in the line of credit to a fixed rate right now because the indeces are lower).
Why did the Fed do all this? You may remember that their stance over the Summer was against inflation. Their verbage didn't even address market stability or economic balance, rather they were primarily concerned with inflation, inflation, inflation. Now, they are 90% turned to market stability and recovery.
What will happen in the near future? Look to the Fed to do a further rate cut. They've already mentioned they would likely inject a few billion into the markets to provide market balance. The DOW, NASDAQ, and S&P will continue to seesaw up and down. It's actually a great time to buy stocks, since the trend since August with the DOW seems to be that the DOW goes from the low 14K range to the upper 12K range, whiplashing upward or downward with relative predictability. I say buy it when it's in the upper 12's and sell when it hits the upper 13's--the DOW has done that twice since August.
Also, be on the lookout for foreign cash infusions. Just last week, a Middle Eastern gentleman infused Citigroup with 7.5 Billion to keep them afloat. Why? Well, it was either likely to save the money he already had invested in CITI or to snap up a bargain. In other words, look for wealthy internationals to inject more money into the marketplace to save their investments, or, rather, to snap them up for a bargain. For instance, the entire credit markets right now really don't have a clue how much their collateralized-debt-obligations are. In other words, we have billions in bad home loans and the banks just don't know how much they're worth when they post their asset values for the public eye. Someone with a good accounting brain should start a fund to snap up these 'bad loans' because some of them will certainly perform, that's the way it goes.
A Fed Rate Cut bodes poorly for inflation. But until the market has any sense of stability, which it doesn't look like it will for another 6 months at least, the Fed won't look to staving inflation. Interesting times ahead!
August, 2007 -- The Fed Reserve lowers the discount rate 0.5%. What's a discount rate? Well, this is the money that the Federal Reserve Bank, a quasi-government institution, charges banks. In other words, if a bank needs quick money (they usually have to repay the money in 24 hours) to meet their reserve requirements, then they can borrow the money. This is pretty much the equivalent of me borrowing my mortgage payment for next month, but this is the normal system we live in. Everything is leveraged.
Why have money sitting around? Inflation is eating at it 3.5% per annum! Lend it, so you can get return on that investment! The only problem is that, in the ensuing credit crises (back in August), many banks had non-performing assets on their books. What's this? This means that the mortgages they held, well, the homeowners weren't making their payments on time. So, if a homeowner doesn't pay their mortgage on time, then the bank can't pay the people they owe money too, and so they have to get it elsewhere....which is where the Fed jumps in.
So, the Fed lowered the discount rate in 8/2007...old news. So what! Right? Well...they then proceeded to lower the Funds rate from 5.25% to where it currently lies at 4.5%. What's this mean? Well, this is the rate that banks charge each other for short-term, overnight loans (just like the Discount Rate, but it's a bank-to-bank loan instead of a bank-to-Fed loan). Those of you who have Home Equity Lines of Credit mortgages probably have just seen your interest rate decrease 0.75% (I would call your local bank and lock in the line of credit to a fixed rate right now because the indeces are lower).
Why did the Fed do all this? You may remember that their stance over the Summer was against inflation. Their verbage didn't even address market stability or economic balance, rather they were primarily concerned with inflation, inflation, inflation. Now, they are 90% turned to market stability and recovery.
What will happen in the near future? Look to the Fed to do a further rate cut. They've already mentioned they would likely inject a few billion into the markets to provide market balance. The DOW, NASDAQ, and S&P will continue to seesaw up and down. It's actually a great time to buy stocks, since the trend since August with the DOW seems to be that the DOW goes from the low 14K range to the upper 12K range, whiplashing upward or downward with relative predictability. I say buy it when it's in the upper 12's and sell when it hits the upper 13's--the DOW has done that twice since August.
Also, be on the lookout for foreign cash infusions. Just last week, a Middle Eastern gentleman infused Citigroup with 7.5 Billion to keep them afloat. Why? Well, it was either likely to save the money he already had invested in CITI or to snap up a bargain. In other words, look for wealthy internationals to inject more money into the marketplace to save their investments, or, rather, to snap them up for a bargain. For instance, the entire credit markets right now really don't have a clue how much their collateralized-debt-obligations are. In other words, we have billions in bad home loans and the banks just don't know how much they're worth when they post their asset values for the public eye. Someone with a good accounting brain should start a fund to snap up these 'bad loans' because some of them will certainly perform, that's the way it goes.
A Fed Rate Cut bodes poorly for inflation. But until the market has any sense of stability, which it doesn't look like it will for another 6 months at least, the Fed won't look to staving inflation. Interesting times ahead!
Tuesday, November 27, 2007
Black Friday spending reports
Last Friday was the biggest retail profit day of the year. It's called "Black Friday". Why "Black"? Financially speaking, if you're 'in the black', that means you are recording a profit. Conversely, if you're 'in the red', that means you're recording a loss. It is somewhat nice to see a profit recorded amongst the plentiful losses going on in the current credit markets (see www.ml-implode.com: Countrywide losses, Citigroup losses, etc).
Informationweek reports:
"ComScore found that online spending rose 22%, to $531 million, compared to last year, while Thanksgiving Day spending online rose 29% to $272 million. The company found that shoppers have spent more than $9.3 billion since Nov. 1."
This is all fine and good, apparently. The potential problem here is that companies have normally used the Black Friday spending as a bellwether for retail spending over the holidays, thoughout the Christmastime season.
However, given the recent investor scare on Wall Street, the successive Fed rate cuts, and credit market crises, the increased spending reports could mean that consumers are watching their budgets more and being more picky about how much they spend this Christmas season.
I would argue that instead of increased holiday sales, you will still see quite a bit of buying, but it will largely be done over the Internet (where you can typically get stronger buys) and will not be as spectacular as forecasters predict. I think that last Friday's strong sales reports show that the consumer is watching their budget more carefully and is not as confident in the economy as some would have us think.
All in all, though, as goes with every bit of financial forecasting, this must be taken with a grain of salt. No one can accurately predict the financial future everytime. Who knows how the spending will go this season? One would like to think that consumers might actually present gifts of savings accounts to their children, stocked with $100-200 earning an interest rate of 4.75% like you can find at Emigrant Direct (www.emigrantdirect.com) ...but maybe that's asking too much?
Informationweek reports:
"ComScore found that online spending rose 22%, to $531 million, compared to last year, while Thanksgiving Day spending online rose 29% to $272 million. The company found that shoppers have spent more than $9.3 billion since Nov. 1."
This is all fine and good, apparently. The potential problem here is that companies have normally used the Black Friday spending as a bellwether for retail spending over the holidays, thoughout the Christmastime season.
However, given the recent investor scare on Wall Street, the successive Fed rate cuts, and credit market crises, the increased spending reports could mean that consumers are watching their budgets more and being more picky about how much they spend this Christmas season.
I would argue that instead of increased holiday sales, you will still see quite a bit of buying, but it will largely be done over the Internet (where you can typically get stronger buys) and will not be as spectacular as forecasters predict. I think that last Friday's strong sales reports show that the consumer is watching their budget more carefully and is not as confident in the economy as some would have us think.
All in all, though, as goes with every bit of financial forecasting, this must be taken with a grain of salt. No one can accurately predict the financial future everytime. Who knows how the spending will go this season? One would like to think that consumers might actually present gifts of savings accounts to their children, stocked with $100-200 earning an interest rate of 4.75% like you can find at Emigrant Direct (www.emigrantdirect.com) ...but maybe that's asking too much?
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