Greed is Good
Lehman Brothers, Bear Stearns, Washington Mutual, Fannie and Freddie, Merrill Lynch, AIG…
If the consequences weren’t so tragic, this would probably make a good movie, perhaps a perfect reprise for Michael Douglas’ Gordon Gecko character from the 1987 film “Wall Street”.
There’s no escaping Gecko’s logic about greed…greed IS good. Its part of the reptilian brain. It spurs competition, innovation, evolution, revolution. Everybody understands greed, Americans understand it as do Canadians, even Swedes! Its probably a more universal language than math.
Greed is good, come on don’t be shy – say it with me, GREED IS GOOD.
So what went wrong?
Hundred’s of billions Trillions in lost shareholder wealth
Economies the world over circling the drain
Consumers out of work, loaded down with debt or bankrupt
Shaky confidence for those fortunate to escape relatively unscathed
Moving beyond the natural desire for some sort of eye-for-an-eye justice, how do we take these expensive lessons and turn some of this into a positive?
To quote Joseph Steiglitz, winner of the 2001 Nobel Economics prize, who weighed in on this issue in a recent CNN article:How to prevent the next Wall Street crisis ,
“…Finally, at the centre of the blame must be the financial institutions themselves. They and even more their executives had incentives that were not aligned with the needs of our economy and our society. They were amply rewarded, presumably for managing risk and allocating capital, which was supposed to improve the efficiency of the economy so much that it justified their generous compensation. But they misallocated capital; they mismanaged risk – they created risk. They did what their incentive structures were designed to do: focus on short-term profits and encourage excessive risk taking.”
Long ago I said a brand was a promise kept. A promise that is defined and agreed upon between the brand and the customer. A promise that can not exist without trust. A promise that helps chart a future course, evolving the relationship from a buyer to a customer to a partner. Anyone agreeing with this viewpoint will have no choice but to see the mortal “Dead Brand Walking” wound many of these premiere brands have inflicted upon themselves – not from marketers or customers, but from somewhere higher up the food chain, in places where ROI’s are calculated for breakfast.
The immediate loss these companies/brands have suffered is significant, but it pales in comparison to the ongoing loss they will experience from any remaining customers who rethink where to allocate their investment portfolios and from those making ready to bolt regardless of the “we-have-everything-under-control, we-know-how-to-fix-things-to-make-sure-it-never-happens-again’ messages.
The root problem is due to the greed of short-termism. The subsequent demands it places on publicly listed companies forces them to run the risk of value erosion. See: Is it time we fired our shareholders?
But rather than try to suppress greed, what if we channeled and amplified it, completely embraced it with renewed vigor. Unfettered greed expanding across the enterprise into every nook and cranny in pursuit of:
- A greed for innovation.
- A greed for profitable customers.
- A greed for investors that share in a desire for long term value creation.
- A greed for employees with a passion for customer centricity.
- A greed for customers that act/think like partners.
Greed played a role in getting us into this situation and ironically only more greed will help us get out and stay out. This is a pivotal opportunity for businesses to stand, proclaim and pursue a long-term value focus, not unlike Google. See We prioritize the end user over the advertiser.
The alternative is no longer a (wise) option.
I look forward to the discussion.
For supplementary reading please refer to the below:
Subprime Mortgage Collapse: Why Bear Sterns is just the beginning – MoneyWeek.com – Excellent review
Long-term Investing in a Short Term World – Legg Mason Capital Management – Excellent review
The Black Swan – The Impact of the Highly Improbable – Nassim Nicholas Taleb
The Wisdom of the Crowds – James Surowiecki
Wall Street’s next big problem – NY Times – Michale Levitt OpEd