Finance Geek

WASHINGTON-It’s almost Labor Day. Unemployment hovers above 9 percent. President Obama plans to address Congress next week, and this time he’s promising some real ideas about how to increase employment.
At the same time, the National Labor Relations Board is making sure that unemployment remains high in America. Just in time for the Labor Day holiday, the National Labor Relations Board is giving employers a “gift” of more labor-for them to perform.
As if employers weren’t burdened with enough paperwork, the Board will now require employers to put up 11″ by…

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The Institute for Policy Studies released a report Wednesday that shows many large companies pay more to CEOs in compensation than they did in corporate income taxes to the federal government in 2010. Of the 100 top paid CEOs, 25 of them earned more than their companies’ tax bill, including the CEOs of Bank of [...]

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Follow The Daily Ticker on Facebook here! Wednesday brought a string of data confirming what most Americans already know: The job market stinks. ADP said 91,000 private sector job were added in August, slightly below expectations while July’s tally was revised down by 5,000 to 109,000. Challenger, Gray & Christmas reports planned layoffs at U.S. [...]

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Despite all the talk about how the Fed is “out of bullets” and how QE2 failed, traders are still conditioned to view monetary stimulus as being bullish for stocks. Take Tuesday for example: Hurt early by more weak economic data, the stock market recovered on hopes for more action by the central bank. After rallying [...]

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After watching its stock tank 50% this year while denying that it needed capital, Bank of America’s management has begun to acknowledge reality. The bank raised $5 billion by selling preferred stock and options to Warren Buffett–diluting common shareholders in the process. And now, as previously promised, it has sold half its stake in China [...]

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The characteristics listed below are adapted from a blog post by Harvard professor Rosabeth Moss Kanter title Five Powers that Get Ideas off the Ground (thanks to Judith Clegg for the pointer).  Lists of characteristics like this are useful as reminders of how we should behave and to provide frameworks for self analysis and coaching of others, but they are not exhaustive or prescriptive.  There is no shortage of advice floating around these days, including on this blog, and as I’ve been assimilating and dispensing it all over my eleven years in this industry I’ve come to the conclusion that the best approach is to develop a framework for pretty much everything that is important to your line of work and then use that as the basis against which to analyse new advice.  Some of it should be rejected, and some of it should cause subtle adjustments to your framework and then occasionally there may be a radical adjustment to the framework, but beware of those.  A lot of this process will be subliminal and the more experienced and successful you get the less you should be expecting to adjust your framework.

1. Showing up – Rosabeth quotes Woody Allen’s famous saying that 90% of success in life comes from just showing up, and I agree.  In the context of leaders and entrepreneurs that means getting started on things and being visible, and that includes when things are difficult/might not work.  In fact, not putting off the difficult things is what separates effective people from the rest.
2. Speaking up – we all know that great leaders make great speeches, and often those speeches come to define the period of leadership – think about Martin Luther King and you quickly think about his famous “I have a dream” speech.  It is still inspiring nearly 50 years later (if you haven’t heard it recently listen here – 9mins in is a good place to start).  More prosaically CEOs and founders are most effective when they are vocal within their companies shaping the debate and articulating the conclusions at team meetings.  I recently asked a former employee of successful UK SEO/SEM agency The Search Works why the company had prevailed over its competitors and his answer was that Nick Heinze, the CEO, had a special talent for articulating the vision and direction of the business and getting everyone at the company believing and pulling in the same direction.  Think about that for a moment.
3. Teaming up – great companies aren’t built by individuals, they are built by teams.  Usually that is a team of co-founders and in just about every case there is a team of executives who have real power and operate as a team.  Delegation is a pre-requisite for success.
4. Looking up – I’m going to quote directly from Rosabeth’s post here, as she nails it “Looking up: the power of values. Higher principles help people transcend the conflicts and concerns of the moment. Standing for something larger than mere self-interest gives leaders moral grounding and provides a basis for inspiring and motivating the work. Those who are honored as great leaders are not merely good at getting results efficiently, they are able to find grander goals that help people look up to see the big picture and set their sights higher.”
5. Not giving up – much has been written about the importance of persistence, and for good reason.  It is something that is easy to forget when the going gets tough and reminders are useful.  As Rosabeth says “everything can look like failure in the middle”.

As I said earlier – this list is not exhaustive guide, and in particular it is important not to do these things well, rather than just do them.  It is following the spirit of the advice not the letter that makes the difference.  Authenticity is critical.

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Five months ago, I posed the question: “Has the Fed eased too much?” Basically, I argued that the Fed, having checked deflation, had not eased too much. Now, the question being debated in many quarters is: “Does the Fed need to ease more?” Last weekend at the Fed’s annual Jackson Hole meeting, Chairman Bernanke acknowledged “that economic growth during the first half of this year was considerably slower than the Federal Open Market Committee had been expecting” while the FOMC expected inflation to settle at a level at or below the 2 percent that is…

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Follow The Daily Ticker on Facebook here! The economic data disappoints again today. Consumer confidence fell nearly 25% in August to the lowest level seen since April 2009. Meanwhile, the S&P/Case-Shiller Home Price Index was down 5.9% year over year and back to early 2003 levels. Despite these headwinds and sluggish GDP growth in the [...]

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A couple of weeks back I recorded a Desert Island Discs style interview for UK radio station Jazz FM.  It went out at 6pm last night as part of their Jazz in the City series and it is now available as a stream from their website.  For those that haven’t listened to Desert Island Discs the format is an hour long wide ranging chat punctuated by six tracks of my choosing.  On Jazz FM they have to be jazz tracks.

David Prever conducts the interview and we have an amusing chat covering my early career, bubbles, Dragon’s Den, and of course why I chose the six tracks.

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A few weeks ago, while its stock steadily tanked, Bank of America assured everyone that it had plenty of capital. The market disagreed, and the stock continued to drop. Then, finally, last week, after one last angry denial that took the form of a press release aimed at a journalist (me), Bank of America owned [...]

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America’s national debate over the “proper” role of government has gone from political theory to stark reality in the aftermath of Hurricane Irene. On Monday, the director of FEMA said the Federal Disaster Relief Fund has less than $800 million, meaning the agency can only pay for emergency repairs vs. rebuilding roads, schools and other [...]

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Ever since the tragic sinking of the Titanic on her maiden voyage, the word “unsinkable” has acquired a very cynical connotation in our society. Rather than representing unsurpassed seaworthiness, it has come to represent the arrogance and folly of believing one’s self to be beyond risk.
With a new tidal-wave of “gold bubble” propaganda having swept through the mainstream media as gold made its latest surge, quite obviously many market sheep have been duped into viewing gold as the new ‘Titanic’. Yet as we watched gold getting “torpedoed”…

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For a while now the folks at the Startup Genome Project have been doing some excellent data driven work into what drives success and failure at startups, and earlier this year I wrote about their first report under the headline The ingredients for a successful startup.  Yesterday they followed that up with the release of a mini-report on premature scaling (download here).  According to their data 70% of startups scale prematurely in one of the what they see as the 5 core dimensions of a startup: Customer, Product, Team, Business and Financials, although most problems come when the team dimension is scaled too early.  As well as a new report, the Startup Genome Project also released a benchmarking tool designed to help companies avoid the mistakes of premature scaling. 

I have said many times that too much money can kill a company and that timing is everything for startups.  Both of these statements are related to the dangers of premature scaling, and hence I was immediately drawn to this report.  One of the most difficult tasks for entrepreneurs and investors is matching investment with the emergence of the market opportunity.  It is important to be the leader when the market starts to scale, but spending too much money before then is an exercise in misery and value destruction.  Note my careful use of language – a) leading when the market scales is important, not being first to market, and b) raising money ahead of a market opportunity can be ok so long as it isn’t spent, although it is rare to see a board deciding not to spend money that is in the bank.

The report makes good reading and will helps clarify the meaning and dangers of premature scaling.  It is full of useful quotes and charts.  My favourite quote is:

Quote about premature scaling by …
Michael A. Jackson, serial entrepreneur and investor

“Having been both an entrepreneur and investor I’ve seen many entrepreneurs (myself included) try to scale blindly. No one takes venture money to stay a small business and scaling successfully is what separates eventual industry leaders from long-forgotten startups in the deadpool. Far too often though entrepreneurs start scaling before they know what is going to work.

Premature scaling is putting the cart before the proverbial horse, and in the case of startups this can potentially relate to both engineering and operations. As an entrepreneur there’s always the temptation to grow the sales team at the first sign of revenue traction, but there is always the danger that this early traction is coming from the subset of the market that are early adopters and not the actual market itself. Additionally, too often I’ve seen startups ramp up sales before they’ve figured out the most efficient way to achieve profitability. A vicious cycle ensues wherein the more a company grows, the more it farther away from profitability it becomes. Teams need to be obsessed with the metrics that drive their businesses’ growth, constantly testing and challenging their assumptions.

For the engineering team, there’s the often obsessed about notion of having a robust platform that can handle millions of users before the startup even gets to 10’s of thousands on there. The team starts to worry about all the technical issues that they’ll have to deal with when success comes, but they lose track of what is actually going to make them succeed.

And I liked the cart below which illustrates the false comfort that can come from scaling user numbers for a consumer internet service before the business model and/or product are ready:

I also had a go with the benchmarking tool, which I think could be quite useful for a lot of companies, although less for the benchmark data (which was a little hard to draw insight from) but more as a tuition/reminder tool for companies interested in following the lean startup methodology.  I spent about 20mins putting in data for one of our recent investments and got some helpful pointers of things to think about both from a strategic and operational perspective.  I also think it could be useful for investors as a due diligence checklist.

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Nobody’s perfect. Not even the “bond king” Bill Gross. The Pimco co-founder and manager of the $244 billion Total Return Fund tells the Financial Times betting against U.S. Treasuries was a mistake. The Total Return Fund sold all its U.S. Treasury holdings this winter thinking Treasuries were the “most overvalued” fixed income asset (as he [...]

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A week ago the market was gripped with fear and talk of a “retest” of the August lows of 1100 filled the airwaves. Today, markets are surging and the bulls are giddily predicting a run to S&P 1250, 1300 and beyond. Building on last week’s 4.7% gain, the S&P was recently up 2.83% to 1210 [...]

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