Tag Archives: economic downturn

Thank You, Recession: A Look At The Opportunities That Can Only Come From A Big Crisis

Forget all the depressing news stories about the ongoing economic downturn. What are some things about the current recession that we can actually be thankful for? 

"Thank You, Recession" is the name of an episode by "no-limits" documentary series Vanguard that made my day over the weekend. Two reporters travel 5,000 miles south to Argentina, a country that went through its own economic crisis back in 2001. They interview local young people, business owners, factory workers, and families to hear their personal perspectives on how the recession has changed their life and their coping strategies for living in a post-recession world.

Though I am certain there are many untold stories of unbelievable suffering and heartbreak from the recession in Argentina, I was extremely moved to hear the simple and innovative way the Argentines have learned to deal with the crisis that wiped out the life savings of nearly every resident in the country. Factory workers have taken over abandoned factories to create an entirely new business model where every worker has a say in the direction of their business. One man in his twenties has started a successful print magazine highlighting stories of young people coping with the recession. Communal bartering centers have become more popular than ever, where men and women can swap clothing and household items for food, and vice versa.

Towards the second half of the episode, Vanguard then takes a look at the innovations that have begun in America in response to the ongoing recession.

The main take-away I got from the episode is this: the recession is certainly not the end of the world, and every crisis comes with its own set of unique opportunities that otherwise would not have existed. Having extremely limited resources forces many of us to churn out creative and innovative ideas to make do with what we can afford.

As articulated by one young entrepreneur who co-founded her own recession-themed clothing line, it may be possible that we will all one day look back on the economic downturn with some weird nostalgia. Will we all be throwing ironic recession-themed parties five, ten years down the line? 

Watch the episode for yourself to dare to be inspired by our ongoing recession.

PHOTO (cc): Flickr / origomi

Get Out of Bed With the Bankers, Mr. President

Mr. President,

The signal from Massachusetts’ special election is clear: a major course correction is required to move forward your agenda over the next three years.

The first order of business is to pour your heart and soul into being a clear, public champion of Main Street against the interests of Wall Street. I do not doubt that Main Street has always been your prime concern but Wall Street has an insidious way of maintaining its grip on power and money.

When you took office in the midst of a global financial meltdown, it was understandable and perhaps even necessary that you hired a coterie of the old economic guard to help you chart the course of action. However, the Summers and Geithners of the world may be very smart and likely quite convincing, but they are fundamentally a product of Wall Street, Goldman Sachs and the like. Their fundamental DNA is that of big-time bankers.

You may be the man who makes the final decisions. But the people who determine what information you pay attention to and therefore what course of action is even thinkable are your advisers. You cannot create meaningful, true economic reform while surrounded with the likes of your current economic team. They may be wonderful people on a personal level, hard-working and well-intentioned. But they are products of an old, broken, and fundamentally parasitic financial system. They will not be able to see the pathway forward and they will ensure your ongoing blindness. For true reform, you need economic innovators, people who have been studying what is fundamentally flawed about the U.S. economic system and what reforms can begin to put America back on track and to get the engine of real businesses to roar back to life.

I thus believe that the first and most important act of course correction is to thank your current economic team for their service during a year of financial emergency, release them all, and bring in a new team bristling with innovation, reform, and pioneering ideas. The less time spent on Wall Street, the better.

The brilliant economist Hazel Henderson pointed out in a radio interview I did with her that the financial sector is 20% of our current GDP and that a truly healthy economy should not have more than 10%. That is because the financial sector is largely a game of intermediaries who don’t by themselves create products of value. A healthy financial sector greases the wheels of the real economy but an unhealthy one creates methods to siphon off a larger and larger share of the profits. An unhealthy financial sector is basically a parasite, taking nutrients in the form of money and undermining the health of the host. And that is what we have: a parasitic financial system that has come perilously close to killing the host.

Americans know that a $30,000/year teacher in Kansas is more valuable to our society than a middle-manager at Goldman Sachs who takes home $300,000 in bonuses. They also feel outraged that they are still unemployed while the bailed out banks are now paying outsize bonuses again. They sense that our system is rigged to allow Wall Street to profit off the backs of Main Street, all with the blessing of Washington, and that something very deep has to change.

It has to be clear that you are the champion of that deep, systemic change in the economic system or your presidency will fail.

I am no expert on the economy, but I have studied enough to know that there are plenty of forward thinking economists outside of the Wall Street club who can help you to rebuild the engine of innovation that is America. For your own understanding, try starting out with Ellen Brown’s Web of Debt, a brilliant survey of American economic history and what is fundamentally flawed. It’s an eye-opener. Or listen to Catherine Austin Fitts, a former assistant secretary for HUD who has detailed the "tape-worm" economy after her years on Wall Street and DC.

I’ll give you examples of the kinds of reforms I think should to be on the table for your economic reform work to be real:

  1. Federal Reserve reform – America needs to take back its constitutional right to create money rather than borrow it from bankers at interest (who simply create it out of thin air anyways). You are a fan of Lincoln and I think his Greenbacks were one of his most important stances our country has ever taken against the banking cartels. The Greenbacks were what allowed us to rebuild after the devastation of the Civil War and we need to do something similar now. One of the few financially healthy states is North Dakota, which has its own bank, a model the U.S. should emulate
  2. Transaction tax in the stock market – Even a quarter of a cent tax on trades could generate billions for the American people and slow some of the arbitrage and day-trading that poisons the financial system. This tax would not be felt by Main Street Americans but only by the elite who squeeze money out of the system through extremely rapid trading that games the system and does not create enduring value.
  3. Microlending fund for small businesses – The Grameen Bank of Nobel Laureate Mohammed Yunus has demonstrated success in empowering millions of entrepreneurs in Bangladesh with microlending and is now showing 99% repayment in pilot U.S. programs. What if we created a massive micro-lending fund for U.S. entrepreneurs with the same principles? It could even be profitable. That would spur enormous innovation without adding to the debt burden. You might use some of the repaid TARP money for this purpose.
  4. Full transparency of the derivatives market – What happens in secret almost always leads to no good in the long run. The trillions of dollars of potentially destabilizing derivatives simply must be brought out into the light of day. Before another financial bomb goes off, we need to know what is happening and to defuse as many bombs as possible.
  5. Too big to fail insurance – For any business that is deemed too big to fail, the American taxpayers should be paid for our insurance of that business. After all, we are shouldering the risk of their bad decision-making, just like an insurance company. A substantial and pricey insurance policy would motivate them to either move off the public too big to fail list (and it should be a clear, public list) or for the taxpayers to earn a decent profit in the good times. If a company is not on this list, then public investors need to know that it is free to fail and that the government will not intervene in its mistakes.
  6. Remove all corporate money from elections – this can be a bipartisan initiative, ensuring that the big banks and other corporations cannot buy votes.

These are audacious reforms to be sure, but they are only a handful of what is necessary to liberate our creative power from the predatory pirates that have taken over Wall Street and who are continuing to manipulate Washington.

The logic here is simple: if the American people see you as in bed with the bankers, the 2010 elections will be a bloodbath and most of the other reforms you want to see will fail.

You have to decisively, publicly break your linkage with Wall Street — which first means eliminating the Wall Streeters from the White House — and then take up the mantle of true, deep reform.

When you have shown that you can stare down Wall Street and clean up the corruption and piracy, the American people will again rally by your side. And then you will have the political and social capital to stare down the health insurance giants to create real health care reform.

Why Hiring is Paradoxically Harder in a Downturn

Hiring is always hard.  The hardest thing to do at a company is the recruiting and hiring.  It was really hard when the economy was doing well.  Paradoxically, for certain industries (especially those reliant on innovation such as those in the tech space), it’s even harder when times are tough.

That’s right … hiring in tough economic times can actually be much harder than when times are good.   In a 

Never settle

First, let’s assume you’ve already bought into the "When Good Isn’t Good Enough" philosophy of always trying to hire A-players because they are just so much more productive than B-players (an ‘A-Player’ by definition is incredibly productive and smart and  has that ‘it’, that rockstar-esque factor that makes everyone want to work with her).  That means you won’t settle for people who are good but instead hold out for people that are great.

Great people – the A-Players – are a very different breed from the good (B-Players) and mediocre (C-Players).  Great people are more likely to be employed with a company since a great person is often over 3 times as productive as a good person.  Joel Spolsky argues in Smart & Gets Things Done that an A-player is anywhere from 5-10 times as productive. Joel looked at coursework data from a Yale computer science class and found that the fastest students finished their workload as much as ten times faster than the slowest students (average was 3-4 times faster).

The (Un)Employed A-Player

In troubled economic times, anyone can get laid off, but a disproportionate number of layoffs tend to fall on C-players.  This is because they are the lowest performing people in a company and there generally are more C-players at a company than any other caliber.  Note that this isn’t always true, as evidenced with Yahoo!, a company that has recently experienced many layoffs but doesn’t have many C-players.  In Yahoo!’s case, majority of the lay-offs fell on B-players and even some A-players.  Yahoo! is an exception and is an exceptional company — most large companies, however, are chock-full of C-players.

A smart company would (or should) never lay off a great person unless her/his job function is eliminated.  For instance, if a smart company had to lay off one of two software engineers with one being great and other being good, it will very likely lay off the good engineer and retain the great one (and might even give the great person a raise).  Again, this is the logic that smart companies should follow.  Then again, there are many dim-witted companies that lay off their great people for odd reasons and so you’ll find some great people out of those laid off.        

Where to find that A-player

Some A-players are less likely to be looking to jump ship during tough times due to a risk adverse profile, security, financial reasons, or other reasons.  They are happy where they are and more likely to hunker-down in tough times.  On the flipside there are A-players that are MORE likely to leave.  Tough times often paint companies into a corner and force them into maintenance mode rather than continuing to innovate.  Great players love to innovate and usually NEED to innovate.  It’s usually very hard to keep these type of A-players caged-up and thus this presents a big opportunity for recruiting.

For instance, in the past it was really hard to hire great software engineers out of financial behemoths like Goldman Sachs, Morgan Stanley, and JP Morgan Chase.  These companies have outstanding people and pay these people really well (often 50% above the salary at a tech company).  Nowadays, even if these people have not been laid off, the great people are going to be leaving in droves.  Why?  Because in the next two years, it is really doubtful they will be doing anything remotely innovative.  Instead they will be maintaining current systems due to the understaffed and underfunded technology departments.  No fun there so expect a big exodus out of these companies.

It’s also worth noting that great people are often first to leave sinking ships.  They don’t feel they need to stick around for a severance because they are confident they can always get another job.

How to deal with the paradox

Let’s face it, these great, A-Player type people are just really hard to find.  Let’s say for sake of argument that A-players make up 1% of the population that could do the job, B-players are 19%, and C-players comprise the other 80%.  It’s uncertain if these percentages are accurate, but there definitely are more C-Players than B-players and more B-players than A-players.  Now if people find out you are hiring (through a Craigslist ad, posted on careers page, etc.), it probably means you are going to get a massive influx of resumes from C-players.  Many of these resumes will be indistinguishable from those of A-players (it’s always hard to distinguish on paper).  Which means the amount of noise (aka undesirable hires) will likely increase.  Which means more work sifting through these resumes and talking to many more people.   

It’s important to screen for great people in order to turn the volume down on all the noise.

Unfortunately, it is really hard to tell the difference between an A-player, B-player, or C-player just from a resume.  Which means you need to engage with candidates and therefore you’ll have far more candidates to deal with given this economic climate.  My guess – for a standard job announcement, you’ll have three times the number of C-players applying, twice the number of B-players, and the same number of A-players.   Wow…your noise level has just massively increased!

Aplayer graph

At Rapleaf for instance, we have a written one-hour technical interview as the first screen for resumes we like.  Last year, our pass-rate for the test was 17% … meaning 17% of the candidates passed the written interview and moved on to a second round (a live chat with a Rapleaf engineer).  Today our pass rate is about 6-8%.  Our noise level has really increased.

One way to decrease the noise level (and thereby increase the amount of quality) is to specifically target candidates rather than to post a job ad.  I would suggest targeting a company you think has great people, call into that company, and try convincing the talent to meet with you.  I know if I was based in Manhattan and was recruiting software engineers, I’d be calling on the people in the top banks.  While not everyone at a top bank is a great player, your ratio of great-to-good is going to go up substantially (assuming they haven’t already left).

Of course, not every position is harder to hire in this downtown.  It is easier to find great people whose industries have been totally decimated by this recession.  You’re in luck if you are looking to hire investment bankers, corporate lawyers, construction workers, or people in manufacturing.

This downturn looks to affect us all for the next couple years, so be sure to fill your company with only A-players and thereby creating your own A-Team.

(Special thanks to Vivek Sodera for his edits.)  
(if you like this, please send it to a friend)

See comments and comment yourself at: Summation blog   

Also — there is at least one company hiring in this recession…
My company, Rapleaf, is looking to hire six super talented people right now.  if you refer someone we hire you get a MacBook Air AND a 40 inch flat screen monitor.  we are looking for:
– awesome marketing person
– kick-butt product manager
– 4 incredibly talented software engineers
More at:  http://business.rapleaf.com/careers.html

 

Read my articles in the Huffington Post

Read my articles in BusinessWeek

Read my best blog of the year on homophily

Silver Linings in Economic Downturn : Peace | Heart and Soul of Success

 

My generation has accomplished much, and it  is also sometimes called the “me” generation.  It seems safe to say that the “greed is good” motto, has lost any charm it might have once had.  Perhaps we are returning to our 60’s “Peace and Love” at a deeper level.

Silver Lining:

Out of the economic fallout, people will need to turn to one another — and realize conflict and war doesn’t get them what they want.  Actually, “an each person for himself” orientation has gotten us into our current downturn.

By thinking more of the deeper meaning in life, peace and harmony emerges.

Yes there will still be conflict and war, but it’s being put into a larger context. We can’t save ourselves and lose our soul.

avila-shoreThink of something that brings you peace… a place, a flower, a person, an idea, a feeling, an experience.  Now project that into your future and let it connect with other peaceful pieces…

that’s it, breathe into it.

What brings you peace?

 

Learning to Say

I was born in Canada—the land of snow.  And though I grew up skiing, playing and snowshoeing in piles of it, it has taken decades for me to say “yes” to wintertime.  When the first northerly winds blow into town each fall, inspiring me to cook stews and sleep later, I resist. 

“No!” I shout out to the heavens.  “I don’t want to slow down. I don’t want to be cold.  I don’t want to spend more time inside.”

But we all know that there is a season for everything.  The earth needs time to lay fallow—to gather strength for the burst of life in spring.  And since the earth cannot resist orbiting around the sun, winter is inevitable.  If we say “no” to winter, we will only make it harder on ourselves. 

This past year, I tried to apply that logic to recessionary times—I wanted to frame the downturn as an economic “recess,” or timeout.  I wondered if we collectively needed time to step back from our careers, investment portfolios and consumption to assess what we really value and how much we really need to live happily. 

As a child, I have only fond memories of recessionary times.  In the early eighties, our family was forced to downsize our lifestyle—we lost much of our income so we we moved to a smaller house and radically cut our spending.  But from a child’s perspective, the recession meant my father worked fewer hours and spent more time at home.  What a gift! It also was a time when we played creatively because we didn’t have piles of new toys.  Our family spent less time talking about money or buying goods at the mall–we focused on other things like play, spirituality, gardening.  All in all, I enjoyed our family’s “recess” from the hustle and bustle of new immigrant life.

So when our economy began its downslide last April, and I lost about 50% of my income and investments, I teetered on the precipice of despair.  I wanted to shout, “no.” I wanted to find a way to get more work and have more money.  But gazing upon my daughter, I decided to say “yes” to the recession.  I’ve taken a mental break from a handful of projects. I spend less time shopping and more time sharing what I’ve got.  I forego restaurant meals for tea-dates at friends’ homes.   Most important of all, hours I might have spent working are now dedicated to playing with my daughter.  Because more than anything else, I want my daughter to remember the recession of 2008/9, as one of the best times in our lives.

What are the Upsides of This Major Downturn?

Well, we’ve all heard plenty about the major down turn that we’re in the midst of. The news media is having a real hay day with it all. Unemployment continues to rise, home foreclosures are everywhere, and no one seems to know quite what to do about it all.

But let’s take a step back and look at this from a different perspective.

Let’s say for the moment that we live in a universe where there are no accidents.  I know that can be a bit of a challenge in its own right, especially when it looks like there’s been a major accident on the universal freeway, but I don’t think so.

I think it’s more likely that we’ve been paid a visit from the Universal UPS Truck.

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The Universal UPS Truck
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I still remember when my coach at that time, Michelle Lisenbury Christensen, shared with me about the Universal UPS Truck.  It went something like this:

The Universal UPS truck drives up to your home. Inside it, there’s a package with your name on it, and inside the package is a present just for you.  Now, if you don’t come to the door when the driver tries to deliver the package, it’s not a problem.  The Universal UPS truck will simply return again, and again until the package is delivered, just like a regular UPS truck….with one important exception.

Each time the Universal UPS truck attempts to deliver the package with the gift inside, it gets a bit more intentional, even forceful with its attempts, until finally, if you continue to refuse the package, the Universal UPS truck drives through your living room.

Quite a wake up call, right?  Well, perhaps we’re being given the opportunity to wake ourselves up…but to what?

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3 Upsides to this Down Turn
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I think the package we’re being delivered has at least 3 gifts inside.  They are:

**  The opportunity to re-evaluate our lives

**  The opportunity to simplify our lives

**  The opportunity to know our true Self

I remember hearing from one of my clients a few years ago that he realized that he was one of the many people so busy climbing the corporate ladder,  scrambling all over each other he’d failed to notice the ladder was propped against the wrong wall, and wasn’t going to result in a fulfilling or satisfying life.

What wall is your ladder propped against? Isn’t this the perfect time to spend a little time reflecting upon such a question?

This is an ideal time to get in touch with what matters most in our lives.  Is it really having the latest model, gas guzzling car?  Or to be able to rent a private jet to fly to the Super Bowl?  Or to work 50, 60 or more hours at a job your hate so you can afford the ‘good life’ while ignoring the loving family that’s starved for your attention?

I don’t think so….even though perhaps we’ve thought so up to now. 

My daughter was given an assignment recently by one of her teachers to bring in the one thing she’d be sure to take with her if there was a fire in our home, and an person or pet didn’t count.

We both realized from the assignment that there wasn’t anything more important than our loved ones.  (And we also both agreed we’d grab our lap tops if we had the chance. <G>)

So, this is the time to embrace what matters most to you, and to spend a bit more time appreciating them.  In future issues, we’ll examine the gift of simplifying our life and knowing our true Self.  In the meantime, let’s discuss what really matters to you on the Living & Working On Purpose blog.

Let’s shift the ground beneath the cynics, the greedy, the powerful

Obama said it. Now Forbes is saying it: the wost is yet to come. The fact is, we haven’t seen nothing yet when it comes to our economic downturn.

So, why am I optimistic?

One thing is because in situations like these, when what we take for granted fails us, there occurs a window of opportunity where people are open to new ideas, new ways of doing things. Several times in his inaugural address, President Obama alluded to this.

The state of our economy calls for action: bold and swift. And we will act not only to create new jobs but to lay a new foundation for growth… …What is required of us now is a new era of responsibility — a recognition, on the part of every American, that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character than giving our all to a difficult task.

These words combined with the economic condition we face represent an unprecedented opportunity for those with the insight and daring to do it differently – in our national economy, in our workplaces, in our relationships and in our personal lives. As we respond in disgust at greed-oriented, clueless corporate executives intent on business as usual and preserving the status quo, we have the opportunity to shift the ground beneath them and create something that will support connections between all people, yes, even those who lavish themselves with French executive jets and thousand-dollar wastepaper baskets.

For, remember what a dynamic Spiritual Leader once said long ago: "Forgive them, for they know not what they do."

It is fitting that our financial downturn hit us in full in the winter. For winter is a time to turn energies inward, to store that energy and build up our reserves for the coming spring. Our economic winter may last well beyond the coming of the spring, but its duration and severity allows us to look deeply into our hearts and souls and ask: is there a way we can do things differently that offers a more promising future?

I say there is…

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