Wisdom from the 42nd Page

When Giants Fall

On the forty-second page of “When Giants Fall: An Economic Roadmap for the End of the American Era” author Michael Panzner wrote (emphasis added):

To try and avoid the economic and social challenges posed by growing resource constraints, countries around the world have raced to find alternatives. Among the options they have chosen is one that will almost certainly have unwelcome and unintended consequences. Without meaning to, they have heightened the risks in a world already destined to become more dangerous and violent.

More information about “When Giants Fall: An Economic Roadmap for the End of the American Era” (and the book itself) is available from:

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(John Wiley & Sons, February 2009. Hardcover, 264 pages. ISBN: 047031043X; EAN: 9780470310434.)

Saving Capitalism from the Capitalists

On the forty-second page of “Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity” authors Raghuram Rajan & Luigi Zingales wrote (emphasis added):

on firm value. There are ways of ruiling this explanation out. When a company is included in the S&P 500 index, many mutural funds simply replicate the index and invest in the company. The higher institutional ownership in these "index" companies does not reflect the value judgment of institutional investors but simply the application of a mechanical rule. Even institutional ownership driven by such mechanical considerations has a positive effect on firm value.

More evidence that institutional ownership is beneficial comes from examining the consequences of regulatory changes.³¹ Before 1992, if ten or more investors in the United States wanted to discuss the performance of a particular company, they had to file a report with the Securities and Exchange Comission, detailing the purpose of, and participants in, the discussion. These requirements made it onerous for institutional investors to coordinate their actions. In 1992, this rule was done away with. The relationship between institutional shareholdings and firm value is twice as large after 1992 as bfore, consistent with the idea that institutional investors force companies to be better managed. That institutional investors help reduce waste in companies flush with cash is bolstered by the finding that the relationship between institutional shareholding and firm value is especially strong in firms that generate more free cash flow.

For mature firms, therefore, financiers play the role of policemen and undertakers, preventing the theft of resources and burying the dead. In other instances, however, they play the more creative role of midwife. Young firms need a very different kind of assistance than established, mature firms. Young firms have tremendous growth opportunities, and in an economy with good laws and decent accounting, most managers of young firms ahve the incentive to succeed (rather than steal or waste investors' money). Top management runs the company in trust, not just for shareholders but also for junior management, which expects to succeed top management. The rewards for a growing firm come not from misappropriating current free cash, which is meager, but from the prospect of running a larger, more profitable firm. So managers can be relied upon to keep obvious wrongdoing by other members of the management team in check.³² The reason management needs close monitoring is that management may be inexperienced and headstrong and may unwittingly do the wrong thing.

Consider how venture capitalists (VCs) help inexperienced manage[ment]

More information about “Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity” (and the book itself) is available from:

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(Crown Business, February 2003. Hardcover, 384 pages. ISBN: 0609610708; EAN: 9780609610701.)

Fallen Giant

Since American Tax Payers now own almost 80% of insurance giant AIG, we turn to the forty-second page of “Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG” where authors Ronald Shelp & Al Ehrbar, wrote (most emphasis added):

shakers. Luce's friend got great treatment—Starr's is the first profile in the package, and the longest. Even then, journalists recognized that insurance as practiced by AIG was different: "His insurance career has not been the dull, routine-ridden affair that is so typical of this profession in America.

"Were the total assets of Mr. Starr's companies to be tabulated they would seem midgetlike beside those of Metropolitain Life," Fortune wrote. "Buy Mr. Starr's income is fat—perhaps as bigtoday as any U.S. insurance income. This money is earned upon a sociological premise, that the standard of living and hygiene of the Chinese middle class are improving, with a consequent decline in the death rate. Indeed, since Chinese statistics are all but nonexistent, the success of Mr. Starr's American Asiatic Underwriters, and of its various subsidiaries, is perhaps the best available proof that the death-rate decline in China is a reality."

The article observed that Starr had never bothered to become proficient in Chinese, but his knowledge of China was encyclopedic, and he was famed in the foreign community for his uncanny ability to work with and through the Chinese people. Fortune explained he was expelled from the Rotary Club for speaking his mind. There is no record of what he said but I would wager it was his pro-Chinese stance, either his belief in their integrity and honesty or his conviction of foreign concessions would revert to the Chinese. In any case, his expulsion probably became a badge of honor to Neil Starr.

Fortune called him Shanghai's most bullish tai-pan. "But like many of his modern associates, he is bullish in finance rather than in goods." Interestingly, the article describes an insurance operation with one characteristic that became a hallmark of AIG under Greenberg: "His operations form a vast and intricate web, the outer limits of which no one knows."

The article concluded: "His is a machine-gun mind, tactful at times, but often tough. At the psychological moment he will thrust out his jaw, which, with his glasses, is the most prominent feature of his face. He is forever on the go—Shanghai to New York, New York to London, London to Singapore. He goes with, and in quest of, ideas, talks insurance everywhere, spreads his interests out through Asia.... In his rare periods of quiescene he lives with a maiden aunt on the eighth floor of the North China Building, No. 17, The Bund, where Asia Life and American Asiatic are also housed. He belongs to the usual Shanghai clubs, dines outs, drinks

More information about “Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG” (and the book itself) is available from:

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(John Wiley & Sons, October 2006. Hardcover, 228 pages. ISBN: 047191696X; EAN: 9780471916963.)

Greed and Glory on Wall Street

Greed and Glory on Wall Street: The Fall of the House of Lehman” was published in 1987. Obviously the author would have a lot of new material in the past 24-hours (and in the coming weeks and months) for an updated revision! But looking back two decades we find that on the forty-second page author Ken Auletta wrote (some emphasis added):

strategy"; (2) "a fragmented and undisciplined approach to running its business"; (3) "a portion of the partnership whose ability, training, and/or work habits are inconsistent with the competitive demands of the marketplace and with Lehman's present business"; (4) "too small a professional staff relative to the number of clients to be serviced and transactions to be processed"; (5) "a bond distribution system which is in chaos and an equity distribution system which is experiencing declining market share"; (6) "recent management changes throughout the organization"; (7) "high overhead relative to current revenue levels"; (8) "comparatively limited capital." The authors warned that "in our judgment the long-term future of this firm is uncertain."

"The firm must face up to the fact that the ability, training, and/or work habits of a substantial number of partners (totaling perhaps 10 to 15 throughout the Firm) are inconsistent with the competitive demands of the marketplace and with that expected of Lehman partners," the authors concluded. "These individuals should be phased out according to some specific plan. The single most important conclusion of this study is that the quality of the partnership is the key to our present problems and to our ability to be successful in the future [their italics]."

Peterson was determined to phase out some partners and to reinvigorate the forty-four man partnership with new blood. But he was sensitive to how fragile the partnership was, and he moved slowly. It wasn't until September 1976 that he replaced seven senior members of the board, reducing the average age of the board from fifty-six to forty-seven years. After his friend Warren Hellman left in 1977 to start his own venture capital firm, Peterson left the presidency vacant.

To address the composition of the partnership required Peterson to confront a strategic question: What kind of investment bank did Lehman wish to be? With remarkable prescience, the internal report had sketched how investment banking had changed, and was likely to change further: "As the nation industrialized, financing was the most important element of corporate life, since shortages of goods created demand which eliminated marketing as the key feature. Few of the inventory-entrepreneur class understood how to raise capital; they had limited contacts with financial institutions and knew of only the handful of investment banking firms whom they could solicit to assist them in the critical function of raising capital... Personal contacts, imaginations, salesmanship and an entreprenurial orienta[tion]

More information about “Greed and Glory on Wall Street: The Fall of the House of Lehman” (and the book itself) is available from:

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(Warner Books, March 1987. Paperback, 292 pages. ISBN: 0446384062; EAN: 9780446384063.)

Cracking Creativity

On the forty-second page of “Cracking Creativity: The Secrets of Creative Genius” author Michael Michalko wrote (emphasis added):

that the other person can connect with and understand. The ideas stemming from the second scenario will probably be more bottom-line oriented and impersonal. Perhaps they will include an objective idea that the other person can readily understand and accept.

Da Vinci's Multiple Perspectives

Leonardo da Vinci equated comprehension of the deeper structure of his subject with having multiple perspectives, specifically, from at least three different points of view. This seems to be a very fundamental and key part of Leonardo's strategy—multiple points of view are synthesized together. Leonardo believed that until one perceived something from a minimum of three different perspectives, one did not yet have a basis for understanding it. A true and complete knowledge comes from the synthesizing of these views. For example, when he designed the first bicycle, he looked at this new form of transportation from the viewpoint of the inventor, investors who would sponsor prototypes and production, the bicycle rider or consumer, and the municipalities where bicycles would be used, and then he synthesized the views.

Just as the difference in point of view between your eyes allows you to perceive depth, multiple perspctives about your subject deepen your understanding. Educational psychologists have conducted many experiments illustrating how a multiplicity of perspectives open awareness and creativity. In one study of beginning piano students, two groups were introduced to a simple C-major scale. One group was told to learn the scale by responding to multiple perspectives, including thoughts and feelings; the other group was told to practice the scale by the traditional memorization through repetition. When the groups were evaluated, the psychologists found the playing of the first group to be much more competent and creative.

In other experiments, researchers assigned chapters about particular subjects (e.g., the passage of the Kansas-Nebraska Act) to two groups. one group was asked to read the passage from multiple perspectives: its own, as well as that of the participants, wondering what they must have felt or thought at the time. The other group was told simply to learn the passage. Invariably, when the groups were tested the group that studied using "multiple" perspectives outperformed the other group that used "traditional" learning methods, in terms of information retained, the content of the essays they wrote, and creative solutions proposed.

More information about “Cracking Creativity: The Secrets of Creative Genius” (and the book itself) is available from:

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(Ten Speed Press, January 2001. Paper Textbook, 320 pages. ISBN: 1580083110; EAN: 9781580083119.)

The Corporate Blogging Book

On the forty-second page of “The Corporate Blogging Book: Absolutely Everything You Need to Know to Get It Right” author Debbie Weil wrote (emphasis added):

A blog published on a company Web site is going to have a team or at least several people behind it. These folks may be allied with your Web content staff or your communications team or your marketing department. But it's most likely going to be more than one person in a bigger organization. In addition, you're going to have a content strategy, both for creating the blog and for keeping it going. Yes, you'll try for passion and spontaneity in your blog. But it will be planned. And that's OK.

"I've never really found the time to blog, so to speak. For me blogging isn't about sitting down on a regular basis and dreaming up something to say. It's more about indignation, frustration, pride and beliefs. I always have my BlackBerry with me. When I'm feeling inspired I jot something down. I've always been this way."

—Bob Lutz, General Motors¹⁰

Another time concern about blogging is that it's a distraction to employees. According to an analysis by Advertising Age, U.S. workers annually are wasting the equivalent of 551,000 years reading blogs. AdAge.com calculated that 35 million workers (one in four) visited blogs in 2005 and spent 3.5 hours or 9 percent of the work week reading them.¹¹

But the same concern could be expressed about employees spending too much time on email or surfing the Web. And blogs are, of course, just Web sites. So where do you draw the line? How do you separate blogging—reading or writing them—from the other forms of online communication and information gathering that are part of every knowledge worker's modus operandi?

You don't. Blogging can and should be lumped in with email, Instant Messaging, chat rooms, discussion boards, forums—in other words, the kinds of online communications your employees are already engaged in.

More information about “The Corporate Blogging Book: Absolutely Everything You Need to Know to Get It Right” (and the book itself) is available from:

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(Portfolio, August 2006. Hardcover, 218 pages. ISBN: 1591841259; EAN: 9781591841258.)

Tulipomania

On the forty-second page of “Tulipomania: The Story of the World's Most Coveted Flower & the Extraordinary Passions It Aroused” author Mike Dash wrote (most emphasis added):

of his own. Instead, he took pleasure in stocking the gardens of his friends, and they in turn provided him with a host of experimental seedbeds with which to investigate the properties of the plants he had discovered.

Clusius made full use of his friends' gardens in preparing some of the masterful botanical studies to which he devoted much of the latter part of his life. These books, which included detailed studies of the flora of Spain, Austria, and Provence, were among the first to assume that plants are more than simply potential ingredients in the dubious medical preparations of the day and are worthy of study in their own right. Because of this Clusius has always been considered one of the fathers of botany, not least because he developed a system for classifying plants in groups according to their characteristics—an idea that would later be taken up by Carl Linnaeus and turned into one of the foundation stones of modern science.

In May 1573, while Clusius was still living in Mechelen and busy distributing tulip bulbs and other plants throughout Europe, he was asked by the Holy Roman emperor, Maximilian II, to go to Vienna and establish an imperial hortus—or botanic garden—there. This was a tempting offer. Clusius's father, whom he had been supporting had just died at the age of eighty-one freeing his son from the burden of caring for him. The proposed salary of five hundred Rhine guilders a year would let Clusius—who had been embarrassingly dependent on the charity of friends for years—live comfortably at last. And Maximilian wanted a garden to outshine those his princes and nobles had been cultivating. Clusius, whose poverty and scanty claim to the ranks of nobility had left him with something of an inferiority complex, was flattered by the attention and grateful that the emperor offered formal acknowledgment of his status as a noble. In addition, he already knew a little about his prospective patron, who was one of the few emperors ever to show sympathy toward the Protestant faith; his friend and regular correspondent Johannes Crato

More information about “Tulipomania: The Story of the World's Most Coveted Flower & the Extraordinary Passions It Aroused” (and the book itself) is available from:

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(Three Rivers Press, January 2001. Paperback, 288 pages. ISBN: 060980765X; EAN: 9780609807651.)

Ponzi's Scheme

On the forty-second page of “Ponzi's Scheme: The True Story of a Financial Legend” author Mitchell Zuckoff wrote (hyperlinks & some emphasis added):

them with polished fourteen-karat-gold heads, on which was inscribed: "Presented by The Boston Post to the oldest citizen of," followed by the name of the resident's town. Below that, to make clear that the cane should pass to the next oldest man upon the holder's death, were the words "To be transmitted." Grozier wrote to selectmen throughout much of New England asking them to locate the deserving recipients and present the canes, then inform the Post of the selection, ideally with a photo. Eventually, 413 canes were handed out, often with great pomp and ceremony followed by fawning stories in the Post. Holders of the canes variously attributed their longevity to abstinence from, or daily devotion to, alcohol and tobacco. The death of a Post cane holder was cause for another story, as was the token's passage to the town's next oldest man. To Grozier, the appeal was obvious: "In many small towns and villages the general store was a place where many men gathered to talk and swap stories. One of the most conspicuous figures in the group was the 'oldest man.' Age is a subject of universal interest, no matter whether it is among city folks or country folks. A man who has succeeded in cheating death longer than most of us manage to do it is always an interesting figure."

Edwin Grozier knew he needed more than fun and games to win readers. He loved a good murder case. Lizzie Borden's father and step-mother turned up dead less than a year after he bought the Post, and the early years of the new century provided an endless stream of other celebrated killings. Circulation always rose when murders involved the rich, the pious, an attractive woman, or a spurned lover. A case involving a minister with two beautiful young fianc&eeacute;es, one of whom turned up dead from poison in what looked like a suicide, kept Grozier in gravy for weeks. A Post reporter cracked the case when he tracked the minister's purchase of cyanide. A close second was when a diver hired by Grozier found the severed head of a beautiful showgirl at the bottom of Boston Harbor. "MIssing Head Found by the Post's Diver," the headline blared.

When not covering crime, the paper kept its promise to be a friend to the little guy. Grozier supported the labor movement and shorter

More information about “Ponzi's Scheme: The True Story of a Financial Legend” (and the book itself) is available from:

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(Random House, March 2005. Hardcover, 416 pages. ISBN: 1400060397; EAN: 9781400060399.)

Sources of Power

On the forty-second page of “Sources of Power: How People Make Decisions” author Gary Klein wrote (emphasis added):

He would stay until this civilian could not take it anymore, and then he would leave. So they both stayed where they were, while the cloud got closer. As the cloud floated directly overhead, the wind plunged the tear gas down at them. They tried to run, but it was too late. They collapsed, coughing uncontrollably, their faces covered with tears and mucus.

In terms of pure adrenaline rush, I do not think any of our experiences can exceed the time we were studying airport baggage screeners, to understand how they interpreted the X-ray images. Their difficult job is to identify weapons that may be rotated in any direction and may be superimposed on other metal objects. They need to make the judgment in only a few seconds. During this project sponsored by the Federal Aviation Administration, two of our researchers, Steve Wolf and Dave Klinger, traveled to Cleveland to observe and conduct interviews. Approximately ten minutes after they arrived at the checkpoint, a baggage screener saw something suspicious in the bag that a large, expensively dressed man had sent through the machine. The baggage scanner did not know it was a gun (if she had, she would have locked it into the machine). She asked the man if she could open the bag. Security guards were summoned and quickly confiscated a gun, then led the man off in handcuffs. Our stunned researchers looked on in amazement. The odd part of the story is that the man had not intended to smuggle the weapon at all. He was carrying drugs and had forgotten to remove his .38 when he arrived at the airport.

Applications

The part of intuition that involves pattern matching and recognition of familiar and typical cases can be trained. If you want people to size up situations quickly and accurately, you need to expand their experience base. One way is to arrange for a person to receive more difficult cases. A fireground commander in a small, rural community may get little direct experience. Recall the case of the Christmas fire where the commanders acted like novices compared to the two consultants. In contrast, firefighters in a large city with many old buildings can get a tremendous amount of experience in a short time.

More information about “Sources of Power: How People Make Decisions” (and the book itself) is available from:

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(MIT Press, February 1999. Paperback, 348 pages. ISBN: 0262611465; EAN: 9780262611466.)

Tuned In

On the forty-second page of “Tuned in: Uncover Extraordinary Opportunities That Lead to Business Breakthroughs” authors Craig Stull, Phil Myers & David Meerman Scott wrote (hyperlinks & emphasis added):

Each vehicle has a home location (a dedicated parking space located on a city street, driveway, or neighborhood lot) in the member's area. Members are issued a "Zipcard" access card, which, when swiped, opens the vehicle (but only at the appointed reservation time) and records the hours of usage, the mileage, and the time of return. This data is then uploaded to a central computer via a wireless data link, charging the member's account. The Zipcar experience resonates so well that many members write about Zipcar on their blogs and have posted YouTube fan videos detailing their experiences.²

But the company didn't stop there. In subsequent years, Zipcar developed an understanding of other buyers who would benefit, and the company now offers its services to college students. They've partnered with over thirty colleges and universities, including the 25,000-student University of North Carolina at Chapel Hill, to provide students with access to the Zipcar car-sharing service on or near campus. And they have started a "Z2B" program—Zipcar for Business—that companies can offer to employees as a benefit and that landlords can offer to tenants.

Members aren't the only ones who love the way Zipcar fits their lifestyles—municipalities do too. Several cities offer free parking spots for Zipcars, which provide a green alternative to individual vehicle ownership. With initial service in Boston quickly expanding to 14 cities (including New York, Washington, DC, Minneapolis, San Francisco, Toronto, London, Chicago, and Vancouver), Zipcar has grown into the largest car-sharing organization in North America and Europe. At a time when U.S. rental car business was flat, Zipcar grew from 5,000 members and $2 million revenue in 2003 to 180,000 members and $100 million in revenue by the end of 2007.

How Zipcar Tuned In and Created a Resonator

The six-step Tuned In Process that we've developed is simple to learn. We're certain that if you apply these six steps to your own business, you will have a much better chance at success. But applying the process means adopting a new approach to how you develop and build products and how you market and sell them. Compared

More information about “Tuned in: Uncover Extraordinary Opportunities That Lead to Business Breakthroughs” (and the book itself) is available from:

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(John Wiley & Sons, June 2008. Hardcover, 203 pages. ISBN: 047026036X; EAN: 9780470260364.)