Power Pal

This was certainly an interesting week for the global economy. A low level index trader at a French bank loses $7.2 billion without anyone knowing. The bank unravels it's investments and the international markets tank. The US markets tank. The Fed proactively responds with a 75 basis point drop in the fed rate. The markets rebound a bit (maybe it wasn't a crisis after all?). Then the President announces an economic stimulus package to give the economy a "shot in the arm". Crazy week. Looking back, there were many intertwined, profound issues that were highlighted. Let me comment on each: It's the (Global) Economy, Stupid It still remains to be seen to what extent the $7.2 billion losses at Societe Generale in France caused the decline in the international markets on Monday. But, it appears that it certainly didn't help things. The bank quickly tried to unwind in just 72 hours the unauthorized trades its rogue trader had made over several months. That news did...

There's a lot of research and publishings about leadership available. But there's surprisingly not as much about followers. I read an interesting article in the WSJ about that late last year. Two books mentioned in the article seem particularly interesting: In "Followership," a book being published this winter, Ms. Kellerman argues that a big organization's fate can be surprisingly dependent on how well it understands thousands of low-ranking employees, and makes them more effective. Entrepreneurs Ori Brafman and Rod Beckstrom took a similar perspective last year in their book, "The Starfish and the Spider," suggesting that lower-ranking employees, called catalysts, need to drive organizational change, instead of top bosses. And another important perspective from Barbara Kellerman, a lecturer at Harvard's Kennedy School of Government: Among these authors' precepts: companies should look for passionate employees, keep them informed and give t...

The holidays have passed and the madness associated with holiday sales has as well. But what's so common in the United States is actually quite uncommon around the world, particularly in Europe. I read an article in the WSJ last Christmas Eve about how German stores are finally offering items on sale during the holiday season. Up until 2004, that practice was actually illegal! The stores are finally loosening up, extending store hours and offering significant discounts. It's interesting why those laws existed in the first place. The simple answer is that it's a general controlled economy system that has existed in Europe for some time. Trade unions, churches, and small retailers all have traditionally argued that increased flexibility hurts store workers and benefits only the larger retailers. And then a more unusual reason was also included in the article: In Germany, it took years of intense debate to eliminate a Nazi-era law that prohibited haggling and put limits on b...

Who knew you could buy the Magna Carta ? But apparently it was up for sale back in December last year. The only privately held copy was being sold by the Perot Foundation to raise money for medical research and other charitable reasons. Who would buy such a document? The co-founder of the Carlyle Group ... for $21.3 million! He was worried it would be purchased by someone outside the U.S. He's a quote: Mr. Rubenstein: I had read about it going on sale in a newspaper, and I thought it was surprising that the U.S. government wasn't buying it and that the National Archives didn't have the money to do it. I thought that maybe someone from outside the United States would buy it and thought, "Jeez, wouldn't it be a terrible thing if one of the most important documents in Western civilization were not available for Americans to see anymore?" Very admirable. Unfortunately, it wasn't on display when I visited the National Archives in late December.

We can only hope. I read an article in the WSJ about how business people across the country, from entrepreneurs to bankers, are all hoping for Bloomberg to run. The economy thus far seems to have taken an unusual backseat in this years election but seems to be emerging as an important issue. An interesting excerpt: As the economy has emerged as a dominant issue in the 2008 campaign, candidates have struck populist notes, from Republican Mike Huckabee's boast that he is not a "wholly owned subsidiary of Wall Street" to Democrat Barack Obama's visit to Wall Street to chastise finance executives for failing to protect the middle class. I can see the approach these guys are taking and I'm sure they have really smart campaign strategists. But I really wonder if this type of message of polarizing the "working man" vs. "big business" really resonates with voters anymore? Is the middle-class really that disgruntled with big business and income dispa...

I read a brief article in the WSJ this past week about how there's a cycle of bubbles that investors themselves create. The basic premise is that investors pour financial capital into an industry on the premise that asset prices will rise. As capital is poured in, the asset prices of course rise so it's a self-fulfilling prophecy. Then, when the bubble bursts in that industry, investors make up their losses by pouring their money into a different sector, creating another bubble, more artificially high asset prices, another bust, and the need for yet another bubble. So where's the next bubble? Alternative-energy!