Wednesday, February 25, 2009

Obama, You and the Paradox of Leadership

Tuesday night Obama walked carefully along the razor's edge of leadership: trying to be both realistic and optimistic. It's a tough balancing act.

If the current and near term reality is pretty bad, reminding us of that is a downer. But if turning that around requires that we have faith and believe in the future, Obama has to be brimming with optimism. Many of the commentaries this morning tried to put him in one camp or the other, either praising (mostly) or criticizing (very few that I could find, except from the most predictable voices) his optimism or realism.

Done well, the optimism prevents the realism from becoming cynical. And the realism prevents the optimism from becoming naive.

It is a challenge many senior authorities are facing right now. How much bad news can I deliver to my people without being dismissed as The Prince of Darkness? How optimistic can I be if I am not sure myself that everything eventually will be ok or that I even know what ok will look like in the future?

To me, it sounded as if Obama decided, and rightly so, that what David Brooks and other commentators have been saying about the current condition is right: this is a psychological issue as much as it is a policy issue. The stimulus plan, the bank and auto bailouts, the mortgage relief program and all the rest will not break the economic gridlock (see what has happened, or not happened, so far)until you and I have confidence that things will get better, that in every way we stop selling short and make consumption and investment bets on the future.

Having sound policy is relevant but not controlling.

Another leadership skill in periods of uncertainty and chaos is buying time. The wolves are at the door, maybe even calling for your head, and you know that it is going to take time to turn the situation around. Throwing the wolves some red meat can be effective in calming them down.

Obama did that last night. He said that we should not make policy out of anger, but then he said he was angry at all those fat cats and their fancy trips, bonuses and jet planes and that none of that bad stuff would happen any more on his watch...or on our dime. Eliminating corporate jets or bonuses is not going to solve anything, but it might buy Obama some time by temporarily relieving some populist frustration and anger. Didn't it make you feel good that Obama said he was going to get those bad guys, just like it felt good when George W. Bush said that he was going to get those bad guys who perpetrated 9/11?

Monday, February 23, 2009

Will You Reset or Hunker Down?

That's the choice.

Are you individually and we as a country going to treat the current reality as a one-time thing that we need to overcome, or as a signal that the sands are permanently shifting and that all our assumptions need to be dredged up and examined and potentially re-calibrated? Are you going to Hunker Down or Reset?

The Dow Jones is sliding toward 7000 as I write this. Talk of nationalization of the banks is growing, as we taxpayers keep pouring money into them without any noticeable effect on the credit system. The folks in charge in Washington do not know what to do because they have never been here before.

But neither have we.

Take a look at this video and see if it makes you think twice about whether we are experiencing a sea change or just a big bump in the road:

As usual, David Brooks nailed the problem well. In case you missed it, here's a link to his February 13 column called "The Worst Case Scenario". The underlying issue right now is not the lack of credit in the present, it's the uncertainty about the future.

And yet to many people I know and clients I work with, the response is to hunker down, hibernate like a bear, and hope that when you wake up, it will all be better. I'm tempted to hunker down myself because reset is hard and scary.

Most of us humans do not deal well with uncertainty. We look to our senior authorities, whether the President, the Governor, the CEO, the Executive Director, or Mom and Dad to create stability and security and clarity for ourselves. That's what we want from authority: direction, protection and order. We're hard wired from the day we're born to depend on authority to provide those services. And as long as they do, we will reward them with whatever is the coin of the realm: loyalty, votes, money, more responsibility. But in these times, authorities fail us because no one can provide those services. Hunkering down is the closest they can get.

Here's what hunkering down looks like: (1) Stephanie Strom's piece in the Times on Friday of last week showering sympathy on the well-intentioned charities going belly up, rather than seeing this moment as an opportunity to rethink their priorities, eliminate duplication, introduce good management practices, and get rid of programs and people who are not performing well. (2) GM and Chrysler begging for - and getting - more money to pour down their sinkholes, rather than using some of that money to support less encumbered investors and entrepreneurs who can design and build cars that we would actually buy.

It is harder to know what Reset looks like because it is so new and culturally outside our repertoire and comfort zone....and maybe competence.

For example, my friends in the foundation world are struggling with this dilemma every day. Their grantees are panicking, begging for emergency funds from them to fill the gap as their usual sources are drying up and there are more people to be served. The more courageous in the foundation community are using this crisis as an opportunity to encourage those grantees to make hard choices and to help them through the psychological trauma that Brooks wrote about as they contemplate mergers, closing of programs and whole agencies, starting innovative programs that might meet future needs and priorities, more disciplined practices, greater accountability and more transparency. Those are all Reset ideas.

Here's what Reset might look like more generally, for you and for the Government: (1) Funding risk-takers, creators, and inventors, small and large, in manufacturing, financial services, nonprofits, and even academia, as Tom Friedman suggested in yesterday's Times. (2) targeting your spending and investing now for the long term, like buying a Prius or supporting new faces and burgeoning success stories in education, people and ideas to help rescue the current school-age generation, so many of whom are not getting a decent foundation for their adult lives. (3) Governor Deval Patrick of Massachusetts opting for a 19-cent gas tax increase rather than tolls to help bail out a transportation system deeply in debt, knowing that the gas tax will incentivize drivers to buy fuel efficient cars and spew less evil stuff into the atmosphere. Similarly, (4) Reset would be the Obama Administration and some of those towers of marshmallow in Congress making the obvious changes in Social Security to keep the system solvent for the next generation. (5) Israel and the US talking with Hamas.

Reset is an idea still to be fleshed out. (My colleagues at Cambridge Leadership Associates are trying to do that even as I write.)But it has resonance with the choices we all face today. Reset can challenge us individually to think differently about the options we have.

For example, how would it feel to put your money or your body where your mouth is, and step up and target your volunteering and financial support by putting a stake in the ground where YOU think your time and money will build a society that can adapt to the new realities that lie ahead? How would it feel to really distinguish between what you want and what you need? How would it feel to work to restore those relationships which were once important to you and are now broken? How would it feel to embody our interdependence by engaging with The Other, in your personal as well as your professional life?

ps. Steve Pearlstein, an old editor and longtime friend of mine, now a Big Shot as
a Pulitzer Prize winning columnist for the Washington Post, has joined with Ben Bradlee and Andrea Ussem to start a blog called On Leadership at the Post. I've been posting on it, along with some real experts on leadership and some heavy duty authority figures. Check it out.

Sunday, February 15, 2009

What If this is as good as it gets?

"What if this is as good as it gets?"

That's the line Melvin Udall (Jack Nicholson) delivers in the movie "As Good as It Gets" as he scans the depressed faces waiting for their 50-minute hours in the psychiatrist's anteroom.

Most everyone I talk with has a Plan A for dealing with the economic meltdown. For most people I know, it is some form of hunkering down, trying to save every penny, until it blows over. That's what we are doing, more or less. Dinners out are rare. Keeping a record of our expenditures. Fewer cabs.

But what if this IS as good as it gets? Or, even more dramatically, what if we have not only not yet reached rock bottom, but when we do it is not going to start back up to where we were before? The Dow Jones. The jobs. Wall Street. Taking your kids to the ballpark? Making year-end charitable contributions that make up for not volunteering any of your time? What of all that is really gone for good?

I just read an essay called "Reset", written by Peter Karoff, an old friend. Karoff wrote for his constituency of non-profits and foundations, but the message is equally applicable to individuals, corporations, countries, and Barack Obama. I have attached his essay to the end of this post.

Playing off Rahm Emanuel's oft-quoted comment that "a crisis is a terrible thing to waste", Karoff suggests that rather than planning how to get through tough times until the status quo ante returns, what about planning as if the status quo ante is gone forever, that the new reality will be nothing like the old, and that the future is ours - or someone else's - to invent?

What if you internalize the idea that no one knows what will work or what the future will hold? What if you actually believe that the era of US global hegemony is over and that this country will have to refashion its relationships and responsibilities? What if you accept the possibility that you will never have enough money to retire and live in the manner to which you are accustomed, that you will never again earn as much as you did last year, and that your parents are not going to leave you a nest egg when they die?

What would you do differently, right now, if you believed that your life and expectations have irrevocably changed and the assumptions you have been relying on were no longer operative?

This is a leadership moment. The opportunity for exercising leadership is there for each of us, right now. It is easy to be in front of the crowd when you know where you are going. Very different when you assume it will never be the same again and the future is not only unknown, but unknowable.

How do you act in the face of an uncertain future, for yourself or for your country? What's your Plan B? How can you exercise leadership now in your personal, professional or civic? What will you do differently?

I am just as flummoxed by this as you are. But here are a few thoughts.

(1) Make hard choices. Of all the values you cherish, of all the activities you enjoy, which are essential and which can you let go? Of all the missions that your organization pursues, which are most important to you and to the people who count on you? Once you clarify your priorities, act on those values, whether it is stopping smoking or cutting out a product line or turning down work that makes you feel bad about yourself.

(2) Identify what is enduring and focus on that. For the US, it might mean remembering how this country was created and built and then opening borders even wider to allow an infusion of human energy and talent and imagination to enter just when it is needed the most. It might mean recommitting to universal quality education with a massive transfer of resources and a new conception of what it means to be a teacher and what it means to go to school, if need be sacrificing health care reform in the short run but creating a generation of young people who will figure it out later. We can learn much from the charter experiments that are being run within and parallel to the failing public school system. It might mean suspending disbelief about Hamas and being a real honest broker in the Middle East, using both carrots and sticks to get the Palestinian Authority, Israel, and Hamas to give up their fantasies and get on with the hard work of living peacefully side-by-side.

(3)Identify and then begin to close the gap between what you say you believe in and how you behave. (As I get older, I learn more about what I really believe in by watching what I do rather than listening to what I say.) Buy the hybrid car. Eat what Michael Pollan calls "real food". Join Facebook and re-connect with people you say you care about. Don't agree to be on a team at your firm unless it reflects the diversity you believe in.

(4) Run experiments, lots of them. Try out kooky-sounding ways of giving life to what you believe in, like the Indian eco-tour Tom Friedman wrote about in today's NYTimes. Organize your neighborhood on behlaf of something, anything, that you care about. Ahem, start a blog. A failed experiment is a learning opportunity and may move the ball forward just as far as a successful one. Test your own boundaries and tolerances physically, emotionally, and intellectually and test those of your family, your organization, and your public officials as well.

(4) Hold on to your optimism in the face of uncertainty, but temper it with realism. That is the only way to change the world...or yourself. Pessimism and naivete are the enemies of transformation.

Reset: The New Name of the Game

By Peter Karoff

“There will not be an economic ‘recovery’ – everything is going to be ‘reset.’” This comment from a very smart TPI client, spoken three weeks ago, was the first time I had heard the term ‘reset.’ Since then that word, and others like fundamental, and transformational, are being used by economists, business leaders, commentators and government leaders to indicate that “what is going on” is a huge disruption of business as usual for the American, and the global economy. Disruption is the term used when entrepreneurs introduce their innovations and in the process disrupt/destroy existing business models/industries. This disruption, however, was not of any entrepreneurial vision or design, but has been thrust upon us with astonishing vengeance.

President Obama’s Chief of Staff, Rahm Emanuel, was quoted as saying “never waste the opportunity that a crisis brings to the table.” The question then is whether we can use this crisis as a kind of jujitsu that lands us as a society in a better place.

Philanthropy is contingent on the ebb and flow of individual, family and corporate wealth, and the nonprofit sector is dependent on philanthropy, government resources, and earned income. What will a major reset of philanthropy’s fundamentals look like, and what should the actors in this massive Third Sector – more than 8% of GNP – do to turn it in ways that are positive?

In 2005 in The Atlantic Monthly, Jonathan Rauch wrote an article entitled Seeing Around Corners. The article dealt with how “we might learn to anticipate the kinds of events that lie ahead, and where to look for interventions that might work.” In my interview with John Abele, the co-founder of Boston Scientific, in The World We Want book, John talks about the experience of using ‘parallel tracks’ to overcome the ‘body of gods’ that fiercely resisted the introduction of less invasive surgery into the medical care system, which today seems almost incomprehensible when those procedures have become normative. I think some of the answers lie in exactly these ideas – seeing around corners – running parallel tracks – and overcoming the resident body of gods. And perhaps even more relevant – Peter Senge wrote this – “We have no idea the power we have to create the world anew.”

So far, the chorus of concern emanating from the field has had some predictable themes. Nationwide, foundations and other major donors, with assets declined 20% to 40%, are struggling with how to 1) do no harm, 2) stand up and be counted at a time when it is important to do so, and 3) be responsible to their fiduciary responsibilities. Nonprofit institutions and organizations, reeling under the impact of reduced income from all sources, are trying to figure out how to maintain mission critical programs and services with less. While difficult, and painful, these steps don’t go far enough.

A plan for a nonprofit based on the assumption that revenue will recover from the same sources to pre-crisis levels is very different from a plan that acknowledges there may never be such a recovery. A plan that is based on a foundation’s assets returning to previous levels is very different than one that assumes what we have today is what we have. A plan that only makes adjustments, even big ones, to the status quo, and does not transform how one goes about doing the work, is one of diminishing returns.

What else could be done now? Here are the elements on my short list:

Deal with, and acknowledge fear – the deer-in-the-headlight kind of fear that freezes intelligent response. Talk about it, stare it down.

A clean slate – sweep everything that you do now off the table. Take a deep breath and step way back and assume nothing exists except a blurry vision. In essence, it is as though you are starting from scratch. Reinvent the way you pay for, and do the work.

Look around the corner. Exercise your moral imagination. Make wild scenarios. Do complete end runs around the prevailing best practices – create multiple parallel tracks. As Barry Dym, the director of The Institute of Nonprofit Management and Leadership put it – “Shift the paradigm from loss to gain, from preservation to creation.”

Reassess your resources, especially those you have not valued enough. Think networks, contacts, the power of convening and access that you, your colleagues and board have. Make those calls you haven’t made in years, pull out all the stops – be shameless in the use of your cache to further the work.

Forget about going it alone. Subsume your ego. Collaborate and cost-share on a scale that was previously unimaginable. Cross domains, tear down silos between what you do and others with whom you had never imagined sharing services, and jointly serving the needs of your community of interest.

Put endowment capital to work. Make mission-based investing integral to program. Think hard about whether spending down is actually a capital investment in renewed sustainability.

Recruit new talent. Leap on the sea-change shift in attitude the financial meltdown is having on young people. The best and the brightest are no longer looking to Wall Street. This could be the biggest opportunity the nonprofit field has ever had to add great human resources.

Realize that the most influential ‘body of gods’ that need to be overcome, in addition to funders and government policy makers may be the ‘best practices’ with the field itself, or your board, the staff, and within you! Resist to your core – “that won’t work here” and “we tried that before” and “we never do that.”

Grit your teeth. This is going to be hard. Thousands of marginal nonprofit organizations will not exist eighteen months from now. Funders need to be objective, honest, and caring. Nonprofit boards need to be the same.

Renew your vows. The passion you feel, or once felt, for the work that you do, is central to the exercise of creative moral imagination. The centrality of philanthropy to the making of a better world is the heart and soul of why you are an actor on this stage. Make a poem of it.

Will the above better prepare you for a ‘reset?’ Will the field come through renewed and stronger? I think it is a fair beginning.

Peter Karoff is the founder of The Philanthropic Initiative (TPI) and author of The World We Want – New Dimensions of Philanthropy and Social Change) AltaMira Press (2006)

Wednesday, February 11, 2009

The Dangers of Leadership

For better or worse, the current crisis is a terrific leadership learning laboratory. But first, check out David Leonhardt's column in Wednesday's NY Times today. He does a much better job than I did last week of laying out the spend-or-save dilemma. The headline? Spend to save. Lots of homey examples. The one I like the best is to buy a seltzer-making machine.

Back to the dangers of leadership. Both Obama and Geithner are trying to level with their constituencies, to tell hard truths: (1) vengeance is less important that getting us out of this mess; (2) we don't have the foggiest idea what will work, neither does anyone else, but we are making our best guess, will run thoughtful experiments, and will closely and publicly monitor how they are working and not hesitate to make changers if necessary; and (3) if we can't get some people who we don't like very much to play with us (Republicans on the Hill, Wall Street folks whose greed was the proximate cause of the meltdown, and vulture investors who could make fortunes out of other people's misery) there is no chance for a recovery any time soon.

The push back has been enormous. See Maureen Dowd ( and the lead editorial in Wednesday's Times ( today. We want simplicity in the face of complexity, clarity in the face of ambiguity, and unbridled confidence from authority regardless of its intellectual honesty.

Don't you have to love Joe Biden? He cannot stop telling uncomfortable truths. Early in the Presidential campaign he got in a lot of trouble for saying that Obama was the kind of clean cut African-American that people could vote for. He was right, of course, but he was not the right person to say it. Then a couple of days ago, he said that the Obama recovery plan had a 70% chance of working (even that might be optimistic). But we don't want our authorities to tell us that what they are proposing has a 30% chance of failure, even if it does!

What I really worry about is that poor Tim Geithner, by all accounts a smart and decent fellow, is in no position to carry the water he has to carry. Between his Wall Street lineage, his culpability for not anticipating while he was at the NY Fed the mess he is trying to fix, his youth, and his own tax problems we will just not tolerate tough messages from him, the way we will from his boss, in whom we have invested enormously. As my friend and former colleague Glenn Loury has so brilliantly written, the speaker has content. Will we ever listen to Tim Geithner when he is telling us what we need to hear rather than what we want to hear?

Saturday, February 7, 2009

My Piece of the Mess, Part II

I do want to be a good citizen.

I am old enough to remember JFK's challenge to "ask not what your country can do for you, ask what you can do for your country." While I think "country" is a rather arbitrary boundary - think family, neighborhood, community, or world - I take what he said seriously. I remember thinking about what he said when, about a year later, I signed up to register voters in the South during a summer while I was in Law School only to be called in by the Dean (the only time I talked with him in my three years there) and told not to go because it would hurt my future career. Impressionable and immature as I was, I am embarrassed to say, I took his advice.

I try to do the little things that make me feel like a contributor and not just a bloodsucking taker. We donate an appropriate tithe to charity. I buy those funny-looking energy-saving bulbs. I donate time on a couple of non-profit Boards. I fill up the sink when shaving, rather than let the water keep running. I run around turning off lights. I usually tip generously. Occasionally, but only occasionally, I even do pro bono what I otherwise get paid to do.

But now it is different. What is a good citizen to do in these times? Do I save money in a bank so that they can - but probably won't - make more loans? Do I go out and spend so those restaurants and retailers can make it through and my dollars help fuel the recovery? Do I volunteer time helping those much worse off than me? Do I write my Congressperson asking for a raise in taxes that I can probably afford? Do I give back my Social Security check to reduce the national debt or help keep the Social Security system solvent? Do I fly only on US airlines? The economists, even the micro-economists who should know about this stuff, seem without good guidance or at least a clear consensus.

If I had really big cohones, I would take a chunk of our accessible cash and buy some more stock. That might help the confidence index and the Dow and, in the end, if I live long enough, enable me to do well as well as do good. But that's a big "if".

Most everyone I know, however deeply they have been affected by the economic meltdown, have responded best as they can by hunkering down, trying to cut back expenses, save what they can if they can (not putting dollar bills under the pillow, but getting close to that), and hoping that it will all blow over.

I'm really confused. What would have us JFK do? What are you doing?

Wednesday, February 4, 2009

My Piece of the Mess, Part I

OK, ok.

I made no millions by investing with Madoff, nor did I lose millions investing with him.

But life is pretty good. No complaints. Nice New York apartment. Wonderful healthy family. Steady work. Can pay my bills, up to now at least. What's not to like?

True, some of the business prospects I thought were very likely a few months ago have started to slip away. There's a pattern there to be sure, but there's still enough on my plate to keep me busy (that's my pathetic explanation for why no posts since January 15).

And, yes, in the last six months my retirement date has slipped about five years. Already being in my dotage, those five years are a considerable chunk of whatever I have left. But the economic turmoil that has devastated so many people has, so far, left me pretty much unscathed giving me the luxury in the current climate of trying to look at the Big Picture.

So, here's the question for today. Since I am part of the economic/social reality in this country and in this world (as are you), I must have contributed to the economic meltdown, at least in some small way. Even if most of what I do and how I behave and what I believe has had no impact, there must be something, however small, that actually helped bring this mess about. In short, what's my piece of the mess?

The purpose of this inquiry is not self-flagellation. But if I could identify my piece of the mess, then I might learn something about myself, about the economy, and even about what to do about it.

Here's the best I have been able to come up with. Part of what created the mess we are in was a belief, really a fantasy, that good times would never end, that growth was a given, and that the theoretical downside risks of holding that attitude were just that, theory. Peter Schwartz, an acquaintance of mine, co-founder of Global Business Network and inventor of scenario planning, legitimized this fantasy with the 1999 publication of his book, The Long Boom.

Holding on to the silly and illogical but enormously seductive idea that our portfolio would continue to grow and that income from work would do likewise made me an enabler, a contributor to the bubble, a part of the "irrational exuberance" that Alan Greenspan warned about in December of 1996.

My piece of the mess manifested itself dramatically twice. First, about five years ago, I wrote a long e-mail to our financial advisor suggesting it was time for us to move a considerable chunk of our investments for retirement into low/no risk instruments such as Treasuries. I let him talk me out of it. I’m not angry at him, but I am furious at myself for being seduced by the illusion that the gravy train was going to go on forever and I did not want to miss out, even though I didn’t really need that kind of growth. Then, two years ago, my wife and I and dear friends from Australia decided to build a house together in Italy. The house is wonderful and has already given us much joy, but it ate up a considerable portion of those retirement savings and will be an expensive continuing drain in order to maintain it and to fly there to use it on a regular basis. I do not have the kind of self-loathing over Italy that I do over failing to move funds into Treasuries, but both of those decisions were based on greed and my own version of “irrational exuberance.”

What are the lessons? Pretty basic. There is no such thing as a free lunch. Nothing is forever. Don’t confuse want with need. Trust your gut. Investment advisors have biases and defaults just like the rest of us. And no one is going to take care of us if we don’t take care of ourselves.

Going forward, we are making a family budget for the first time ever. I am adapting to the reality that I will be working hard longer than I had hoped. And we can save much more than we thought if we put our minds to it, without affecting our daily life in a noticeable way.

So, what’s your piece of the mess? And how are you going to learn from that and adapt to a new reality?