For the past 25 years, the trend in the world's economy has been to financilization of everything. It doesn't matter what business you have been in, some form of securitization, new financial products, hedging, derivatives, financing, or other financial intermediation has been part of your world. Those of us who actually like to create stuff have been playing second-fiddle to those whose game has been moving the financial blocks around, slicing and dicing them beyond recognition, repackaging them into incomprehensible forms, and then trying to sell them back to us.

A Financialization Orgy

That world hit incredible heights. General Motors (NYSE:GM) and Ford (NYSE:F) have become shells of their former selves, making most of their money from financing. Automobile manufacturing has become practically a sideline, something they needed to do in order to have something to finance. Even General Electric (NYSE:GE) has become much the same kind of company, slowly shedding low-profitablilty manufacturing divisions, while securing the rights to provide financing to purchasers of the products that are manufactured by others yet still bear their name. Jack Welch's success wasn't so much in making GE's manufacturing divisions better as it was in making them less relevant to GE's financial results, depending more and more on easily game-able financial business results. (Jack Welch's greatest genius may have been realizing when it was time to get out with his money intact. His jumping off the financialization train was -- in retrospect -- an early signal that it was about to run off a cliff.)

Even small companies with little financial sophistication were caught up in this. As Kevin Depew pointed out in December, little CKE Restaurants (NYSE:CKR) got caught flat-footed in a bad interest rate swap deal. Why an interest rate swap made any sense for a company in the business of operating fast-food restaurants is not clear to this relatively sophisticated investor. Hedging food costs? Maybe. But interest rate swaps? Most likely it made no sense to anybody other than the bankers who sold the deal and the auditors who were paid to tell management that it was a valid use of shareholder money. (Hint to all managers of small companies: Remember the poker axiom that if you can't see the sucker at the table, it's probably you. If you're sitting at the table with a bunch of investment bankers whose job is to create financial products, each of whom makes more in a year than the top ten earners in your company, then odds are you are the sucker.)

Most of us have been suckers. It's just taken a couple of decades for the final cards to be dealt and the reality of things to kick in.

A few weeks ago I noted that I had encountered the term "Voluntary Simplicity" during an Anderson School-sponsored career options exercise.

The MBA Indicator

That's 12 people, in the most image-conscious city on the planet, all of whom have had significant business success, who in fact went to school to get ahead in business and who are used to 60-70 hour workweeks, all of whom are looking at their lives and thinking that maybe wanting less and having less could be a better way of living.

There's been more and more evidence that this idea could be a force in the economy in the coming years

I’m currently sitting in a meeting for the local chapter of a sizable professional organization. The fact that I’m writing this probably suggests to you that I’m not all that excited about what’s going on. The reason is that despite being a supposed professional organization that as part of it’s “agenda” promotes good management, communications, and other process, nobody in this group has ever put together a good quality meeting in their lives.

Look at the agenda:

• 8:30 – 8:45: “Warm up”
• 8:45 – 8:50: Opening, welcome and introductions
• 8:50 – 9:00: Meeting agenda and organization
• 9:00 – 9:55: Department introductions, 6-8 minutes each
• 9:55 – 10:00: Team formation
• 10:00 – 10:10: Break
• 10:10 – 11:00: Breakout Sessions
• 11:00 – 11:10: Closing

What do you think is wrong?

Well, let’s start with the obvious. What is the purpose of this meeting? Can you even divine this from the agenda?

OK, I’ll clue you in. The purpose was to get volunteers involved in the organization and assigned to specific responsibilities.

Can you see on the agenda where this would come across?

Can you see how this agenda drives towards that ultimate purpose?

Neither can I.

And not surprisingly, the meeting is wasting a lot of time and heading towards being a complete failure.

Here’s my agenda, should anybody ever ask me for one:

Purpose: To introduce volunteers to the organization and allow them to select an appropriate volunteer opportunity.

Homework: Review the attached powerpoint describing each of the departments, it’s functions and its volunteer needs. Please complete this before the meeting as we will not have time for review.

Schedule:

• 8:30 – 9:00: Bagels and coffee.
• 9:00 – 9:05: Welcome and quick agenda overview
• 9:05 – 9:20: Quick intro of each department's needs by the director, 1-2 minutes each. (Reminder, we expect you to have reviewed the background information provided in advance for details.)
• 9:20 – 9:30: Break
• 9:30 - -10:10: Department roundtable #1, select one of the departments you may be interested in volunteering for and speak with the director about opportunities in a small group setting. Identify opportunities and fit.
• 10:10 - 10:15: Quick break and reorganize
• 10:15 – 10:55: Department roundtable #2, same as the first roundtable, in a second department.
• 10:55 – 11:00: Closure and review next steps/action items

Action Items::

• Directors to follow up with volunteers to confirm choices and assignments.
• Additional action items to be agreed to between directors and volunteers.
• Other items resulting from meeting

Next steps: Be prepared to present final teams, assignments and expectations at next board meeting on [date]...

[Off topic. I am now listening to one regularly self-interested participant who has hijacked the meeting to discuss his pet topics. Nobody is telling him: “not on the agenda, we need to table this, shut up.” But running meetings is a topic for another day.]

Why is my agenda better?

Following up on earlier comments about retail, I just ran into my friend with the gift store at the one local bar that was open Christmas Eve.

Her business is at roughly 50% of where it was last year. And she's already been experiencing some returns. That usually doesn't happen until after New Year's.

Her feel is that it's been a completely lousy year for specialty retail, even at the high end.

-btc

For the past year or so, I've found that the number of companies looking for contract employees and consulting services has dropped off significantly compared to the number that wanted to hire me to full time project management positions.

Recently, I've noticed this has reversed.

Typically, this is a sign of reduced willingness to commit to hiring, and perhaps a weaker employment market.

Obviously, I'm just a very small sliver of overall employment, and a fairly high-end one as well. I'll be following up with a few recruiters I know to try to get a better understanding of what's going on a bit further beneath the surface.

-btc

Crazy day today. I'm working on a lot of little things and watching the market.

• I'm working on a complete revamping of my business website. My business works mostly on referrals, so I haven't ever thought about this much, but I really should have one even if it's only a few simple pages. Building from a fairly nice template, but the content is what's getting me.

  I can come up with dozens of anecdotes and stories to tell about my work and what I bring to the table. But summing them up into a few simple pages is turning out to be more of a challenge than I expected. My focus has changed somewhat since I started and bringing that new context to the pages is forcing me to rethink what I'm actually selling. I got so frustrated with this yesterday that I decided to skip a networking meeting this morning so I could refine my pitch before I botch it in front of fifty people.

• I've been getting lots of postcards and letters from real estate agents in Miami. Actually,they're addressed to the former resident of this place, who pretty much dropped off the face of the earth when he left here. (Some suspect he went back to Europe. Others have suggested that he had "pharmaceutical" issues of some sort. Nobody knows.)

  In any case, from what I've been able to tell, he's been trying to sell his Miami condo. Unsuccessfully. Last year, the card were all from agents anxious for the listing. This year they're all from agents noting that his listing has expired from the Miami MLS, and offering their "specialty" services in disposing of properties that are not selling well. The latest one was from a vulture who is offering to trade the condo (presumably at a very low valuation) for income-producing commercial real estate (presumably at a high valuation). Why the title on this condo still lists my address is unknown.

  I suspect things in the hot markets have not gotten as bad as they will. I'm waiting for the foreclosure notice.

• Apparently Miami Beach is also having a problem with receding sand, and there is no easy solution in sight.
• Not much new to say about the markets. We'll know more about hedge fund redemptions tomorrow and it'll be interesting to see if the selling is taking place in advance of expected redemptions, or if the redemption requests will trigger more selling. In any case, virtually impossible to game it right now. I'm doing very little. Sold a bit of the silver position in my IRA because I'm increasingly concerned about deflation and a further wave of selling everything, and added a bit of Korea Fund (NYSE:KF), but it's a tiny position.
• I do not believe that the Fed is going to loosen unless things get a lot worse. The Fed quite clearly is intent on crushing speculation in all markets. Until or unless the political pressure gets big enough to demand otherwise, I think they'll stay in that mode. Ultimately the economy will benefit far more than they would from a more accomodative policy, but it could be a painful second half.
• Caution is still the only reasonable strategy.

-btc

Somebody is finally taking my advice.

About eight years ago I was working for a major PC manufacturer, doing analysis on customer support patterns and costs. The results I came up with were not surprising. 80% of our support costs were due to about 20% of our customers. And worst 1% were almost 30% of the total cost. For the most part, these were not people whose PCs were not working properly. Many of them were people who just did not want to be bothered with learning, who would call in to ask the same questions about basic operations day after day. Some of them felt that our customer service people were there to provide free tutorials for hours each week. A few of them -- like a priest in a remote parish who called us 3-4 times a day -- were clearly just lonely and looking for somebody to talk to.

At the time I had other suggestions too. It was pretty easy to identify that the biggest problem customers tended to have purchased their products from certain retailers, and usually at certain times of the year. So I recommendded, among other thing, that we reconsider doing things like day-after-Thanksgiving specials at Wal-Mart, or at the very least do some further analysis, to attempt to determine if the long-term value of the new customers acquired could ever justify the cost of getting them up to speed on their intitial purchases, and whether in fact they ever would come up to speed and be satisfied with the product.

For those people who were truly at the extreme -- the ones who were five or six standard deviations away from the norm -- my recommendation was simple: Repurchase their PCs and all accessories from them at the original MSRP (probably less than they paid at retail), and even provide them an extra $100 gift card which they could use to buy a competing product. Getting rid of that small number of people would be worth the money.

So yesterday's news about Sprint Wireless did not surprise me in the least.

Up in Utah where I spend as much of my winters as I can, I'm friendly with a dog named Midas. Midas is the senior avalanche dog on the Snowbird Ski Patrol, and also one of the most experienced dog/volunteers of Wasatch Backcountry Rescue. I've done some avalanche training at Snowbird and seen Midas in action. In his career he's been responsible for at least a couple of successful rescues that I know about. During the 2005-2006 ski season, which was the most deadly on record for the Utah backcountry, Midas was responsible for recovering many of the victims.

I was thinking about Midas last night as I watched MythBusters clumsily go about "busting" all sorts of myths about avalanches. I have been a fan of MythBusters since it started airing several years ago and have generally found it to be pretty well put together, if not always completely thorough.

Until last night, that is.

Last night's episode was so badly done that it makes me doubt I can ever take them seriously again. For me, it was one of those "jump the shark" moments, in which a show goes from being good, to being one that is coasting on its past glory, trying desperately to be as cool as it once was but unable to because it has exhausted all real possibilities.

There were so many things wrong with the experiment it's not even funny.

If you've looked at this blog, you'll note that there are now some Google ads embedded in the main page as well as in all of the posts. There are a few reasons for this:

• I've finally hit the point where the traffic justifies trying to monetize this thing.
• Anecdotal evidence suggets that pages with embedded Google ads do much better in Google's rankings than pages without them. I suspect the reason for this has less to do with an overt bias and more to do with the fact that sites with ads get crawled a lot more frequently, but I wouldn't put it past Google or anybody else to favor the folks who drive traffic their way.
• My accountant would really prefer that my business has multiple streams of income, even if they are small. I've never considered this blog a "business," but I suppose I might if there's a few hundred bucks a year in it.

I've rebuilt the pages to keep the ads as unobtrusive as possible. They should blend in pretty well and are located at natural break points or at the ends of blog entries.

I have also updated my search box to use Google for searches both on this site and on the web.

-btc

In the course of running a small business it often becomes necessary to ask for advice. Small businesspeople tend to be very good about giving it, because we all know that at times we will need to ask for it as well. Giving informal advice is a great way to network.

But you can go too far, as a correspondent of mine recently demonstrated:

To: Important Biz School Alumni Email List
From: Small company CEO

Is there anyone out there with SAP experience and how to do implementations.

SOS

Small company CEO

Well, as much as I hate to admit it, I have some experience with SAP, and this guy is in my area, and I'm looking for clients and references right now. So as a fellow alum I got back to him right away:

To: Small company CEO
From: BTC

I've been through several implementations. What do you need to know?

And I got an equally unclear response:

To: BTC
From: Small company CEO

We are in need of lots help. Please call me, if you may.

Regards,

Small company CEO

He subsequently sent out another general email clarifying what he was looking for, but not really:

To: Important Biz School Alumni Email List
From: Small company CEO

Further clarification -

We are a Human Resource Outsourcing firm and are looking for implementation professionals with extensive knowledge of Human Resources (Outsourcing) and SAP Implementation.

Small company CEO

As it was right before the holiday weekend, I decided not to pick up the phone and start a call. Instead I sent a very polite note stating:

To: Small company CEO
From: BTC

Based on your clarification, I'm not sure I have that much to offer as I haven't touched the HR side of things in more than a decade, and in truth have not been a hands-on guy for several years, as I've moved up the chain into project management. But if you'd like any general thoughts, project assistance, or overall guidance, I'm always happy to have a conversation with a fellow alum, and if it leads to doing business together great, if not then no big deal.

I'm working from home at xxx-xxx-xxxx, but am wrapping up for the day and about to head out. I can speak with you early next week, either by phone or in person. Would that be OK? One of my clients is about five minutes away from you and I hope to be over there on Tuesday.

BTC

I received no reply, but followed up on Tuesday.

To: Small company CEO
From: BTC

I have not heard from you. Just returned from my somewhat extended weekend and would be available to talk if you like.

Thanks

BTC

I did not hear from him by the end of the day and figured that there was no interest. Fair enough. What he's talking about isn't really my expertise anyway. It would have been nice to get a note saying "thanks but no thanks." Unfortunately, some would-be businesspeople seem to regard simple courtesy as an optional matter, even when corresponding with a fellow grad-school alum.

So I was sort of floored to receive the following today:

To: BTC
From: Small company IT Manager

I am the IT manager at SmallCo, and I have been asked by Small company CEO to contact you regarding this email. First I would like to thank you for the quick response. We are currently in the project planning phase and we would like to gather as much information as possible. We will be formalizing our questions and send them to you via email within a week or so.

Again we would like to thank you and appreciate your assistance.

Small company IT Manager

How many ways is this fucked up?

• I offer to have a brief conversation with a fellow-alum and am instead passed off to some IT manager, without so much as an introduction or a request that I speak with him. Since when is a personal offer of assistance translated into an offer to do work for your whole company?
• I offer to answer some quick questions this week, yet the response presumes me to be available to answer detailed questions at some indefinite time in the future, without even asking if I expect to have the time.
• I am presumed to have expertise to answer their questions, even though I pointed out that my detail-level expertise is limited. In fact, I still don't even know what kind of information they are looking for.
• The sig line on my emails makes clear that I'm in the consulting business. While the line between "friendly advice" and "professional services" is vague at times, generally speaking if you're sending somebody lists of questions, you have probably crossed the line into the "services" area, in which case it's appropriate to first ask about establishing a formalized relationship. Yeah, that includes paying me.

-btc

I've been cleaning out the garage this weekend. In the past few months I've replaced a car, purchased a new mountain bike, moved all my old wine (some of which is sadly over the hill) out of storage and back home where it can be drunk, and worked on a number of small projects that have caused me to accumulate a lot of junk. Since my garage and my office are really one space with a half-wall and some bookcases between them, this has gotten quite annoying.

As with any major cleanup effort, it started with total destruction. Move everything off the shelves, move everything out of the closet space under the stairs, move everything that isn't delicate or a book off the bookcases, and leave a pile on the floor.

Then what do you do?

With many business problems, it's tough to figure out where to start. Prioritizing the tasks, the items, and the junk seems almost impossible. Some of the stuff is important, some isn't, some takes consideration, and some will need to be put away in a location to be determined. If you try to think about it too much, you end up like my "buddy" Casey Serin: overwhelmed with the choices and unable to get anything going.

Readers of this blog know that I have some training in wilderness emergency medicine, search and rescue and general emergency response. All of these have a simple approach to dealing with an overwhelming situation that is equally useful when cleaning a garage or deciding what to do next in a highly-stressful business situaiton.

Start where you stand.

There's really no better solution. If you're dealing with 100 wounded people all around you, you have no way to know who needs the most critical care without looking at every one of them. There's no way to guess, no way to know until you check each one. If you start anywhere other than just where you are, you'll just waste time and won't (on average) do any better at getting to the most critical folks first. So you start where you stand. Assess the situation, give everybody a quick once-over (triage) and then, as needed, go back.

That's how I approach business situations. Focus on the next thing in front of you. Get it done or at least take a good enough look to assess how critical it is. Then on to the next item. Do it carefully, systematically, and ensure that you do go back to the things you decided could be skipped right away. It doesn't matter if I'm figuring out a project plan, considering my next trade, or assessing any other problem, you've got to start somewhere and there's usually very little point in debating the starting point.

That's how I started the garage. With one screwdriver on the floor next to me. I put it into a drawer in the tool chest. Yes, I may need to reorganize the tool chest later, but that could wait. Then some antenna wire on the floor. Put it into a garbage pile. Next item, and next.

Right now, I have much of the big work done, a large garbage pile and a couple of smaller piles to be sorted through with greater attention and consideration. Those will be done by the end of today. I'll still have to re-organize some of the shelves as well as the afformentioned tool chest, but those are seperate smaller projects. Everything that needs to be on the shelves is, and all the tools are nicely put away.

And all because I decided to start, not debate. And for lack of any better idea, I started where I stood.

-btc

Listening to Casey Serin’s webcast Friday made me a bit queasy. The thought that kept going through my head was “this thing is going to end very, very badly.” And maybe not just with a bankruptcy or even a jail sentence. It made me reconsider whether I should continue to follow his story or participate in any way.

So I’m taking a bit of time out to stop hating the guy’s guts quite so much and make something constructive of it as well as to answer the question he asked this morning: "How do other entrepreneurs do it?". I doubt any of this will matter to him. He’s so far ignored even the most basic advice given to him, about the most basic things, like the need to open his mail. ("I’m trying to get better about it," he says.) But there may be lessons here for somebody else.

It may be the last thing I have to say about him.

Yesterday's LA Times included an article about a new type of retirement plan that some businesses are lobbying for. The "automatic IRA" would allow employees to have money deducted from their paychecks to fund self-sponsored IRAs if their companies didn't have their own retirement plans.

While part of me hopes this effort succeeds, the other part of me thinks that the proliferation of different retirement options is the problem, not the solution.

When starting my business, I had a plethora of choices for retirement plans that I might set up for myself. (At present time I'm the only employee.) I could go for a Profit Sharing Plan, or a SEP IRA. The two are essentially the same, except that the profit sharing plan allows loans and requires more paperwork both allow the employer (my company) to contribute up to 25% of the year's total compensation, up to a maximum contribution of $42,500. I could set up an independent 401K, which allows the same employer contribution while also allowing the participant to take a salary deduction consistent with the limits on other 401Ks. Again, the $42,500 limit on total contributions would apply.

Then of course there's the traditional 401K, the CRA, the Simple IRA, the QRP and the Personal Defined Benefit.

For individuals there are all the standard IRAs and Roth variants, though all of these have much lower limts than company-sponsored or self-employed plans, meaning that W-2 employees of companies with no formal retirement plans are pretty much screwed in terms of tax-advantaged savings.

Each of these is designed to cover one situation or another, some to cover multiple situations, and many of them cover the same situation with slightly different contribution sources. Many of them don't work or work poorly. Has anybody not worked for an employer whose 401K offered terrible, high cost fund choices and no other options? In a previous life, I was subject to a 401K that was run by one of the company owner's buddies. The owner cared more about fees for his buddy than about a useful plan for his employees. He had his own "executive retirement plan."

It's crazy.

Here's my proposal, as a small business owner:

Don't add new retirement accounts to fill in for missing segments. Wipe the slate clean.

Two types of retirement accounts should exist: A traditional retirement account and a Roth retirement account. The only difference would be in how the contributions and distributions would be treated for tax purposes.

Every employer would be required to allow you to direct-deposit contributions to the plan of your choice, on either a tradition (pre tax) or Roth (post tax) basis. The employer would be allowed to make their own contributions as well, with a standard limit set for the maximum combined contribution.

Any companies that believed they could provide a real benefit to their employees by having an in-house plan would still be able to do so. Others might choose to open a default account for any employees who didn't make an alternate selection.

It would be a win-win. Employees with no company-sponsored plan would still be able to have the option of full retirement savings. Employees with a lousy plan would be able to opt out. Self-employed and small business owners would have similar options to everybody else without a bewlidering set of choices. And employers whose core competency doesn't include running retirement plans would be able to focus their energies on the things they do well.

Oh yeah, and while we're at it, lets get rid of any favorable tax treatment for any retirement plan that is available only to select employees.

-btc

Much of my focus recently has been on my own consulting business. I've been learning a lot, but it hasn't all been all that relevant to the other stuff on this blog. Rather than avoiding discussing things, I've decided to reorient the blog a bit to focus on my current activities.

I'll be posting some learnings/primers here soon.

-btc