With the Dow Jones Industrial Average (DJIA) dropping 504 points yesterday and me being the “504 Expert,” I thought it must be a sign to comment on that course of events. While Lehman’s bankruptcy, Merrill’s sale and AIG’s capital call are indeed worrisome, the sky isn’t falling for the American economy at-large. The financial markets may be reeling, but it’s always the worst when you’re smack in the middle of things . . . a little perspective is needed.
Lousy lending standards and excessive leverage stoked by ridiculously low interest rates are the roots of today’s financial crisis . . . but it’s largely confined to just the well-publicized, finance industry. The economy is not crumbling — it’s been growing at an average rate of 2.37% for the past 6 quarters. The non-housing portion of the economy (which comprises roughly 95% of total U.S. economic activity) is quite stable with the non-housing real GDP having grown at a 3.2% clip over the past three years. Productivity of the average U.S. worker has risen an average of 2.6% annually during the past 10 years (the largest gains in 40 years). For every dollar of U.S. economic output generated today, we burn less than half as much oil as 30 years ago — and the price of a barrel is now close to $95, almost $50 less than the high in July. Times are better than they appear… but it helps if you unplug the television and skip the “doom and gloom” headlines in every other media (this is also why you should have the courage to be buying currently discounted assets like commercial property right now). Obviously, this being an election year and politicians doing what politicians do best to get our attention, neither can sling quite enough mud at each other in their attempt to paint a picture of Armageddon in our minds . . . alleviated only if we vote for our “savior.”
As I’ve written previously, among the many roles a Chief Executive Officer has is that of “hope-purveyor,” of remaining calm, optimistic, and reasonable. Employees, business owners, and their advisors regularly look to me to gauge where things are headed. I always marvel a little at me being the “calm one,” but such is my place. I strive to be a “merchant of optimism.” So this blog post is as much for my employees and partners, as it is for our investors, Clients, prospective Clients, and the business community as a whole.
Today’s headlines suggest to me that we’re entering a New Era in our society — one where the venerable old names don’t really matter that much anymore. We’ve been headed in this direction for some time with the disruptive technologies the IT world has wrought everywhere. But now, the staid, conservative financial and banking communities are finally feeling the tremors (or should it be the “earthquakes”) of change. What Lehman, Merrill and AIG had in common was resting on their laurels too long, not adapting to change as quickly as they should have, and becoming victims of their own hubris. All of these actions left them distant from their customers… and if there’s one absolute fact in this New Era, it’s this: customers want to be closer to, not further away from, their service-providers. They want their service-providers to understand them. When you’re busy creating exotic financial instruments that hardly anyone really understands, just how exactly do you expect Clients to feel closer to you?
In this new world of constant communication, social-networking, and Web 2.0, people don’t just want “service-providers,” they want “Experience-providers.” They want their business relationships to be comprised of Experiences . . . service, alone, is not enough anymore. “Satisfaction” is merely expected. “Delightful experiences” are something to shoot for. I believe that’s what we’ve provided our Clients with from day one, and it’s a major contributor to our growth and successes. Contrary to what every pundit once said, the computer and other electronic gadgets have actually brought us closer together, not further apart . . . so if you’re hiding behind your email or voicemail, you’re making a MAJOR mistake by not engaging with your Clients and Prospective Clients. Of course, if you’re bloated with layer after layer of management and suffer “Big Dumb Company-itis” (as I call it), then getting close to your clients is pretty tough to do.
It strikes me as unreasonable to expect a Wall Street firm to still be around 160 years after its founding. It strikes me as odd to think the original DJIA should somehow match today’s DJIA. Change is the other member of the triumveriate of Constants: death and taxes being the other two, of course. Am I the only one who wasn’t exactly surprised by the “Old Guard” changing? I’m surprised it took this long.
What we witnessed yesterday — and it should be more apparent daily — is that Schumpeter’s “creative destructionism” is alive and well within our economy. The strongest survive, as they say, but to be strong these days requires being smart, swift and adaptive. Our firm is the personification of this trend — we probably couldn’t have started 15 or 20 years ago and actually thrived against the Giant banks in our industry . . . like we have. But today, being the cigarette boat instead of the supertanker is appreciated by the consumer . . . actually, it’s demanded by them. Old, established brands are doing everything they can to hold-off the oncoming wave of new entrants.
With us, it helps that the entrepreneurial spirit prevalent among our employees resonates with our target market of business owners and entrepreneurs… while we compete in a world filled with 20+ year employee veterans who have no comprehension of the risks, burdens and thrills our ideal Clients endure weekly. If you want your business to thrive in this New Era, then you’ve got to Stay Close to your Clients and Prospective, Ideal Clients. You’ve got to Give Them an Experience they can’t get anywhere else by anyone else. You’ve got to Delight Them, but also, you have to do the heavy-lifting of Creating the Next, New Thing. Anything less than these strategies and you’ll more than likely be working for a dinosaur. Surely, you remember what happened to them . . . they once roamed Wall Street, too.