Ohhhh Canada!

How I would love to write about the American Airlines order. It appears  that AMR has agreed to one of the largest airframe purchases in the history of flight. They bought 200 Boeing 737’s and 260 A320’s, Airbus wins again. It is my understanding that due to Boeing’s inability to make a decision Airbus earned the larger portion of the order. Regardless, it is a good thing for both companies. However, Bombardier has a new offering that will give Airlines another option, and China is right around the corner with their small airline offering. However, that is not what I want to talk about today. Today I want to talk about Canada.

Everywhere I turn I hear people say that we don’t want a health care system like Canada. Other folks had made comments about Canada’s financial health, all of which I believed. However, the truth is often much different than what we hear.

In 1993 Canada was in dire straits. Government spending represented about 53% of the economy, while government debt was 70% of GDP. Their interest payments amounted to $.35 of every tax dollar. The Canadians understood their situation well. Rather than haggle over politics they decided to take action.

The first action taken was to cut spending. Benefits were slashed and taxes were increased. However, the ratio between reduced spending and increased taxes was 7:1. For every new dollar of increased revenue, the government cut seven dollars in spending.

The second action involved privatization. Canada’s national railway and air-traffic control systems were privatized to gain efficiencies.

After taking these actions the Canadian economy improved. According to the Wall Street Journal, “Between 1995 and 1998, a $36.6 Billion deficit turned into a $3 Billion surplus.” Also, the debt-t0-GDP ratio was cut in half. As a result, their economy began to grow, and it is now growing faster than ours.

You would think that it was the conservatives that forced this action, much like the republicans are here, but that was not the case. The leaders who pushed these actions through their government were part of the Liberal Party.

Today our great country is in the same situation as Canada. Our government is spending like crazy, our debt-to-GDP ratio is growing, from 40% in 2008 to 62% in 2011, and our interest payments are about 9% of our budget. Our deficit has exceeded $1 trillion for three consecutive years, while our politicians play their fiddles and ignore the flames on the horizon.

As I write this a Bruce Springsteen song comes to mind, “Glory Days.” Our politicians are sitting at the bar, thinking about the days that once were. They are not being leaders they are crying in their beer. We have become fodder for late night jokes, and a lesson of what not to do. A former Canadian ambassador to the US stated in the book, The Canadian Century: Moving Out of America’s Shadow, “If we want to see what would have become of Canada had we not lived through the difficult changes, we need look no further than Washington D.C., where unreformed entitlements and undisciplined borrowing are hobbling America’s power to be a world leader.” Shame on you politicians for your lack of leadership. Shame on you politicians for your inability to manage this country.

And that is my thought for the day!

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When Are You Too Old To Do Your Job?

Mr. Murdoch is 8o years old. His wife is in her 40’s and by the looks of it yesterday very feisty. However, after watching Mr. Murdoch and his son be interviewed yesterday I have to say he is showing his age. Of, course my daughter told me I looked old when I got off the plane from Ireland recently.

Many of the shareholders of his company felt he did not come off well during the interviews. Some said it was painful to watch, and he seemed like an old man. It may just be the fact that he is a bit embarrassed about what happened, who knows. But the question still remains in my mind, when do you stop leading an organization?

There are several reasons why a leader stops leading. One reason could be getting fired. Maybe you are a leader like Robert Nardelli who just about ran Home Depot into the ground. His confrontative style did not mix well with the culture at Home Depot and he was asked to leave. However, it was reported that it cost Home Depot over $100 million to dismiss him.

Anther reason a leader leaves is they find another opportunity. They are doing so well in their current position that another company decides that they want them. An example of this would be Jame McNerney current CEO of Boeing. He was very happy at 3M in Minnesota, but Boeing wanted him badly and lured him to Chicago with lots of money.

Eventually though leaders get old, and they need to let go. Ben and Jerry found that out the hard way. They would hire someone to run the company, but then they would take over when it wasn’t going the way they thought it should go. Phil Knight decided to retire and hired William Perez. Perez lasted about six months at Nike. Not a good fit. So often a leader will do a Farve. They stay around just a bit too long.

Murdoch may have reached that point. It may be time to let James Murdoch take over. I really wonder if James, the Chief Operating Officer, is already running the company. The fact is we get old, the mind and the body just won’t do what we want it to do. I’d love to have a perfect golf swing every time, but as I age I am realizing that it is just better to play for the exercise. Murdoch should go home, take his pension, and enjoy his young wife and his kids. He should enjoy life, not spend it all at the office.

And that is my thought for the day!

Murdoch

Modern management is very complicated. The modern manager needs to be a strategist, psychologist, and operationalist. This manager also needs to have decision-making skills, financial skills, and people skills. This complexity is why they make the big bucks. I know of a business manager who works for a Dr.’s office here in town that knows accounting, but doesn’t have a clue on how to deal with people, which is the reason she is failing miserably. One of the biggest mistakes a manager can make though is not paying attention to detail.

Greg Hammond, who was CEO of Nautilus, learned this lesson the hard way. His goal at Nautilus was to grow the company. The only problem was the infrastructure of the company could not support the speedy growth that was occurring. Nautilus ended up shipping multiple items to customers without understanding who received what. The honest customer would contact Nautilus and tell them they received multple Bowflexs, and the dishonest ones didn’t. Needless to say because Hammond had no idea this was going on profits plummeted. Now he is coaching High School sports.

Robert Murdoch is another manager that lost focus. This is not to say that delegating authority is a bad thing. However, when you delegate you need to have checks and balances in place to measure the performance of all involved. In the case of the periodical News of the World, it appears that Murdoch did not know what was going on. He relied on his right hand person Rebekah Brooks, but it appears she practiced the MUM principle. She told Murdoch only what he wanted to hear.

Murdoch continues to state the illegal activities that occurred were the result of one rogue reporter, but one has to wonder whether the desire to get a scoop overwhelmed the requirement to obtain information ethically. When a reporter hacks into someone’s voice mail and deletes a couple of messages so those that are listening might hear something new, that is wrong and should be punished.

Just like Phil Condit at Boeing, who denied knowledge of what Mike Sears was doing during a previous negotiation with the US government over tankers, Murdoch denies any knowledge of this event. However, some manager knew how the information was being obtained. If that person is Rebekah Brooks, then the mighty will fall.

Here is a woman with a High School education who has hob knobbed with Queen Elizabeth and Prince Charles. She is a woman who was the CEO of News International and was very close to Murdoch, but she is a person who has now been arrested.

There is something about power that corrupts, and corrupts absolutely. Brooks is another, like Bernie Madoff, Jeff Skilling, Kenneth Lay, and Mike Sears who, drunk with power, felt they were above the law. Murdoch’ problem, which to me is amazing, is the fact that something as extreme as this happened without his knowledge. He has been in the business for 57 years, and now this happens?

I’ll bet you that this will never happen again to Murdoch or his son. They will learn from this and create a stronger ethical system with checks and balances. Why can’t we learn from others, why do we need to have a first generation failure before we change. And change Murdoch will do.

And that is my thought for the day!

My Children

Today will be a posting that will probably be more cathartic for me than for the reader. The Wall Street Journal had an article this morning that caught my attention: Power Couple: Meet the Sister CEO’s. It explores the fact that for the “first time, two sisters will run big public companies.” The article goes on to discuss these two sisters, as well as other siblings that have worked together within senior leadership.

It is not unprecedented that family members have worked together, but to have two sisters running big companies is quite rare. One of my favorite leaders in recent history is Anne Mulcahy. The turn around that she and Ursula Burns accomplished at Xerox was incredible. However, Anne’s brother actually reported to her at Xerox, which led to some very interesting family gatherings I am sure. But what about the sisters? Who are they, and how did they get to run Campbell’s Soup and Frontier Communications?

Denise Morrison, who will be Campbell’s next CEO, and Maggie Wilderrotter, CEO of Frontier, are sisters who control large corporations that are not family holdings. Their father was an AT&T executive who taught them from a very early age about profit margin goals. Their mother “taught them that ambition is a part of femininity.” The sisters talk frequently and often on six-mile walks. They discuss ideas, etc. Reading about these two sisters, and their family upbringing got me to thinking about my own children. What did I teach my children?

As I look at my children, all of whom are over thirty, I am very proud of what they have done. I have also come to the conclusion that I am a classic baby-boomer who is now looking back thinking about how I should have spent more time with my children and less time working and playing. I am going to describe each of my children, and how I feel about them. I will go through all five from the oldest to the youngest.

Tracy, who is now in her forties, works at a large law firm in Seattle. She is a senior paralegal, and has done well for herself. Tracy and I have had an interesting relationship over the years. We definitely butt heads, as she is strong-willed and so am I. I do think that our conflict has helped her become the strong woman she is today. She and I did not talk for several years, after her mother and I divorced, but we are talking now.

Jennifer, who is in her mid thirties, is very much like me. She was ten when her mother and I divorced, and I think it rocked her world. We did ok a for a few years but now we are not talking. She has done well for herself though. She graduated from WSU with a business degree, and is now the director of finance in Washougal, WA. She and I have not talked for a few years now, which really is tough for me. I really miss her.

Jennie, who grew up in my wife’s and my home, is a survivor. Just like all of my kids she has had ups and downs but through it all she has survived. She has a wonderful daughter named Gracie, and has done a great job of raising her. Gracie loves to read and is very smart. Jennie has worked hard at her job, even though her boss is a jerk, but she does it for herself and Gracie.

Chris, who is thirty-two, is a successful businessman. He left a good job at a church here in town, and started his own business. He and I talk just about every day. He is an intellectual, and probably more stubborn than me. When he left the church in town where he worked after he finished college his supervisor told him that if he wanted to make some real money to come back to the church. It was a bit condescending, but Chris has not looked back. He too, just like Jennie, is a survivor.

Katie, who is my youngest, is twenty-nine (for a couple of yours now), is a very strong individual. She has had her own business for several years now. Like my son she as a great disdain for the man. She likes being her own boss, and I know where ever she plans on going in her life she will be successful.

Like the power sisters how did my kids end up where they are today. Some of it is nature, obviously, while some of it is nurture. I’ll focus on my part of the equation, and my opinion on how I nurtured by action and inaction.

As a Christian I made sure my children saw the importance of faith in their lives. This was both good and bad. Three of my children see religion as the reason for the breakup of my marriage to their mother. It may have been a contributing factor, but my inability to connect intimately with my first wife was the main reason.  Even through this tragedy occurred I hope my children have not lost the importance of a relationship with Jesus Christ. For my other two children growing up in a Christian home we did get them to church on Sunday’s, and they were exposed to faith.

All through the years my children were growing up I was in school. This is why I am a teacher today, but it is also why I have a bit of an estranged relationship with my children. I was very busy working on degrees. My children did see the importance of a college education, which all of them have. Each of them have earned at least one college degree.

I am a reader. I will have three to five books in queue at any time. My son is the same way. He and I frequently talk about the books we are reading. In fact this morning he shared a quote with me from a book he had read, but because he has read some much lately he could not remember which book it had come from. Every Christmas I give my children a book. And every year I write comments in the books related to that year.

I am sure there are other positive things I did while they were growing up that they could look back and say that I had a positive affect on their lives. At least I hope so. I think this is a common adult feeling.

I fear, however, that most of their lessons came from what I didn’t do. For Tracy, Jennifer, and Chris they learned that they did not have anyone else than themselves to count on. That  was good in the sense that they had to fend for themselves which is why they are all successful in their work. However, the price of my absence was pretty high, at least to me.

With Jennie and Katie, I was at home, but I wasn’t at home. Mentally, I was filled with guilt over a divorce, while being over committed to my job, education, and teaching. All they got from me was someone who was there when needed. On the positive side, I think they know they can count on someone to be there when the chips are down. On the negative side, they really did not get a very positive male role model.

So there it is, the children that I love, and have impacted with my life. All of them are productive members of society. All of them care and are contributing. All of them have friends, and have a level of success.They are all CEO’s of their households and their lives. They are all successful in their lives.

None of them are losers. which makes me happy and proud of them. But I am a sad man, because of what I have lost. When I was younger I swore I would be a great father, oh well, maybe next time.

And that is my thought for the day!

Is It Wrong To Redistribute America’s Wealth?

The other day I was talking with my son, and he asked me a question. He asked me why is it wrong to redistribute the nation’s wealth equally, and all right to allow more wealth to accumulate in the hands of the wealthy. I thought that was a fair question, so here is my attempt to answer his question. Right up front I need to say that I don’t agree with a system that allows for the exploitation of people, but I do believe in free enterprise.

The first thing I needed to understand was what are the facts. I know Economists measure the distribution of wealth, and they will normally look at it in quintiles. The lowest 5th to the highest 5th.

The numbers tell us a very interesting story. The Bureau of Census tracks the distribution of income by percentage. For example, the share of income for the lowest 5th quintile in 1970 was 4.1%. However, in 2005 that share had been reduced to 3.4%. The next lowest 5th, went from a 10% share of pretax income to 8.6%. The third fifth went from 17.4% to 14.3%, and the fourth quintile went from 24.5% to 22.8%. If we define the third and fourth quintile as middle class, we see that their portion was reduced by almost 5%. The highest 5th, however, grew from an income distribution of 43.3% to 51%, a growth of almost 8%. It would be interesting what the numbers were for 2010.

Our market system is considered free enterprise, although it is not completely free. The government is supposed to make sure that the exchange of goods is done in a manner that is fair to all parties involved. With the growth of Keynsian theory, the government now operates under a fiscal policy that controls the flow of money to the market. By raising or lowering interest rates the fed can control the flow of money so that a slow economy can be improved, and economy that is overheating can be slowed down. So to say we operate in a free market system has to be qualified. So with taxes as a tool the government can redistribute income more fairly.

In fact, if you look at the amount of income for just the top 10% of our wage earners from 1942 to 1982 they actually held about 33% of the income rather than the current level of 42%. The government was able to accomplish this feat by suppressing wages, increased tax rates on stock dividends, interest earning, and business income. Some would say that we need to go back to that, others say we finally got it right, because if we lower the taxes of the rich there will be a stimulation of job growth.

The fact is, when the rich are taxed more they find tax loopholes. So higher taxes on the rich will not necessarily increase government revenue. Several corporations are holding large amounts of cash offshore in order to escape the current tax rates. As a side note the government is talking about a tax holiday to allow these corporations to move that money back to the States.

Another fact is lower taxes for the rich, and corporations, do not necessarily lead to more jobs. Tax breaks have been continued for the rich, and we only created 18,000 jobs in June.

I think it is counter productive to go after the rich and make them pay more than their share. However, I also think it is a travesty that the income for the highest 5th has gone up while everyone else has gone down. Therefore, what is the answer to the question?

I think we are heading down the wrong path by setting up unfair advantages for the wealthy. To give the wealthy tax breaks in the hope that it will create more jobs for the working class is quixotic, therefore it is time to set a fixed tax rate for the wealthy with no tax loop holes. In fact, a flat tax rate for everyone is the best way to go.

What does the tax rate have to do with distribution of wealth? Taxes are one of the main tools for the distributing wealth. Higher taxes on the rich means that tax rates can be reduced for the poor. If we place the burden of the whole economic health of this nation on just the rich we are setting the system up for failure. We all need to pay our fair share. The current economic system is one that rewards incentive. We cannot destroy that with a socialistic belief of everyone gets to same slice of pie. If everyone earns the same size of the pie, then yes, but to give everyone the same size of slice is counter productive, and will ultimately destroy where we need to go.

Bottom line, we need to wake up, and all of us need to pay our fair share of taxes. The government needs to quit spending so much, and for every $1 we raise in revenue, we need to cut spending by $2. We need to make sure that we have entitlement systems in place to help the less fortunate, but we need to be reasonable. America is still a place of hope. It is a country where someone can still make something  of themselves, but they need to take the initiative.
The redistribution of wealth from the rich to other classes is not wrong. But if the government attempts to eliminate the ability of people to improve themselves, thus making them all the same, then our system of destined to fail. We are the largest economy in the world because of innovation and initiative. We need to keep this and not make everyone wear Mao suits and carry a little red book.

And that is my thought for the day!

Satisficing!

Here we go, editorialists are looking for new ways of raising tax revenue. The first thing they do is start talking about is taxing the sins that people do that supposedly will not harm others than themselves. The article I read this morning discussed legalizing Internet gambling and the use of marijuana for taxing purposes. My initial thought was that if they do this then they won’t stop there. They’ll start talking about legalizing prostitution, stealing, and (to take this to a horrible conclusion) pornography. They could tax all those things. Our society is in trouble when we look to legalizing things just because we can’t run our business well.

In my Management Theory class we discuss decision-making. We look at several different theories associated with making good decisions. The Rational Model assumes that management teams have all the facts necessary to make a good decision. However, it does not take into consideration that uncertainty, the fact we are not omniscient, plays a role in any decision people make. We don’t know for certain what tomorrow will bring, which is why another concept was developed, Bounded Rationality. This theory recognizes that our decisions are based on the ability to have the amount of information necessary to make the current decision. We bracket the event and do the best we can to make the decision. If we need to adjust we can, or at least we should.

Often times though management will take the least costly decision. It is quick and is usually good enough for right now. They call this type of decision a satisficing decision. It is just good enough. We would also call it a single-loop decision. In other words, a decision that only deals with what is on the surface. A double-loop decisions looks at the root causes of the situation, so to a better decision, that will hopefully not need to be repeated in a short period of time, could result.

Legalizing pot is a satisficing decision. This will not fix a thing in the long run. The world has changed and it is more important for us to have good managers in place to run our government and our businesses. This means doing what it takes to make a good decision, not just take the first solution offered. “Don’t bogart the decision my friend, pass it over to me,” to paraphrase a song lyric from the 60’s.

And that is my thought for the day!

It’s What We Do, Negotiate! (Sounds Like Its Just Business)

Thomas Sowell’s editorial today was entitled “Workers Pay For Political Uncertainty.” It was very interesting and in line with what I think. The political cartoon associated with the editorial illustrated the “Whining of the Bulls” on Wall Street. The cartoon has several bulls running down the street saying “just `cause we caused the collapse, got bailed out and are now reaping enormous profits, without rehiring, people say mean things about us.” The fact is the economy is still slow, the business community is unsure of the Obama administration, and they are concerned about what will happen with the debt ceiling. So although they are reaping rewards from the government bailout, businesses are still behaving conservatively.

The situation we are in will not be fixed quickly. Although we are not as bad as Greece, the fact is our nation needs to change its behavior. Just taxing the rich will not fix everything. All the rich will do is move their money overseas into tax shelters. Our government needs a holistic plan to put people back to work.

In June there were 18,000 jobs created, which is abysmal. May was not much better, 25,000 jobs. According to sources the percentage of our population that is now employed is 58.2%. That is down from where we were when the recession officially ended (59.4%). The number of people who have been unemployed for over six months is 44.4%! This is horrifying. This is a serious situation that needs a systemic fix, not just bandaids.

To fix the debt issue our politicians have a ninety minute meeting? What are they doing the rest of the time? At the state level Minnesota has shutdown its government. The shutdown is in its second week, and there appears to be no end in site. We have national and state level examples of how government deals with these difficult modern problems. What is interesting about Minnesota, is that while thousands of people have been laid off, and not getting paid, the lawmakers are still getting a paycheck! The essential people that are getting paid even includes the governors housekeeper and his personal chef.

I remember when I was in the union and we would go on strike. While walking the picket line, we would talk about how we would fix the situation. Please realize I am not anti-union, but I am anti-elitism. We used to talk about that when a strike occurs that all negotiators should be put in a hotel, and not get paid, until a settlement occurred. The company and union negotiators would be a bit more motivated to get a solution that would benefit all stakeholders.

The fact that Minnesota lawmakers are still getting paid while state workers are not is travesty. The fact that the people of Minnesota are suffering because the state government has shutdown while the lawmakers are still getting paid is unfair and elitist. The fact that Boehner and Obama are still getting paid while the American people are getting hit testifies to the fact that we have moved to an aristocratic environment, where the leaders are no longer working for the people.

They, Obama and Boehner, would say this is the way government works, we negotiate! That sounds like the statement, “it was just business.” But they have to remember, it is all personal to us. Come on gang get it together. There is currently a recall in Wisconsin of the politicians the ran that state into the ground. The Wisconsin charter says that the people can recall nine politicians a term. Guess how many they are recalling? Nine! We are in a tough place, and we need forward thinkers to help us get out of this mess.

And that is my thought for the day!