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Interview with Mark Williams
Sunday’s Boston Globe on June 27, 2010
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Mark Williams, a former Federal Reserve examiner who teaches finance at Boston University, recently authored the book “Uncontrolled Risk: Lessons of Lehman Brothers and How Systemic Risk Can Still Bring Down the World Financial System.’’ He spoke with Globe reporter Beth Healy about the book and the financial crisis, as Congress tries to overhaul the laws governing banks and Wall Street.
In your book, you examine the downfall of Lehman Brothers. Do you see this mainly as a work of history, or are the there lessons for the future in Lehman’s fate? I wanted to look at the themes around asset bubbles, and those themes continue to come through. We’ve had both a real estate bubble and an asset bubble. The decade of 2000 was quite an interesting one for learning about excess. I think there are a lot of lessons here for the future.
How, in sum, did Lehman, one of Wall Street’s big names before the crash, wander into such serious trouble?
It was as if the ship got into a sort of narrow, dangerous area where it couldn’t get itself out. It was really a series of small events. Lehman sticks its toe in the real estate market and eventually moves into subprime in the late 1990s, early 2000s. Things looked pretty good. Lehman came in and bought real estate assets for cheap. Then, making profits makes you want to stretch it out further. By 2008, the capital structure wasn’t adequate to support the level of risk.
Congress is trying to wrap up the financial overhaul bill. Does this legislation address the root causes of the 2008 crisis?
The answer is no. One of the key root causes was excessive lending. There’s no piece of legislation that actually sets a higher credit standard on banks. The Fed has had a really disappointing record in protecting consumers. And yet we’re throwing them greater responsibility, and they haven’t earned it. I really don’t think the Fed is up to the task yet.
Do new regulations stand any chance of staving off another crisis?
I think it would be naive for us to say that an asset bubble won’t happen again, and that banks themselves cannot be caught up in another one. It will happen. But we can reduce the chances of another one occurring. It should be crafted with the understanding that these things do occur — it’s part of capitalism.
The regulators need to anticipate. The excesses of the future will be different. What will be consistent is risk will be taken to make profits. And the government needs to anticipate those risks.
What do you mean?
The Fed needs to start rating banks on whether their compensation schemes are aggressive. We know that compensation itself motivates behavior. So if regulators are going to be proactive, that’s what they really need to look at.
Isn’t it a little late for Congress to go after Wall Street now that the financial crisis is in the past?
Look at BP and the environmental disaster. Regulators need to regulate. We saw that with the Fed. These banks took risk over time, not overnight. And yet the Federal Reserve Bank examiners — and I can speak to that group because I used to be one — they were very slow to understand that growing risk trend, not only its impact on our US banking system, but also how that could affect the global financial markets.
Is the debt crisis unfolding in Europe essentially Part B of the US crisis?
I think it’s a continuation. In this case, instead of a company’s excess, it was a country that’s overdosed on debt. It’s a discipline that wasn’t put in place. Lehman taught us how fragile our global financial system is. And a small country like Greece — its potential implosion has such a rippling affect globally. That just goes to show we need more stewardship and more global oversight . . . we’ve learned the banks just have this ability to shoot themselves in the foot. We have to protect them against themselves.
How do you do that? I think with the Volker rule [and another measure proposed by Senator Blanche Lincoln, requiring banks to raise more capital to continue trading derivatives], they are trying to protect banks against themselves. If you’re going to take big risks, you need a big capital position.
To read the interview online, please click HERE
Interview with Ram Charan
The Star newspaper Sat 15 May 2010
Management guru Ram Charan gets up close and personal
Cash. A simple four-letter word, but the most critical metric in the economic world today.
When former Harvard business professor Ram Charan was a child, he learned the importance of money.
“Before the crisis struck, your company’s indicators of success were increasing earnings per share and growing revenues by gaining market share. Today, it is cash. You absolutely must have sufficient cash or credible access to it, to weather the storm. And with today’s information technology, you can and should know your company’s cash position every single day,” he writes in Leadership in the Era of Economic Uncertainty.
Ram was in Kuala Lumpur at the end of March as a guest speaker in an instalment of Sime Darby Bhd’s lecture series held at the Sime Darby Convention Centre.
There, he spoke about the importance of execution.
Much has transpired between the time when he was an 11-year-old helping out with the family shoe business and being the Dallas-based advisor and speaker he is today.
But he has not forgotten the importance of cash flow.
Back then, his duty was to clean the shoes, deal with customer requests and count the rupees in the till in that little shop of about 400sq ft.
Although he has the benefit of an early training in business, he grew up unaware that he was adept at it.
“I will go to the shop after school. My two older brothers and I were also dealing with customers,” he recalls.
When it was time for him to enter university, he joined the engineering department because “that was the way to get out into the new world”.
Finance and the business world were not on his agenda.
After earning his engineering degree, he took a job in Australia in a gas and light company for four years.
It was during this time that he realised that he has good business acumen.
He was encouraged to do his MBA and doctorate degrees, which he did at Harvard Business School, where he graduated with high distinction.
He served on its business faculty after his doctorate.
About 30 years ago, he quit a tenured professorship at Boston University to devote himself full-time to consulting.
Today, Ram is alone at the top of his profession – not so much a consultant but a guru, a corporate sage with access to boardrooms across the globe, and enjoys intimate, enduring relationships with an array of powerful CEOs.
Among them are Jack Welch, formerly of General Electric (“He has this rare ability to distil the meaningful from the meaningless and transfer it to others in a quiet, effective way without destroying confidences.”); Dick Harrington of Thomson Corp (“He probably knows more about corporate America than anybody.”); and Verizon’s Ivan Seidenberg (“I love him. He’s my secret weapon.”).
“He’s like your conscience,” says former Citicorp CEO John Reed, in a magazine article. “Just when you sort of think you have everything done and you’re feeling pretty good about yourself, he calls you up and says, ‘Hey, Reed, did you do this and that and the other?’”
Writes Fortune magazine: “What he does is hard to describe. But the most powerful CEOs love it enough to keep him on the road 24/7 and make him the most influential consultant alive.”
At 71, Ram continues to travel extensively.
He purchased his first apartment at 67 in Dallas.
Before this purchase, he did not have a home and spent every night in a hotel room or at an associate’s residence.
His assistants in Dallas send him new clothes via courier and he returns his dirty laundry to them.
A semblance of that “routine” was evident during his trip here.
A day after his lecture in Kuala Lumpur, he left only to return within 10 days.
It was a sudden appointment, with probably a potential client.
As long as Ram is with a client, he’s home.
But while he criss-crosses the globe, he does not seem to have much ties with the place he once called home, or that little shoe shop where he learned the intricacies of finance as a child.
He prefers not to talk about that part of his life and instead, focuses a lot on his work.
Says Ram: “I am a teacher at heart. I consider helping business and corporate leaders to perform better as my mission in life. My job is to learn everyday and teach ideas and practise them.”
On what he has gained from these interactions with headline-making CEOs, Ram says he is fortunate “to learn from almost all of them”.
“The classroom experience increases learning but it is with people that you learn wisdom – about what works and what does not,” he explains. “Teaching and learning are complementary. The more I learn, the more I teach. Hence, this pursuit of knowledge on my part, that I may impart what I’ve learned to others. In finality, I teach more.”
Notwithstanding his appetite to learn, Ram admits he has one drawback – he is still shy about asking questions.
“As a child, I have been taught that it is impolite to ask, especially if the person is older than me. So although I told the audience that they must ask me questions, in order that they learn, I have problems with that. But I made it up (his learning and absorption methods) in other ways.”
Other than coaching and advising, Ram is a prolific writer.
He has written about execution (Execution: The Discipline of Getting Things Done and Confronting Reality), leadership (What the CEO Wants You to Know, Every Business is a Growth Business) and the importance of governance (Boards at Work, Owning Up and Boards that Deliver).
Ram is also a director of companies and is active in board work.
“I select who I work with. If I cannot help, I will not take the assignment.”
Ram says he is committed to moral education.
While good governance in every sphere of life is necessary, it is difficult to have zero fraud.
“You cannot stop it. Consider India’s Satyam Computer Services scandal (January 2009).
“He (chairman Ramalinga Raju) led what seemed like a simple, clean and honest life. But at the end, he turned out to be dishonest.”
Ramalinga falsified company accounts.
Ram says making a living and making money are two different things.
The largest business population is the street vendors.
Many of them never get the opportunity to get out of street poverty.
“But if you get them out at 15 to 16 and train them, you will find how good they are. You have people who are Nobel prize winners – they may be scientists – but they don’t have a clue about business.”
Scientists, military leaders and activitists make very poor businessmen.
The key to business acumen is being able to make money on a sustained basis.
Whatever areas he may be involved in – leadership, governance, company growth – Ram says he has made people his common theme.
“A leader succeeds on the basis of how his leadership develops people. He has to be sincere and passionate about it. When the one I am coaching grows, I am growing with him. No one is shortchanged. It has been shown in neuroscience that if the coaching is compassionate, the process of coaching and teaching brings about healing in the person who coaches and the person who is being coached. It is not about numbers; it is about motivation, about putting the person you are coaching on the right job and to build capacity and capabilities. So the role model is important,” he says.
Like his lecturing style, which is basic and rather spartan – other than a projector, he only uses a marker pen and a piece of paper; “Don’t be taken in by the Power Point stuff,” he says – he believes business must have revenue, products and service.
The dotcom had the bubble, but not the revenue, with the exception of Amazon and e-Bay.
Digitisation must be directed to where it can be converted into revenue.
On his return to Malaysia – he used to lecture at Malaysian Institute of Management several years ago – he notices vast changes.
Ram lays down three areas that Malaysia must work in order to not to be left behind while Asia thrives.
No country, says Ram, can succeed without foreign direct investments.
Malaysia needs to target industries and companies and pursue them actively.
The country has vast natural resources like water, soil and oil.
Harvest these, he says.
“You have water. India does not have that much water. So you go to a company that uses water and bring them here. You have great soil, one of the most important natural resources of the world. You can become a fantastic food producer.
“Develop her people. If you can’t develop them inside, you have to find them outside. People management is critical. Think beyond its borders because this is part of the global game. And of course, there must be execution, execution, execution, not just mere talking.”
To read the interview online, please click HERE
HAPPINESS AT WORK
Is featured on Businessweek.com
Q&A on Businessweek.com | Book Excerpt | Book Information
Srikumar S. Rao, PhD, author of Are You Ready to Succeed? and the just published Happiness at Work has some unusual ideas about how people can experience more fulfilling lives—both personally and professionally—that he has been teaching in his MBA-level class, Creativity and Personal Mastery. Among his beliefs: There is no separation between our professional and personal selves/lives, and we can radically change the way we experience life by using various techniques that he teaches, such as doing exercises in alternate reality and reevaluating the notion of what is a good thing vs. a bad thing.
He recently spoke with Businessweek.com Management Editor Patricia O’Connell about this new book and his work. (O’Connell is an alumna of Creativity and Personal Mastery, which has been taught at various institutions including Columbia Business School, London Business School, the Kellogg School of Management at Northwestern University, the Haas School of Business at the University of California at Berkeley, and Long Island University). Edited excerpts of their conversation follow.
Q&A with Srikumar S. Rao
How can you enjoy life when you’re wearing a sweater in 90-degree weather? The author of Happiness at Work explains it all
There is no arguing that a lot of people are unhappy and dissatisfied at work and disengaged. What is the connection between the level of disengagement people have at work and the disengagement and unhappiness they have with their lives overall?
I don’t believe that you have a work life and a home life. I believe that you have one life, and either it’s working or it isn’t working.
I have had the benefit of taking your class and reading both of your books, which many of our readers won’t have had. If you could sum up the important takeaway, especially in Happiness at Work, what would that be?
We have the ability to craft a life where we are completely fulfilled. We think it is dependent on outsiders and to some extent it is, but it is much more dependent on the attitude we bring to life.
One of the things you focus on is that you want people to stop labeling things as bad. I have a hard time characterizing the death of a loved one as not a bad thing. I have a hard time not characterizing losing my job and being worried about paying my mortgage as a bad thing. How do you respond to sentiments like that?
If something comes that it is so extreme that you have difficulty thinking of it as a good thing, don’t think of it as a good thing and kid yourself. To the extent that you can, don’t label it a bad thing. Refusing to label something a bad thing opens you up to possibilities you would not have even considered otherwise.
Can you give me a concrete example?
Someone losing their job is a perfect example. Of course there are practical considerations about needing money, etc. But if you think about losing your job not as a bad thing but an opportunity to do something that brings you great joy and fulfillment, you are already better off. People look for evidence to support their beliefs, whatever those beliefs are.
You go into corporations and work with people who probably are making distinctions between their work selves and their personal selves, What do people in corporations tend to have the most trouble grasping in terms of what you are teaching?
Many of them are so used to having compartmentalized lives it’s hard for them to give that up and realize that they have to be authentic—live their whole life one way. They tell me that when they have made this effort, they feel much more at peace.
Do you find that there is one specific aspect of your teaching that is easiest for them to embrace?
Alternate reality is something that is extremely powerful, and I would say that when I teach a program, somewhere between half and two-thirds of the people have their big breakthrough doing that exercise.
For people who have not yet had the benefit of taking the class and/or doing the exercise, can you explain what you mean?
For the alternate reality exercise, I have people describe in detail something that is of concern to them right now—a work situation, a personal situation, it doesn’t matter. They describe the reality that they are living in. What they don’t recognize is that this isn’t the reality, it is a reality. And it is one they have constructed. With the help of their teammates, I ask them to come up with one that is better and one that they can possibly believe at some level. Then I have them go out and live as if the alternate reality were their reality.
What if it’s something that I don’t believe?
It’s okay for you to act as if it is true as long as you believe it could be. You should note the evidence that supports your alternate reality.
We are always looking for evidence that proves our current reality so I ask people to look for evidence that supports the alternate reality. They are surprised to find out how much evidence shows up to support the alternate reality. Once they start focusing on that, they are able to make the transition, and the alternate reality becomes the one they are living. And since the alternate reality is better than the one they were living, their life is improved.
There are certain things that are absolute. It’s 90 degrees outside today. That’s an objective, scientific measure. I can’t create and alternate reality around that or create one where it’s 60 degrees.
Do you have to experience 90 degrees as miserable? Or can you experience it as “this is an interesting situation— let me help my body react to that?”
You say you are not teaching people anything new. So how did you come to amass this collected wisdom?
I did my MBA in a top school in India, did my PhD in Columbia, got tired of corporate politics, and found that even though I was successful, I wasn’t passionate about what I was doing. It was intellectually interesting, but much of the time I disliked it. And I realized what bothered me bothered hundreds of thousands, if not millions, of people.
All of my life I had read a lot of spiritual and mystical biographies. Somehow I had the conviction that I needed to figure out a way to make [all of what I had learned] applicable. Thinking about it made me come alive.
I took the teachings, stripped them of cultural context and religious baggage and adapted them so very intelligent people in a post-industrial economy could relate to this information.
Do you ever get resistance in corporate settings?
All the time!
So what do you do about that?
There are a lot of people who come in the first day with not chips on their shoulders but 2×4′s. They think this is wishy-washy stuff and it’s not going to work.
I tell them on the first day, “Don’t waste your time wondering if it’s true….If you push hard enough, all of these teachings will crumble.”
What they don’t recognize is that the models they are currently using are equally false. So here’s what I say: Don’t ask if what I am saying is right or wrong, good or bad, or true or false. Ask yourself, does this work for me in my life better than what I am presently using?
And if the answer is yes—and you are the sole judge—use it. If not, drop it and just acknowledge that it doesn’t work for you and move on.
Most people are open to that approach. When they do the exercises with that approach, they experience amazing changes. They go from being skeptics to believers to evangelists.
McGraw-Hill Education (Asia)
