Leadership in Financial Reform - or Not

The global recession was caused by financial hubris and a nearly maniacal expansion of credit. Risk considerations were ignored and subdued until the risk exploded into all our faces.

Now, after having cleaned up the first mess, financial regulators try to appease us with timid reforms. One example is the white paper of the British governement: Darling rules out radical changes in City white paper. The US government is embarrassed by the humongous bonuses of the bank manages, while the economy and the unemployed suffer, here and here

Why kill the goose, that lays the golden eggs? But, were the eggs so golden and then for whom? And, who has to clean out the pen? In the end, financial managers found their personal profit perpetuum mobile: Leverage your equity until the hilt, if it explodes, turn the risks over to the governments and taxpayers. If it works out fine, pocket the cash and buy a big yacht.

These managers are all right and good people and fathers & mothers for the most part (besides outright fraudsters). It must be understood that their behaviour is not as much a question of values, but of reasons. Who on earth would give up risk-less money? The problem is not the individual, it is the regulations and incentives.

Why can´t we make the high-risk bankers eat their own losses? The answer is that it would destroy our economy. That is right. But why do we let our banks and financial institutions put us in such a situation? Because the central banking system provides the banks a shelter from free market forces. This is the crux of the problem.

The central bank is the "lender of last ressort" for banks and their money (credit). This creates a government sponsored monopoly. And as such, market forces break down and the situation we experience now is the sad result.

What would leadership mean in this situation? Financial regulators need to wake up to their responsibility towards not only the financial players, but to the society overall and institute a money system that does away with these artificial monopolies given to banks.

For the theoretical background on these see Rothbard. Practically, however, it is a sad state of affairs to know that our government budgets will wreck and bankrupt over the next years, while on the other hand completely reasonable changes are ignored.

It seems to me, here our political leadership is in the situation of the leading class of the U.S.S.R in mid-80´s. They know they got a problem, but reform is too hard. They would have to change the basis of their power structure, which they are unwilling to do.

As a result, our current leaders are leading us down a path that leads to more waste through government sponsered "deficit spending," which only means throwing good money (that we do not have) after bad money. Bailouts, subsidies and other nonsense destroys value on a scale not seen after the fall of Soviet-style communism.

It is ironic - if not foolish as well - to make new debts to cure the crash, which was caused by too much debt. In the end, the budget deficits will explode and suppress further growth for years to come (think: Japan).

Also, to call for less markets and more government, or even to ask leftist philosophers and other theoreticians to propose the establishment of a " better world" makes me feel scared. We do have fine market systems that made us successful, prosperous and even happy over the last 50 or 100 years. (Better than any other known to mankind.)

Now it is up to the enlightened leadership to preserve the working elements (e.g. markets) for all economic sectors: it is time now to let market rules work for the money and financial system.

Marketing in Times of Recession

What does it mean to market in times of recession and low demand?

This is a new question to many managers, having been spoiled by success. Same - same and business as usual are definitely out.

Nevertheless, some managers are clinging to the old habit of sitting still, waiting for the storm to abate. Hey, it worked in the past.

This time, though, is different and here are some of the reasons for urgent change:

1. The recessionary business climate will take longer, at the minimum 18 months or - god forbid - even years, so sitting still will lead to insolvency
   
2. Global competitors will start to enter new markets, maybe already next month in search of new customers (most probably yours)
3. The internet and international exchange help to spread innovations much faster, therefore, innovations will be obsolete earlier and will not last until the next up-turn
   
4. Lower demand and smaller budgets require lean and more frugal offers, products and solution to be marketed fast
5. Cost reduction while keeping talents and brain power demands creative approaches in order to develop profitable business in a time of change
6. Thrifty customers will force everyone, from CEO to engineer to sales rep, to figure out what exactly customer really value so much that they will spend their scarce budget
   

These reasons - among others - will force CEOs, CMOs, and other managers to think hard and to come up with better market solutions. But not to wait, because time can run out on the ones who come late.

Between the option of cutting costs and the option of pushing for better customer solutions, managers are well advised to overcome the seeming paradox and to do both: developing and delivering better solutions at lower costs.

Now, that is a task worth of managers of our times. What else would they need us for otherwise?

Globalization - Rules of Global Business

Globalization has brought to us the world-wide exchange of goods and services together with broad international connections in cultural, political and financial terms. Many managers have welcome this as an opportunity for increased growth.

New markets with millions or even billions of potential customers make every marketer´s heart jump with joy. The idea is to source from the global market cheaply and then export it with high value and profitable prices to countries with needs.

However, globalization has profound consequences in the way of Schumpeter´s "creative destruction". Whereas this is an ongoing process for all, especially the European countries are lagging dangerously, hiding behind obsolete protectionist and unsustainable barriers to competition.

Not only does the current financial and economic crisis put up a strong mandate for excellent management of global business. This serious recession makes the mandate to change more urgent and pressing for top managers, leaders and statesmen.

How to master the global business challenge? Here are some proven rules:

1. Extend your personal and organizational perspective to global matters; open up your world to what is out there, take it in and learn from new realities - if you like it or not. Start here at the lonely planet guide .
   
   
2. Secure the facts and knowledge about global markets, the trends, risks and opportunities; replace hear-say, half-truths and pseudo-knowledge with systematic understanding. Start here: global edge, university washington library, CIA world factbook, stat usa, or internet world stats .
   
   
3. Develop clear international business goals and strategies; these need to be realistic and worked out in required detail, while keeping room for adaptation to accomodate local or temporal changes. Start learning here: OpenCourseWare MIT or here Kellogg Insight .
   
   
4. For market leadership, the right positioning is key to success; research and establish the right position in the respective markets and back it up with branding resources. For branding and positioning see MarketingProfs Branding, Copernicus Marketing or B2B Branding .
   
   
5. Accept, respect and integrate local culture and quirks; leave local decision makers to adapt the goals for optimal implementation. Execution is always local, not only in marketing, but in all functions. For details, look at cross culture communication, WorldBusinessCulture, or
   
   
6. Leverage existing market infrastructure, channels and providers and build alliances and cooperations; to build everything from scratch is seldom necessary or profitable. Select high-quality partners and tie them to you. See US Commercial Service, German Chambers of Trade or Austrian Trade.
   
   
7. Get started now with this one page marketing plan template. For details on starting, just look into yourself! Good luck!