America, Inc.: The Pros/Cons Of A ‘CEO President’

Jevin Sackett

Despite all the hand-wringing, America remains the world’s largest and most dominant economic and military power—and, as a result, the nation’s president remains arguably the most powerful person on the planet.

Not surprisingly, given its size and scope, the American government can also be an enormous, unwieldy entity; divided into three equal branches—Executive (the President & his cabinet), Legislative, and Judicial—the U.S. government also has a massive budget that is unparalleled by even the largest companies in the world.

For example: In 2014, the U.S. federal government spent an eye-popping $3.8trillion!

In addition to that massive fiscal responsibility, as Commander-in-Chief of the American military, the President also has to provide leadership to a world awash in political and military instability and upheaval. It could even be argued that, given recent world events, not since the days of the last World War has the American president faced as many challenges, both at home and abroad.

So any way you choose to look at it, being President of the United States is, as musicians are wont to say, “a tough gig.”

With a presidential election now just over a year away, both major political parties are in the process of selecting their respective nominees.

Interestingly, despite their ideological differences, one thing both parties share as we enter yet another presidential election cycle is the seemingly perpetual question: what leadership qualities are required for a successful presidential nominee and—ultimately—our next president?

Many American voters—of all political stripes—have expressed a desire to consider a political ‘outsider’ as their next president, particularly one with hands-on experience “running” a large organization; the thought behind this idea is that the same qualities that make for a successful business leader could—theoretically—transfer to the political world, and therein better prepare the next president for the seemingly endless financial and geopolitical challenges ahead.

But that poses an interesting question: does having leadership experience in the business world provide the experience and acumen required to be a successful president?

Unless you have resided under a (well insulated) rock the last few months, you’ve likely heard this question—in various forms—debated in American media. Of course, the driving factor behind that debate has been the (seemingly) omnipresent figure of Donald Trump, whose lengthy resume includes decades of prominent real estate development and, in recent years, his presence on the hit television program “The Apprentice.”

More recently, adding fuel to the debate about the merits of having a ‘CEO President’, has been the rising popularity of presidential candidate Carly Fiorina, former CEO of tech giant Hewlett-Packard. Like Trump, Fiorina touts her years as Chief Executive of one of the world’s most prominent tech companies as a substantial asset that would provide her with the requisite leadership skills needed to succeed as American president.

Although vastly different in both style and substance, by reaching the top tier of Republican presidential sweepstakes, Trump and Fiorina are forcing both the voters and pundits to confront the real possibility of having a business-trained, ‘non-politician’ as America’s next president.

Like anything having to do with entrepreneurialism, there are risks and rewards—or in this case, potential pros and cons—to selecting a business leader to run the American government, military and foreign policy.

Putting aside the specific individual personalities of prospective candidates, from the perspective of a fellow Chief Executive, here’s what I see as being the benefits–and potential drawbacks–of a President with a business-oriented resume:

Pros:

  • Financial savvy: Perhaps the strongest argument in favor of “hiring” a President with a business-oriented background would be the fiscal acumen (and one hopes discipline) that a former business leader would bring to both the Oval Office and Washington, D.C. America’s national debt is approaching $19 trillion, and with a rapidly aging population there will be considerably greater demand on programs such as Social Security and Medicare in the next few years; combine that with Washington’s penchant for ‘pork’—projects that serve the interests of few at the expense of many—and the idea of a president inclined to wield a responsible fiscal ‘stick’ becomes quite appealing indeed
  • Leadership skillsOne of the core traits of any successful business leader is the ability to put forward a ‘big picture vision’, and then build both the team and widespread consensus required to work toward that goal. Political preferences aside, it is hard to argue that over the last several years in Washington, there has been much ‘consensus’ leadership on display. It could be argued that a president with a proven track record in the business world, which illustrated the ability to ‘bring people together’ from various points of view, might be able to fill the considerable vacuum of visionary, and consensus-building leadership in our nation’s capital
  • Interpersonal SkillsAs I have discussed in previous columns, the ability to successfully interact and communicate with other senior leaders—as well as audiences both internal and external—is a critical component for achieving success as a business leader. That same skill is needed by a successful president; thirty years ago, despite their vast differences, Ronald Reagan and Mikhail Gorbachev established a strong personal relationship that played a role in diffusing Cold War tensions between the American and Russian super powers. That ability—to get beyond personal differences and work towards a mutually beneficial destiny—is a characteristic that could, potentially, be transferred from the ‘wheeling and dealing’ world of business to that of a President actively involved in world (and domestic) diplomacy.

Cons:

  • Division of Powers: America’s Founding Fathers were very wise men who took great precautions to ensure that no one branch of government—or individual, including the President—wielded too much power. As a result, our nation has three branches of government, with Constitutionally-mandated equal powers. In real terms, that means that in order for a president to see his ‘vision’ come to pass, he must convince the Legislative branch—Congress—to pass the laws required to achieve his presidential goals. As we’ve seen in recent years, that’s often easier said than done, and can often require considerable political acumen and experience that a former business leader may not necessarily bring with him or her to the Oval Office.
  • Requisite Geopolitical Knowledge/Experience: It can be argued that few presidents arrive on the first day of their job with the required amount of foreign policy knowledge and experience, especially given the critical leadership role that a president plays in setting the national—and indeed, global—political agenda. However, it can also be argued that somepresidents, particularly those who either bring with them senior level political experience garnered from either the statehouse (i.e. governors) or Washington (i.e. Senators, former Cabinet members) at least have a baselineof knowledge about global affairs and/or trade and commerce. Other than senior business leaders of multi-national companies, few Chief Executives would bring with them to D.C. much hands-on acumen about global affairs or trade.
  • Lack Of ‘Glad Handing’ Skills: Although there is, of course, a certain amount of ‘office politics’ at play in any organization, there is a vast difference between that, and the type of national political campaigning required to be elected president. Chief Executives tend to be ‘can-do’ people who are more results-oriented, and while there may be some executives who could endure—and perhaps even enjoy—the lengthy, costly and unwieldy process of running for the highest office in the land, many others would find the process onerous; in addition, ‘kissing babies’ and taking ‘selfies’ are not the kind of events that most successful CEOs would normally gravitate towards. Simply put, unlike many ‘professional’ politicians, business people are not ‘natural campaigners’.

Without a doubt, the 2016 Presidential Election is shaping up to be one of the most fascinating, unpredictable races in modern times. Based on early results—and we are, after all, still a full year out from election day—there appears to be a palpable desire among the electorate to–at the very least–give serious consideration to ‘non-traditional’ politicians as our next President, including at least two former/current Chief Executive Officers.

Time, as it always does, will ultimately tell whether the American electorate is truly ready to recruit our next President from the ranks of Corporate America.

In the interim, the debate over transferring a business leader from his—or her—executive corner office to the famed Oval one in Washington is likely to heat up in the coming months.

Corporate Communications: Can You Hear Me Now?

conference hall

In earlier posts, I discussed some of the most vital skills required to be a successful Chief Executive Officer.

As you may have noticed, the recurring theme in those columns—and many others that have pertained to successfully managing a growing company—was the absolutely essential need for clear and consistent corporate communications.

Now, on the surface, that may seem to be a given—after all, in business it’s only natural that within an organization employees consistently communicate with their managers, while externally, salespeople regularly communicate with their customers. However, as an organization grows, it also becomes increasingly important that the company consistently communicate with all of its stakeholders—internally as well as externally–as well as the media, which often serves as the conduit for communication between business and the public.

For the senior management of any business, the task of successfully communicating—both internally and externally—has always been somewhat of a challenge, albeit a necessary part of ‘doing business.’ Entrepreneurs are, by their nature, often more focused on building their businesses, rather than sharing their corporate stories.

It’s also ironic, but true, that in this Information Age–where the available tools for communication have never been easier to access and utilize–successful ‘Corporate Communications’ has actually become more challenging.

The fact is that in the Internet age–where even your cell phone can provide limitless amounts of news and information at a moment’s notice–people are constantly inundated with information from a seemingly endless number of sources.

Breaking through that informational ‘din’, and actually connecting with your target audience, is indeed a challenge for all business leaders, and one that requires considerable effort and commitment.

For example: in the case of our company, Sackett National Holdings (SNH), successful communications has never been more important. This year, we’re experiencing unprecedented growth, and as a result, we’ve also been hiring a considerable number of new employees to keep up with that expansion.

That is, of course, good news.

Still, it’s increasingly important that we ensure that all of our employees—both existing and new hires—are kept abreast of our diverse and growing business.  As we strive to ensure that all of our employees understand the current state of our company–and the direction it’s headed going forward—internal corporate communications has become an even more important priority for our Senior Management team.

One of the benefits of having a ‘tech savvy’ company such as SNH is that we are well suited to utilize technology to benefit not only our clients, but our own internal communication efforts as well.

Still, like many growing and diverse companies, one of the challenges we face in achieving our internal communications objectives is basic geography. Our corporate headquarters is located in Las Vegas, but we also have a large office in San Diego, as well as offices in Ohio and Kansas City; in a less-technological age, that geographic disparity would present significant logistical problems for our communication efforts.

Enter the benefits of technology.

As a method of bridging the geographic distance between our regional offices, and ensuring ‘consistent and clear’ corporate communications—our company recently began providing employees a “CEO Communication” webcast; initially broadcast live, and then posted online for several days in case any employees were unavailable during the original webcast, this video allows me—in my capacity as Chief Executive Officer–to speak directly to all  SNH employees, and deliver the good news about our company’s growth and success.

In that same broadcast, we also made a point of singling out several employees for their exceptional work, and thanking them for their efforts on behalf of the company. In addition to sharing information about our company’s growth, we also included some lighter fare, such as photos from company gatherings as well as contests offering employees prizes.

And while internal webcasts are most useful as a means of updating and connecting with staff, I also believe that maintaining the ‘human touch’ is an important element in our internal corporate communication efforts. To that end, we recently held company ‘Town Hall’-type meetings in San Diego and Las Vegas—providing employees with a chance to hear directly from Senior Management about the status of our company, as well as fielding corporate questions from those in attendance.

I was very pleased to find that, in response to an internal survey, 94 percent of our employees said they welcomed the ‘Town Hall’ events, and hoped we would conduct many more on a regular basis; while happy with that result, I wasn’t the least bit surprised, because I recognize the inherent and natural desire of employees to be kept ‘up to speed’ with what’s happening at their place of employment.

Concurrent to our internal communications efforts, our company is also expanding our efforts to reach out to external stakeholders—including current and potential customers—to share information about both our organization, and the innovative products and services we offer.

With double-digit growth, rapid expansion and unique and innovative products to proffer, we’re proud of SNH’s corporate ‘story’, and are committed to the communication efforts required to share our story often, and with as many stakeholders as possible.

In the business world, most commerce can be divided into one of two categories: business-to-business (B2B) as well as business-to-consumer (B2C). At SNH, we’re fortunate to have subsidiaries that are industry leaders in both B2B as well as B2C businesses.

While there may be some minor differences in the way a company approaches communication for a B2B versus B2C audience, it’s imperative that the corporate messaging for both be clear and consistent—and fully aligned with an organization’s internal communications; the several hundred employees who work for our company are our strongest ‘brand’ ambassadors, and ensuring they are fully engaged with our company’s progress is key to our success.

When devising a corporate communications plan, it’s important to keep in mind that throughout all of history, there’s never been a time when information was more readily available–everywhere and all of the time.

Given that reality, one of the most formidable challenges facing organizations—and those charged with running them—is to commit the time, effort and resources required to ensuring successful corporate communications; by doing so, you will also ensure that your company’s story gets heard, and doesn’t fall between the constant ‘clicks’ of the Information Age.

 

It’s Personal! Customer Service In The ‘Selfie’ Age

Hands Holding Digital Devices with People's Images

Jevin Sackett Business

It may be hard to believe, particularly for those under-30 years of age, but there was a time in the not-too-distant past, that we all lived in a world where the daily reality included:

  • Only one phone company—not so affectionately known as ‘Ma Bell’; and a time when placing a long distance call was often an exceptionally expensive thing to do
  • A grand total of three network choices proffered for TV viewing
  • The need to be in front of your TV screen, at a designated time—or else risk missing a favorite program
  • A world in which would-be photographers had to purchase a camera, then film, and then bring that film to a third party–and wait to get it developed
  • And a world in which job seekers had to manually search through the “Help Wanted” ads in their local newspaper

There are many other illustrations of the changing times, but I think you get the point. 

In ways almost too numerous to count, the business world of 2015 bares almost no similarity to the one that existed as recently as 20 years ago. Of course, technology is–and remains–the main driver for the majority of the changes in the way business is conducted today; however, technology has also resulted in one other significant trend within the business world.

The personalization of goods and services. 

One of the most significant changes that technology has both caused–and enabled–has been demand for personalized products and services. Today, it is virtually impossible for any member of the ‘millennial generation’ to conceive of a time when it was the norm for everyone to have the same choices—or in some cases, no choices at all—in everything from telephones to televised entertainment.

In addition, in the era of Instagram, Facebook, Twitter and other forms of social media, the ability to interchange ideas and images with anyone, anywhere at anytime is now a given. And implicit in that fact is the ability for consumers to create, share and enjoy personalized communication and entertainment on a 24/7 basis. 

Many successful businesses—including our own Sackett National Holdings and its subsidiaries—have long touted a commitment to individualized customer service. We’ve long recognized that while a ‘one size fits all’ approach to servicing our clients might make our business model simpler and more uniform, it would also be tantamount to telling customers they’re just ‘another numerical file’; were we to be foolish enough to adapt such a view, the resulting loss of business would be both predictable, and appropriate.

For us, that was always the case. 

However, halfway through the second decade of the new millennium, clients (be they consumers or businesses) now not only appreciate–but expect–to receive products and services designed to meet their individual needs. As I’ve noted in previous columns, the Internet means that customers have a wider array of choices than ever before, and easier access to that plethora of available choices.

Still, even at this late date, some industries are just now awakening to this new reality. Take, for example, the cable television industry. 

It’s estimated that more that $70 billion is spent annually on TV advertising. That’s an impressive figure. However, it may also be deceptive. 

One of the latest buzzwords within the business world is “cord-cutting”, which references a rapidly growing consumer willingness to walk away from ‘bundled’ programming packages offered by the cable TV industry in favor of, you guessed it, more personalized options. 

For decades, cable companies—who have near complete domination of their assigned regions due to lack of competition—have been able to ‘bundle’ dozens of channels, and sell those packages to their customers. Other than opting for satellite television, consumers were left with little or no choice: pay for channels you have no intention of watching, in order to get access to those you will, or walk away from your favorite program or network.

That was then, this is now—and ‘now’ is the age of the Internet. As a result of new technology, a rapidly growing number of TV consumers are cutting their proverbial cable cords—ergo, the phrase ‘cord-cutting’–and seeking alternatives to the expensive cable option; after all, in any business other than cable television, the notion of customers paying for goods or services they know they will never use would be—correctly–seen as patently absurd.

And there is good reason for the cable companies growing concern over a diminishing customer base—as seen in the rapid growth of the alternative option to cable TV. Web video advertising is slated to grow by an impressive 30 percent this year, and while it is valued at about $8 billion dollar (a fraction of the giant cable market), unlike cable, all of the indicating arrows for web-based advertising point upward.

This new era of personalized consumer demand is, perhaps correctly, being seen in historical terms as one of great narcissism. From ‘selfie sticks’ to Twitter—and for better or worse–the primary focus of this era seems to be pleasing the face we see in our mirrors.

However, the bottom line is that businesses failing to provide the quality, personalized goods and services expected by today’s demanding consumers do so at their peril–and risk learning first-hand the economic consequences of customer ‘cord-cutting’.

“How Am I Doing?”: Five Recurring Questions Every Successful Business Should Ask Itself

The keys of success

Back in the 1970s, New York City Mayor Ed Koch was well-known for stopping fellow New Yorkers and randomly asking them “how am I doing?”.

Beyond the obvious attempt at empathizing with his electorate, Koch’s question was actually a wise one; there is much to be gained—and learned—for anyone in a leadership role by pausing every now and then and asking oneself–and others–“how am I doing?”

The theory has ancient roots: even Socrates once opined that “the unexamined life is not worth living.”

Still, you might think that in the narcissistic age of the ‘selfie’ and social media, the self-examining question of “how am I doing” could be seen as superfluous, especially in the business world. However, given the competitive nature—and speed—of business these days, far too few business leaders take the time to seriously reflect on just how ‘on target’ their efforts are, and whether or not their operations are in sync with the best interest of their business.

With that in mind, I’d like to offer up five of the key operational questions every successful business leader/owner should ask his or herself–on a regular, recurring basis–to help ensure his company’s long-term prosperity:

5) Do We Have The Right People In Senior Management Positions?

There’s an old adage that says “a fish rots from the head down”. The business implication of that statement being, that if there are problems within the top management of a company, it’s likely that those problems will trickle down to the business’ daily operations.

Of course, the opposite is also true: a well-run company, with senior management who have a clear vision of where the company is heading–and the skills to take it there–is far more likely to succeed and overcome competitors.

Simply stated, it’s imperative that an organization put in place not only skilled senior management—but the right skilled senior management—to ensure that the executive decisions made daily are in sync with how best to both increase sales, while maintaining a positive workplace environment.

4) Is Our Company Sufficiently Open To New Ideas & Taking Appropriate Risks?

As I noted in an earlier column, one of the biggest challenges that face very successful companies is a sense of complacency, and the accompanying assumption that since the company is doing well now, it can expect to continue to enjoy success going forward.

The fact is that in today’s business world things change faster than ever before, and even companies—such as our own Sackett National Holdings–that are today enjoying solid growth, cannot simply assume they will retain that momentum. Innovation and complacency are foes, and it’s rare that a company that loses its competitive edge is also a hub of innovation.

Another victim of corporate complacency is a company’s tolerance for risk. There’s a reason that one of the most commonly used phrases in the entrepreneurial business world is “no risk, no reward”—it just happens to be true. While due diligence is always important, even successful companies have to be willing to accept the degree of risk that’s inherent with innovation, and introducing new products and services. Thus, it’s important for a company to continually ask itself if it is willing to accept the risk that comes with innovation.

3) What defines and delineates our company from our competitors?

In 2012, there was an estimated 29 million small businesses operating in the United States. For any business-owner, that can be an intimidating number, given the implications for competition; certainly, that competition is good news for consumers, but it also means that it’s absolutely imperative that a company be able to offer customers a product or service that can delineate it from its competitors.

In the Internet age, consumers have more choices—and sources of information regarding those choices—than ever before. To be heard above the ‘din’, to stand out from the vast number of competitors, a business needs to identify what it can offer customers that its competition either can’t, or does not: competitive pricing, a track record of reliability, innovative products, and superior customer service are each examples of how a business can delineate itself from others competing for the same customer’s dollar.

But, of course, in order to persuade customers your business stands out from its competition, a company must also ask itself…

2) Are We Doing Enough To Tell The World Our Company’s ‘Story’?

Business people—and particularly entrepreneurs—are hardly renowned as shy or introverted.

And rightly so. For in addition to possessing ability and ‘business smarts’, it takes a great deal of self-confidence to believe that one can overcome the odds to create–and operate–a successful business.

However, in line with my previous point, it’s never been more imperative than in the Internet age that a business makes the effort required to tell the world its ‘story’—to proudly, and accurately, inform current and potential customers about why they should consider the company’s products or services.

The fact is that, as any first year science student knows, “Nature hates a vacuum”, and if a company fails to tell its corporate story, then that ‘void’ will be filled either by misinformation or by another, more proactive competitor’s story.

There’s a reason that even well established, iconic brands such as Coca Cola, Ford Motors or Bank of America spend considerable time and resources in the areas of marketing and public/media relations. It’s because they realize that, despite their iconic brands, they have both a corporate—and fiduciary—responsibility to help shape the ‘narrative’ about what is being said regarding their company; they also recognize that equally ‘iconic’ rivals such as Pepsi Cola, General Motors and Wells Fargo would be happy to fill the information vacuum, should they fail to tell their company’s respective corporate stories.

Even if the ROI (return on investment) isn’t always immediately apparent, it’s imperative that any company—of any size—make whatever reasonable efforts it can to proudly tell the world about itself; failure to do so in a fiercely competitive market endangers the company’s future prospects, no matter the quality of its products or services.

And speaking of future prospects, there’s the critically important question…

1) Where Do We Envision Our Company To Be In Five Years?

We’ve all heard the expression ‘you can’t get to where you want to go, until you know where you want to be’, and nowhere is this truer than in the corporate journey. Simply having a goal of ‘more success’ isn’t a sufficient vision for a company’s future.

In order for a business to have a clearly delineated path to success, it must also have a clearly delineated goal(s). In shaping a company’s path forward, there are a multitude of important questions to address, including:

  • How fast do you wish to grow your business?
  • Will that growth be organic or via acquisitions, or both?
  • Will the focus be specific to a targeted market or geographic region?
  • If it’s a privately held entity, do you plan to someday consider taking the company public? If so, what needs to be done in preparation for this move?

And of course, a company’s desired goals may need to be revised over time; circumstances change, and so it may be necessary to revisit a company’s longer-term plans to ensure that they remain in sync with significant external changes that occur.

It’s also critically important to remember that all the ‘how am I doing’ questions outlined here are recurring—businesses, like the people who run them, change over time, and constant adaptation to those changes requires ongoing, honest self-appraisal.

The bottom line is that, in an era where change is accurately said to be the only constant, companies willing to continuously ask themselves “how am I doing” aren’t being narcissistic—they’re being well-run.

Google This! Competition=Innovation

man hand using smartphone in officeIn the business world, all companies strive to grow their ‘market share’—the percentage of the market demand for a particular product or service.

In fact, the heart of capitalism derives from competition between companies for the same consumer or business dollar–and the resulting market share. Of course, competition benefits consumers, but it also benefits businesses–by forcing them to become more efficient and innovative in order to stand out from their business rivals.

Which is why it caught my eye when it was revealed this week that Apple Inc. reported 92 percent of total operating profits from the world’s top eight smartphone makers, during the first quarter of this year.

Take a moment and let that sink in: Apple’s ‘iPhone’ generated more than 9 out of every 10 dollars of profit in the lucrative smartphone industry during the first quarter of the year. That’s a truly astonishing accomplishment, and one that is almost without precedent in the business world.

Similarly, an Apple rival in the technology sector is also establishing eye-catching dominance in its field; Google Inc. has become the dominant force in many tech-based sectors, including its overwhelming 67.6 percent market share of the search engine world. Google also has a dominant presence in the online advertising, browser, email and video markets (it purchased Youtube in its infancy several years ago).

Now, don’t get me wrong. As CEO of Sackett National Holdings–a company that greatly values innovative technology–I applaud Apple and Google’s impressive ability to produce high quality tech products and services that are much in demand. These are two American companies that have achieved worldwide success in large part by offering their customers quality products—which have, to a large extent, also transformed the way the world communicates and conducts business. No small feat.

However, as someone whose rapidly growing entrepreneurial business has to—and chooses to—compete against many other large, national companies, I am also well-versed in the important role competition plays in spurring our company towards success.

Whether it’s providing state-of-the-art software solutions to our clients in the financial services sector, automotive, employment screening or retail energy industries, we at SNH recognize that complacency is unacceptable; our customers have choices, and we can’t—and would not—ever assume that they will remain our clients unless we can offer them innovative, quality products and services.

And that is my concern when I read about a company such as Apple attaining 92 percent of the quarterly operating profits for the smartphone industry, or Google’s complete domination of varied online businesses.

The level of innovation that Steve Jobs and his team showed by creating the iPhone was born out of competition, and an entrepreneurial desire to think outside the proverbial ‘box’; Google also became a dominant player in the world’s tech sector through innovation born of entrepreneurial competition.

But when any one company grows so large as to dwarf its competitors—and, as a result, its competition—will that dominance result in less innovation? There are legitimate reasons to believe so.

Innovation is, by its very nature, born out of a company’s need to delineate itself from its competition; to be able to say to clients—and potential clients—‘we can offer you a superior product or service, and do so at a competitive pricing level.’

All businesses–even companies that produce desirable products and services such as Apple and Google–that no longer have to be concerned about fierce competition, rarely remain hubs of innovation.

If it’s true that ‘necessity is the mother of invention’, then it’s equally true that competition is likely invention’s father. And frankly, any company that no longer feels the need to worry about its competition is more likely to become an ‘orphanage’, than a parent, to new inventions.

For all its perceived flaws, capitalism encourages competition, and that, in turn, encourages businesses to take risks; and few, if any, great innovations were ever achieved without some degree of risk.

Still, perhaps it is just the natural evolution of business that successful start-up companies often grow to become dominant players in their industries. Certainly, when we first founded our company more than 20 years ago, we hoped that it would grow to become a national presence, and compete directly with established industry leaders; the fact that we have been able to reach that point is due, in no small part, to our corporate commitment to taking calculated risks, which include innovative technology.

Some critics of Apple and Google say that as those two companies have grown into international corporate giants dominating the tech sector, their capacity for innovation has diminished; although they both no doubt employ smart, innovative people, the tech giants have become so big that they are more concerned with protecting—rather than growing—their market share.

As it always does, Time will tell whether or not Apple and Google’s most innovative days are behind them.

But even if they are, you can rest assured that somewhere out there is a ‘hungry’ entrepreneur working on a new, innovative product, which will ultimately result in greater competition for the Apples and Googles of this world.

 

Economics 101: A Greek Tragedy

20 euro banknote dissolving as a concept of economic crisis in gThe nation of Greece has, for centuries, conjured up a plethora of images and thoughts: the birthplace of democracy, philosophical land of Aristotle and Socrates, the Parthenon, and the natural beauty of Corfu, Mykonos and other Greek resort islands.

Sadly, over the last half decade, for many around the world the word ‘Greece’ has a very different connotation: a bankrupt nation, whose economic and political uncertainty threatens not only the future of its people, but of the entire Eurozone.

In much the same way that—as the old saying goes–Rome wasn’t ‘built in a day’, so too is it true that this modern Greek tragedy evolved over a longer period of time. What’s transpiring now in Greece can be traced back to decades of mistakes, miscalculations, and an unwillingness by many to confront an evolving, and long threatening, economic reality.

There are those who, perhaps with some validity, have argued for years that while the European Economic Union (EU)—and its singular currency, the Euro—made fiscal sense, it ignored a long, convoluted and often confrontational history among the European nations. For while it’s true that yesterday’s enemies can evolve into today’s economic allies—the examples are countless, including America’s close ties with former ‘enemies’ such as Germany and Japan—European history is long, often violent and replete with the nationalism of many nations.

So it came as no surprise to many that, when the recent referendum question was asked of the Greek electorate “do you wish to accept the terms offered by the EU in exchange for another economic bailout”, more than 60 percent of voters said ‘no’.

On a practical level, it may be difficult for some to understand why Greeks—who have repeatedly said en masse that they wish to remain in the EU—would endanger that likelihood by such a vote, it is completely understandable on an emotional level.

The fact that the ‘No’ supporters used the stern countenance of Germany’s finance minister Wolfgang Schaeuble on their referendum poster was not by happenstance; those Greeks opposing the EU bailout knew that their best chance for success would be an emotional appeal, and so relied on a poster that none-too-subtly recalled memories of 1941, a time when German forces invaded and occupied Greece.

And what does the economic and political drama unfolding in Greece mean for Americans, and American business?

That all depends on the terms of reference one chooses to use. Economically, a Greek bankruptcy would have little direct  impact on either American business or consumers. The Greek economy is but a fraction of the size of the U.S. economy: the Greek Gross Domestic Product (GDP) was $242 billion (US) in 2013, while the American GDP for the same year was $16.77 trillion (US).

However, the fear among some economists and politicians is of a ‘Greek contagion’, which translates into a possible domino effect of a Greek bankruptcy, wherein other EU countries with weaker economies and higher debt levels—such as Spain and Portugal—could follow Greece’s exit from the EU.

Were that to occur, the impact on America would be far greater than simply a Greek exit from the EU. According to the European Commission, the U.S. and EU economies combined account for about half of the entire world’s GDP.

So the unanswered issue, especially for an American audience, is would a Greek exit from the EU be the end–or just the beginning of a much larger story?

And the overriding question still remains: how did it come to this?

As noted earlier, a combination of several factors are at play in the evolution of this Greek tragedy. Profligate government spending, overly generous pensions (with Greek ‘retirement’ often starting up to 15 years before traditional American retirement), compounded by a worldwide recession, finally brought to the forefront long-simmering questions about the sustainability of Greece’s social spending.

The real tragedy at play here is not so much a philosophical one regarding the policies of the Greek government, or the terms of a European bailout of Greece, as much as it is a human one. As of this week, Greek banks are restricting individual withdrawals to no more than $60 per day, as they fear running out of hard currency; meanwhile, everyone–from the poor and the elderly, to the hardworking businesspeople and merchants in Greece–face an uncertain economic future that, at best, will likely mean difficult times for several years to come.

There are many economic lessons to be learned from what is currently unfolding in Greece.

These would include: a confirmation that ever-increasing debt levels are ultimately unsustainable, and carry with them very real, and very human consequences; that politicians who choose to sugar-coat the economic reality of their country for short-term political expedience should be avoided at all costs; and a recognition that, as I noted in another recent column, those who choose not to learn from history are doomed to relive it.

From the time of Aristotle and Socrates, Greece has taught the world many Life Lessons.

The modern Greek tragedy, and the resulting painful human drama, unfolding in the summer of 2015 is a political and economic lesson the world would do well to learn.

Lessons Learned: Five Ways To Avoid The Next Recession

economicsThose who cannot remember the past are condemned to repeat it.”—George Santayana

In business, particularly in an entrepreneurial business, taking risks is all in a day’s work. Certainly, a smart businessperson will do what he or she can to mitigate risks—a practice widely referred to as ‘risk management’—but entrepreneurs understand that risk and reward are two sides of the same coin.

In business, as in many aspects of life, you rarely encounter one without the other.

However, smart businesspeople also know better than to repeat the mistakes of the past. That’s one reason why you never saw a second edition of such legendary corporate mistakes such as the Ford Edsel, or Coca-Cola’s disastrous “New Coke”. You will also note that, despite those legendary business errors, both Ford and Coke remain iconic brands that are dominant forces in their respective industries.

Unfortunately, not all businesses—or governments—take heed of Santayana’s wise advice, and learn from the mistakes of their past. And as the Great Recession begins to—thankfully–fade into memory, there is a growing concern that some of the same errors that helped to trigger that economic disaster could be repeated.

Our company, Sackett National Holdings, has subsidiaries that have a national footprint in multiple business sectors that were either directly—or indirectly–impacted by some of the misguided policies that exacerbated the Great Recession. Specifically, our company’s SettlementOne subsidiary works closely with the financial services sector, and is a national provider of credit and data information; in addition, SNH’s National Credit Center subsidiary services more than 4,000 automotive dealerships nationwide with credit information and software solutions.

Therefore, as you might imagine, economic and political decisions that directly impact the financial services and automotive sectors are of great interest and concern to our company.

And so, with the passage of time and the fading of the recession’s legacy, I think it would be beneficial to take a moment and review five of what I consider to be the most important business lessons to be learned from the 2008 Great Recession:

5) The Size Of A Mortgage Should Reflect An Individual’s Fiscal Reality:

Prior to the collapse of the housing sector in 2007/2008, there was a generally accepted notion among some Americans and politicians—including some with enough experience/knowledge to know better—that housing was a universally ‘safe’ investment that would continue to gain in value, in perpetuity, and no matter the location; there was also the active promotion of some mortgages that required very little, or even no, down payment. Both of these misguided ideas were substantial contributors to the eventual collapse of the housing sector.

Common sense—remember that useful business tool?—and Best Practices dictate that consumers, just like businesses, should not financially overextend themselves. Someone earning $40,000 a year should not be purchasing a home valued at 15 or 20 times his annual income—often with little or no down payment–especially when one at half the price meets his needs. And while home equity can, over time, contribute to a family’s net worth, a family home should not be viewed as simply another gambling ‘chip’, with ever-increasing value. This, I believe, is a critical lesson worth remembering from the massive foreclosures that devastated the lives of millions of Americans in the last recession.

4) Politics Should Not Trump Reality:

In a recent post, I examined the question about the future prospects for universal home ownership as an integral part of the American Dream. As a corollary to that question, and in keeping with the previous suggestion, it’s imperative that government policy encourages home ownership (and the subsequent financial obligation) that is in line with Americans’ financial capabilities. To do otherwise, is to risk a replay of the foreclosure debacle of the last recession.

3) Business Growth Should Also Reflect Reality:

As CEO of a rapidly expanding, entrepreneurial company, few if any businesspeople understand or support the notion of corporate growth more than I do. However, just as we should expect consumers not to overextend themselves, so too should businesses ensure that their growth—and related financial liability—reflects their fiscal reality. In business, as in life, just because you can do something, doesn’t mean you necessarily should—or at least not until it makes fiscal sense to do so.

2) Be wary of ‘bubbles’:

In the 1990s, it was the infamous ‘tech bubble’—the hyper-inflated growth of new tech companies, far too many of whom had little or no long-term business plans or chance for prosperity (Pet.com anyone?) In the next decade, as discussed, there was the housing ‘bubble’, and the inevitable explosion of a housing market that was largely built on a weak financial foundation. As a general rule of thumb, when pondering a potential business ‘bubble’ opportunity, it’s best to simply remember what your mom probably told you growing up: “if something seems to good to be true, it likely is.” Put another way, the Laws of Nature dictate the almost inevitably, ‘bubbles’–of any kind–eventually burst; best to avoid them whenever possible.

1) Don’t Be Blinded By Greed:

In the movie Wall Street, fictional tycoon Gordon Gekko delivered a famous speech about the business virtues of ‘greed’. And while ambition and drive—along with hard work—are, indeed, fundamental requirements in order to succeed, they differ greatly from greed, which Webster’s defines as “a selfish and excessive desire for more of something (as in money) than is needed”. I would only add that the road to ruin is littered by businesses and people who allowed greed to cloud their judgment and perspicacity. For businesses and individuals alike, sound financial decisions require a clear mind, and greed often manifests itself into one of the aforementioned business ‘bubbles’ that ultimately burst, and leave millions to suffer in its wake.

So, as we (thankfully) move forward and leave the Great Recession to the history books, let’s also try and keep Santayana’s wise advice in mind.

For while we should not live in the past, we should also not forget the–sometimes painful–business lessons it has taught us.

 

The US Dollar: The King of Currencies

Jevin Sackett CurrenciesLet’s begin with a quick quiz: of all the products that America exports to the rest of the world, what uniquely American creation is the most sought after U.S. product worldwide?

As an exporting nation, the range of possible answers is, of course, as diverse as the American economy.

And although the U.S. continues to be the preeminent global exporter of many highly desirable goods—ranging from cars and trucks, to movies and television programs—the most sought after American product worldwide remains its most durable and reliable commodity: the U.S. dollar.

Yes, even in an age in which it’s fashionable among some to speak about the decline of American dominance in global affairs, the dollar remains the most desired—and powerful—currency worldwide.

When asked about the driving forces behind the might of the American dollar, economists will likely proffer several reasons for its ongoing supremacy among world currencies. However, I believe that the most significant reason for the dollar’s continued strength is simple: it is both backed by—and representative of—the United States.

All one has to do is read or listen to the news any day of the week to discover how unstable and insecure much of the world is these days. And that global instability and insecurity often comes in many forms: social, political, as well as economic. Even some of our most traditionally stable allies, including several European nations, find themselves struggling to overcome social and economic instability as they continue to wrestle with the after-effects of the Great Recession, as well as the domestic threats posed by terrorist groups at home and abroad.

Which is not to say that America does not face many of the same social and economic challenges as our allies. The key difference is that–despite China’s growing economic strength, and our own domestic economic challenges—the United States is correctly viewed as the “safest harbor” among the world’s major economies. The strength of the dollar simply reflects that worldview.

Contrary to what you might hear daily in news reports, our government is still among the most stable in the world, and our economy remains the largest and most influential worldwide. In fact, in the ensuing years since the Great Recession, the American economy has been the most resilient of all the major world economies.

Add to that the fact that American workers are amongst the world’s most productive–and the immense influence that American consumers’ buying power has on global exports–and you begin to see why the world views the American dollar as the most desirable among global currencies.

Now, there is—of course—a downside to having the world’s strongest currency. American companies export goods to nations around the world, and a stronger dollar makes those goods more expensive for other countries to import. That, in turn, adds to the nation’s trade deficit (the difference between the amount of goods we export versus those we import).

So, while American consumers may benefit from a strong dollar when purchasing foreign currencies for their vacations (in Europe, Asia or elsewhere), there is also a price to be paid back home for the muscle of the US dollar.

All of this may seem to some like an obscure debate topic among economists, but the fact is that an overly strong US dollar signals both good–and potentially bad–news for both American businesses and consumers.

Take, for example, the US auto industry.

In earlier posts, I’ve discussed the resurgence of US automakers, and how our company’s subsidiary–National Credit Center (NCC)–continues to grow and prosper along with the auto dealerships it services.

However, due to globalization, the US auto manufacturing industry is now far more international than it has ever been (best example being the Italian-based ownership of Fiat-Chrysler). In this new era, the price of US exports—as well as domestic imports—resulting from a strong dollar, can have a direct effect on the bottom line of both American businesses as well as consumers.

Still, despite its potential pitfalls, the global strength and desirability of the dollar is a reminder that in an age beset with chaos and uncertainty, America–and its mighty ‘greenback’—is still seen as providing the safest of safe harbors throughout the world.